Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4/A Pre-Effective Amendment to Registration of 93± 434K
Securities Issued in a
Business-Combination Transaction
2: EX-12 Statement Regarding Computation of Ratios 3± 16K
3: EX-15 Letter in Lieu of Consent From Delloitte & Touche 1 7K
4: EX-24 Power of Attorney of Whitson Sadler 1 5K
S-4/A — Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents
As filed with the Securities and Exchange Commission on May 29, 1996
Registration No. 333-02585
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
SOUTHDOWN, INC.
(Exact name of registrant as specified in its charter)
3241
(Primary Standard Industrial
Classification Code Number)
LOUISIANA 72-0296500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 SMITH STREET, SUITE 2400
HOUSTON, TEXAS 77002-4486
(713) 650-6200
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
PATRICK S. BULLARD
VICE PRESIDENT -- GENERAL COUNSEL AND SECRETARY
SOUTHDOWN, INC.
1200 SMITH STREET, SUITE 2400
HOUSTON, TEXAS 77002-4486
(713) 650-6200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
R. DANIEL WITSCHEY, JR.
BRACEWELL & PATTERSON, L.L.P.
2900 SOUTH TOWER PENNZOIL PLACE
HOUSTON, TEXAS 77002-2781
----------------------
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after this
Registration Statement becomes effective.
If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
CROSS REFERENCE SHEET
Pursuant to Rule 404(a)
ITEM IN FORM S-4 CAPTION IN PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1.Forepart of Registration Statement and Facing Page; Outside Front
Outside Front Cover Page of Prospectus. Cover Page of Prospectus.
2.Inside Front and Outside Back Cover Pages Inside Front Cover Page of
of Prospectus. Prospectus; Table of
Contents; Available
Information.
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Risk
Charges and Other Information. Factors.
4. Terms of the Transaction. Prospectus Summary; The
Exchange Offer;
Description of the Series
B Notes.
5. Pro Forma Financial Information. Not applicable.
6. Material Contacts with the Company Being
Acquired. Not applicable.
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters. Not applicable.
8. Interests of Named Experts and Counsel. Validity of the Series B
Notes.
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities. Not applicable.
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants. Incorporation by Reference;
Prospectus Summary.
11. Incorporation of Certain Information by
Reference. Incorporation by Reference.
12. Information with Respect to S-2 or S-3
Registrants. Not applicable.
13. Incorporation of Certain Information by
Reference. Not applicable.
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants. Not applicable.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies. Not applicable.
16. Information with Respect to S-2 or S-3
Companies. Not applicable.
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies. Not applicable.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited. Not applicable.
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer. Incorporation by Reference.
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 29, 1996
SOUTHDOWN, INC.
OFFER TO EXCHANGE ITS
10% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________________, 1996, UNLESS EXTENDED.
Southdown, Inc., a Louisiana corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus
("Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" and, together with the Prospectus, the "Exchange Offer"), to issue
$1,000 principal amount of the Company's 10% Senior Subordinated Notes due 2006,
Series B (the "Series B Notes"), in exchange for each outstanding $1,000
principal amount of its 10% Senior Subordinated Notes due 2006 (the "Original
Notes"), of which an aggregate principal amount of $125,000,000 are outstanding.
See "The Exchange Offer." The Series B Notes offered hereby are substantially
identical to the currently outstanding Original Notes, except that the Series B
Notes have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and hence will not bear legends restricting the transfer
thereof. The Series B Notes will evidence the same debt as the Original Notes
and will be entitled to the benefits of the same indenture (the "Indenture").
The Original Notes and the Series B Notes are sometimes referred to herein
collectively as the "Notes." See "The Exchange Offer" and "Description of the
Series B Notes."
The Company will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
_____________, 1996, unless extended (the "Expiration Date"). Tenders of
Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer." Original Notes may be tendered only in
integral multiples of $1,000.
Interest on the Notes will be payable semi-annually on March 1 and
September 1 of each year, commencing September 1, 1996. The Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after March 1, 2001, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. The Notes will not be
subject to any mandatory sinking fund. In the event of a Change of Control (as
defined), each holder of Notes will have the right, at the holder's option, to
require the Company to purchase such holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase. There can be no assurance that the Company will have
sufficient funds to repurchase the Notes upon a Change of Control, and the
Company's Revolving Credit Facility restricts the Company's ability to make such
a purchase. See "Description of the Series B Notes." The Notes will be general
unsecured obligations of the Company and will be subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company. As of March 31, 1996, the Company had approximately $78.6 million of
Senior Indebtedness outstanding.
Prior to this offering, there has been no public market for the Series B
Notes. The Company does not intend to list the Series B Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the Series B Notes
will develop. The Original Notes have been eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market, but
the Series B Notes will not be so eligible. The Company has agreed to pay the
expenses of the Exchange Offer.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES, SEE "RISK
FACTORS," BEGINNING ON PAGE 13.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS __________, 1996.
(COVER PAGE CONTINUED)
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, the Company believes that, except as noted below, the Series B Notes
issued pursuant to the Exchange Offer in exchange for Original Notes may be
offered for resale, resold and otherwise transferred by holders thereof without
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any holder who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing the
Series B Notes (i) cannot rely on the interpretation by the staff of the
Commission set forth in the above referenced no-action letters, (ii) cannot
tender its Original Notes in the Exchange Offer, and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Original Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements. See "Risk
Factors--Consequences to Non-Tendering Holders of Original Notes." In addition,
each broker-dealer that receives Series B Notes pursuant to the Exchange Offer
in exchange for Original Notes that such broker-dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Original Notes acquired directly from the Company or its affiliates)
must acknowledge that it will deliver a prospectus in connection with any resale
of such Series B Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
If the Company receives certain notices in the Letter of Transmittal, this
Prospectus, as it may be amended or supplemented from time to time, may be used
for the period described below by a broker-dealer in connection with resales of
Series B Notes received in exchange for Original Notes where such Original Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities and not acquired directly from the Company. The Company
has agreed that, if it receives certain notices in the Letter of Transmittal,
for a period of one year after the date on which the Registration Statement of
which this Prospectus is a part becomes effective, it will make this Prospectus
available to any such broker-dealer for use in connection with any such resale.
See "The Exchange Offer--Purpose and Effect of the Exchange Offer; Registration
Rights" and "Plan of Distribution." EXCEPT AS DESCRIBED IN THIS PARAGRAPH, THIS
PROSPECTUS MAY NOT BE USED FOR AN OFFER TO RESELL, RESALE OR OTHER TRANSFER OF
SERIES B NOTES.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act, covering the Series
B Notes offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Company
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Such materials can also be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
or on the Internet at http:\\www.sec.gov.
This Prospectus does not contain all of the information set forth in the
Registration Statement, of which this Prospectus is a part, including the
exhibits and schedules to the Registration Statement. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the applicable documents filed with the Commission. For further information with
respect to the Company and the Series B Notes offered hereby, reference is made
to the Registration Statement, including the exhibits and schedules thereto,
which may be inspected at the public reference facilities of the Commission
referred to above, and copies of which may be obtained therefrom upon payment of
the Commission's customary charges.
INCORPORATION BY REFERENCE
This Prospectus incorporates by reference the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1996, the Company's
Current Report on Form 8-K dated May 16, 1996 (filed May 21, 1996), and all
other documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the later of (i) the termination of the Exchange Offer, or (ii) if this
Prospectus is to be delivered by certain broker-dealers in connection with
resales of Series B Notes as provided under "Plan of Distribution," the earlier
of (a) one year from the date the Registration Statement was declared effective
and (b) the date on which the offering of such Series B Notes for resale is
terminated.
Any statement contained in this Prospectus or in a document incorporated
by reference in this Prospectus will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is also
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON, INCLUDING A
BENEFICIAL OWNER OF ORIGINAL NOTES, TO WHOM A PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL OF THE INFORMATION
THAT HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS, EXCLUDING EXHIBITS
TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE DOCUMENTS SO INCORPORATED. REQUESTS FOR COPIES OF SUCH
DOCUMENTS SHOULD BE ADDRESSED TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES
AS FOLLOWS: MR. JAMES L. PERSKY, EXECUTIVE VICE PRESIDENT--FINANCE AND
ADMINISTRATION, SOUTHDOWN, INC., 1200 SMITH STREET, SUITE 2400, HOUSTON, TEXAS
77002-4486 (TELEPHONE (713) 650-6200). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY , 1996.
NO PERSON HAS BEEN AUTHORIZED, IN CONNECTION WITH THIS OFFERING, TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION THAT IS NOT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY
THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITY OTHER THAN THE SERIES B NOTES OR AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE SERIES B NOTES IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. EXCEPT WHERE OTHERWISE
INDICATED HEREIN, THIS PROSPECTUS SPEAKS AS OF ITS DATE, AND NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE, UNDER ANY
CIRCUMSTANCES, AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
Page
Prospectus Summary.............................................................4
Risk Factors..................................................................13
Capitalization................................................................18
The Exchange Offer............................................................19
Certain Federal Income Tax Considerations.....................................30
Description of Revolving Credit Facility......................................32
Description of the Series B Notes.............................................33
Plan of Distribution .........................................................55
Validity of Series B Notes....................................................55
Experts.......................................................................56
Annex A - Form of Letter of Transmittal
-3-
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS INCLUDED ELSEWHERE OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. AS USED HEREIN, THE TERMS "SOUTHDOWN" AND THE
"COMPANY" REFER TO SOUTHDOWN, INC. TOGETHER WITH ITS SUBSIDIARIES.
THE COMPANY
Southdown is one of the leading cement and ready-mixed concrete companies
in the United States. The Company's operations are strategically located in
various regions of the U.S., many of which the Company believes have attractive
prospects for long-term economic growth. The Company operates eight
manufacturing facilities and seven quarrying sites and utilizes a network of 19
cement storage and distribution terminals for the production, importation and
distribution of portland and masonry cements, primarily in the Ohio valley and
the southwestern and southeastern regions of the U.S. The Company is also
vertically integrated in the regional vicinity of its two largest cement plants,
with ready-mixed concrete operations serving markets in Florida and southern
California. In 1995, the Company had revenues of $596.1 million and net earnings
of $47.5 million. Southdown's principal executive offices are located at 1200
Smith Street, Suite 2400, Houston, Texas 77002-4486, and its telephone number is
(713) 650-6200.
CEMENT OPERATIONS. The Company is the third largest producer of cement in
the U.S. and produces cement at its plants located in California, Florida,
Kentucky, Ohio, Tennessee, Texas, Colorado and Pennsylvania, which have a
combined cement manufacturing capacity of approximately 6.5 million short tons
(6.2 million short tons, excluding the joint venture interests of others).
Management believes that the Company's network of eight cement plants is one of
the most modern and efficient of any large cement manufacturer in the U.S. Seven
of the Company's eight plants (approximately 95% of the Company's clinker
capacity) utilize variations of the "dry process" manufacturing technology which
is more fuel efficient compared to the older "wet process" manufacturing
technology. In contrast, as of December 31, 1994 (the most recent date for which
data are available), only approximately 72% of domestic industry capacity
utilized "dry process" technology, according to the Portland Cement Association
("PCA"), the industry's leading trade organization.
Cement is the binding agent for concrete, a primary construction material.
Because the cost of transporting cement is high relative to the value of the
product, cement markets are generally regional. The primary end-users of cement
in each of the Company's regional markets include numerous small and sometimes
one or more large ready-mixed concrete companies. Other principal customers
include manufacturers of concrete products such as blocks, roof tiles, pipes and
prefabricated building components. Sales are also made to building materials
dealers, other cement manufacturers, construction contractors and, in some
regions, oil well cementing companies. In 1995, the Company's cement segment had
$419.1 million in revenues and contributed $112.7 million to operating earnings
compared to $397.5 million and $91.2 million, respectively, in 1994. Cement
segment revenues and earnings increased in 1995 over 1994 primarily because of a
9% increase in the Company's weighted average sales price per ton over that
period.
CONCRETE PRODUCTS. The Company has vertically integrated its cement
operations with ready-mixed concrete and other concrete products operations in
the regional vicinity of its two largest cement plants which are located in
Florida and southern California. Management believes that this vertical
integration enhances the Company's competitive position in these markets, where
most cement producers are vertically integrated. Ready-mixed concrete is a
versatile, low-cost building material used in almost all construction
applications. Concrete is produced in batch plants by mixing stone, sand, water
and admixtures with cement,
-4-
the basic binding agent, and is transported to the customer's jobsite in mixer
trucks. The Company operates a combined total of approximately 600 ready-mixed
concrete trucks, approximately 80 batch plants, 13 concrete block plants and, in
California, two aggregate quarries, one of which is under a long-term lease. In
1995, the Company's concrete products segment had $219.2 million in revenues and
contributed $7.9 million to operating earnings.
INDUSTRY. Demand for cement is highly cyclical and derived from the demand
for concrete products which, in turn, is dependent on the demand for
construction. All industry and import percentages in this section are estimates
of the PCA as of December 31, 1994, the most recent date for which such data are
available. The three construction sectors that are the major components of
cement consumption are (i) public works or infrastructure construction, (ii)
commercial and industrial construction and (iii) residential construction, which
comprised 51%, 25% and 24%, respectively, of U.S. cement consumption for
construction. Construction spending and cement consumption have historically
fluctuated widely. The construction sector, and hence demand for cement and
concrete, is affected by the general condition of the economy and prevailing
interest rates, and can exhibit substantial variations in activity across the
country as a result of the differing structures and cycles of regional
economies. The impact on the Company of regional construction cycles may be
mitigated to some degree by its geographic diversification. Because of the high
fixed-cost nature of the business, however, overall profitability of cement
manufacturers, including the Company, is sensitive to minor variations in sales
volumes and small shifts in the balance between supply and demand. The cement
business is also seasonal to the extent that construction activity tends to
diminish during the winter months and other periods of inclement weather.
Historically, cement imports have increased during peak demand periods to
supplement U.S. production to meet customers' needs. However, during the 1980s,
competition from imported cement in most coastal and border areas grew
significantly. The large volume of low priced imported cement depressed cement
prices during a period of strong growth in cement consumption. Imports increased
from approximately 4% of U.S. consumption in 1982 to a peak of approximately 20%
in 1987. In response to the surge of unfairly priced imports, beginning in 1989,
groups of industry participants, including the Company, filed antidumping
petitions against cement producers in Mexico, Japan and Venezuela which resulted
in duties being imposed on imports of cement from Mexico and Japan and an
agreement with Venezuelan cement producers to revise their prices to eliminate
the dumping of cement. As a consequence, imports declined to 8% of total
consumption in 1992. Since then, U.S. cement consumption has increased and in
response, imports have increased to a PCA estimated 16% of total U.S. cement
consumption in 1995. During this recent period of strong demand, however, the
prices of cement imports have risen and, unlike imports during the 1980s,
imports are primarily playing a supplementary rather than a disruptive role.
Recent imports of foreign cement are primarily by domestic producers in response
to cement demand in excess of the domestic supply.
See "Risk Factors--Effects of Imports; Status of Certain Duties."
BUSINESS STRATEGY. To enhance profitability and return on investment, the
Company intends to continue its focus on its core business in the areas of
internal growth, improving productivity and enhancing the Company's market
positions. The Company plans to take advantage of opportunities for internal
growth through the modernization and expansion of its existing cement plants. A
capital project to upgrade the Company's Ohio cement plant is currently underway
and should be completed in 1997. This project is expected to modernize
manufacturing facilities, enhance productivity and efficiency, lower storage and
handling costs and add approximately 10% more cement capacity at the plant. In
the Company's two largest markets, Florida and southern California, the Company
has sought to improve its market position through the recent acquisition of
additional cement terminals and ready-mixed concrete operations in Florida and
additional ready-mixed concrete operations in southern California. The Company
also may evaluate other acquisitions that could improve the Company's
competitive position and increase profitability. Further, in
-5-
an effort to increase the demand for cement and concrete, the Company is taking
a leadership role in the industry's development of new promotional programs to
increase concrete's market share relative to other building products. In
addition, the Company will continue to pursue antidumping actions, if necessary,
to prevent unfairly priced foreign cement from adversely impacting the Company's
markets.
PRIVATE PLACEMENT OF ORIGINAL NOTES AND TENDER OFFER FOR 14% NOTES. On
February 14, 1996, the Company commenced a cash tender offer for all of its 14%
Senior Subordinated Notes Due 2001, Series B (the "14% Notes"), of which
$125,000,000 were outstanding, at a price of $1,096.62 per $1,000 principal
amount plus accrued interest to the payment date pursuant to the tender offer.
The tender offer expired on March 13, 1996, and $120,160,000 of 14% Notes were
tendered. On March 19, 1996, the Company sold the Original Notes to Lehman
Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Initial Purchasers"), which placed the Original Notes with institutional
investors. On the same date, the Company purchased all 14% Notes which were
tendered using the net proceeds of the private placement (approximately $121.1
million), borrowings of approximately $12.7 million under its Revolving Credit
Facility (as defined), and cash on hand of approximately $4.7 million. The
$4,840,000 in principal amount of 14% Notes which remain outstanding rank PARI
PASSU with the Notes. The Company may consider various alternatives, including,
but not limited to, acquiring additional 14% Notes in the open market or in
privately negotiated transactions or calling the remaining 14% Notes for
redemption when they become redeemable in October 1996. While the Company
currently anticipates that the 14% Notes remaining outstanding will be redeemed
or otherwise retired, there can be no assurance as to which, if any, of these
alternatives the Company may pursue.
THE EXCHANGE OFFER
Registration Rights
Agreement...........................The Original Notes were sold by the Company
on March 19, 1996 to the Initial Purchasers,
which placed the Original Notes with
institutional investors. In connection
therewith, the Company executed and
delivered for the benefit of the holders of
the Original Notes a Registration Rights
Agreement dated March 19, 1996 with the
Initial Purchasers (the "Registration Rights
Agreement") providing for the Exchange
Offer.
The Exchange Offer..................$1,000 principal amount of Series B Notes in
exchange for each outstanding $1,000
principal amount of Original Notes. As of
the date hereof, $125,000,000 aggregate
principal amount of Original Notes are
outstanding. Subject to the terms and
conditions of the Exchange Offer, promptly
after the Expiration Date and after
acceptance for exchange of the tendered
Original Notes, the Company will issue the
Series B Notes to holders who validly tender
and do not withdraw Original Notes.
Based on an interpretation by the staff of
the Commission set forth in no-action
letters issued to third parties, the Company
believes that, except as noted below, Series
B Notes issued pursuant to the Exchange
Offer in exchange for Original Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other
than any such holder which is an "affiliate"
of the Company within the meaning of
-6-
Rule 405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such Series B
Notes are acquired in the ordinary course of
such holder's business and that such holder
has no arrangement or understanding with any
person to participate in the distribution of
such Series B Notes. Any holder who is an
"affiliate" of the Company or who intends to
participate in the Exchange Offer for the
purpose of distributing the Series B Notes
(i) cannot rely on the interpretation by the
staff of the Commission set forth in the
above referenced no-action letters, (ii)
cannot tender its Original Notes in the
Exchange Offer and (iii) must comply with
the registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or transfer of the
Original Notes, unless such sale or transfer
is made pursuant to an exemption from such
requirements. See "Risk
Factors--Consequences to Non-Tendering
Holders of Original Notes."
Each broker-dealer that receives Series B
Notes pursuant to the Exchange Offer in
exchange for Original Notes that such
broker-dealer acquired for its own account
as a result of market making activities or
other trading activities (other than
Original Notes acquired directly from the
Company or its affiliates) must acknowledge
that it will deliver a prospectus in
connection with any resale of such Series B
Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a
prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. If
the Company receives certain notices in the
Letter of Transmittal, this Prospectus, as
it may be amended or supplemented from time
to time, may be used for the period
described below by a broker-dealer in
connection with resales of Series B Notes
received in exchange for Original Notes
where such Original Notes were acquired by
such broker-dealer as a result of
market-making activities or other trading
activities and not acquired directly from
the Company. The Company has agreed that, if
it receives certain notices in the Letter of
Transmittal, for a period of one year after
the date on which the Registration Statement
becomes effective, it will make this
Prospectus available to any such
broker-dealer for use in connection with any
such resale. The Letter of Transmittal
requires broker-dealers tendering Original
Notes in the Exchange Offer to indicate
whether such broker-dealer acquired such
Original Notes for its own account as a
result of market making activities or other
trading activities (other than Original
Notes acquired directly from the Company or
any of its affiliates), and if no
broker-dealer indicates that such Original
Notes were so acquired, the Company has no
obligation under the Registration Rights
Agreement to maintain the effectiveness of
the Registration Statement past the
consummation of the Exchange Offer or to
allow the use of this Prospectus for such
resales. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer;
Registration Rights" and "Plan of
Distribution."
-7-
Expiration Date.....................5:00 p.m., New York City time, on ______,
1996, unless the Exchange Offer is extended,
in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
Conditions to the
Exchange Offer......................The Exchange Offer is subject to certain
customary conditions which may be waived by
the Company. See "The Exchange
Offer--Conditions."
Procedures for Tendering
Original Notes......................Each holder of Original Notes wishing to
accept the Exchange Offer must complete,
sign and date the Letter of Transmittal, or
a facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together
with the Original Notes and any other
required documentation to the Exchange Agent
at the address set forth herein. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the Series B Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such Series
B Notes, whether or not such person is the
holder, that neither the holder nor any such
other person has an arrangement or
understanding with any person to participate
in the distribution of such Series B Notes
and that neither the holder nor any such
other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer--Procedures
for Tendering."
Special Procedures for
Beneficial Owners...................Any beneficial owner whose Original Notes
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender
should contact such registered holder
promptly and instruct such registered holder
to tender on such beneficial owner's behalf.
See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery
Procedures..........................Holders of Original Notes who wish to tender
their Original Notes and whose Original
Notes are not immediately available or who
cannot deliver their Original Notes, the
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date,
must tender their Original Notes according
to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights...................Tenders may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date.
-8-
Acceptance of Original
Notes and Delivery of
Series B Notes......................Subject to the conditions set forth herein,
the Company will accept for exchange any and
all Original Notes which are properly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration
Date and not withdrawn. The Series B Notes
issued pursuant to the Exchange Offer will
be delivered promptly following the
acceptance for exchange of the Original
Notes by the Company. See "The Exchange
Offer--Terms of the Exchange Offer."
Certain Federal Income Tax
Consequences........................The exchange pursuant to the Exchange Offer
should not be treated as a taxable exchange
for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Exchange Agent......................State Street Bank and Trust Company is
serving as Exchange Agent in connection with
the Exchange Offer.
