As filed with the Securities and Exchange Commission on April 13, 2001.
Registration No. 333-32518
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BETTER MINERALS & AGGREGATES COMPANY
AFFILIATE GUARANTORS LISTED ON SCHEDULE BELOW
(Exact name of Registrant as specified in its charter)
DELAWARE 1446-1 55-0749125
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification
of Incorporation or Organization) Classification Code Number) Number)
GARY E. BOCKRATH
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Better Minerals & Aggregates Company
ROUTE 522 NORTH, P.O. BOX 187 Route 522 North, P.O. Box 187
BERKELEY SPRINGS, WEST VIRGINIA 25411 Berkeley Springs, West Virginia 25411
(304) 258-2500 (304) 258-2500
(Name, Address, Including Zip Code, and
(Address, Including Zip Code, and Telephone Number, Telephone Number, Including Area Code, of
Including Area Code, of Registrant's Principal Executive Offices) Agent for Service of Process)
WITH A COPY TO:
JEFFREY J. DELANEY
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, NY 10004
(212) 858-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the 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. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
-----------------------------
SCHEDULE OF REGISTRANT AFFILIATE GUARANTORS
Primary Standard
Industrial I.R.S. Employer
Exact Name of Registrant Affiliate Guarantors As Classification Identification
Specified in Their Respective Charters State of Formation Code Number Number
-------------------------------------- ------------------ ---------------- ----------------
U.S. Silica Company Delaware 1446 23-0958670
BMAC Services Co., Inc. Delaware 1446-1 55-0777773
Better Materials Corporation Pennsylvania 1429 23-1542403
BMC Trucking, Inc. Delaware 4212 23-2986246
Chippewa Farms Corporation Pennsylvania 9999 23-2160463
Commercial Aggregates Transportation and Sales, LLC Delaware 4212 25-1846125
The Fulton Land and Timber Company Pennsylvania 1446 23-1622540
George F. Pettinos, Inc. Delaware 1442 23-0966840
Ottawa Silica Company Delaware 1446 94-3093543
Pennsylvania Glass Sand Corporation Delaware 1446 94-3024593
Stone Materials Company, LLC Delaware 1422-1 52-2205266
================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 13, 2001
Prospectus
Better Minerals & Aggregates Company
13% Senior Subordinated Notes due 2009
We issued the 13% Senior Subordinated Notes due 2009, which have been registered
under the Securities Act of 1933, in exchange for our 13% Senior Subordinated
Notes due 2009 in an exchange offer consummated in May 2000.
Maturity
o The notes will mature on September 15, 2009.
Interest
o Interest on the notes is payable on March 15 and September 15 of each year.
Redemption
o We may redeem some or all of the notes at any time after September 15,
2004.
o We may also redeem up to 35% of the notes prior to September 15, 2002 with
the net proceeds of certain equity issuances.
o The redemption prices are described on page 43.
Change of Control
o If we experience a change of control, we must offer to purchase the notes
at 101% of the principal amount, plus accrued and unpaid interest.
Security and Ranking
o The notes are not secured by any collateral.
o The notes are subordinated to all of our senior debt, rank equally with all
of our other senior subordinated debt and rank senior to all of our
subordinated debt.
Guarantees
o If we fail to make payments on the notes, our guarantor subsidiaries must
make them instead. These guarantees are senior subordinated obligations of
our guarantor subsidiaries. Our domestic subsidiaries guarantee the notes.
-------------------------
We prepared this prospectus for use by Chase Securities Inc. ("CSI") in
connection with offers and sales related to market-making transactions in the
notes. CSI may act as principal or agent in these transactions. These sales will
be made at prices related to prevailing market prices at the time of sale at
prices related thereto or at negotiated prices. We will not receive any of the
proceeds of these sales.
-------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 4 OF THIS
PROSPECTUS IN EVALUATING AN INVESTMENT IN THE NOTES.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
Chase Securities Inc.