Shelf Registration..................The Registration Rights Agreement requires
the Company to file a shelf registration
statement relating to resales of certain
Notes by certain holders if within 20
Business Days after the consummation of the
Exchange Offer a Holder of Original Notes
notifies the Company that it was prohibited
by law or Commission policy from
participating in the Exchange Offer and in
certain other limited circumstances. See
"The Exchange Offer--Purpose and Effect of
the Exchange Offer; Registration Rights."
THE NOTES
Securities Offered..................$125,000,000 principal amount of 10% Senior
Subordinated Notes due 2006, Series B.
Maturity Date.......................March 1, 2006.
Interest Payment Dates..............March 1 and September 1, commencing
September 1, 1996.
Optional Redemption.................The Notes will be redeemable at the option
of the Company, in whole or in part, at any
time on or after March 1, 2001 at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption.
Sinking Fund........................None.
Ranking.............................The Notes will be general unsecured
obligations of the Company, will be
subordinated in right of payment to all
existing and future Senior Indebtedness (as
defined) of the Company and will be senior
in right of payment to or PARI PASSU with
all other indebtedness of the Company. As of
March 31, 1996, the Company had
approximately
-9-
$78.6 million of Senior Indebtedness
outstanding. See "Capitalization" and
"Description of the Series B
Notes--Subordination."
Change of Control...................In the event of a Change of Control (as
defined), each holder of Notes will have the
right, at the holder's option, to require
the Company to purchase such holder's Notes
in whole or in part, at a purchase price
equal to 101% of the principal amount
thereof, plus accrued and unpaid interest,
if any, to the date of purchase. The
Revolving Credit Facility limits the
Company's ability to make such a purchase,
and the Indenture requires the Company to
repay or obtain all requisite consents from
certain holders of Senior Indebtedness
before offering to make such a purchase. See
"Description of the Series B Notes--Change
of Control."
Certain Covenants...................The Indenture contains certain covenants
that, among other things, limit the ability
of the Company and its subsidiaries to (i)
incur additional indebtedness, (ii) pay
dividends or make certain other restricted
payments, (iii) enter into transactions with
affiliates, (iv) create certain liens, (v)
engage in certain sale and leaseback
transactions, (vi) make certain asset
dispositions and (vii) merge or consolidate
with, or transfer substantially all of its
assets to, another person. The Indenture
also limits the ability of the Company's
subsidiaries to issue preferred stock and to
create restrictions on the ability of such
subsidiaries to pay dividends or make any
other distributions. In addition, the
Company is obligated, under certain
circumstances, to offer to purchase the
Notes with the net cash proceeds of certain
sales and other dispositions of assets at a
purchase price of 100% of the principal
amount of the Notes, plus accrued and unpaid
interest, if any, to the date of purchase.
The Company's ability to make such a
purchase is limited by the Revolving Credit
Facility. See "Description of the Series B
Notes--Covenants."
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth selected historical financial and
operating data for the Company for the three-month periods ended March 31, 1996
and 1995 and for each of the five fiscal years in the period ended December 31,
1995. The selected historical financial information for the Company for each of
the three years in the period ended December 31, 1995 has been derived from the
consolidated financial statements of the Company audited by Deloitte & Touche
LLP, independent public accountants, as indicated in their report thereon
incorporated by reference herein. The selected historical financial information
for the Company for each of the two years in the period ended December 31, 1992
has been derived from the audited consolidated financial statements of the
Company. The selected historical financial information for the Company for the
three-month periods ended March 31, 1996 and 1995 has been derived from the
Company's unaudited condensed consolidated financial statements, which, in the
opinion of the Company's management, include all adjustments (consisting only of
normal recurring entries) that the Company considers necessary for a fair
presentation of such data. The interim period results of operations presented
are not necessarily indicative of results to be expected for the full fiscal
year. This historical data should be read in conjunction with the condensed
consolidated financial statements and the consolidated financial statements and
notes thereto of the Company and "Management's Discussion and Analysis of
Financial
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Condition and Results of Operations" included in the Company's Quarterly Report
on From 10-Q for the quarterly period ended March 31, 1996 and the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. See
"Incorporation by Reference." Certain data for prior years have been
reclassified for purposes of comparison.
[Enlarge/Download Table]
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
INCOME STATEMENT DATA:
Revenues ......................................... $ 127.4 $ 119.1 $ 596.1 $ 560.3 $ 507.7 $ 463.1 $ 468.2
Costs and expenses:
Operating ..................................... 91.9 86.4 408.3 399.3 364.8 350.8 366.9
Depreciation, depletion and
amortization ............................... 10.1 9.9 40.3 39.4 38.5 41.8 42.5
Selling and marketing ......................... 3.9 3.6 15.0 13.6 14.0 13.6 13.7
General and administrative .................... 8.5 9.4 34.6 37.8 40.1 43.9 51.6
Other expense (income), net ................... (0.2) (0.9) (5.4) (5.6) 2.9 (5.1) 2.9
-------- -------- -------- -------- -------- -------- --------
114.2 108.4 492.8 484.5 460.3 445.0 477.6
Minority interest in earnings
of consolidated joint venture ............... 0.3 0.4 5.8 4.1 3.1 2.7 1.9
-------- -------- -------- -------- -------- -------- --------
114.5 108.8 498.6 488.6 463.4 447.7 479.5
-------- -------- -------- -------- -------- -------- --------
Operating earnings (loss) ..................... 12.9 10.3 97.5 71.7 44.3 15.4 (11.3)
Equity in net loss of
unconsolidated joint venture ................ -- -- -- -- -- -- (16.0)
Interest, net of amounts
capitalized1 ............................... (6.0) (6.6) (26.7) (27.7) (39.3) (45.0) (40.7)
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from continuing
operations before income taxes,
extraordinary charge and
cumulative effect of a change
in accounting principle ..................... 6.9 3.7 70.8 44.0 5.0 (29.6) (68.0)
Federal and state income tax
(expense) benefit ........................... (2.1) (1.2) (23.3) (13.9) (1.4) 12.7 28.0
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from continuing
operations .................................... 4.8 2.5 47.5 30.1 3.6 (16.9) (40.0)
Loss from discontinued operations,
net of income taxes(2) ........................ -- -- -- (5.9) (3.6) (24.5) (3.2)
Loss on disposition of discontinued
operations, net income taxes(2) ................ -- -- -- (21.6) -- -- --
Gain on disposition of
discontinued oil and gas
operations, net of income
taxes .......................................... -- -- -- -- -- 0.8(3) --
Extraordinary charge, net of
income taxes(4) ................................ (11.4) -- -- -- (1.0) -- (1.4)
Cumulative effect of change in
accounting principle, net of
income taxes(5) ................................ -- -- -- -- (48.5) -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss) .............................. (6.6) 2.5 47.5 2.6 (49.5) (40.6) (44.6)
Dividends on preferred stock ..................... (2.4) (2.4) 9.8 9.4 5.0 5.0 5.1
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss) to common
stockholders ................................... $ (9.0) $ 0.1 $ 37.7 $ (6.8) $ (54.5) $ (45.6) $ (49.7)
======== ======== ======== ======== ======== ======== ========
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[Enlarge/Download Table]
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------- ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA:
Total assets ....................... $ 887.0 $ 895.2(6) $ 875.5 $ 881.0 $ 907.0 $ 921.5 $ 986.1
Total debt ......................... 208.3 213.3 175.2 186.1 293.9 314.8 332.7
Shareholders' equity ............... 364.4 337.2(6) 375.0 337.1 262.2 316.4 362.0
Ratio of total debt to total
capitalization(7) ................ 36.4% 38.7% 31.8% 35.6% 52.9% 49.9% 47.9%
OPERATING DATA:
Cement segment
Tons sold (in thousands) ........ 1,219 1,216 6,058 6,218 6,196 5,788 5,340
Weighted average per ton data:
Sales price ............... $ 60.42 $ 58.16 $ 60.69 $ 55.77 $ 51.59 $ 49.98 $ 52.26
Operating costs(8) ........ 46.20 44.60 41.97 40.95 38.57 39.70 43.72
--------- --------- --------- --------- --------- --------- ---------
Margin ................. $ 14.22 $ 13.56 $ 18.72 $ 14.82 $ 13.02 $ 10.28 $ 8.54
========= ========= ========= ========= ========= ========= =========
Concrete segment
Cubic yards sold (in thousands) . 858 791 3,442 3,530 3,274 3,038 3,488
Weighted average per cubic
yard data:
Sales price ............ $ 52.72 $ 50.03 $ 51.34 $ 47.76 $ 43.86 $ 43.13 $ 42.97
Operating costs(9) ..... 51.83 50.58 50.75 47.32 45.48 46.66 46.69
--------- --------- --------- --------- --------- --------- ---------
Margin .............. $ 0.89 $ (0.55) $ 0.59 $ 0.44 $ (1.62) $ (3.53) $ (3.72)
========= ========= ========= ========= ========= ========= =========
OTHER DATA:
EDITDA(10) ......................... $ 23.0 $ 20.2 $ 137.8 $ 111.1 $ 82.8 $ 57.2 $ 31.2
EBITDA as a percent of revenue ..... 18.1% 17.0% 23.1% 19.8% 16.3% 12.4% 6.7%
Capital expenditures ............... $ 9.6 $ 6.8 $ 32.9 $ 28.8 $ 13.4 $ 7.7 $ 20.6
EBITDA/interest expense(11) ........ 3.6x 3.0x 4.9x 3.7x 2.1x 1.3x 0.8x
EBITDA less capital expenditures
/interest expense(11) ........... 2.1x 2.0x 3.7x 2.8x 1.7x 1.1x 0.3x
Ratio of total debt to EBITDA ...... 9.1x 10.6x 1.3x 1.7x 3.5x 5.5x 10.7x
Ratio of earnings to fixed
charges(12) ..................... 1.8x 1.4x 3.1x 2.2x 1.1x 0.4x --
---------------------
(1) Amounts capitalized were approximately $0.4 million and $0.2 million for
the three months ended March 31, 1996 and 1995, respectively, and
approximately $1.5 million, $2.0 million, $0.7 million, $0.0 million and
$0.3 million for the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(2) In November 1994, the Company decided to exit the environmental services
business and these business activities are presented as discontinued
operations for years 1991 through 1994.
(3) Represents the final portion of the Company's gain realized in conjunction
with the 1989 sale of the Company's oil and gas operations.
(4) Premiums on early extinguishment of debt.
(5) Cumulative after-tax effect of change in accounting for initial obligation
for estimated postretirement health care benefits as required by adoption
of Statement of Financial Accounting Standards No. 106 effective January 1,
1993.
(6) As a result of changing accounting methods for interim periods for cost of
goods sold for cement manufacturing operations from predetermined standard
cost estimates to actual cost, certain balance sheet amounts as of March
31, 1995 differ from previously reported amounts. The change had no impact
on annual financial statements.
(7) Total capitalization represents the sum of the book value of total debt and
shareholders' equity.
(8) Includes fixed and variable manufacturing costs, selling expenses, cost of
purchased cement, plant general and administrative costs, other plant
overhead and miscellaneous costs.
(9) Includes variable and fixed plant costs, delivery, selling, general and
administrative and miscellaneous operating costs, but excludes the $1.7
million gain realized on the sale of trucks during 1994.
(10) EBITDA is defined as the sum of (i) earnings (loss) from continuing
operations before income taxes, extraordinary charge and cumulative effect
of a change in accounting principle; (ii) interest, net of amounts
capitalized; and (iii) depreciation, depletion and amortization, as
reported on the Company's income statement. EBITDA is presented not as an
alternative measure of operating results or cash flow from operations (as
determined in accordance with generally accepted accounting principles),
but rather to provide additional information related to the debt servicing
ability of the Company. In 1991, EBITDA excludes $16.0 million of equity in
net loss of an unconsolidated joint venture.
(11) Interest expense before capitalization of interest. See Footnote (1) above.
(12) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. "Earnings" represent the aggregate of (a) the
pre-tax income from continuing operations of the Company and (b) fixed
charges, net of interest capitalized. "Fixed charges" represent interest
(whether expensed or capitalized), the amortization of total debt discount
and expenses and that portion of rentals considered to be representative of
the interest factor (deemed to be one-third of rentals). In 1992 and 1991,
earnings were insufficient to cover fixed charges by $29.6 million and
$68.5 million, respectively. Had the consummation of the private placement
of the Original Notes and the tender offer for the 14% Notes and the
related borrowings under the Revolving Credit Facility described under
"Prospectus Summary - The Company - Private Placement of Original Notes and
Tender Offer for 14% Notes" occurred on January 1, 1995, the pro forma
ratio of earnings to fixed charges for the three months ended March 31,
1996 and 1995 would have been 2.0x and 1.7x, respectively, and for the year
ended December 31, 1995 would have been 3.5x.
-12-
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE SERIES B NOTES OFFERED HEREBY SHOULD
CONSIDER THE FOLLOWING MATTERS, AS WELL AS THE OTHER INFORMATION IN THIS
PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
DEPENDENCE ON CONSTRUCTION INDUSTRY
GENERAL AND REGIONAL ECONOMIC CONDITIONS. Demand for cement is highly
cyclical and is derived from demand for concrete products which, in turn, is
dependent on the demand for construction. The construction sector is affected by
the general condition of the economy and a variety of other factors beyond the
control of the Company, including the amount of new public works or
infrastructure construction projects, commercial or industrial construction and
residential construction. These factors are affected by, among other things, the
availability of funds for public or infrastructure construction, the movement of
interest rates and the availability of short- and long-term financing. In
addition, the construction sector can exhibit substantial variations in activity
across the country as a result of the differing structures of regional
economies. New construction activity stagnated as the U.S. economy entered a
recession during the latter half of 1990, declined in 1991 in most areas and, in
California, continued to decline in 1992. As a consequence, the Company's sales
and earnings declined from the previous cyclical peak in 1989.
REGIONAL MARKETS; CYCLICAL INDUSTRY; SEASONALITY. Because
transportation costs are high relative to the value of the product, cement
markets are generally regional. However, access to water transport, which is
generally less expensive than overland shipping, can effectively expand the
market area of a particular production facility. Regional markets are highly
cyclical, experiencing peaks and valleys that correlate with regional
construction cycles. Although the impact of construction cycles on the Company's
operations in individual regions may be mitigated to some degree by the
geographic diversification of the Company, profitability and cash flows are
significantly affected by such construction cycles. Regional markets are also
seasonal to the extent that construction activity, and hence the demand for the
Company's products, tends to diminish during the winter months and other periods
of inclement weather. As a result, the Company has historically experienced its
lowest levels of revenue and operating income during the first quarter of its
fiscal year.
HIGH LEVELS OF COMPETITION; PROFIT AND CASH FLOW SENSITIVITY. The
cement and concrete products industries are highly competitive. The Company's
products are commodities and competition among suppliers is based primarily on
price, with consistency of quality and service to customers being of lesser
significance. Prices are often subject to material changes in response to
relatively minor fluctuations in supply and demand, general economic conditions
and market conditions, all of which are beyond the Company's control. Because of
the high fixed-cost nature of the business, however, the overall profitability
of cement manufacturers, including the Company, is sensitive to minor variations
in sales volumes and small shifts in the balance between supply and demand.
While the Company's ratio of total debt to total capitalization at March 31,
1996 was approximately 36.4%, the cyclicality of the Company's cash flows
increases the risk associated with leverage. In addition, the Indenture permits
the Company to incur significant additional indebtedness.
EFFECTS OF IMPORTS; STATUS OF CERTAIN DUTIES
During the 1980s, competition from low-priced imported cement in most
coastal and border areas of the U.S. grew significantly and materially impacted
the U.S. cement market. A group of domestic cement producers, including the
Company, filed antidumping petitions which resulted in the imposition of
significant antidumping duty cash deposit requirements in August 1990 on cement
and clinker imported from Mexico and in April 1991 on cement and clinker
imported from Japan. In addition, in February 1992 the U.S. Department of
Commerce signed an agreement with Venezuelan cement producers which is designed
to
-13-
eliminate the dumping of gray portland cement and clinker from Venezuela into
Florida and the U.S. generally. The dumping margins and resulting rates of
antidumping duty cash deposits are subject to annual administrative review by
the Department of Commerce. In the case of Japan, the dumping margins are
subject to appeal to the U.S. Court of International Trade (the "CIT") and the
U.S. Court of Appeals for the Federal Circuit ("CAFC"). In the case of Mexico,
the dumping margins are subject to appeal either to the CIT and CAFC or to
bi-national dispute panels under the North American Free Trade Agreement
("NAFTA"). The results of a number of the annual administrative reviews
regarding Japanese and Mexican cement and clinker are on appeal to the CIT. The
underlying injury determinations against Japan and Mexico have also been
appealed by the foreign producers. The determination against Japanese cement and
clinker remains in effect pending appeal before the CIT. While the material
injury determination against Mexican cement was affirmed by both the CIT and the
CAFC, a dispute resolution panel under the General Agreement on Tariffs and
Trade ("GATT") recommended in July 1992 that the antidumping order be vacated
and that all duties collected under the order be returned. Under GATT rules, the
Antidumping Code Committee, of which the U.S. is a member, must unanimously
adopt the panel's recommendation before it becomes a GATT obligation. The U.S.
has refused to endorse the GATT panel ruling.
Pursuant to the Uruguay Round Agreement, the GATT and the GATT
Antidumping Code were superseded on January 1, 1995 by a new GATT, which is
administered by the newly created World Trade Organization ("WTO"). The
antidumping orders outstanding against cement and clinker from Mexico and Japan
and the suspension agreement on cement and clinker from Venezuela remain in
force. However, new legislation passed by the U.S. Congress in December 1994
requires the initiation of "sunset" reviews of the antidumping orders against
Mexico and Japan and the suspension agreement with Venezuela prior to January
2000 to determine whether these antidumping orders and the suspension agreement
should terminate or remain in effect.
NAFTA has thus far had no material adverse effect on the antidumping
duty cash deposit rates imposed on gray portland cement and clinker imported
from Mexico. Certain appeals which previously would have been brought before the
CIT will now be heard by a bi-national panel of Mexican and U.S. citizens under
NAFTA. A severe economic crisis in Mexico resulted in devaluations of the
Mexican peso in late 1994 and early 1995. Because of the retroactive nature of
administrative reviews, the impact on the calculation of antidumping cash
deposit rates resulting from the devaluation of the peso, if any, will not be
realized until some future period.
A substantial reduction or elimination of the existing antidumping
duties as a result of GATT, NAFTA, currency devaluation or any other reason, or
an influx of low-priced cement from countries not subject to antidumping orders,
could materially adversely affect the Company's results of operations.
ENVIRONMENTAL RISKS
The Company is subject to extensive Federal, state and local air, water
and other environmental laws and regulations. These constantly changing laws
regulate the discharge of materials into the environment and may require the
Company to remove or mitigate the environmental effects of the disposal or
release of certain substances at the Company's various operating facilities and
elsewhere. Management believes that the Company's current procedures and
practices for handling and management of materials are generally consistent with
industry standards and legal requirements and that appropriate precautions are
taken to protect employees and others from harmful exposure to hazardous
materials. However, because of the complexity of operations and legal
requirements, there can be no assurance that past or future operations will not
result in operational errors, violations, remediation liabilities or claims by
employees or others alleging exposure to toxic or hazardous materials. Owners
and operators of industrial facilities may be subject to fines or other actions
imposed by the U.S. Environmental Protection Agency ("U.S. EPA") and
-14-
corresponding state regulatory agencies for violations of laws or regulations
relating to hazardous substances. The Company has incurred fines imposed by
various environmental regulatory agencies in the past.
Several of the Company's previously and currently owned facilities at
several locations have become the subject of various local, state and federal
environmental proceedings and inquiries, including the naming of the Company as
a potentially responsible party with regard to Superfund sites, primarily at
several locations to which the Company is alleged to have shipped materials for
disposal. While some of these Superfund matters have been settled for de minimis
amounts, others are in preliminary stages and final results may not be
determined for years. Based on the information the Company has developed to
date, the Company has no reason to believe it will be required to spend
significant sums with regard to these locations either individually or in the
aggregate. However, until it is determined what, if any, contribution the
Company made to these locations, and until all environmental studies,
investigations, remediation work and negotiations with or litigation against
potential sources of recovery have been completed, it is impossible to determine
the ultimate cost to the Company of resolving these environmental matters.
Industrial operations have been conducted at some of the Company's
cement manufacturing facilities for almost 100 years. In the past, the Company
disposed of various materials, including used refractory brick and other
products generally used in its cement manufacturing and concrete products
operations, in onsite and offsite facilities. Some of these materials, if
discarded today, might be classified as hazardous wastes and might be subject to
regulation under Federal and state environmental laws and regulations, which may
require the Company to undertake corrective action to remediate these sites.
In addition, many of the raw materials, products and by-products
currently associated with the operation of any industrial facility, including
those for the production of cement or concrete products, contain chemical
elements or compounds that are presently designated as hazardous substances.
Some examples of such materials are the trace metals present in cement kiln dust
("CKD"), chromium present in refractory brick formerly widely used to line
cement kilns and general purpose solvents. CKD is not classified as a hazardous
waste, except CKD that is produced by kilns burning hazardous waste derived
fuels and which fails to meet certain criteria. However, CKD that is infused
with water may produce a leachate with an alkalinity high enough to be
classified as hazardous and may also leach certain hazardous trace metals
present therein. Several of the Company's inactive CKD disposal sites around the
country have been under investigation by the Company to determine if remedial
action is required and, if so, the extent of remedial action required. The
Company has recorded charges totaling $13.3 million (approximately $12 million
of which has been expended through March 31, 1996) with respect to remediation
projects at one such site in Ohio, and on a voluntary basis is investigating two
other inactive CKD disposal sites in Ohio. No substantial investigative work has
been undertaken at the Company's other CKD sites in Ohio. Although data
necessary to enable the Company to estimate additional remediation costs are not
available, the Company acknowledges that it is at least reasonably possible that
the ultimate cost to remediate the CKD disposal problem in Ohio could be
significantly more than the amounts reserved.
Although CKD is at present generally exempt from management as a
hazardous waste, on January 31, 1995, the U.S. EPA issued its decision that
further regulation of CKD is necessary. The U.S. EPA has initiated a rulemaking
process, which is estimated to take at least until 1997, in order to develop
specifically tailored CKD management standards. A change in the status of CKD
may require the cement industry to develop new methods for handling this high
volume, low toxicity waste.
With regard to its discontinued environmental services business, the
Company has both given indemnification to and received indemnification from
others for properties previously owned, although some courts have held that
indemnification for such environmental liabilities is unenforceable. No estimate
of the extent of contamination, remediation cost or recoverability of cost from
prior owners, if any, is presently available regarding these discontinued
operations.
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RANKING OF THE NOTES
The Notes are unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, including all
indebtedness under the Revolving Credit Facility. By reason of such
subordination, in the event of an insolvency, liquidation or other
reorganization of the Company, the Senior Indebtedness must be paid in full
before the principal of, premium, if any, or interest on, the Notes may be paid.
As of March 31, 1996, the Notes were subordinated to approximately $78.6 million
of Senior Indebtedness. The Indenture does not limit the amount of Senior
Indebtedness that may be incurred by the Company if certain fixed charge
coverage tests are met, and, whether or not such tests are met, allows the
Company to incur as Senior Indebtedness the entire available amount under the
Revolving Credit Facility and certain additional amounts. See "Capitalization,"
"Description of the Series B Notes--Covenants" and "Description of Revolving
Credit Facility."
The Company may not pay principal of, premium, if any, or interest on,
the Notes, or repurchase, redeem or otherwise retire the Notes if there is any
payment default on Senior Indebtedness unless the default has been cured or
waived in writing, or such Senior Indebtedness has been paid in full, unless the
right under the Indenture to prevent any such payment is waived by or on behalf
of the holders of such Senior Indebtedness. In addition, if any other default
exists with respect to certain Senior Indebtedness and certain other conditions
are satisfied, the Company may not make any payments on the Notes for a
designated period of time. The right of each holder of the Notes to require the
Company to repurchase the Notes at a premium upon the occurrence of a Change of
Control would be blocked by the foregoing subordination provisions to the extent
that the event constituting a Change of Control also causes a default (or if a
default otherwise exists) under the Revolving Credit Facility or other Senior
Indebtedness. Upon any payment or distribution of assets of the Company upon a
total or partial liquidation, dissolution, reorganization or similar proceeding,
the holders of Senior Indebtedness will be entitled to receive payment in full
before the holders of the Notes are entitled to receive any payment. See
"Description of the Series B Notes--Subordination" and "--Covenants."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Original Notes have not been registered under the Securities Act,
and may not be resold by purchasers thereof unless the Original Notes are
subsequently registered or an exemption from the registration requirements of
the Securities Act is available. While the Original Notes are at present
eligible for trading in the PORTAL market, the Series B Notes will not be so
eligible, and there can be no assurance, even following registration or exchange
of the Original Notes for Series B Notes, that an active trading market for the
Original Notes or the Series B Notes will exist. At the time of the private
placement of the Original Notes, the Initial Purchasers advised the Company that
they intended to make a market in the Original Notes and, if issued, the Series
B Notes. However, the Initial Purchasers are not obligated to make a market in
the Original Notes or the Series B Notes, and any such market-making may be
discontinued at any time at the sole discretion of the Initial Purchasers. No
assurance can be given as to the liquidity of or trading market for the Original
Notes or the Series B Notes.
CONSEQUENCES TO NON-TENDERING HOLDERS OF ORIGINAL NOTES
CONSEQUENCES OF FAILURE TO EXCHANGE. To the extent that Original Notes
are tendered and accepted for exchange pursuant to the Exchange Offer, the
trading market for Original Notes that remain outstanding may be significantly
more limited, which might adversely affect the liquidity of the Original Notes
not tendered for exchange. The extent of the market therefor and the
availability of price quotations would depend upon a number of factors,
including the number of holders of Original Notes remaining at such time and the
interest in maintaining a market in such Original Notes on the part of
securities firms. An issue of securities with a smaller outstanding market value
available for trading (the "float") may command a lower
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price than would a comparable issue of securities with a greater float.
Therefore, the market price for Original Notes that are not exchanged in the
Exchange Offer may be affected adversely to the extent that the amount of
Original Notes exchanged pursuant to the Exchange Offer reduces the float. The
reduced float also may tend to make the trading price of the Original Notes that
are not exchanged more volatile.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER. Issuance of the Series B
Notes in exchange for the Original Notes pursuant to the Exchange Offer will be
made following the prior satisfaction, or waiver, of the conditions set forth in
"The Exchange Offer--Conditions" and only after timely receipt by the Exchange
Agent of such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Original
Notes desiring to tender such Original Notes in exchange for Series B Notes
should allow sufficient time to ensure timely delivery of all required
documentation. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to the tenders of
Original Notes for exchange. Original Notes that may be tendered in the Exchange
Offer but which are not validly tendered will, following the consummation of the
Exchange Offer, remain outstanding and continue to be subject to the same
transfer restrictions currently applicable to such Original Notes.
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CAPITALIZATION
The table below sets forth the Company's capitalization at March 31, 1996.
MARCH 31, 1996
(DOLLARS IN MILLIONS)
Total debt:
Revolving Credit Facility(1) ......................... $ 37.0
14% Senior Subordinated Notes due 2001 ............... 4.7
10% Senior Subordinated Notes due 2006 ............... 125.0
Industrial development bonds ......................... 39.3
Other ................................................ 2.3
------
Total debt ............................... 208.3
------
Shareholders' equity:
Series A preferred stock ................................ 19.9
Series B preferred stock ................................ 45.7
Series D preferred stock ................................ 86.3
Common shareholders' equity ............................. 212.5
------
Total shareholders' equity ................ 364.4
------
Total capitalization ................... $572.7
======
-------------------
(1) Consists of a $200 million Revolving Credit Facility which matures in
October 2000, including a $95 million subfacility for standby letters of
credit. On March 31, 1996, the Company had borrowings of approximately
$37.0 million and letters of credit of approximately $51.3 million
outstanding under the Revolving Credit Facility. The majority of the
outstanding letters of credit secure Senior Indebtedness, and the remainder
of such letters of credit, if drawn, would constitute Senior Indebtedness.
See "Description of Revolving Credit Facility."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER; REGISTRATION RIGHTS
The Original Notes were sold by the Company on March 19, 1996 (the
"Issue Date") to the Initial Purchasers, which placed the Original Notes with
institutional investors. In connection therewith, the Company entered into the
Registration Rights Agreement, which required that, within 30 days following the
Issue Date, the Company file with the Commission a registration statement under
the Securities Act with respect to the Series B Notes to be offered in exchange
for the Original Notes, use its reasonable best efforts to cause such
registration statement to become effective under the Securities Act at the
earliest possible time, but in no event later than 90 days after the Issue Date,
and, upon the effectiveness of that registration statement, promptly commence
and cause the Exchange Offer to be consummated at the earliest possible time,
but in no event later than the later of 120 days following the Issue Date or 30
days following the effectiveness of the Registration Statement. The Company also
agreed to include in this Prospectus certain information necessary to allow a
broker-dealer who holds Original Notes that were acquired for its own account as
a result of market-making activities or other trading activities (other than
Original Notes acquired directly from the Company or any affiliate of the
Company) to exchange such Original Notes for Series B Notes pursuant to the
Exchange Offer and satisfy the prospectus delivery requirements in connection
with the Series B Notes received by such broker-dealer in the Exchange Offer as
described below.
In addition, the Company agreed, pursuant to the Registration Rights
Agreement, to file a shelf registration statement pursuant to Rule 415 under the
Securities Act (which may be an amendment to the Registration Statement of which
this Prospectus is a part) (the "Shelf Registration Statement"), registering for
resale (i) any Original Notes held by persons who are not permitted by law or
Commission policy to participate in the Exchange Offer and who satisfy certain
other conditions, (ii) any Series B Notes acquired in the Exchange Offer by any
holder who must comply with the prospectus delivery requirements of the
Securities Act in connection with the resales of such Series B Notes and this
Prospectus is not appropriate or available for such resales by such holder or
(iii) any Original Notes held by a broker-dealer which were acquired directly
from the Company or one of its affiliates. To participate in such a shelf
registration, any such holder of Notes must so notify the Company within 20
business days following consummation on the Exchange Offer and provide to the
Company the information reasonably requested by the Company within 20 days of
such request. The Company agreed to file with the Commission such a Shelf
Registration Statement (or an amendment to the Registration Statement of which
this Prospectus is a part) no later than 30 days after receipt of such a notice
from a holder described in (i), (ii) or (iii) above (the "Determination Date")
and to use its reasonable best efforts to cause the Shelf Registration Statement
(or amendment) to become effective on or prior to 90 days after the
Determination Date. In addition, the Company agreed to use its reasonable best
efforts to keep such Shelf Registration Statement continually effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of Notes for a period of at least three years following the Issue
Date (or one year in the case of a Shelf Registration Statement filed solely at
the request of the Initial Purchasers that hold Original Notes acquired directly
from the Company).
If the Company fails to comply with the above provisions, additional
interest (the "Additional Interest") shall be assessed on the Original Notes as
follows:
(i) if the Shelf Registration Statement is not filed within 30 days
following the Determination Date, then commencing on the 31st day
after such date Additional Interest shall be accrued on the
Original Notes over and above the accrued interest at a rate of
0.50% per annum for the first 90 days immediately following the
30th day after such date, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of
each subsequent 90-day period;
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(ii) if the Shelf Registration Statement is filed but is not declared
effective within 90 days following the Determination Date, then
commencing on the 91st day after the Determination Date,
Additional Interest shall be accrued on the Original Notes over
and above the accrued interest at a rate of 0.50% per annum for
the first 90 days immediately following the 90th day after the
Determination Date, such Additional Interest rate increasing by
an additional 0.25% per annum at the beginning of each subsequent
90-day period; and
(iii) if (A) the Exchange Offer is not consummated by the later of 120
days following the Issue Date or 30 days following the effective
date of this Registration Statement or (B) the Shelf Registration
Statement ceases to be effective or the prospectus which is a
part thereof cannot be used as a result of a notice to the
selling holders by the Company suspending, for certain reasons,
their use of such prospectus (a "Suspension Event") for a period
of more than 90 days prior to three years from the Issue Date,
then Additional Interest shall be accrued on the Original Notes
over and above the accrued interest at a rate of 0.50% per annum
for the first 60 days immediately following (x) the later of the
120th day after the Issue Date or the 30th day after the
effective date of the Exchange Offer Registration Statement, in
the case of (A) above, or (y) the day such Shelf Registration
Statement ceases to be effective or a Suspension Event has lasted
for more than 90 days in the case of (B) above, such Additional
Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 60-day period;
PROVIDED, however, that the Additional Interest rate on the Original Notes may
not exceed 1.0% per annum; and, PROVIDED, FURTHER, that (1) upon the filing of
the Shelf Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Shelf Registration Statement (in the case of clause (ii)
above), or (3) upon the consummation of the Exchange Offer (in the case of
clause (iii) (A) above), or (4) upon the effectiveness of the Shelf Registration
Statement that had ceased to remain effective prior to three years from the
Issue Date or the end of the Suspension Event (in the case of clause (iii) (B)
above), Additional Interest on the Original Notes as a result of such clause
(i), (ii) or (iii) shall cease to accrue.
The summary herein of certain terms and provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Registration Statement. The term "Holder" with respect to the Exchange Offer
means any person in whose name Original Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that, except as
noted below, Series B Notes issued pursuant to the Exchange Offer in exchange
for Original Notes may be offered for resale, resold and otherwise transferred
by a holder of such Series B Notes (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Series B Notes are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such Series
B Notes. Any Holder who is an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of participating in a
distribution of the Series B Notes (i) cannot rely on such interpretation by the
staff of the Commission, (ii) cannot tender Original Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction, unless
such sale or transfer is made pursuant to an exemption from such requirements.
By executing the Letter of Transmittal, each Holder will represent to the
Company that, among other things, the Series B Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such
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Series B Notes, whether or not such person is the Holder, that neither the
Holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Series B Notes and that
neither the Holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company.
Broker-dealers meeting the requirements above who acquired Original
Notes for their own accounts as a part of market making or other trading
activities may participate in the Exchange Offer. However, such broker-dealers
may be statutory underwriters and must deliver a prospectus in connection with
any resale of Series B Notes received in the Exchange Offer. Each broker-dealer
that so receives Series B Notes for its own account pursuant to the Exchange
Offer must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Series B Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, such
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, generally may be used by a broker-dealer in
connection with resales of Series B Notes received in exchange for Original
Notes where such Original Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and not acquired
directly from the Company or any of its affiliates. The Company has generally
agreed in the Registration Rights Agreement that for a period of one year after
the date on which the Registration Statement becomes effective, it will make
this Prospectus available to any such broker-dealer for use in connection with
any such resale. However, the Letter of Transmittal requires a broker-dealer
receiving Series B Notes in the Exchange Offer to indicate whether such
broker-dealer acquired its Original Notes for its own account as a result of
market making activities or other trading activities (other than Original Notes
acquired directly from the Company or any of its affiliates), and if no
broker-dealer indicates that such Original Notes were so acquired, the Company
has no obligation under the Registration Rights Agreement to maintain the
effectiveness of the Registration Statement past the consummation of the
Exchange Offer or to allow the use of this Prospectus for such resales.
Except as set forth above, after the consummation of the Exchange
Offer, holders of Notes have no registration or exchange rights under the
Registration Rights Agreement. See "--Consequences of Failure to Exchange," and
"Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes which are not exchanged for Series B Notes pursuant
to the Exchange Offer and are not included in a resale prospectus which, if
required, will be filed as part of the Shelf Registration Statement, will remain
restricted securities. Accordingly, such Original Notes, within three years
after the Issue Date, may be sold only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) for so long as the Notes are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A that purchases for
its own account or for the account of such a qualified institutional buyer and
to whom notice is given that the transfer is being made in reliance on Rule
144A, (d) inside the United States to an institutional accredited investor that,
prior to such transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the restrictions on transfer
of such Original Notes (the form of which letter can be obtained from such
Trustee), (e) pursuant to offers and sales that occur outside the United States
in compliance with Rule 904 under the Securities Act, or (f) pursuant to any
other available exemption from the registration requirements of the Securities
Act; subject in the case of clauses (d), (e) or (f), that the Company and the
Trustee reserve the right to require the delivery to them of an opinion of
counsel, certifications and/or other information satisfactory to the Company and
the Trustee.
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To the extent Original Notes are tendered and accepted in the Exchange
Offer, the principal amount of outstanding Original Notes will decrease with a
resulting decrease in the liquidity in the market therefor. Accordingly, the
liquidity of the market for the Original Notes could be adversely affected. See
"Risk Factors -- Consequences to Non-Tendering Holders of Original Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept any and all Original Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The
Company will issue $1,000 principal amount of Series B Notes in exchange for
each $1,000 principal amount of outstanding Original Notes accepted in the
Exchange Offer. Holders may tender some or all of their Original Notes pursuant
to the Exchange Offer. However, Original Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the Series B Notes will be identical in all
material respects to the form and terms of the Original Notes except that the
Series B Notes have been registered under the Securities Act and hence will not
bear legends restricting the transfer thereof. The Series B Notes will evidence
the same debt as the Original Notes and will be entitled to the benefits of the
Indenture.
As of the date hereof, $125,000,000 aggregate principal amount at
maturity of the Original Notes are outstanding and there are ________ registered
Holders. This Prospectus, together with the Letter of Transmittal, is being sent
to all such registered Holders as of __________, 1996.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Louisiana Business Corporation Law or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted Original Notes validly
tendered and not withdrawn when, as and if the Company has given oral or written
notice thereof to the Exchange Agent after the Expiration Date. The Exchange
Agent will act as agent for the tendering Holders for the purpose of receiving
the Series B Notes form the Company.
If any tendered Original Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned,
without expense, to the tendering Holder thereof (or, in the case of Original
Notes tendered by book-entry transfer, such Original Notes will be credited to
the account maintained at The Depository Trust Company ("DTC") from which such
Original Notes were delivered) as promptly as practicable after the Expiration
Date.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
_________, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
-22-
The Company expressly reserves the right, at any time or from time to
time, regardless of whether or not any of the events set forth under
"Conditions" shall have occurred or shall have been determined by the Company to
have occurred, subject to applicable law, (i) to extend the period of time
during which the Exchange Offer is open and thereby delay acceptance of any
Original Notes, by giving oral or written notice of such extension to the
Exchange Agent and (ii) to amend the Exchange Offer in any respect by giving
oral or written notice of such amendment to the Exchange Agent. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights described in below under "--Conditions." Any extension, amendment or
termination will be followed as promptly as practicable by public announcement
thereof, the announcement in the case of an extension to be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company may
choose to make any public announcement, the Company shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a release to the Dow Jones News Service.
If the Company extends the Exchange Offer, or if (whether before or
after any Original Notes have been accepted for exchange) the exchange for
Series B Notes is delayed or the Company is unable to exchange Series B Notes
for Original Notes pursuant to the Exchange Offer for any reason, then, without
prejudice to the Company's rights under the Exchange Offer, the Exchange Agent
may retain tendered Original Notes on behalf of the Company, and such Original
Notes may not be withdrawn except to the extent tendering Holders are entitled
to withdrawal rights as described below under "--Withdrawal of Tenders."
However, the ability of the Company to delay the exchange of Original Notes that
the Company has accepted for exchange is limited by Rule 14e-l(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of a tender offer.
PROCEDURES FOR TENDERING ORIGINAL NOTES
TENDERS OF ORIGINAL NOTES. The tender by a Holder of Original Notes
pursuant to any of the procedures set forth below will constitute the tendering
Holder's acceptance of the terms and conditions of the Exchange Offer. The
Company's acceptance for exchange of Original Notes tendered pursuant to any of
the procedures described below will constitute a binding agreement between such
tendering Holder and the Company in accordance with the terms and subject to the
conditions of the Exchange Offer. Only Holders are authorized to tender their
Original Notes. The procedures by which Original Notes may be tendered by
beneficial owners that are not Holders will depend upon the manner in which the
Original Notes are held.
DTC has authorized DTC participants that are beneficial owners of
Original Notes through DTC to tender their Original Notes as if they were
Holders. To effect a tender, DTC participants should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof, have the signature
thereon guaranteed if required by Instruction 1 of the Letter of Transmittal,
and mail or deliver the Letter of Transmittal or such facsimile pursuant to the
procedures for book-entry transfer set forth below under "--Book-Entry Delivery
Procedures," or (ii) transmit their acceptance to DTC through the DTC Automated
Tender Offer Program ("ATOP"), for which the transaction will be eligible, and
follow the procedures for book-entry transfer set forth below under
"--Book-Entry Delivery Procedures."
TENDER OF ORIGINAL NOTES HELD IN PHYSICAL FORM. To tender effectively
Original Notes held in physical form pursuant to the Exchange Offer, a properly
completed Letter of Transmittal (or a facsimile thereof) duly executed by the
Holder thereof, and any other documents required by the Letter of Transmittal,
must be received by the Exchange Agent at one of its addresses set forth below,
and tendered Original Notes must be received by the Exchange Agent at such
address (or delivery effected through the deposit of Original Notes into the
Exchange Agent's account with DTC and making book-entry delivery as set forth
below) on
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or prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedure set forth below. LETTERS OF TRANSMITTAL OR
ORIGINAL NOTES SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND SHOULD NOT BE SENT
TO THE COMPANY.
TENDER OF ORIGINAL NOTES HELD THROUGH A CUSTODIAN. To tender
effectively Original Notes that are held of record by a custodian bank,
depository, broker, trust company or other nominee, the beneficial owner thereof
must instruct such Holder to tender the Original Notes on the beneficial owner's
behalf. A Letter of Instructions is included in the materials provided along
with this Prospectus which may be used by a beneficial owner in this process to
instruct the registered Holder of such owner's Original Notes to effect the
tender.
TENDER OF ORIGINAL NOTES HELD THROUGH DTC. To tender effectively
Original Notes that are held through DTC, DTC participants should either (i)
properly complete and duly execute the Letter of Transmittal (or a facsimile
thereof), and any other documents required by the Letter of Transmittal, and
mail or deliver the Letter of Transmittal or such facsimile pursuant to the
procedures for book-entry transfer set forth below or (ii) transmit their
acceptance through ATOP, for which the transaction will be eligible, and DTC
will then edit and verify the acceptance and send an Agent's Message to the
Exchange Agent for its acceptance. Delivery of tendered Original Notes held
through DTC must be made to the Exchange Agent pursuant to the book-entry
delivery procedures set forth below or the tendering DTC participant must comply
with the guaranteed delivery procedures set forth below.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND LETTERS OF TRANSMITTAL,
ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OR AGENT'S MESSAGE TRANSMITTED THROUGH
ATOP, IS AT THE ELECTION AND RISK OF THE PERSON TENDERING ORIGINAL NOTES AND
DELIVERING LETTERS OF TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED IN THE
LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER
USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT
THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
Except as provided below, unless the Original Notes being tendered are
deposited with the Exchange Agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed Letter of Transmittal or
a properly transmitted Agent's Message), the Company may, at its option, reject
such tender. Exchange of Series B Notes for the Original Notes will be made only
against deposit of the tendered Original Notes and delivery of all other
required documents.
BOOK-ENTRY DELIVERY PROCEDURES. The Exchange Agent will establish
accounts with respect to the Original Notes at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in DTC may make book-entry delivery
of the Original Notes by causing DTC to transfer such Original Notes into the
Exchange Agent's account in accordance with DTC's procedures for such transfer.
However, although delivery of Original Notes may be effected through book-entry
at DTC, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees or an Agent's Message in connection with a book-entry
transfer, and any other required documents, must, in any case, be transmitted to
and received by the Exchange Agent at one or more of its addresses set forth in
this Prospectus on or prior to the Expiration Date, or compliance must be made
with the guaranteed delivery procedures described below. Delivery of documents
to DTC does not constitute delivery to the Exchange Agent. The confirmation of a
book-entry transfer into the Exchange Agent's account at DTC as described above
is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received
-24-
an express acknowledgment from each participant in DTC tendering the Original
Notes and that such participant has received the Letter of Transmittal and
agrees to be bound by the terms of the Letter of Transmittal and the Company may
enforce such agreement against such participant.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered thereby are tendered
(i) by a registered Holder of Original Notes (or by a participant in DTC whose
name appears on a DTC security position listing as the owner of such Original
Notes) who has not completed either the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution. See Instruction 1 of the
Letter of Transmittal. If the Original Notes are registered in the name of a
person other than the signer of the Letter of Transmittal or if Original Notes
not accepted for exchange or not tendered are to be returned to a person other
than the registered Holder, then the signatures on the Letter of Transmittal
accompanying the tendered Original Notes must be guaranteed by an Eligible
Institution as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a Holder desires to tender Original Notes
pursuant to the Exchange Offer and time will not permit the Letter of
Transmittal, certificates representing such Original Notes and all other
required documents to reach the Exchange Agent, or the procedures for book-entry
transfer cannot be completed, on or prior to the Expiration Date, such Original
Notes may nevertheless be tendered if all the following conditions are
satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company
herewith, or an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, is received by the
Exchange Agent on or prior to the Expiration Date, as provided
below; and
(iii) the certificates for the tendered Original Notes, in proper
form for transfer (or a Book-Entry Confirmation of the
transfer of such Original Notes into the Exchange Agent's
account at DTC as described above), together with a Letter of
Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal or a
properly transmitted Agent's Message, are received by the
Exchange Agent within two business days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery,
telegram, facsimile transmission or mail to the Exchange Agent and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of Series B Notes
by the Exchange Agent for Original Notes tendered and accepted for exchange
pursuant to the Exchange Offer will, in all cases, be made only after timely
receipt by the Exchange Agent of such Original Notes (or Book-Entry Confirmation
of the transfer of such Original Notes into the Exchange Agent's account at DTC
as described above), and a Letter of Transmittal (or facsimile thereof) with
respect to such Original Notes, properly completed and duly executed, with any
required signature guarantees and any other documents required by the Letter of
Transmittal, or a properly transmitted Agent's Message.
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DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tendered Original
Notes pursuant to any of the procedures described above will be determined by
the Company, in the Company's sole discretion, and its determination will be
final and binding. The Company reserves the absolute right to reject any or all
tenders of any Original Notes determined by the Company not to be in proper form
or if the acceptance for exchange of, or exchange for, such Original Notes may,
in the opinion of the Company's counsel, be unlawful. The Company also reserves
the absolute right, in the Company's sole discretion, to waive any of the
conditions of the Exchange Offer or any defect or irregularity in any tender
with respect to Original Notes of any particular Holder, whether or not similar
defects or irregularities are waived in the case of other Holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
Letter of Transmittal and the Instructions thereto) will be final and binding.
No tender of Original Notes will be deemed to have been validly made until all
defects or irregularities have been cured or expressly waived. Neither the
Company nor the Exchange Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
WITHDRAWAL OF TENDERS
Tenders of Original Notes made pursuant to the Exchange Offer are
irrevocable, except that Original Notes tendered may be withdrawn at any time
prior to the Expiration Date (but not thereafter). For a withdrawal of a tender
to be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent at one of its addresses
set forth in this Prospectus. Any such notice of withdrawal must (i) specify the
name of the person who tendered the Original Notes to be withdrawn, (ii) contain
the description of the Original Notes to be withdrawn and identify the
certificate number or numbers shown on the particular certificates evidencing
such Original Notes (unless such Original Notes were tendered by book-entry
transfer) and the aggregate principal amount represented by such Original Notes,
and (iii) be signed by the Holder of such Original Notes in the same manner as
the original signature on the Letter of Transmittal by which such Original Notes
were tendered (including any required signature guarantees), or be accompanied
by documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of the Original Notes into the name of the person
withdrawing such Original Notes. If Original Notes have been delivered pursuant
to the procedures for book-entry transfer set forth in "--Book- Entry Delivery
Procedures," any notice of withdrawal must specify the name and number of the
account at the appropriate book-entry transfer facility to be credited with such
withdrawn Original Notes and must otherwise comply with such book-entry transfer
facility's procedures. If the Original Notes to be withdrawn have been delivered
or otherwise identified to the Exchange Agent, a signed notice of withdrawal
meeting the requirements above is effective immediately upon written or
facsimile notice of withdrawal even if physical release is not yet effected. A
withdrawal of Original Notes can only be accomplished in accordance with the
foregoing procedures.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Company, in the Company's
sole discretion, and its determination will be final and binding. No withdrawal
of Original Notes will be deemed to have been properly made until all defects or
irregularities have been cured or expressly waived. Neither the Company nor the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in any notice of withdrawal or revocation or
incur any liability for failure to give any such notification.
Any Original Notes properly withdrawn will be deemed to be not validly
tendered for purposes of the Exchange Offer. Withdrawn Original Notes may be
retendered by following one of the procedures described in "Procedures for
Tendering Original Notes" at any time prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange Series B Notes for, any
Original Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company, or any material adverse development has
occurred in any existing action or proceeding with respect to the
Company or any of its subsidiaries; or
(b) any change, or any development involving a prospective
change, in the business or financial affairs of the Company or any of
its subsidiaries has occurred which, in the sole judgment of the
Company, might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits
of the Exchange Offer to the Company; or
(c) any law, statute, rule or regulation is proposed, adopted
or enacted, which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(d) any governmental approval has not been obtained, which
approval the Company shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering Holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders to
withdraw such Original Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the Exchange
Offer for a period of five to 10 business days, depending upon the significance
of the waiver and the manner of disclosure to the registered Holders, if the
Exchange Offer would otherwise expire during such five to 10 business day
period.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery and other related documents should
be directed to the Exchange Agent addressed as follows:
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STATE STREET BANK AND TRUST COMPANY
BY MAIL:
State Street Bank and
Trust Company
P.O. Box 778
Boston, Massachusetts 02102
Attention: Nancy Bowker
Corporate Trust Department
BY OVERNIGHT DELIVERY:
State Street Bank and
Trust Company
225 Franklin Street - IP4
Boston, Massachusetts 02110
Attention: Nancy Bowker
Corporate Trust Department
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(617) 664-5784
CONFIRM BY TELEPHONE:
(617) 664-5539
BY HAND:
State Street Bank and
Trust Company
Two International Plaza-4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Window
or
State Street Bank and Trust
Company, National Association
61 Broadway
New York, New York 10006
Attention: Corporate Trust Window-
Concourse Level
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$_______. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Original Notes pursuant to the Exchange Offer. If, however,
certificates representing Series B Notes or Original Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the
Original Notes tendered, or if tendered Original Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Original
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
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ACCOUNTING TREATMENT
The Series B Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized upon consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized over the term of the Series B Notes.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
SCOPE AND LIMITATIONS
The following discussion is a general summary of the principal federal
income tax matters of general application relating to the Exchange Offer and the
holding and disposing of the Original Notes and the Series B Notes and
constitutes the opinion of Bracewell & Patterson, L.L.P. ("Counsel"), counsel to
the Company, as to these matters. There can be no assurance that the Internal
Revenue Service will take a similar view as to any of the tax consequences
described below. The discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing Treasury regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change. The discussion does not purport to describe
all aspects of federal income taxation that may be relevant to a holder in light
of its particular tax status and its other income, deductions and credits and
does not discuss any state, local or foreign tax matters. Moreover, certain
holders (including insurance companies, tax-exempt organizations and foreign
persons) may be subject to special rules not discussed below. The discussion is
limited to investors who hold the Original Notes, and will hold any Series B
Notes acquired pursuant to the Exchange Offer, as capital assets (generally,
property held for investment).
Due to the individual nature of tax consequences, each holder of
Original Notes is urged to consult its own tax advisor as to the particular tax
consequences to it of the exchange of its Original Notes for Series B Notes, and
the ownership and disposition of Notes, including the effect of possible changes
in the tax laws.
EXCHANGE OF ORIGINAL NOTES FOR SERIES B NOTES
An exchange of Original Notes for Series B Notes pursuant to the
Exchange Offer will not be treated as an exchange for federal income tax
purposes. Rather, the issuance of Series B Notes in exchange for Original Notes
will be characterized as a continuation of the outstanding indebtedness
previously represented by the Original Notes. If so characterized, the issuance
of Series B Notes in exchange for the Original Notes would have no independent
tax significance and, therefore, an exchanging holder would not recognize income
or loss in connection with the exchange, its basis in the Series B Notes would
be the same as its basis in the Original Notes exchanged therefor, its holding
period in the Series B Notes would include its holding period in the Original
Notes exchanged therefor and interest accrued on the Original Notes as of the
date of the exchange would be recognized by a cash basis holder at the time it
is actually received.
The Company intends to treat the Exchange Offer as a transaction which
is not an exchange for federal income tax purposes. Therefore, the following
summary of federal income tax consequences of owning and disposing of the Series
B Notes also applies to holders of Original Notes who do not accept the Exchange
Offer. As used herein, the term "Notes" means both the Original Notes and the
Series B Notes.
THE NOTES
STATED INTEREST. A holder of a Note is required to report as ordinary
income the stated interest earned on the Note in accordance with such holder's
method of tax accounting.
AMORTIZABLE BOND PREMIUM. If a holder purchases a Note after issuance
and its tax basis in the Note as of the date of purchase exceeds the greater of
the principal amount or the amount payable on a call date prior to maturity, the
holder may be entitled to elect to treat such excess as bond premium which is
amortizable over the term of the Note in accordance with a constant yield to
maturity method that takes into account the compounding of interest. An election
to amortize bond premium applies to all debt obligations
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acquired by the taxpayer in the taxable year of the election and all subsequent
years, unless revoked with the consent of the Internal Revenue Service ("IRS").
If amortizable bond premium for a holder is determined by reference to a call
price, and if the Note is not subsequently redeemed on the call date, then, for
purposes of determining future amounts of amortizable bond premium, the Note
will be considered to be reissued on such date for an amount equal to the
nonexercised call price. The amount of amortizable bond premium with respect to
a Note generally will be treated as a reduction in the holder's interest income
on the Note. The holder's tax basis in the Note will be reduced by any bond
premium it is allowed to amortize. Purchasers of Notes should consult their tax
advisors concerning the existence of amortizable bond premium and the effect of
the associated election.
DISPOSITION. In general, upon the sale, redemption or other disposition
of a Note, the holder will recognize (i) ordinary interest income to the extent
of any interest that has accrued while the holder held the Note but has not yet
been taken into income by the holder and (ii) gain or loss equal to the
difference between the amount realized from such disposition (exclusive of any
amounts treated as ordinary interest income under clause (i)) and the holder's
tax basis in the Note. Except as provided under "--Market Discount" below, the
gain or loss described in clause (ii) of the preceding sentence will be capital
gain or loss and will be long-term if the Note was held for more than one year.
MARKET DISCOUNT. If a holder purchases a Note after issuance, there
will be market discount equal to the excess, if any, of the principal amount of
the Note over the holder's tax basis in the Note at the time of acquisition,
unless such excess qualified for a DE MINIMIS exception. Under the market
discount rules, any gain recognized by a holder upon the sale or other
disposition of a Note with market discount will be taxable as ordinary interest
income to the extent of the portion of the market discount that accrued on a
straight-line basis (or, at the election of the holder, on a constant yield to
maturity basis) while the holder held the Note. Market discount income may be
recognized on a gift of a Note as if the Note had been sold for its fair market
value. A holder of a Note with market discount may be required to defer
deductions for a portion of such holder's interest expense on any indebtedness
incurred or maintained to purchase or carry the Note.
As an alternative to the foregoing, a holder of a Note with market
discount may elect under certain circumstances to accrue such market discount
income currently (in which case its tax basis in the Note will be increased by
such accrued market discount income and the deduction-deferral rule described in
the preceding paragraph will not apply to the Note). Any such election applies
to all obligations acquired by the holder in the taxable year of the election
and all subsequent years, unless revoked with the consent of the IRS.
BACKUP WITHHOLDING. A holder of a Note may be subject to backup
withholding of federal income tax at the rate of 31% of interest paid with
respect to the Note and on the proceeds of a sale or redemption of the Note.
Backup withholding will not apply, however, if the holder (i) provides a
taxpayer identification number under penalties of perjury and otherwise complies
with the requirements of the backup withholding rules or (ii) is an exempt
recipient or an exempt foreign person and demonstrates his qualifications for
such exemption.
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DESCRIPTION OF REVOLVING CREDIT FACILITY
The Company has a Third Amended and Restated Credit Agreement, as
amended (the "Revolving Credit Facility") with certain financial institutions
("Banks") and Wells Fargo Bank, N.A., as Agent ("Agent") pursuant to which the
Banks have committed to provide the Company with a $200 million revolving credit
facility, including a $95 million subfacility for standby letters of credit. The
Revolving Credit Facility matures and must be paid in full on October 30, 2000,
and is secured by a first priority, perfected security interest in (i) five of
the Company's cement plants, not including the Florida cement plant, (ii) the
Company's partnership interest in Kosmos Cement Company, (iii) the Company's
interest in the stock of Mojave Northern Railroad Company, a wholly-owned
subsidiary of the Company and a California corporation ("Mojave"), and (iv)
Mojave's equipment. Interest on each loan under the Revolving Credit Facility
accrues at either LIBOR or the Agent's base "prime" rate plus an applicable
margin, in each case calculated upon the Company's ratio of funded debt to
EBITDA. As of March 31, 1996, the applicable interest rate on the loans was 6.6%
(LIBOR plus 1%).
The Revolving Credit Facility generally limits (in each case with
exceptions), among other things, the ability of the Company (i) to incur debt,
(ii) to grant liens, (iii) to make investments, (iv) to incur contingent
obligations out of the ordinary course of business, (v) to issue Preferred Stock
redeemable prior to October 30, 2002, (vi) to make fundamental changes to the
organization or capital structure of the Company, (vii) to enter into
sale-leaseback transactions, (viii) to sell the Florida cement plant or assets
consisting of the collateral securing the Revolving Credit Facility, (ix) to
enter into affiliate transactions not on an arm's length basis, (x) to engage in
a new business not substantially the same as an existing business, (xi) to amend
or waive certain debt documents, (xii) to use loan proceeds for purposes other
than general corporate purposes, (xiii) to agree to restrict any subsidiary's
ability to make payments to the Company, (xiv) to make principal payments on
subordinated debt other than certain permitted junior payments, (xv) to enter
into speculative hedge agreements, and (xvi) to make or declare certain
dividends or distributions on account of its capital stock. The Revolving Credit
Facility also subjects the Company to financial covenants relating to: (i) its
ratio of funded debt to EBITDA; (ii) its consolidated tangible net worth; (iii)
its ratio of current assets to current liabilities; and (iv) its ratio of EBITDA
minus capital expenditures to free cash flow, in each case as defined.
Events of Default under the Revolving Credit Facility include, among
other things: (i) the Company's failure to make principal payments and, within
applicable grace periods, to make payments of interest, fees or other amounts,
(ii) the Company's default of other monetary obligations on debt aggregating in
excess of $10.0 million, (iii) the Company's breach of certain covenants,
representations and warranties in the Revolving Credit Facility in any material
respect, (iv) an involuntary or a voluntary liquidation, reorganization or
bankruptcy proceeding against the Company, (v) the Company suffering a money
judgment or a writ or attachment or possession of assets by a judgment creditor
in excess of $7.5 million, (vi) the occurrence of certain ERISA events, (vii)
any cessation of the subordination provisions with respect to subordinated debt
of the Company, or (viii) upon a Change of Control of the Company, as defined.
Other than with respect to clauses (i) or (iii), an Event of Default is subject
to certain applicable grace periods.
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DESCRIPTION OF THE SERIES B NOTES
The Original Notes are, and the Series B Notes are to be, issued under
the Indenture, which is dated as of March 19, 1996, between the Company and
State Street Bank and Trust Company, as Trustee (the "Trustee"). Upon the
issuance of Series B Notes, the Indenture will be subject to and governed by the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summary of certain terms and provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act. In addition, definitions of certain
capitalized terms used in the following summary are set forth below under
"--Certain Definitions."
GENERAL
The aggregate principal amount of the Notes that may be issued will be
limited to $125 million. The Notes will mature on March 1, 2006 and will bear
interest from March 19, 1996 (or from the most recent date to which interest has
been paid), payable semi-annually on March 1 and September 1 of each year,
commencing on September 1, 1996, to holders of record at the close of business
on the February 15 or August 15 immediately preceding such interest payment
date. Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months. The interest rate on the Notes will be at the rate
specified on the cover page hereof and the interest rate on the Original Notes
is subject to increase, and such Additional Interest will be payable on the
payment dates set forth above, in certain circumstances described under "The
Exchange Offer--Purpose and Effect of the Exchange Offer; Registration Rights."
Principal of, premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable (subject in the
case of the Original Notes to compliance with transfer restrictions imposed by
applicable securities laws for so long as the Original Notes are not registered
for resale under the Securities Act), at the office or agency of the Company
maintained for such purposes; PROVIDED, HOWEVER, that payment of interest may be
made at the option of the Company by check mailed to the holders of record as
shown on the security register. The Notes will be issued only in fully
registered form without coupons, in denominations of $1,000 and any integral
multiple thereof. No service charge will be made for any registration of
transfer, exchange or redemption of Notes, except in certain circumstances for
any tax or other governmental charge that may be imposed in connection
therewith.
Original Notes that remain outstanding after the consummation of the
Exchange Offer together with the Series B Notes will be entitled to vote or
consent on all matters as a single class of securities under the Indenture.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of the Company,
in whole or in part, at any time on or after March 1, 2001, upon not less than
30 nor more than 60 days' prior notice in amounts of $1,000 or an integral
multiple thereof at the redemption prices (expressed as a percentage of the
principal amount) set forth below, if redeemed during the 12-month period
beginning March 1 of the years indicated below:
YEAR PERCENTAGE
2001.......................................... 105.000%
2002.......................................... 103.333%
2003.......................................... 101.667%
2004 and thereafter........................... 100.000%
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in each case together with accrued and unpaid interest to the redemption date.
If less than all the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by lot, pro rata or by any other method the Trustee
shall deem fair and reasonable. The Company will comply with all applicable
notice requirements regarding redemption as set forth in the Indenture.
SINKING FUND
The Notes are not subject to redemption through the operation of a
sinking fund, or other mandatory redemption provisions (except as described
under "--Change of Control" and "--Covenants--Limitations on Sale of Assets").
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes (including, without limitation, by any purchase of Notes referred to in
"--Change of Control" or in "--Limitations on Sale of Assets") and any other
Indebtedness, obligations or liabilities arising under or in connection with the
Indenture and the Notes, including all expenses, fees, interest and other
amounts payable thereunder, will be expressly subordinate and subject in right
of payment, as provided in the Indenture, to the prior payment in full of all
Senior Indebtedness. As of March 31, 1996, the aggregate amount of Senior
Indebtedness outstanding was approximately $78.6 million. Although the Indenture
contains limitations on the amount of additional Indebtedness that the Company
may incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"--Covenants--Limitation on Additional Indebtedness." The Notes will be general
unsecured obligations of the Company which will rank PARI PASSU with all
existing and future senior subordinated Indebtedness of the Company. The
Indenture provides that the Notes rank PARI PASSU with the 14% Notes.
"Senior Indebtedness" is defined as the principal of, premium, if any,
and interest (including interest accruing on or after the filing of a petition
initiating any proceeding under any state or federal bankruptcy law, whether or
not a claim for such interest is allowed or allowable in such proceeding) on,
and all fees, indemnities, reimbursement obligations in connection with letters
of credit and other monetary obligations of the Company in respect of, any Bank
Credit Facility or any other Indebtedness of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred or assumed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing,
or the agreement governing, such Indebtedness or pursuant to which such
Indebtedness is outstanding expressly provides that such Indebtedness shall not
be senior in right of payment to the Notes. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) Indebtedness evidenced by the
Original Notes or the Series B Notes; (ii) Indebtedness that by its contractual
terms is subordinate or junior in right of payment to any Indebtedness of the
Company; (iii) that portion of any Indebtedness that is incurred in violation of
the Indenture; (iv) Indebtedness of the Company to a Subsidiary; (v)
Indebtedness that is represented by Disqualified Stock; (vi) any liability for
federal, state, local or other taxes owed or owing by the Company; (vii)
accounts payable or other obligations to trade creditors created, incurred or
assumed in the ordinary course of business in connection with obtaining
materials or services; and (viii) amounts owing under leases (other than
Capitalized Lease Obligations).
"Designated Senior Indebtedness" means (i) Indebtedness of the Company
under any Bank Credit Facility and (ii) any other Senior Indebtedness which, at
either the date of creation thereof or the date of determination, has an
aggregate principal amount outstanding of, or under which at the date of
creation thereof or the date of determination, the holders thereof are committed
or have the option to lend, at least
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$10 million and is specifically designated by the Company in any instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
During the continuance of any default in the payment of principal of,
reimbursement obligation under, premium, if any, or interest on, or any other
amounts payable with respect to, any Senior Indebtedness, including any payment
under a Hedging Obligation that constitutes Senior Indebtedness (a "Payment
Default"), no payment or distribution of any assets of the Company of any kind
or character may be made by the Company on account of the principal of, premium,
if any, interest on, or other amounts payable in respect of, the Notes or on
account of the purchase, redemption or other acquisition of or in respect of the
Notes (except in each case for payments or distributions made in certain
permitted equity interests or subordinated securities) unless and until such
Payment Default has been cured or waived in writing or such Senior Indebtedness
shall have been discharged or paid in full in cash or its equivalent or when the
right under the Indenture to prevent any such payment is waived in writing by or
on behalf of the holders of such Senior Indebtedness.
Further, during the continuance of any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness (a "Covenant Default") and upon
the receipt by the Trustee from the Senior Representative for such Designated
Senior Indebtedness of a written notice of such Covenant Default, no payment or
distribution of any assets of the Company of any kind or character may be made
by the Company on account of the principal of, premium, if any, or interest on,
or other amounts payable in respect of, the Notes or on account of the purchase,
redemption or other acquisition of or in respect of, the Notes (except in each
case for payments or distributions made in certain permitted equity interests or
subordinated securities) for the period specified below (the "Payment Blockage
Period").
The Payment Blockage Period shall commence upon the receipt by the
Trustee of such written notice from the Senior Representative for Designated
Senior Indebtedness of a Covenant Default and shall end on the earliest of (i)
179 days after the receipt of such notice; (ii) the date on which such Covenant
Default is cured or waived in writing or such Designated Senior Indebtedness is
discharged or paid in full in cash or its equivalent; or (iii) the date on which
such Payment Blockage Period shall have been terminated by written notice to the
Company and the Trustee from the Senior Representative initiating such Payment
Blockage Period, or the holders of at least the requisite principal amount of
such issue of Designated Senior Indebtedness as set forth in the agreements
relating thereto. After the end of a Payment Blockage Period, the Company shall
promptly resume making any and all required payments in respect of the Notes,
including any missed payments, unless such payment is prohibited because of a
Payment Default or by reason of insolvency, as described in the second
succeeding paragraph. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Trustee of the notice initiating
such Payment Blockage Period. Any number of notices of Covenant Defaults may be
given during a Payment Blockage Period; PROVIDED, that no such notice shall
extend such Payment Blockage Period beyond 179 days and only one Payment
Blockage Period may be commenced within any 360-day period. No Covenant Default
with respect to Designated Senior Indebtedness that existed or was continuing on
the date of the commencement of any Payment Blockage Period and that was known
to the holders of or the Senior Representative for such Designated Senior
Indebtedness will be, or can be, made the basis for the commencement of a second
Payment Blockage Period, whether or not within a period of 360 consecutive days,
unless such Covenant Default has been cured or waived for a period of not less
than 90 consecutive days. The Company shall deliver a notice to the Trustee
promptly after the date on which any Covenant Default is cured or waived or on
which the Designated Senior Indebtedness related thereto is discharged or paid
in full.
If the Company fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the provisions
referred to above, such failure would constitute an Event
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of Default under the Indenture and, thereafter, the holders of Notes would have
the right to accelerate the maturity thereof in accordance with the Indenture.
See "--Events of Default and Remedies."
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its assets, or any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary, or any assignment for the benefit of creditors or other
marshaling of assets or liabilities of the Company (except in connection with
the consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its Properties substantially as
an entirety, upon the terms and conditions described under "--
Covenants--Limitation on Mergers, Consolidations and Sale of Assets"), all
Senior Indebtedness (including interest accruing on or after the commencement of
any such proceeding at the rate specified in the instrument evidencing the
applicable Senior Indebtedness, whether or not a claim therefor is allowed or
allowable in such proceeding, to the date of payment of such Senior
Indebtedness) must be paid in full in cash or its equivalent before any payment
or distribution of any assets of the Company of any kind or character (except in
each case for payments or distributions made in certain permitted equity
interests or subordinated securities) is made on account of principal of,
premium, if any, interest on, or other amounts payable in respect of, the Notes,
or on account of the purchase, redemption or other acquisition of, or in respect
of, the Notes.
By reason of such subordination, in the event of liquidation or
insolvency of the Company, creditors of the Company that are holders of Senior
Indebtedness or other indebtedness of the Company may recover more, ratably,
than the holders of Notes, funds and assets which would otherwise be payable or
distributable to holders of the Notes will be paid to the holders of Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
the Company may be unable to meet its obligations fully with respect to the
Notes.
CHANGE OF CONTROL
If a Change of Control shall occur at any time, each holder of Notes
shall have the right, at the holder's option, to require the Company to purchase
such holder's Notes, in whole or in part, in integral multiples of $1,000, at a
purchase price in cash in an amount equal to 101% of the principal amount of
such Notes plus accrued and unpaid interest, if any, to the date of purchase
(the "Purchase Date"), which date shall be no fewer than 30 days nor more than
60 days from the date the Company notifies the holders of the occurrence of the
Change of Control.
Under the Indenture, the Company is obligated to give notice to holders
of Notes and the Trustee within 30 days following a Change of Control
specifying, among other things, that a Change of Control has occurred and that
each holder of Notes has the right to require the Company to purchase such
holder's Notes for cash, a statement reasonably describing the material
circumstances and relevant material facts regarding such Change of Control event
(including, if applicable, but not limited to, such relevant pro forma financial
information with respect to the Company (or, if applicable, its successor) after
giving effect to such Change of Control event as is reasonably available to the
Company), the purchase price, the Purchase Date, that interest accrued to the
Purchase Date will be paid upon such purchase and that interest will cease to
accrue on Notes surrendered for purchase as of such Purchase Date, whether
tender will be irrevocable and instructions determined by the Company that a
holder must follow in order to have Notes purchased (including, but not limited
to, the place at which Notes shall be presented and surrendered for purchase)
and materials necessary to comply with applicable tender rules.
The Company will comply with all applicable laws, including, to the
extent applicable, section 14(e) of the Exchange Act and the rules thereunder,
in the event that it is required to offer to purchase (a "Change of Control
Offer") any Notes upon a Change of Control.
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"Change of Control" means (i) any sale, lease or other transfer of
(other than the incurrence of a Lien on) all or substantially all of the assets
of the Company to any Person as an entirety or substantially as an entirety in
one transaction or a series of related transactions; (ii) the consolidation or
merger of the Company with or into another Person pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or exchanged
for cash, securities or other Property, other than any such transaction where
(a) the outstanding Voting Stock of the Company is changed into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving corporation or its
parent and (b) the holders of the Voting Stock of the Company immediately prior
to such transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving corporation or its parent immediately after such
transaction; (iii) a "person" or "group" (within the meaning of Sections 13(d)
or 14(d)(2) of the Exchange Act) being or becoming the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all
Voting Stock of the Company then outstanding, except in a merger or
consolidation which would not constitute a Change of Control under clause (ii)
above; (iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) ceasing for any reason (other than death) to constitute
a majority of the Board of Directors of the Company then in office; or (v) the
approval by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company.
With respect to the disposition of assets, the phrase "all or
substantially all" as used in the Indenture varies according to the facts and
circumstances of the subject transaction and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether a Change of Control has occurred and whether
the holders have the right to require the Company to purchase the Notes.
Prior to giving notice to holders, the Company shall, with respect to
all Designated Senior Indebtedness which would prohibit the making of a Change
of Control Offer or a purchase of Notes thereunder, or with respect to which the
making of a Change of Control Offer or a purchase of Notes thereunder would
constitute a default or event of default, either (i) repay in full in cash or
Cash Equivalents, or otherwise make arrangements satisfactory to the holders of
such Designated Senior Indebtedness (or their respective Senior Representatives)
for the repayment in full in cash or Cash Equivalents of, such Designated Senior
Indebtedness or offer to repay such Designated Senior Indebtedness in full in
cash or Cash Equivalents and have repaid in full in cash or Cash Equivalents, or
otherwise made arrangements satisfactory to the holders of such Designated
Senior Indebtedness (or their respective Senior Representatives) for the
repayment in full in cash or Cash Equivalents of, the Designated Senior
Indebtedness of such issue held by any lender who accepts such offer; or (ii)
obtain the requisite consents under any Bank Credit Facility and any other such
Designated Senior Indebtedness to make a Change of Control Offer and to purchase
Notes upon a Change of Control. The Company shall not make the Change of Control
Offer until all such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents and/or such requisite consents have been obtained.
The occurrence of certain of the events which would constitute a Change
of Control would constitute a default under the Bank Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be paid or purchased upon a Change of Control. The Bank Credit Facility
contains, and future Senior Indebtedness may contain, restrictions or
prohibitions on the making of a Change of Control Offer or a purchase of Notes
thereunder. Moreover, the exercise by the holders of Notes of their right to
require the Company to purchase the Notes could cause a default under Senior
Indebtedness, even if the
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Change of Control itself does not, due to the financial effect of such purchase
on the Company. Finally, the Company's ability to pay cash to the holders of
Notes upon a purchase may be limited by the Company's then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any required purchases. Consequently, if the Company is
not able to prepay indebtedness outstanding under the Bank Credit Facility and
any other Senior Indebtedness containing similar restrictions or to obtain
requisite consents, or if the Company's funds are insufficient, the Company will
be unable to fulfill its repurchase obligations if holders of Notes exercise
their purchase rights following a Change of Control, thereby resulting in a
default under the Indenture. Furthermore, the Change of Control provisions may
in certain circumstances make more difficult or discourage a takeover of the
Company and the removal of incumbent management.
COVENANTS
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Company and its Subsidiaries
will not, directly or indirectly, create, incur, assume, become liable for or
guarantee the payment of (collectively, "incur") any Indebtedness (including
Acquired Indebtedness), other than Permitted Indebtedness; PROVIDED, HOWEVER,
that the Company may incur Indebtedness (including Acquired Indebtedness) and
its Subsidiaries may incur Acquired Indebtedness if, at the time of such
incurrence and after giving effect thereto, on a pro forma basis, the
Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding such incurrence (the "coverage period"), taken as one
period and calculated on a pro forma basis as if such Indebtedness had been
incurred and the proceeds therefrom applied and calculated using the assumptions
and adjustments set forth in the following two paragraphs, would have been
greater than 2.25 to 1.
The following assumptions, and any related adjustments, shall be used
in calculating the Consolidated Fixed Charge Coverage Ratio and the components
thereof for the coverage period giving rise to such determination: (i) the
Indebtedness (including Acquired Indebtedness) being incurred will be assumed to
have been incurred and the proceeds therefrom applied on the first day of such
coverage period; (ii) any other Indebtedness (including Acquired Indebtedness)
incurred since the beginning of such coverage period that remains outstanding
will be assumed to have been incurred on the first day of such coverage period,
except that, in making such computation, Indebtedness incurred under a revolving
credit or similar arrangement shall be computed on the average daily balance of
such Indebtedness during such coverage period unless such Indebtedness is
projected in the reasonable judgment of senior management of the Company to
remain outstanding for a period in excess of 12 months from the date of
incurrence of such Indebtedness, in which case such Indebtedness will be assumed
to have been incurred on the first day of such coverage period; (iii) with
respect to the incurrence of any Acquired Indebtedness since the beginning of
such coverage period, the related acquisition (whether by means of purchase,
merger or otherwise) and any related repayment of any Indebtedness will be
assumed to have occurred on the first day of such coverage period; (iv) with
respect to Indebtedness repaid (other than a repayment of revolving credit
Indebtedness, except for revolving credit Indebtedness that was not subject to
the exception in clause (ii) above and therefore was assumed to have been
incurred on the first day of such coverage period) during such coverage period
(or subsequent thereto) or being repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness, such Indebtedness will be
assumed to have been repaid on the first day of such coverage period; (v) any
permanent reduction in the committed amount of a revolving credit facility
during such coverage period (or subsequent thereto) will be deemed to have
occurred on the first day of such coverage period and interest paid on any
amounts drawn on such revolving credit facility during such coverage period in
excess of such reduced committed amount shall, for the period during which such
drawn amounts were actually outstanding, be excluded from such calculation; (vi)
if since the beginning of such coverage period the Company has made any Asset
Acquisition or Asset Sale, such Asset Acquisition or Asset Sale will be assumed
to have occurred on the first day of such coverage period; and (vii) effect
shall be given to the net amounts payable or receivable under agreements
described in the definition of Hedging Obligations.
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For the purpose of determining compliance with the "Limitation on
Additional Indebtedness" covenant, (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness permitted by
this covenant, the Company in its sole discretion shall classify such item of
Indebtedness and only be required to include the amount and type of each class
of Indebtedness in the test specified in this covenant or in one of the clauses
of the definition of Permitted Indebtedness; (ii) the amount of Indebtedness
issued at a price which is less than the principal amount thereof shall be equal
to the amount of liability in respect thereof determined in accordance with
GAAP; and (iii) Indebtedness incurred in connection with, or in contemplation
of, any transaction described in the definition of Acquired Indebtedness shall
be deemed to have been incurred by the Company at the time an acquired Person
becomes a Subsidiary (or is merged into the Company or a Subsidiary) or at the
time of the acquisition of assets, as the case may be.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not
permit any Subsidiary to, directly or indirectly, issue any Preferred Stock
(other than to the Company or a Wholly-Owned Subsidiary).
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, make any Restricted Payment
unless: (i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Restricted Payment; (ii) the
Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding the date of such Restricted Payment, taken as one period
and calculated on a pro forma basis as if such Restricted Payment had been made
on the first day of such period, using the assumptions and adjustments set forth
above under the final two paragraphs of "Limitation on Additional Indebtedness,"
would have been greater than 2.25 to 1; and (iii) immediately after giving
effect to such Restricted Payment, the aggregate amount of all Restricted
Payments (with the fair market value of any such Restricted Payment, if other
than in cash, being determined in good faith by the Company's Board of
Directors, as evidenced by a resolution of such Board) declared or made
subsequent to the Issue Date does not exceed the sum of (a) 50% of the
Consolidated Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the period (treated as one
accounting period) subsequent to March 31, 1996 and ending on the last day of
the fiscal quarter immediately preceding the date of such Restricted Payment;
plus (b) 100% of the aggregate net cash proceeds received by the Company from
any Person or Persons (other than a Subsidiary) as a capital contribution to the
Company or from the issue or sale (other than to a Subsidiary), after the Issue
Date, of Capital Stock (other than Disqualified Stock) of the Company; plus (c)
the amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Indebtedness of the Company into or for
Capital Stock (other than Disqualified Stock) of the Company; plus (d) in the
case of a cash return of capital or principal from an Investment constituting a
Restricted Payment made after the Issue Date, an amount equal to the lesser of
the cash proceeds of such return of capital or principal, or the amount of such
Restricted Payment; plus (e) $30 million.
Notwithstanding the foregoing, the above limitations will not prevent:
(a) the payment of any dividend within 60 days after the date of its declaration
if at the date of declaration such payment would have complied with the
provisions of the Indenture; (b) the purchase, redemption, acquisition or
retirement of any shares of Capital Stock of the Company in exchange for, or out
of the net proceeds of the substantially concurrent sale (other than to a
Subsidiary) of, other shares of Capital Stock (other than Disqualified Stock) of
the Company; (c) the purchase, redemption, defeasance or other acquisition or
retirement of Indebtedness of the Company which is subordinate in right of
payment to the Notes, in exchange for, by conversion into, or out of the net
proceeds of, a substantially concurrent (1) sale (other than to a Subsidiary) of
shares of Capital Stock (other than Disqualified Stock) of the Company or (2)
incurrence of Refinancing Indebtedness with respect to such subordinated
Indebtedness; (d) the purchase or redemption of shares of Capital Stock of the
Company (including stock appreciation rights and similar securities) held by
present or former directors, officers or employees of the Company or any
Subsidiary or by any employee stock ownership plan
-39-
or similar trust for the account of such present or former director, officer or
employee upon such person's death, disability, retirement or termination of
employment or under the terms of any such plan or trust or any other agreement
under which such shares or rights were issued; PROVIDED that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Capital Stock
pursuant to this clause (d) shall not exceed in any twelve-month period,
$500,000 plus the aggregate cash proceeds received by the Company during such
twelve-month period from any reissuance of Capital Stock by the Company to
directors, officers or employees of the Company and its Subsidiaries; (e) an
exchange of shares of the Company's Series B Preferred Stock outstanding on the
Issue Date for 7 1/2% Convertible Subordinated Debentures Due 2013 of the
Company pursuant to the terms of such stock as in effect on the Issue Date; (f)
the payment of the regular preferred dividends on shares of the Existing
Preferred Stock; and (g) the payment of dividends on the Company's Capital Stock
(PROVIDED that any dividend paid pursuant to this clause (g) shall be subject to
clause (iii) of the immediately preceding paragraph, and that the aggregate
amount of all dividends paid pursuant to this clause (g) shall not exceed $10
million during any 12-month period); PROVIDED that (x) no Restricted Payment
described in clauses (b) through (g) of this sentence may be made if any Default
or Event of Default shall have occurred and shall be continuing at the time or
would occur as a result of such Restricted Payment and (y) each Restricted
Payment described in clauses (a), (b), (c)(1), (d), (f) and (g) (but not clauses
(c)(2) and (e)) of this sentence shall be taken into account for the purposes of
computing the aggregate amount of all Restricted Payments made pursuant to
clause (iii) of the immediately preceding paragraph.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or consensual restriction on the ability of
any Subsidiary to (i) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in or measured by its
profits owned by the Company or any Subsidiary; (ii) pay any Indebtedness owed
to the Company or any Subsidiary; (iii) make loans or advances to the Company or
any Subsidiary; or (iv) transfer any of its properties or assets to the Company
or any Subsidiary, except for (a) any encumbrances or restrictions existing
under written agreements (including the Indenture and the Notes) in effect on
the Issue Date, (b) encumbrances or restrictions binding upon any Person at the
time such Person becomes a Subsidiary (unless the agreement creating such
encumbrance or restriction was entered into in connection with, or in
contemplation of, such entity becoming a Subsidiary), PROVIDED that such
encumbrances or restrictions shall not encumber or restrict any assets of the
Company or its other Subsidiaries other than such Subsidiary, (c) any
encumbrances or restrictions under any agreement evidencing Acquired
Indebtedness incurred pursuant to the provisions of the "Limitation on
Additional Indebtedness" covenant; PROVIDED that such encumbrances or
restrictions shall apply only to such Person (if the Person is acquired) or the
acquired assets (if the assets are acquired directly), (d) any encumbrances or
restrictions existing under any Bank Credit Facility, (e) encumbrances or
restrictions under any agreement that refunds, rearranges, restructures,
refinances or replaces any agreement described in clauses (a) through (d) above,
PROVIDED that the terms and conditions of any such encumbrances or restrictions
are not materially less favorable to the holders of Notes than those under the
agreement so refunded, rearranged, restructured, refinanced or replaced, (f)
customary non-assignment provisions in leases and purchase money financings, (g)
any Lien or agreement restricting the sale or other disposition of Property
otherwise permitted under the Indenture, if such Lien or agreement does not
expressly restrict the ability of a Subsidiary to pay dividends or make or repay
loans or advances to the Company, (h) any encumbrance or restriction due to
applicable law and (i) encumbrances or restrictions contained in any agreement
with respect to a sale of assets or Capital Stock permitted under the Indenture
for the period from the date of the execution of such agreement until the date
of the closing thereunder or, if the Company or any Subsidiary retains title to
any such assets after closing, such later date as title is transferred.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without
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limitation, the purchase, sale, lease or exchange of any Properties or the
rendering of any service) or series of related transactions with any Affiliate
of the Company, any Affiliate of any Subsidiary or any holder of 10% or more of
any class of Capital Stock of the Company ("Affiliate Transaction"), on terms
that are less favorable to the Company or such Subsidiary, as the case may be,
than would be available in a comparable arm's length transaction with an
unrelated Person that is not an Affiliate of the Company or a Subsidiary or a
10% stockholder of the Company.
In addition, the Company will not, and will not permit any Subsidiary
to, enter into any Affiliate Transaction, unless the Company delivers to the
Trustee: (i) with respect to such Affiliate Transaction involving the aggregate
value, remuneration or other consideration of more than $5 million, an Officer's
Certificate certifying that such transaction complies with the preceding
paragraph; and (ii) with respect to such Affiliate Transaction involving the
aggregate value, remuneration or other consideration of more than $10 million,
either (a) an Officer's Certificate certifying that such transaction complies
with the preceding paragraph and has been approved by a majority of the Board of
Directors of the Company (including a majority of the disinterested directors)
or (b) a written opinion of an independent financial advisor to the effect that
such Affiliate Transaction is fair to the Company or such Subsidiary, as the
case may be, from a financial point of view.
Notwithstanding the foregoing limitations, the term "Affiliate
Transaction" shall not include: (i) any payment of money or issuance of
securities (or provision of benefits, including indemnification) by the Company
or any Subsidiary pursuant to employment agreements and arrangements and
employee benefit plans approved by the Board of Directors of the Company or the
applicable Subsidiary; (ii) reasonable payments and other benefits (including
indemnification) provided to directors for service on the Board of Directors of
the Company or any Subsidiary, including the reimbursement or advancement of
out-of-pocket expenses and directors' and officers' liability insurance; (iii)
any transaction the prohibition of which would constitute a violation of Section
4.15 of the Indenture dated as of October 15, 1991 between the Company and State
Street Bank and Trust Company of Connecticut, National Association, Trustee,
pursuant to which the 14% Notes were issued (the "14% Notes Indenture"), which
limits, among other things, the ability of Subsidiaries to create restrictions
on their ability to pay dividends or make distributions, or the similar covenant
in the Bank Credit Facility in effect on the Issue Date; (iv) any Restricted
Payment otherwise permitted under the "Limitation on Restricted Payments"
covenant, any payment or transaction which is not a Restricted Payment by virtue
of the parentheticals in clauses (i) and (ii) of the definition of Restricted
Payment, or any Permitted Investment; or (v) transactions between the Company
and a Subsidiary, or between any Subsidiary and another Subsidiary, in the
ordinary course of business.
LIMITATIONS ON SALE OF ASSETS. The Company will not, and will not
permit any Subsidiary to, make any Asset Sale unless: (i) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value thereof (as determined in good
faith by the Company's Board of Directors and evidenced by a resolution of such
Board); (ii) except as provided in the immediately following sentence, not less
than 75% of the consideration received by the Company or such Subsidiary, as the
case may be, consists of cash or Cash Equivalents (PROVIDED that (a) the amount
of any Senior Indebtedness of the Company or any Indebtedness of such Subsidiary
that is assumed or paid by the transferee in any such transaction and (b) the
fair market value as of the date of acquisition of any Exchanged Properties
received by the Company or such Subsidiary in any such transaction shall each be
deemed to be cash for purposes of this clause (ii) and the immediately following
sentence); and (iii) the Net Cash Proceeds, if any, received by the Company or
such Subsidiary, as the case may be, from such Asset Sale are applied in
accordance with the following paragraphs. The Company and its Subsidiaries will
not be required to comply with clause (ii) of the immediately preceding sentence
in connection with an Asset Sale if and to the extent that the sum of (a) the
aggregate non-cash consideration received in connection with such Asset Sale and
(b) the sum of all non-cash consideration received in connection with prior
Asset Sales that has not yet been converted into cash or cash equivalents does
not exceed $15 million; PROVIDED that if and when any
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such non-cash consideration is converted into cash or cash equivalents, it shall
constitute receipt of Net Cash Proceeds.
The Company may, within 365 days following the receipt of Net Cash
Proceeds from any Asset Sale, apply such Net Cash Proceeds to (i) the repayment
of Senior Indebtedness of the Company or Indebtedness of the Company's
Subsidiaries, PROVIDED that any such repayment, if with respect to any revolving
credit, shall result in a permanent reduction in any revolving credit or other
commitment relating thereto in an amount equal to the principal amount so
repaid, unless such amount is used within such 365-day period for investments or
purchases described in clauses (ii) and (iii) of this sentence; (ii) make an
investment in capital expenditures in the cement, concrete products or building
products industries, or any other line of business in which the Company was
engaged on the Issue Date, or in working capital items or current assets related
thereto (other than cash or cash equivalents); or (iii) purchase Exchanged
Properties.
If, upon completion of the 365-day period, any portion of the Net Cash
Proceeds of any Asset Sale shall not have been applied by the Company as
described in clauses (i), (ii) or (iii) of the preceding paragraph and such
remaining Net Cash Proceeds, together with any remaining Net Cash Proceeds from
any prior Asset Sale (such aggregate constituting "Excess Proceeds") exceed $10
million, then the Company will be required to make an offer (a "Net Proceeds
Offer") to purchase from all holders of Notes the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds (on a pro rata basis if
the amount available for such purchase is less than the principal amount of
Notes tendered in such Net Proceeds Offer) at a purchase price in cash of 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase. To the extent that the aggregate amount of Notes tendered
pursuant to the Net Proceeds Offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for general corporate purposes. Upon
completion of a Net Proceeds Offer, the amount of Excess Proceeds shall be reset
to zero.
The Company will comply with all applicable laws, including, to the
extent applicable, section 14(e) of the Exchange Act and the rules thereunder,
in the event that it is required to make a Net Proceeds Offer.
The terms of the Bank Credit Facility will prohibit, subject to certain
exceptions, the Company's prepayment of Notes prior to their scheduled maturity.
Future Senior Indebtedness of the Company may contain similar provisions.
Moreover, the exercise by the holders of Notes of their right to require the
Company to purchase the Notes could cause a default under Senior Indebtedness,
even if the repurchase of Notes is not directly prohibited, due to the financial
effect of such purchase on the Company. Finally, the Company's ability to pay
cash to the holders of Notes upon a purchase may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required purchases.
Consequently, if the Company is not able to prepay indebtedness outstanding
under the Bank Credit Facility and any other Senior Indebtedness containing
similar restrictions or to obtain requisite consents, or the Company's funds are
insufficient, the Company will be unable to make a Net Proceeds Offer or
purchase Notes thereunder, thereby resulting in a default under the Indenture.
LIMITATION ON LIENS. The Company will not, and will not permit any
Subsidiary to, create, incur or otherwise cause or suffer to exist or become
effective any Lien, other than Permitted Liens, upon any Property of the Company
or any Subsidiary (including Capital Stock or Indebtedness of any Subsidiary),
now owned or hereafter acquired, to secure any Indebtedness that is PARI PASSU
with or subordinate in right of payment to the Notes, unless (i) if such Lien
secures Indebtedness which is PARI PASSU with the Notes, then the Notes are
secured on an equal and ratable basis or (ii) if such Lien secures Indebtedness
which is junior to the Notes, any such Lien shall be junior to a Lien granted to
the holders of the Notes, in each case until such time as such Indebtedness is
no longer secured by a Lien, at which time such Lien securing the Notes shall
automatically cease to exist.
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LIMITATION ON FUTURE SENIOR SUBORDINATED INDEBTEDNESS. The Company will
not incur any Indebtedness, other than the Notes, that is subordinated in right
of payment to any other Indebtedness of the Company unless such Indebtedness by
its terms is PARI PASSU with, or subordinated to, the Notes pursuant to
subordination provisions substantially similar to those contained in the
Indenture.
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS. The Company will not,
and will not permit any Subsidiary to, enter into any sale and leaseback
transaction with respect to any Property (whether now owned or hereafter
acquired) unless (i) the Company or such Subsidiary, as the case may be, would
be entitled under the "Limitation on Additional Indebtedness" covenant to incur
any Capitalized Lease Obligations in respect of such sale and leaseback
transaction; and (ii) the Company or such Subsidiary receives proceeds from such
sale and leaseback transaction at least equal to the fair market value thereof
(as determined in good faith by the Company's Board of Directors and evidenced
by a resolution of such Board) and such proceeds are applied in accordance with
the "Limitations on Sale of Assets" covenant.
LIMITATION ON MERGERS, CONSOLIDATIONS AND SALE OF ASSETS. The Company
will not consolidate or merge with or into any other Person or entity, or permit
any other Person or entity to consolidate or merge with or into the Company
(except, in each case, a merger of the Company with a Wholly-Owned Subsidiary
which is organized and existing under the laws of the United States, any state
thereof, or the District of Columbia, for the purpose of redomesticating the
Company), nor will the Company sell, lease, convey or otherwise dispose of
(other than the incurrence of a Lien on) all or substantially all of its assets
unless (i) either (a) the Company shall be the surviving or continuing
corporation or (b) the entity formed by or surviving any such consolidation or
merger, or to which such sale, lease, conveyance or other sale shall have been
made (the "Surviving Entity"), is a corporation organized and existing under the
laws of the United States, any state thereof, or the District of Columbia; (ii)
the Surviving Entity assumes by supplemental indenture all of the obligations of
the Company under the Notes and the Indenture; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iv) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Company or the Surviving Entity, as the case may
be, would be at least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction; and (v) immediately after giving effect
to such transaction, the Company or the Surviving Entity, as the case may be,
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of the "Limitation on Additional
Indebtedness" covenant.
CERTAIN PERMITTED TRANSACTIONS. Notwithstanding any of the foregoing
covenants, nothing in the Indenture shall prohibit any transaction the
prohibition of which would constitute a violation of Section 4.15 of the 14%
Notes Indenture, which limits, among other things, the ability of Subsidiaries
to create restrictions on their ability to pay dividends or make distributions,
or the similar covenant in the Bank Credit Facility as in effect on the Issue
Date.
REPORTS. The Indenture provides that, so long as the Company is subject
to the periodic reporting requirements of the Exchange Act, it shall furnish the
reports required to be filed with the Commission (excluding exhibits) to the
Trustee and the holders of Notes. The Indenture also provides that even if the
Company is entitled under the Exchange Act not to furnish such information to
the Commission, it will nonetheless continue to furnish such reports both to the
Commission and to the Trustee and the holders of Notes as if it were subject to
such periodic reporting requirements.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any Person, Indebtedness
of such Person (i) existing at the time such Person becomes a Subsidiary (or
such Person is merged into the Company or any Subsidiary) or (ii) assumed in
connection with the acquisition of assets from any such Person, and, in each
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case, not incurred in connection with, or in the contemplation of, such Person
becoming a Subsidiary or such acquisition.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controls" and
"controlled"), when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) a transaction in which any other Person
shall become a Subsidiary or shall be merged with the Company or any Subsidiary;
or (ii) the acquisition by the Company or any Subsidiary of assets of any Person
which constitute substantially all of a cement plant or terminal, concrete batch
plant, aggregate quarry or operation, ready-mixed concrete operation or other
operating unit or business of such Person.
"Asset Sale" means any sale, lease, conveyance, transfer or other
disposition (or series of related sales, leases, conveyances, transfers or
dispositions) of any Capital Stock (including the issuance of shares of Capital
Stock) of a Subsidiary or Property, whether owned on the Issue Date or
thereafter acquired, in one or more related transactions, by the Company or any
Subsidiary, whether for cash or other consideration, other than (i) a
disposition by the Company or a Subsidiary to another Subsidiary or by a
Subsidiary to the Company; (ii) a disposition of Property in the ordinary course
of business; (iii) a disposition or abandonment of damaged, worn-out or obsolete
Property or Property no longer necessary for the conduct of the Company's
business, provided that the Net Cash Proceeds, if any, received from such
disposition or abandonment exceeding $250,000 will be applied in the manner set
forth in the "Limitation on Sale of Assets" covenant; (iv) any disposition
pursuant to a consolidation, merger or transfer of assets that is permitted by
the "Limitation on Mergers, Consolidations and Sale of Assets" covenant; (v)
Liens; (vi) any disposition which is a Restricted Payment made in accordance
with the "Limitation on Restricted Payments" covenant or which is not a
Restricted Payment by reason of the parenthetical in clause (i) of the
definition of Restricted Payment; (vii) any Permitted Investment described in
clause (v)(c) or (vii) of the definition of Permitted Investment; and (viii)
other disposition or dispositions during any 12-month period having in the
aggregate a fair market value of less than $2 million.
"Average Life" means, as of the date of determination, with reference
to any Indebtedness, the number of years obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal payment of such Indebtedness multiplied by
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bank Credit Facility" means the $200 million Third Amended and
Restated Credit Agreement dated as of November 3, 1995 among the Company, the
financial institutions signatory thereto and Wells Fargo Bank, N.A., as agent,
together with the documents related thereto (including, without limitation, any
letters of credit issued pursuant thereto, and any related guarantee agreements
and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified or replaced (including with other lenders), from time to time and
including any agreement or agreements (which agreement or agreements state
therein that they represent a "Bank Credit Facility" for purposes of the
Indenture) extending or lessening the maturity of, refinancing, modifying,
increasing, substituting for, adding to (including by the creation of a new
agreement or agreements or facility unrelated to, and whether or not refinancing
or increasing any Indebtedness under, any then existing Bank Credit Facility) or
otherwise restructuring (including, but not limited to, the inclusion of
additional or different or substitute lenders or agents thereunder) all or any
portion of the Indebtedness, including changing the borrowing limits, under any
Bank Credit Facility, regardless of whether any Bank Credit Facility or any
portion thereof was outstanding or in effect at the time of such replacement,
refinancing,
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increase, addition, substitution, extension, restructuring, supplement or
modification. There may at any time be multiple Bank Credit Facilities, and the
term "Bank Credit Facility" shall refer to all such Bank Credit Facilities.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
real or personal property that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purposes of this definition,
the amount of such obligation at any date shall be the amount thereof at such
date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights to purchase, warrants, options or other
equivalents (however designated) of such Person's capital stock, whether now
outstanding or issued after the Issue Date, including, without limitation, all
common stock and Preferred Stock.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America; (ii) commercial paper rated "P-1" or
"P-2" or an equivalent or higher rating by Moody's Investors Service, Inc. or
"A-1" or "A-2" or an equivalent or higher rating by Standard & Poor's Ratings
Group and maturing not more than 180 days from the date of acquisition thereof;
(iii) demand and time deposits with, and certificates of deposit and banker's
acceptances issued by, any bank having capital surplus and undivided profits
aggregating at least $500 million and maturing not more than 180 days from the
date of acquisition thereof; (iv) repurchase agreements that are secured by a
perfected security interest in an obligation described in clause (i) and are
with any bank described in clause (iii); and (v) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof rated "Aa3" or an equivalent or higher rating by Moody's
Investors Service, Inc. or rated "AA-" or an equivalent or higher rating by
Standard & Poor's Ratings Group.
"Consolidated EBITDA" means, for any period, on a consolidated basis
for the Company and its Subsidiaries as determined in accordance with GAAP, (i)
the sum (without duplication) for such period of (a) Consolidated Net Income,
(b) federal and state income tax expense, (c) interest, net of amounts
capitalized, (d) depreciation, depletion and amortization expense (including
amortization of debt discount and debt issue costs) and (e) any other non-cash
charges to earnings relating to restructuring or other unusual charges (to the
extent deducted in determining Consolidated Net Income); less (ii) any cash
actually paid during such period related to any restructuring or other unusual
charges incurred after the Issue Date.
"Consolidated Fixed Charges" means, for any period, on a consolidated
basis for the Company and its Subsidiaries, the sum (without duplication) for
such period of (i) the aggregate amount of interest, whether expensed,
capitalized or accrued during such period (including any non-cash interest
payments or accruals and the interest portion of Capitalized Lease Obligations,
but excluding amortization of debt discount and debt issue costs) of the Company
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP; PROVIDED that, in making such computation, Consolidated Fixed Charges
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation was the applicable rate for the entire period; and (ii)
all dividends in respect of Disqualified Stock and Existing Preferred Stock to
the extent payable to Persons other than the Company or a Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio, the ratio of (i) Consolidated EBITDA for the relevant coverage
period to (ii) Consolidated Fixed Charges for the relevant coverage period.
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"Consolidated Net Income" means, for any period, the net income or loss
of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, excluding, without duplication and
together with any related provisions for taxes, (i) extraordinary gains and
extraordinary losses; (ii) net gains or losses in respect of dispositions of
assets other than in the ordinary course of business; (iii) the net income of
any Person (other than a Subsidiary) in which any other Person other than the
Company or any Subsidiary has a joint equity interest, except to the extent of
the amount of dividends or other distributions actually paid to the Company or
any Subsidiary by such Person during such period; (iv) the net income of any
Person accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Company or any Subsidiary or that other Person's assets
are acquired by the Company or any Subsidiary, except to the extent includable
in Consolidated Net Income pursuant to clause (iii) above; (v) the net income of
any Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of that income is at the time
prohibited by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary; (vi) any gains or losses attributable to
write-ups or write-downs of assets other than in the ordinary course of
business; (vii) the cumulative effect of a change in accounting principles;
(viii) net income (loss) from discontinued operations; and (ix) the gains or
losses realized during such period resulting from the acquisition of securities,
or extinguishment of Indebtedness, of the Company or any Subsidiary.
"Consolidated Net Tangible Assets" means, as of any date of
determination, the total assets of the Company and its Subsidiaries determined
on a consolidated basis in accordance with GAAP (less applicable reserves and
other items properly deductible from total assets) and after deducting therefrom
(to the extent otherwise included therein): (i) goodwill, unamortized debt
discount and expense, and other intangible assets (other than permits and other
contractual rights used in the operation of the Company's business); and (ii)
appropriate deductions for any minority interests.
"Consolidated Net Worth" means, as of any date of determination, the
total assets of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP (less applicable reserves and other items properly
deductible from total assets) and after deducting therefrom (i) total
liabilities as of such date and (ii) appropriate deductions for any minority
interests.
"Default" means any event, occurrence or condition that, with the
passage of time, the giving of notice or both, would constitute an Event of
Default.
"Disqualified Stock" means any Capital Stock of any Person which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event or with the
passage of time, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the maturity date of
the Notes, or which is exchangeable or convertible into debt securities of such
Person, except to the extent that such exchange or conversion rights cannot be
exercised prior to the maturity date of the Notes.
"Exchanged Properties" means capital assets or other long-term assets
used in, or Capital Stock of a Person engaged primarily in, the cement, concrete
products or building products industries or any other line of business in which
the Company was engaged on the Issue Date, and working capital items or current
assets related thereto (other than cash or cash equivalents); PROVIDED in the
case of an acquisition of Capital Stock of a Person that after such purchase
such Person would be a Wholly-Owned Subsidiary.
"Existing Preferred Stock" means the Company's Series A Preferred
Stock, Series B Preferred Stock and Series D Preferred Stock outstanding on the
Issue Date.
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"GAAP" means generally accepted accounting principles recognized as
such by the American Institute of Certified Public Accountants, as in effect on
the Issue Date.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under interest rate swap agreements, interest rate
cap agreements, interest rate collar agreements, foreign currency exchange
contracts, foreign currency swaps, commodities futures and any other agreement
designed to protect such Person against fluctuations in interest rates, currency
valuations or commodity prices.
"Indebtedness" means, with respect to any Person, (i) any liability of
such Person (a) for borrowed money, or under any reimbursement obligation
relating to a letter of credit, bankers' acceptance or note purchase facility;
(b) evidenced by a bond, note, debenture or similar debt instrument; (c) for the
balance deferred and unpaid of the purchase price for any Property (except for
trade payables arising in the ordinary course of business); (d) for the payment
of money relating to a lease that is required to be classified as a Capitalized
Lease Obligation; or (e) for the maximum fixed repurchase price of any
Disqualified Stock of such Person plus accrued and unpaid dividends thereon;
(ii) any obligation of others secured by a Lien on any asset of such Person,
whether or not any obligation secured thereby has been assumed, by such Person;
(iii) any obligations of such Person under any Hedging Obligation; and (iv) any
obligation of such Person which in economic effect is a guarantee with respect
to any Indebtedness of another Person.
For purposes of this definition, "maximum fixed repurchase price" of
any Disqualified Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value shall be determined in good faith by the board of directors of
the Person issuing such Disqualified Stock.
"Investment" means, with respect to any Person, (i) all investments by
such Person in any other Person in the form of loans (including guarantees of
loans), advances or capital contributions (including the contribution of
assets); (ii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person;
and (iii) all other items that would be classified as investments on a balance
sheet of such Person prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes were first authenticated
and delivered under the Indenture, which was March 19, 1996.
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Net Cash Proceeds" means, with respect to any Asset Sale, the cash
payments or Cash Equivalents (including any cash received by way of deferred
payment pursuant to a note receivable or otherwise, but only as and when so
received) from such Asset Sale, net of (i) fees, commissions, expenses and other
direct costs of sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions) and, if applicable, any
relocation expenses and severance or shutdown costs incurred as a result of such
Asset Sale; (ii) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions); (iii) amounts required to be
applied to the repayment of Indebtedness which is secured by a Lien on the asset
or assets that are the subject of such Asset Sale or Indebtedness which must by
its terms, or in order to obtain a necessary consent, or by applicable law, be
repaid out of the proceeds of such Asset Sale; (iv) any amount required to be
paid to any Person (other than the Company or any of its Subsidiaries) owning
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a beneficial interest in the stock or other assets sold; and (v) reserves in
accordance with GAAP against any liabilities associated with such Asset Sale and
retained by the Company or any Subsidiary, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale. Further, with
respect to an Asset Sale by a Subsidiary which is not a Wholly-Owned Subsidiary,
Net Cash Proceeds shall be reduced pro rata for the portion of the equity of
such Subsidiary which is not owned by the Company.
"Permitted Indebtedness" means (i) Indebtedness of the Company
evidenced by the Original Notes or the Series B Notes; (ii) Indebtedness of the
Company or any Subsidiary outstanding on the Issue Date (excluding any
Indebtedness that is repaid with the proceeds of the private placement of the
Original Notes); (iii) Indebtedness of the Company under any Bank Credit
Facility, PROVIDED that the aggregate amount of Permitted Indebtedness
outstanding under all Bank Credit Facilities shall at no time exceed $255
million; (iv) Indebtedness incurred by the Company or any Subsidiary consisting
of Purchase Money Obligations and Capitalized Lease Obligations in an amount not
to exceed $25 million at any one time outstanding; (v) Indebtedness of the
Company to any Subsidiary (PROVIDED that such Indebtedness is evidenced by a
note) and Indebtedness of a Subsidiary to the Company or another Subsidiary;
PROVIDED, HOWEVER, that any Indebtedness of any Subsidiary owed to any
Subsidiary that ceases to be such a Subsidiary shall be deemed to be incurred
and shall be treated as an incurrence for purposes of the first paragraph of the
covenant described under "Limitation on Additional Indebtedness" at the time the
Subsidiary in question ceases to be a Subsidiary; (vi) Indebtedness of the
Company or a Subsidiary under a guarantee of any Permitted Indebtedness incurred
by a Subsidiary and Indebtedness of any Subsidiary under a guarantee of any
Indebtedness of the Company; (vii) Indebtedness of the Company or any Subsidiary
in respect of bid, performance or advance payment bonds (or letters of credit in
lieu thereof), bankers' acceptances and surety or appeal bonds provided in the
ordinary course of business; (viii) Indebtedness under Hedging Obligations; (ix)
Indebtedness of the Company or any Subsidiary consisting of obligations in
respect of purchase price adjustments, guaranties or indemnities in connection
with any acquisition or disposition of assets permitted under the Indenture; (x)
Indebtedness of any Permitted Joint Venture with respect to which no recourse
may be had to the assets of the Company or any Subsidiary (other than such
Permitted Joint Venture or a Subsidiary the only material asset of which is an
interest in such Permitted Joint Venture); (xi) additional Indebtedness of the
Company or any Subsidiary, not to exceed $50 million in the aggregate at any one
time outstanding; and (xii) any Refinancing Indebtedness.
"Permitted Investments" means (i) Investments existing on the Issue
Date; (ii) Investments in Cash Equivalents; (iii) any Investment in a Subsidiary
or any Investment in any other Person if, as a result, such Person either (a)
becomes a Subsidiary or (b) is merged or consolidated with or into, or transfers
all or substantially all of its assets to, the Company or a Subsidiary; (iv)
loans or advances to employees or customers made in the ordinary course of
business and guaranties or similar obligations with respect to the foregoing;
(v) (a) negotiable instruments held for collection, (b) lease, utility and
similar deposits and (c) stock, obligations or securities received in settlement
or restructuring of obligations owing to the Company or a Subsidiary, in each
case as to obligations that arose in the ordinary course of business of the
Company or such Subsidiary; (vi) sales of goods on trade credit terms consistent
with industry practices; (vii) Investments in Permitted Joint Ventures; PROVIDED
that, after giving effect to such Investment, the ratio of (a)(1) the sum of the
aggregate amount of all such Investments made on or after the Issue Date
pursuant to this clause (vii) less (2) the aggregate amount of all cash
distributions, cash dividends or other cash returns received on or after the
Issue Date on Investments made pursuant to this clause (vii) to (b) the
Company's Consolidated Net Tangible Assets as of the end of the Company's most
recent fiscal quarter for which financial statements have been furnished to the
Trustee and the holders of Notes pursuant to the "Reports" covenant shall not
exceed 5%; (viii) any Investment in the Company by a Subsidiary; and (ix) in
addition to Investments described in clauses (i)-(viii) of this definition,
Investments with a fair market value
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(determined for each such Investment when it is made) at any time not exceeding
$10 million in the aggregate.
"Permitted Joint Venture" means any Person (i) in which the Company
owns at least 25% of the outstanding equity interests and (ii) that does not
have or enter into any line of business other than the cement, concrete products
or building products industries, or any other line of business in which the
Company was engaged on the Issue Date.
"Permitted Liens" means (i) Liens existing on the Issue Date; (ii)
Liens on the Issue Date or thereafter securing any Hedging Obligations of the
Company or any Subsidiary; (iii) Liens securing Refinancing Indebtedness, the
proceeds of which are used to refinance Indebtedness of the Company or any
Subsidiary; PROVIDED that such Liens either extend to or cover only the Property
then securing the Indebtedness being refinanced or comply with the covenant set
forth under "Limitation on Liens;" (iv) Liens securing Acquired Indebtedness
incurred by the Company or any Subsidiary and permitted under the "Limitation on
Additional Indebtedness" covenant or Liens on Property at the time such Property
is acquired, PROVIDED that such Liens attach solely to the assets or Property
(or the assets of the Subsidiary) acquired and were in existence prior to the
contemplation of the acquisition; (v) Liens securing Indebtedness owing to the
Company by a Subsidiary; (vi) Liens securing Purchase Money Obligations incurred
in accordance with the Indenture; (vii) Liens securing Indebtedness of the
Company or any Subsidiary in respect of performance bonds, bankers' acceptances
and surety or appeal bonds provided in the ordinary course of business; (viii)
any interest or title of a lessor in assets or Property subject to Capitalized
Lease Obligations of the Company or any Subsidiary; (ix) rights of setoff; (x)
Liens imposed by law; (xi) other Liens (not securing Indebtedness for money
borrowed) incidental to the conduct of the business of the Company or any of its
Subsidiaries or the ownership of their assets, that do not materially detract
from the value of the property of the Company or Subsidiary subject thereto; or
(xii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, PROVIDED that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor.
"Person" means any individual, corporation, limited or general
partnership, joint venture, limited liability company, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" means, with respect to any Person, all Capital Stock
of such Person of any class or classes (however designated) that ranks prior, as
to distribution in profit or liquidation, to shares of Capital Stock of another
class of such Person.
"Property" means, with respect to any Person, all types of real,
personal, tangible, intangible or mixed property owned by such Person, whether
or not included in the most recent consolidated balance sheet of such Person.
"Purchase Money Obligations" means any Indebtedness of the Company or
any Subsidiary incurred to finance the acquisition or construction of any
Property or business (including Indebtedness incurred within 90 days following
such acquisition or construction), including Indebtedness of a Person existing
at the time such Person becomes a Subsidiary or assumed by the Company or a
Subsidiary in connection with the acquisition of any Property from such Person;
PROVIDED, HOWEVER, that any Lien securing such Indebtedness either (i) shall not
extend to any Property other than the Property so acquired or constructed or
(ii) shall comply with the covenant set forth under "Limitation on Liens."
"Refinancing Indebtedness" means Indebtedness that renews, rearranges,
refunds, refinances or extends any Indebtedness of the Company or any Subsidiary
outstanding on the Issue Date or other
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Indebtedness permitted to be incurred by the Company or any Subsidiary pursuant
to the terms of the Indenture, but only to the extent that (except if the
Refinancing Indebtedness will be used to refinance all Notes outstanding) (i)
the Refinancing Indebtedness is subordinated to the Notes to at least the same
extent as the Indebtedness being renewed, rearranged, refunded, refinanced or
extended, if at all; (ii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being renewed, rearranged, refunded,
refinanced or extended or (b) after the maturity date of the Notes; (iii) the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the maturity date of the Notes has an Average Life to maturity at
the time such Refinancing Indebtedness is incurred that is equal to or greater
than the Average Life to maturity of the portion of the Indebtedness being
renewed, rearranged, refunded, refinanced or extended that is scheduled to
mature on or prior to the maturity date of the Notes; (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (x) the aggregate principal amount then outstanding under the
Indebtedness being renewed, rearranged, refunded, refinanced or extended, (y)
the amount of accrued and unpaid interest, if any, on such Indebtedness being
renewed, rearranged, refunded, refinanced or extended and (z) the amount of
customary fees, expenses and costs related to the incurrence of such Refinancing
Indebtedness; and (v) such Refinancing Indebtedness is incurred by the same
Person that initially incurred the Indebtedness being renewed, rearranged,
refunded, refinanced or extended, except that (a) the Company may incur
Refinancing Indebtedness to renew, rearrange, refund, refinance or extend
Indebtedness of any Subsidiary and (b) any Subsidiary may incur Refinancing
Indebtedness to renew, rearrange, refund, refinance or extend Indebtedness of
another Subsidiary.
"Restricted Investment" means any Investment (other than a Permitted
Investment) or guarantee of an Investment (other than a Permitted Investment) in
any Person.
"Restricted Payment" means any of the following: (i) any dividend or
other distribution in respect of the Capital Stock of the Company or any
Subsidiary (other than (a) dividends or distributions payable solely in Capital
Stock (other than Disqualified Stock), (b) any dividend or distribution in
respect of the equity interests in a Subsidiary in respect of the class of
equity interests owned by the Company or another Subsidiary, PROVIDED that such
dividend or distribution is made pro rata, or in accordance with the terms of
their interests, to all holders of such class of equity interests, and (c) any
dividends or distributions payable to the Company or a Subsidiary); (ii) the
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of the Company (other than a purchase, redemption, acquisition or
retirement for other Capital Stock (other than Disqualified Stock)); (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness which is subordinated in right of payment to the Notes (other than
with Capital Stock (other than Disqualified Stock)); and (iv) the making of any
Restricted Investment.
"Senior Representative" means any trustee, agent or representative, if
any, for the holders of any Designated Senior Indebtedness or, if there is only
one holder of an issue of Designated Senior Indebtedness, such holder.
"Subsidiary" means any Person either (i) the majority of the Capital
Stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other governing body of which is directly
or indirectly owned by the Company or (ii) in the case of a Person without a
governing body, a majority of the outstanding common equity interests of which
is directly or indirectly owned by the Company.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling holders thereof
(whether at all times or only so long as no other class of stock has
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voting power by reason of any contingency) to vote in the election of members of
the board of directors or other governing body of such Person.
"Wholly-Owned Subsidiary" means a Subsidiary of which all issued and
outstanding Capital Stock is owned beneficially and of record by one or more of
the Company and its Wholly-Owned Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
Events of Default shall include (i) failure by the Company to pay
interest on the Notes when due and continuance of such failure for 30 days,
whether or not prohibited by the subordination provisions of the Indenture; (ii)
failure by the Company to pay the principal on, or premium, if any, of, the
Notes when due and payable, whether at maturity, upon acceleration, redemption
or otherwise (including failure to make payments pursuant to a Change of Control
Offer or a Net Proceeds Offer), whether or not prohibited by the subordination
provisions of the Indenture; (iii) failure by the Company to comply with any
other covenant in the Indenture and continuance of such failure for 60 days
after written notice from the Trustee or holders of 25% in principal amount of
the Notes outstanding (except in the case of a default with respect to a Change
of Control Offer or a Net Proceeds Offer pursuant to the "Change of Control" and
"Limitation on Sale of Assets" covenants, and except in the case of a Default
with respect to the "Limitation on Mergers and Consolidations" covenant, which
will constitute Events of Default with such notice but without passage of time);
(iv) a default by the Company or any Subsidiary on any Indebtedness aggregating
in excess of $10 million, and the acceleration of the maturity of such
Indebtedness by reason of such default; (v) failure by the Company or any
Subsidiary to pay when due, after giving effect to any applicable grace periods,
any Indebtedness aggregating in excess of $10 million; (vi) a final judgment or
judgments against the Company or any Subsidiary (to the extent not covered by
insurance) aggregating in excess of $7.5 million which remains undischarged for
a period (during which execution shall not have been effectively stayed) of 60
days after the date on which any period for appeal has expired and all rights of
appeal have been denied; and (vii) certain events of bankruptcy, insolvency or
reorganization involving the Company.
If an Event of Default (other than an Event of Default specified in
clause (vii) of the prior paragraph) shall occur and be continuing, the Trustee
or the holders of not less than 25% in aggregate principal amount of the Notes
then outstanding may, and the Trustee upon the request of such holders shall,
declare by written notice to the Company (and, if any Designated Senior
Indebtedness is outstanding, to the holders thereof or their Senior
Representatives) the Notes due and payable immediately. Upon such acceleration,
the entire principal amount of and accrued and unpaid interest on the Notes (i)
shall become immediately due and payable; or (ii) if there is any Designated
Senior Indebtedness outstanding, shall become due and payable upon the first to
occur of an acceleration under such Designated Senior Indebtedness or five
business days after receipt by the Company and the Senior Representatives with
respect to such Designated Senior Indebtedness of such acceleration notice,
unless all Events of Default specified in such acceleration notice (other than
any Event of Default in respect of non-payment of principal of the Notes) shall
have been cured. Thereupon the Trustee may, at its discretion, proceed to
protect and enforce the rights of the holders of Notes by appropriate judicial
proceeding. However, if any Event of Default specified in clause (vii) of the
prior paragraph occurs and is continuing, then all the Notes shall IPSO FACTO
become and be immediately due and payable, without any declaration or other act
on the part of the Trustee or any holder.
The holders of a majority in principal amount of the Notes by written
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal or interest that has become
due solely because of the acceleration) have been cured or waived.
Notwithstanding the foregoing, any acceleration of payment of the Notes as a
result of the failure of the Company to make an interest payment on the Notes
during a Payment Blockage Period (an "Acceleration Due to Blockage")
automatically will be rescinded if and when the following conditions are
satisfied within five business days following the end of such Payment
-51-
Blockage Period: (i) the payment in respect of interest on the Notes, the
failure of which gave rise to such Event of Default, is made; and (ii) no other
Event of Default, other than an Event of Default which has occurred solely as a
result of the acceleration of the Notes or of other Indebtedness of the Company
or any Subsidiary prior to its express maturity that was caused solely by an
Acceleration Due to Blockage, shall have occurred and be continuing.
No holder will have any right to institute any proceeding with respect
to the Indenture or the Notes or for any remedy thereunder, unless (i) such
holder shall have previously given to the Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate principal
amount of the Notes outstanding shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
(iii) the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the Notes outstanding a direction inconsistent
with such request and (iv) the Trustee shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder for enforcement of payment of the principal of and
premium of, if any, or interest on such holder's Note on or after the respective
due dates expressed in such Note.
The holders of more than 50% in aggregate principal amount of the Notes
outstanding may on behalf of the holders of all the Notes waive any past
defaults under the Indenture and their consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without consent of the holder of each Note outstanding. For
information with respect to waiver of defaults, see "--Modification of the
Indenture; Waiver."
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. The Company is
required to notify the Trustee within five business days of becoming aware of
any Default.
SATISFACTION AND DISCHARGE OF THE INDENTURE; COVENANT DEFEASANCE
At the Company's option, at any time, the Indenture will cease to be of
further effect as to all outstanding Notes (except as to (i) rights of
registration of transfer and exchange and the Company's right of optional
redemption; (ii) the obligation of the Company to substitute apparently
mutilated, defaced, destroyed, lost or stolen Notes; (iii) rights of holders of
the Notes to receive payments of principal and interest on the Notes; (iv)
rights, obligations and immunities of the Trustee under the Indenture; and (v)
rights of the holders of the Notes as beneficiaries of the Indenture with
respect to the property so deposited with the Trustee payable to all or any of
them), if (a) the Company will have paid or caused to be paid the principal of
and interest on the Notes as and when the same will have become due and payable
or (b) all outstanding Notes (except lost, stolen or destroyed Notes which have
been replaced or paid) have been delivered to the Trustee for cancellation or
(c) (1) the Notes not previously delivered to the Trustee for cancellation will
have become due and payable or are by their terms to become due and payable
within one year or are to be called for redemption under arrangements
satisfactory to the Trustee upon delivery of notice and (2) the Company will
have irrevocably deposited with the Trustee, as trust funds, cash, in an amount
sufficient to pay principal of and interest on the outstanding Notes, to
maturity or redemption, as the case may be. Such trust may only be established
if such deposit will not result in a breach or violation of, or constitute a
default under, any agreement or instrument pursuant to which the Company is a
party or by which it is bound and the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions related to such satisfaction and discharge have been complied with.
The Indenture will also cease to be in effect (except as described in
(i) through (v) in the immediately preceding paragraph) and the Indebtedness on
all outstanding Notes will be discharged on the 91st day after the irrevocable
deposit by the Company with the Trustee, in trust, specifically pledged as
security for, and
-52-
dedicated solely to, the benefit of the holders of the Notes, of cash, U.S.
Government Obligations, or a combination thereof, in an amount sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
the principal of and interest on the Notes then outstanding to maturity or
redemption in accordance with the terms of the Indenture and the Notes. Such a
trust may only be established if (i) such deposit will not result in a breach or
violation of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound; (ii) the Company has
delivered to the Trustee an opinion of counsel stating that (a) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (b) since the date of the Indenture there has been a change in the
applicable federal income tax law, in either case to the effect that, based
thereon such opinion shall confirm that, the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred; (iii)
the Company has delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (iv) the Company has
delivered to the Trustee an officer's certificate and an opinion of counsel,
each stating that all conditions related to the defeasance have been complied
with.
The Company may also be released from its obligations described under
"--Change of Control" and "--Covenants" and shall cease to be subject to clauses
(iii) through (vi) of the first paragraph under "Events of Default and
Remedies," with respect to the Notes outstanding on the 91st day after the
irrevocable deposit by the Company with the Trustee, in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the holders of
the Notes, cash, U.S. Government Obligations, or a combination thereof, in an
amount sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and interest on the Notes then outstanding to
maturity or redemption in accordance with the terms of the Indenture and the
Notes ("covenant defeasance"). Such covenant defeasance may only be effected if
(i) such deposit will not result in a breach or violation of, or constitute a
default under, any agreement or instrument to which the Company is party or by
which it is bound; (ii) the Company delivers to the Trustee an officers'
certificate and an opinion of counsel to the effect that the holders of the
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such deposit and covenant defeasance and will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and covenant defeasance had not occurred;
(iii) the Company has delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and (iv)
the Company has delivered to the Trustee an officers' certificate and an opinion
of counsel, each stating that all conditions related to the covenant defeasance
have been complied with. Following such covenant defeasance, the Company may
omit to comply with and will have no liability in respect of any term, condition
or limitation set forth in such sections of the Indenture, whether directly or
indirectly by reason of any reference elsewhere in the Indenture to such
sections or by reason of any reference in such sections to any other provision
in the Indenture or in any other document, and such omission will not constitute
an Event of Default.
MODIFICATION OF THE INDENTURE; WAIVER
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented with the consent of the holders of at least a
majority in aggregate principal amount of the Notes then outstanding, or
compliance by the Company with any provision of the Indenture or the Notes may
be waived; PROVIDED, HOWEVER, that without the consent of each holder affected
thereby, the Company may not (i) reduce the percentage of aggregate principal
amount of the Notes outstanding whose holders must consent to any
-53-
modification, amendment, supplement or waiver; (ii) reduce the rate or change
the time for payment of interest, including defaulted interest, on any Note;
(iii) reduce the principal amount of any Note or extend the maturity date of the
Notes; (iv) reduce the redemption price, including premium, if any, payable upon
redemption of any Note or change the time at which any Note may or shall be
redeemed; (v) reduce the repurchase price, including premium, if any, payable
upon the repurchase of any Note or change the time at which any Note shall be
repurchased as set forth above under "--Change of Control" or "--Limitations on
Sale of Assets;" (vi) change the currency of payment of principal of, premium,
if any, or interest on, any Note; (vii) impair the right to institute suit for
the enforcement of any payment of principal of, premium, if any, or interest on,
any Note; or (viii) waive a continuing Default or Event of Default in the
payment of principal of, premium, if any, or interest on, the Notes (except a
rescission of acceleration of the Notes as set forth under "--Events of Default
and Remedies" and a waiver of the payment default that resulted from such
acceleration).
Notwithstanding the foregoing, without the consent of any holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to (i) cure an ambiguity, defect or inconsistency, (ii) provide for
uncertificated Notes in addition to or in place of certificated Notes, (iii)
provide for the assumption of the Company's obligations to holders of Notes in
the case of a transaction made in accordance with the "Limitation on Mergers,
Consolidations or Sale of Assets" covenant, (iv) make any change that would
provide any additional rights or benefits to holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such holder, or (v)
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
REGARDING THE TRUSTEE
State Street Bank and Trust Company is the Trustee under the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
under the Indenture or in the exercise of any of its rights or powers if it has
reasonable grounds to believe that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Subject to the
provisions of the Indenture and applicable law, the holders of a majority in
principal amount of outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in
transactions with the Company or any Affiliate of the Company other than acting
as Trustee under the Indenture; however, if it acquires any conflicting interest
(as defined in the Indenture), it must eliminate such conflict or resign. State
Street Bank and Trust Company of Connecticut, National Association, is the
trustee under the 14% Notes Indenture.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Series B Notes will be issued in
fully registered form, without coupons. The Series B Notes initially will be
represented by a single, permanent global certificate in definitive, fully
registered form (the "Global Note") and will be deposited with, or on behalf of,
DTC, and registered in the name of Cede & Co., as DTC's nominee or will remain
in the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee. Interests of beneficial owners in the Global Note
may be transferred or exchanged for physical Series B Notes in accordance with
the provisions of the Indenture and the procedures of DTC and the Trustee.
-54-
GOVERNING LAW
The Indenture and the Notes are governed by, and are to be construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. As noted below,
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Series B Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities and not acquired
directly from the Company or any of its affiliates. The Company has generally
agreed that for a period of one year from the date the Registration Statement is
declared effective, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer for use in connection with any such resale.
See "The Exchange Offer -- Purpose and Effect of the Exchange Offer;
Registration Rights."
The Company will not receive any proceeds from any sale of Series B
Notes by broker-dealers. Series B Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Series B Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or purchasers of any such Series B Notes. Any broker-dealer
that resells Series B Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Series B Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of Series B
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year from the date the Registration Statement is
declared effective, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to indemnify broker-dealers permitted to use this Prospectus
in connection with their resales of Series B Notes as described above against
certain liabilities, including liabilities under the Securities Act, in
connection with such resales.
VALIDITY OF SERIES B NOTES
The validity of the Series B Notes offered hereby will be passed upon
for the Company by Bracewell & Patterson, L.L.P., Houston, Texas. Bracewell &
Patterson, L.L.P. will rely on the opinion of Stone, Pigman, Walther, Wittmann &
Hutchinson, L.L.P., New Orleans, Louisiana, as to matters of Louisiana law.
-55-
EXPERTS
The consolidated financial statements of the Company listed in the
Index to Financial Statements appearing in the Company's Annual Report on Form
10-K for the year ending December 31, 1995, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included therein,
and such report is incorporated herein by reference. See "Incorporation by
Reference." The consolidated financial statements referred to above have been
incorporated herein by reference in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
periods ended March 31, 1996 and 1995 which is incorporated herein by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their report included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
-56-
ANNEX A
FORM OF LETTER OF TRANSMITTAL
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LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR SUBORDINATED NOTES DUE 2006
OF
SOUTHDOWN, INC.
PURSUANT TO THE PROSPECTUS
DATED ______________, 1996
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______________,
1996, UNLESS EXTENDED. TENDERS OF NOTES MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
BY MAIL:
State Street Bank and
Trust Company
P.O. Box 778
Boston, Massachusetts 02102
Attention: Nancy Bowker
Corporate Trust Department
BY OVERNIGHT DELIVERY:
State Street Bank and
Trust Company
225 Franklin Street - IP4
Boston, Massachusetts 02110
Attention: Nancy Bowker
Corporate Trust Department
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(617) 664-5784
CONFIRM BY TELEPHONE:
(617) 664-5539
BY HAND:
State Street Bank and
Trust Company
Two International Plaza-4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Window
or
State Street Bank and Trust
Company, National Association
61 Broadway
New York, New York 10006
Attention: Corporate Trust Window-
Concourse Level
A-1
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE SERIES B NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR ORIGINAL NOTES TO
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
__________, 1996, unless the Company extends the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended. All capitalized terms used herein and not defined
shall have the meanings ascribed to them in the Prospectus.
This Letter of Transmittal is to be used by holders ("Holders") of 10%
Senior Subordinated Notes due 2006 (the "Original Notes") of Southdown, Inc.
(the "Company") if: (i) certificates representing Original Notes are to be
physically delivered to the Exchange Agent herewith by such Holders; (ii) tender
of Original Notes is to be made by book-entry transfer to the Exchange Agent's
account at The Depository Trust Company ("DTC") pursuant to the procedures set
forth under the caption "Procedures for Tendering Original Notes--Book-Entry
Delivery Procedures" in the Prospectus dated _____________, 1996 (the
"Prospectus"); or (iii) tender of Original Notes is to be made according to the
guaranteed delivery procedures set forth under the caption "Procedures for
Tendering Original Notes--Guaranteed Delivery" in the Prospectus, and, in each
case, instructions are not being transmitted through the DTC Automated Tender
Offer Program ("ATOP").
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
exchange offer as set forth in the Prospectus and this Letter of Transmittal
(together, the "Exchange Offer") must transmit their acceptance to DTC which
will edit and verify the acceptance and execute a book-entry delivery to the
Exchange Agent's account at DTC. DTC will then send an Agent's Message to the
Exchange Agent for its acceptance. Delivery of the Agent's Message by DTC will
satisfy the terms of the Offer as to execution and delivery of a Letter of
Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a notice of
guaranteed delivery through ATOP.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, then such Holder must tender such Original Notes
according to the guaranteed delivery procedures set forth under the caption
"Procedures for Tendering Original Notes--Guaranteed Delivery" in the
Prospectus. See Instruction 2.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
A-2
TENDER OF ORIGINAL NOTES
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
A-3
List below the Original Notes to which this Letter of Transmittal relates.
If the space provided is inadequate, list the certificate numbers and principal
amounts on a separately executed schedule and affix the schedule to this Letter
of Transmittal.
DESCRIPTION OF ORIGINAL NOTES
Name(s) and Address(es) Aggregate Principal
of Registered Holder(s) Certificate Principal Amount Amount
(Please fill in if blank) Number(s)* Represented** Tendered**
Total
Principal
Amount of
Original Notes
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise specified, the entire aggregate principal amount
represented by the Original Notes described above will be deemed to be
tendered. See Instruction 4.
The names and addresses of the registered Holders should be printed, if not
already printed above, exactly as they appear on the Original Notes tendered
hereby. The Original Notes and the principal amount of Original Notes that the
undersigned wishes to tender should be indicated in the appropriate boxes.
A-4
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Southdown, Inc. ("the Company"), upon the
terms and subject to the conditions set forth in its Prospectus dated
_______________, 1996 (the "Prospectus"), receipt of which is hereby
acknowledged, and in accordance with this Letter of Transmittal (which together
constitute the "Exchange Offer"), the principal amount of Original Notes
indicated in the table above entitled "Description of Original Notes" under the
column heading "Principal Amount Tendered." The undersigned represents that it
is duly authorized to tender all of the Original Notes tendered hereby which it
holds for the account of beneficial owners of such Original Notes ("Beneficial
Owner(s)") and to make the representations and statements set forth herein on
behalf of such Beneficial Owner(s).
Subject to, and effective upon, the acceptance for purchase of the
principal amount of Original Notes tendered herewith in accordance with the
terms and subject to the conditions of the Exchange Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company, all
right, title and interest in and to all of the Original Notes tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company) with
respect to such Original Notes, with full powers of substitution and revocation
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (i) present such Original Notes and all evidences of transfer and
authenticity to, or transfer ownership of, such Original Notes on the account
books maintained by DTC to, or upon the order of, the Company, (ii) present such
Original Notes for transfer of ownership on the books of the Company, and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Original Notes, all in accordance with the terms and conditions of the
Exchange Offer as described in the Prospectus.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Series B Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Series B Notes, (iii) except as indicated below, neither the
undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405
under the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), of the Company, and
(iv) the undersigned and each Beneficial Owner acknowledge and agree that (x)
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Series B Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Series B Notes acquired by such person and cannot rely
on the position of the Staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are noted in the section
of the Prospectus entitled "The Exchange Offer--Purpose and Effect of the
Exchange Offer; Registration Rights" and (y) any broker-dealer that pursuant to
the Exchange Offer receives Series B Notes for its own account in exchange for
Original Notes which it acquired for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Series B Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer shall not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned understands that tenders of Original Notes may be withdrawn
by written notice of withdrawal received by the Exchange Agent at any time prior
to the Expiration Date in accordance with the Prospectus. In the event of a
termination of the Exchange Offer, the Original Notes tendered pursuant to the
Exchange Offer will be returned to the tendering Holders promptly (or, in the
case of Original Notes tendered by book-entry transfer, such Original Notes will
be credited to the account maintained at DTC from which such Original Notes were
delivered). If the Company makes a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer or waives a material
condition of such Exchange Offer, the Company will disseminate additional
Exchange Offer materials and extend such Exchange Offer, if and to the extent
required by law.
The undersigned understands that the tender of Original Notes pursuant to
any of the procedures set forth in the Prospectus and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Exchange Offer. The Company's acceptance for exchange of Original Notes tendered
pursuant to any of the procedures
A-5
described in the Prospectus will constitute a binding agreement between the
undersigned and the Company in accordance with the terms and subject to the
conditions of the Exchange Offer. For purposes of the Exchange Offer, the
undersigned understands that validly tendered Original Notes (or defectively
tendered Original Notes with respect to which the Company has, or has caused to
be, waived such defect) will be deemed to have been accepted by the Company if,
as and when the Company gives oral or written notice thereof to the Exchange
Agent.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Original Notes
tendered hereby, and that when such tendered Original Notes are accepted for
purchase by the Company, the Company will acquire good title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or by the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Original Notes tendered hereby.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned and any Beneficial Owner(s), and any obligation of the
undersigned or any Beneficial Owner(s) hereunder shall be binding upon the
heirs, executors, administrators, trustees in bankruptcy, personal and legal
representatives, successors and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned understands that the delivery and surrender of any Original
Notes is not effective, and the risk of loss of the Original Notes does not pass
to the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, together with all accompanying evidences of authority and any other
required documents in form satisfactory to the Company. All questions as to form
of all documents and the validity (including time of receipt) and acceptance of
tenders and withdrawals of Original Notes will be determined by the Company, in
its sole discretion, which determination shall be final and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Original Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Original Notes tendered by book-entry
transfer, by credit to the account of DTC), and Series B Notes issued in
exchange for Original Notes pursuant to the Exchange Offer be issued to the
undersigned. Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," the undersigned hereby requests that any Original Notes
representing principal amounts not tendered or not accepted for exchange and
Series B Notes issued in exchange for Original Notes pursuant to the Exchange
Offer be delivered to the undersigned at the address shown below the
undersigned's signature(s). In the event that the "Special Issuance
Instructions" box or the "Special Delivery Instructions" box is, or both are,
completed, the undersigned hereby requests that any Original Notes representing
principal amounts not tendered or not accepted for purchase be issued in the
name(s) of, certificates for such Original Notes be delivered to, and Series B
Notes issued in exchange for Original Notes pursuant to the Exchange Offer be
issued in the name(s) of, and be delivered to, the person(s) at the address(es)
so indicated, as applicable. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" box or "Special
Delivery Instructions" box to transfer any Original Notes from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the principal amount of such Original Notes so tendered.
[ ] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD
ORIGINAL NOTES IS AN AFFILIATE OF THE COMPANY.
[ ] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD
ORIGINAL NOTES TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED
SUCH NOTES DIRECTLY FROM THE COMPANY OR AN AFFILIATE OF THE
COMPANY.
[ ] CHECK HERE AND COMPLETE THE LINES BELOW IF YOU OR ANY BENEFICIAL
OWNER FOR WHOM YOU HOLD ORIGINAL NOTES TENDERED HEREBY IS A
BROKER-DEALER WHO ACQUIRED SUCH NOTES IN MARKET-MAKING OR OTHER
TRADING ACTIVITIES. IF THIS BOX IS CHECKED, THE COMPANY WILL SEND
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO TO YOU OR SUCH BENEFICIAL OWNER
AT THE ADDRESS SPECIFIED IN THE FOLLOWING LINES.
A-6
Name: ________________________________________________________
Address: ________________________________________________________
A-7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original Notes in a
principal amount not tendered or not accepted for
exchange are to be issued in the name of, or Series B
Notes are to be issued in the name of, someone other
than the person or persons whose signature(s)
appear(s) within this Letter of Transmittal or issued
to an address different from that shown in the box
entitled "Description of Original Notes" within this
Letter of Transmittal.
Issue: [ ] Original Notes
[ ] Series B Notes
(check as applicable)
Name___________________________________
(Please Print)
Address_________________________________
(Please Print)
________________________________________
(Zip Code)
______________________________________________
(Tax Identification or Social Security Number)
(See Substitute Form W-9 herein)
------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original Notes in a
principal amount not tendered or not accepted for
exchange of Series B Notes are to be sent to someone
other than the person or persons whose signature(s)
appear(s) within this Letter of Transmittal or to an
address different from that shown in the box entitled
"Description of Original Notes" within this Letter of
Transmittal.
Delivery: [ ] Original Notes
[ ] Series B Notes
(check as applicable)
Name______________________________________
(Please Print)
Address___________________________________
(Please Print)
A-8
____________________________________________
(Zip Code)
_____________________________________________
(Tax Identification or Social Security Number)
(See Substitute Form W-9 herein)
------------
PLEASE SIGN HERE
(To be completed by all tendering
Holders of Original Notes regardless of whether Original Notes
are being physically delivered herewith)
This Letter of Transmittal must be signed by the registered Holder(s) exactly as
name(s) appear(s) on certificate(s) for Original Note(s) or, if tendered by a
participant in DTC exactly as such participant's name appears on a security
position listing as owner of Original Notes, or by person(s) authorized to
become registered Holder(s) by endorsements and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.
................................................................................
................................................................................
Signature(s) of Registered Holder(s) or Authorized Signatory
(SEE GUARANTEE REQUIREMENT BELOW)
Dated: ...................................................................1996
Name(s).........................................................................
.......................................................................
(Please Print)
Capacity (Full Title) ..........................................................
Address .......................................................................
.......................................................................
(Including Zip Code)
Area Code and
Tel. Number ...................................................................
Tax Identification or
Social Security No. ............................................................
(Complete Accompanying Substitute Form W-9)
SIGNATURE GUARANTEE
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ...........................................................
Name of Firm ...................................................................
[PLACE SEAL HERE]
A-9
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. SIGNATURE GUARANTEES. Signatures on this Letter of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered hereby are tendered
(i) by a registered Holder of Original Notes (or by a participant in DTC whose
name appears on a security position listing as the owner of such Original Notes)
that has not completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal, or (ii) for the account of an Eligible Institution. If the Original
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, if Original Notes not accepted for exchange or not
tendered are to be returned to a person other than the registered Holder or if
Series B Notes are to be issued in the name of or sent to a person other than
the registered Holder, then the signatures on this Letter of Transmittal
accompanying the tendered Original Notes must be guaranteed by an Eligible
Institution as described above. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND ORIGINAL NOTES. This Letter of
Transmittal is to be completed by Holders if (i) certificates representing
Original Notes are to be physically delivered to the Exchange Agent herewith by
such Holders; (ii) tender of Original Notes is to be made by book-entry transfer
to the Exchange Agent's account at DTC pursuant to the procedures set forth
under the caption "Procedures for Tendering Original Notes--Book-Entry Delivery
Procedures" in the Prospectus; or (iii) tender of Original Notes is to be made
according to the guaranteed delivery procedures set forth under the caption
"Procedures for Tendering Original Notes--Guaranteed Delivery" in the
Prospectus. All physically delivered Original Notes, or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of all Original
Notes delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof), any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at one of its addresses set
forth on the cover page hereto on or prior to the Expiration Date, or the
tendering Holder must comply with the guaranteed delivery procedures set forth
below. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, such Holder must tender such Original Notes
pursuant to the guaranteed delivery procedures set forth under the caption
"Procedures for Tendering Original Notes--Guaranteed Delivery" in the
Prospectus. Pursuant to such procedures, (i) such tender must be made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Company, or an Agent's Message with respect to guaranteed delivery that is
accepted by the Company, must be received by the Exchange Agent, either by hand
delivery, mail, telegram, or facsimile transmission, on or prior to the
Expiration Date; and (iii) the certificates for all tendered Original Notes, in
proper form for transfer (or confirmation of a book-entry transfer of all
Original Notes delivered electronically into the Exchange Agent's account at DTC
pursuant to the procedures for such transfer set forth in the Prospectus),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, or in the case of a book-entry transfer, a properly
transmitted Agent's Message, must be received by the Exchange Agent within two
business days after the date of the execution of the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE OPTION AND RISK
OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2,
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE MAILING BE MADE
SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT PRIOR TO SUCH DATE.
A-10
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or a facsimile
thereof), waive any right to receive any notice of the acceptance of their
Original Notes for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the principal amount represented by Original Notes
should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to Holders who tender by book-entry
transfer). If Holders wish to tender less than the entire principal amount
evidenced by any Original Note submitted, but only in integral multiples of
$1,000, such Holders must fill in the principal amount that is to be tendered in
the column entitled "Principal Amount Tendered." In the case of a partial tender
of Original Notes, as soon as practicable after the Expiration Date, new
certificates for the remainder of the Original Notes that were evidenced by such
Holder's old certificates will be sent to such Holder, unless otherwise provided
in the appropriate box on this Letter of Transmittal. The entire principal
amount that is represented by Original Notes delivered to the Exchange Agent
will be deemed to have been tendered, unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Original Notes tendered hereby, the signatures must correspond
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
is signed by a participant in DTC whose name is shown as the owner of the
Original Notes tendered hereby, the signature must correspond with the name
shown on the security position listing as the owner of the Original Notes.
If any of the Original Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any of the Original Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Original Note or instrument of
transfer is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to the Company of such person's
authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered Holders of the
Original Notes listed herein and transmitted hereby, no endorsements of Original
Notes or separate instruments of transfer are required unless Series B Notes are
to be issued, or Original Notes not tendered or exchanged are to be issued, to a
person other than the registered Holders, in which case signatures on such
Original Notes or instruments of transfer must be guaranteed by an Eligible
Institution.
IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED
HOLDERS OF THE ORIGINAL NOTES LISTED HEREIN, THE ORIGINAL NOTES MUST BE ENDORSED
OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN EITHER CASE SIGNED
EXACTLY AS THE NAME OR NAMES OF THE REGISTERED HOLDERS APPEAR ON THE ORIGINAL
NOTES AND SIGNATURES ON SUCH ORIGINAL NOTES OR INSTRUMENTS OF TRANSFER ARE
REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION, UNLESS THE SIGNATURE
IS THAT OF AN ELIGIBLE INSTITUTION.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Series B
Notes or unexchanged or untendered Original Notes are to be issued in the name
of a person other than the signer of this Letter of Transmittal, or if Series B
Notes or such Original Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. All
Original Notes tendered by book-entry transfer and not accepted for payment will
be returned by crediting the account at DTC designated above as the account for
which such Original Notes were delivered.
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Original Notes to it, or to its order, pursuant to the Exchange Offer.
If Series B Notes, or Original Notes not tendered or exchanged are to be
registered in the name of any persons other than the registered owners, or if
tendered Original Notes are registered in the name of any persons other than the
persons
A-11
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered Holder or such other person) payable on account of the
transfer to such other person must be paid to the Company or the Exchange Agent
(unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted) before the Series B Notes will be issued.
8. WAIVER OF CONDITIONS. The conditions of the Exchange Offer may be
amended or waived by the Company, in whole or in part, at any time and from time
to time in the Company's sole discretion, in the case of any Original Notes
tendered.
9. SUBSTITUTE FORM W-9. Each tendering owner of a Note (or other payee) is
required to provide the Exchange Agent with a correct taxpayer identification
number ("TIN"), generally the owner's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the owner (or other payee) is not subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
owner (or other payee) to a $50 penalty imposed by the Internal Revenue Service
and 31% federal income tax withholding on the payment of the Purchase Price. The
box in Part 3 of the Substitute Form W-9 may be checked if the tendering owner
(or other payee) has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked and the
Exchange Agent is not provided with a TIN by the time of payment, the Exchange
Agent will withhold 31% on all such payments of the Purchase Price until a TIN
is provided to the Exchange Agent.
10. BROKER-DEALERS PARTICIPATING IN THE EXCHANGE OFFER. If no broker-dealer
checks the last box on page 6 of this Letter of Transmittal, the Company has no
obligation under the Registration Rights Agreement allow the use of the
Prospectus for resales of the Series B Notes by broker-dealers or to maintain
the effectiveness of the Registration Statement of which the Prospectus is a
part after the consummation of the Exchange Offer.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance or additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange
Agent at the telephone numbers and location listed above. A Holder or owner may
also contact such Holder's or owner's broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING THE ORIGINAL NOTES AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
A-12
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Original Notes whose tendered
Original Notes are accepted for exchange is required to provide the Exchange
Agent with such owner's current TIN on Substitute Form W-9 below. If such owner
is an individual, the TIN is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, the owner or other recipient of
Series B Notes may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, any interest on Series B Notes paid to such owner or other
recipient may be subject to 31% backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding, the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the form below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner has not
been notified by the Internal Revenue Service that the owner is subject to
backup withholding as a result of failure to report all interest or dividends or
(ii) the Internal Revenue Service has notified the owner that the owner is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the Original
Notes. If the Original Notes are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9,"for
additional guidance on which number to report.
A-13
PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
Part 1--PLEASE PROVIDE YOUR TIN IN Social security number(s) or
THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number(s)
SIGNING AND DATING BELOW. _________________________________
Part 2--Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued for me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under reporting interest or dividends on your tax return.
SIGNATURE______________________ Part 3--
DATE ______________________ Awaiting TIN [ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31%.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable cash payments made to me thereafter will be withheld until I provide
a taxpayer identification number.
Signature______________________ Date___________
A-14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LOUISIANA BUSINESS CORPORATION LAW
The Louisiana Business Corporation Law ("LBCL") generally gives a
corporation the power to indemnify any of its directors or officers against
certain expenses, judgments, fines and amounts paid in settlement in connection
with certain actions, suits or proceedings, provided generally that such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. In the case of an action by, or in the right of, the corporation, the
corporation may indemnify such person against expenses, including attorneys'
fees and amounts paid in settlement not exceeding, in the judgment of the board
of directors, the estimated expense of litigating the action to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such action, and no indemnification shall be made in respect of any claim,
issue, or matter as to which such person shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
for willful or intentional misconduct in the performance of his duty to the
corporation, unless, and only to the extent that the court shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
Indemnification provided pursuant to the foregoing provisions is
not, under the LBCL, deemed exclusive of any other rights to which the person
indemnified is entitled under any bylaw, agreement, authorization of
shareholders or directors; however, no such other indemnification measure shall
permit indemnification of any person for the results of such person's willful or
intentional misconduct. In addition, the LBCL contains provisions to the general
effect that any director shall in the performance of his duties be fully
protected in relying in good faith upon the records of the corporation and upon
such information, opinions, reports or statements presented to the corporation,
the board of directors, or any committee thereof by any of the corporation's
officers or employees, or by any committee of the board of directors, or by any
counsel, appraiser, engineer (including a petroleum reservoir engineer), or
independent or certified public accountant selected by the board of directors or
any committee thereof with reasonable care, or by any other person as to matters
the director reasonably believes are within such other person's professional or
expert competence and which person is selected by the board of directors or any
committee thereof with reasonable care. A director shall not be liable for the
commission of a prohibited act if his dissent was either noted in the minutes of
the meetings or filed promptly thereafter in the registered office of the
Registrant.
ARTICLES OF INCORPORATION
As permitted under Section 24(C)(4) of the LBCL, Article XIII of
the Restated Articles of Incorporation of the Registrant eliminates the personal
liability of any director or officer to the Registrant or its shareholders for
monetary damages for breach of fiduciary duty in such capacity, except for (i)
any breach of the duty of loyalty to the Registrant or its shareholders; (ii)
acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law; (iii) unlawful payment of dividends or unlawful stock
purchases or redemptions; or (iv) any transaction from which the director or
officer derived an improper personal benefit.
II-1
BYLAWS OF THE COMPANY
Article VI, Section 6 of the Registrant's Bylaws contemplate that
the Registrant shall indemnify its directors and officers to the maximum extent
permitted by Louisiana law.
DIRECTORS' AND OFFICERS' INSURANCE
In addition, the Registrant has purchased a liability insurance
policy under which its directors and officers are indemnified against certain
losses arising from certain claims that may be made against them by reason of
their serving in such capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS. The following documents are filed as exhibits to this
Registration Statement.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.1 Indenture dated as of March 19, 1996, between the Registrant and State
Street Bank and Trust Company, as Trustee, relating to the Registrant's
10% Senior Subordinated Notes due 2006 and 10% Senior Subordinated
Notes due 2006, Series B.
4.2 Registration Rights Agreement dated as of March 19, 1996, among the
Registrant, Lehman Brothers Inc., and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
5* Opinions of Bracewell & Patterson, L.L.P. and Stone, Pigman, Walther,
Wittmann & Hutchinson, L.L.P. as to the validity of the securities
being registered.
8* Opinion of Bracewell & Patterson, L.L.P. with respect to certain
federal income tax matters.
12** Statement regarding computation of ratios.
15** Letter in lieu of consent from Deloitte & Touche LLP regarding interim
financial information.
23.1** Consent of Deloitte & Touche LLP, independent auditors for the
Registrant (See page II-7).
23.2 Consents of Bracewell & Patterson, L.L.P. (included in their opinions
to be filed as Exhibit 5 and 8 to this Registration Statement) and
Stone, Pigman, Walther, Wittmann & Hutchinson, L.L.P. (included in
their opinion filed as Exhibit 5 to this Registration Statement).
24** Power of Attorney of Whitson Sadler (other Powers of Attorney
previously filed).
II-2
25 Statement of Eligibility Under the Trust Indenture Act on Form T-1 of
State Street Bank and Trust Company, as Trustee.
99.1 Third Amended and Restated Credit Agreement as of November 3, 1995
among the Registrant; Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse; Caisse National De Credit Agricole;
Banque Paribas; CIBC Inc.; The Bank of Nova Scotia; and The First
National Bank of Boston (incorporated by reference from Exhibit 99.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
99.2 Letter Agreement dated February 29, 1996, amending the Third Amended
and Restated Credit Agreement as of November 3, 1995, among the
Registrant and the banks party thereto.
99.3 Indenture dated as of October 15, 1991, between the Registrant and
State Street Bank and Trust Company of Connecticut, National
Association, as Trustee, as amended by First Supplemental Indenture
dated as of December 10, 1993, relating to the Registrant's 14% Senior
Subordinated Notes Due 2001, Series B (incorporated by reference from
Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated
December 21, 1993).
----------------------
* To be filed by amendment.
** Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES.
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) That, for the purpose of determining any liability under the Securities
Act of 1933 (the "Act"), each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or other wise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceed-
II-3
ing) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to such request.
(d) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 29th day of May, 1996.
SOUTHDOWN, INC.
By: CLARENCE C. COMER
Clarence C. Comer
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURES POSITIONS DATE
CLARENCE C. COMER President, Chief Executive Officer May 29, 1996
Clarence C. Comer Officer and Director (Principal
Executive Officer)
JAMES L. PERSKY Executive Vice President - Finance May 29, 1996
James L. Persky and Administration (Principal
Financial Officer)
ALLAN KORSAKOV Corporate Controller (Principal May 29, 1996
Allan Korsakov Accounting Officer)
W. J. CONWAY* Director May 29, 1996
W. J. Conway
KILLIAN L. HUGER JR.* Director May 29, 1996
Killian L. Huger Jr.
FRANK J. RYAN* Director May 29, 1996
Frank J. Ryan
WHITSON SADLER Director May 29, 1996
Whitson Sadler
II-5
ROBERT J. SLATER* Director May 29, 1996
Robert J. Slater
DAVID J. TIPPECONNIC* Director May 29, 1996
David J. Tippeconnic
RONALD N. TUTOR* Director May 29, 1996
Ronald N. Tutor
V. H. VAN HORN III* Director May 29, 1996
V. H. Van Horn III
STEVEN B. WOLITZER* Director May 29, 1996
Steven B. Wolitzer
*By: PATRICK S. BULLARD
Patrick S. Bullard
Attorney-in-Fact
II-6
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-02585 on Form S-4 of Southdown, Inc. of our
report dated February 14, 1996 appearing in the Annual Report on Form 10-K for
the year ended December 31, 1995 of Southdown, Inc., and to the references to us
appearing under the captions "Prospectus Summary--Selected Historical Financial
and Operating Data" and "Experts" in such Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
May 28, 1996
II-7
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.1 Indenture dated as of March 19, 1996, between the Registrant and State
Street Bank and Trust Company, as Trustee, relating to the Registrant's
10% Senior Subordinated Notes due 2006 and 10% Senior Subordinated
Notes due 2006, Series B.
4.2 Registration Rights Agreement dated as of March 19, 1996, among the
Registrant, Lehman Brothers Inc., and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
5* Opinions of Bracewell & Patterson, L.L.P. and Stone, Pigman, Walther,
Wittmann & Hutchinson, L.L.P. as to the validity of the securities
being registered.
8* Opinion of Bracewell & Patterson, L.L.P. with respect to certain
federal income tax matters.
12** Statement regarding computation of ratios.
15** Letter in lieu of consent from Deloitte & Touche LLP regarding interim
financial information.
23.1** Consent of Deloitte & Touche LLP, independent auditors for the
Registrant (See page II-7).
23.2 Consents of Bracewell & Patterson, L.L.P. (included in their opinions
to be filed as Exhibit 5 and 8 to this Registration Statement) and
Stone, Pigman, Walther, Wittmann & Hutchinson, L.L.P. (included in
their opinion filed as Exhibit 5 to this Registration Statement).
24** Power of Attorney of Whitson Sadler (other Powers of Attorney
previously filed).
25 Statement of Eligibility Under the Trust Indenture Act on Form T-1 of
State Street Bank and Trust Company, as Trustee.
99.1 Third Amended and Restated Credit Agreement as of November 3, 1995
among the Registrant; Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse; Caisse National De Credit Agricole;
Banque Paribas; CIBC Inc.; The Bank of Nova Scotia; and The First
National Bank of Boston (incorporated by reference from Exhibit 99.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
99.2 Letter Agreement dated February 29, 1996, amending the Third Amended
and Restated Credit Agreement as of November 3, 1995, among the
Registrant and the banks party thereto.
99.3 Indenture dated as of October 15, 1991, between the Registrant and
State Street Bank and Trust Company of Connecticut, National
Association, as Trustee, as amended by First Supplemental Indenture
dated as of December 10, 1993, relating to the Registrant's 14% Senior
Subordinated Notes Due 2001, Series B (incorporated by reference from
Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated
December 21, 1993).
----------------------
* To be filed by amendment.
** Filed herewith.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Dates Referenced Herein and Documents Incorporated by Reference
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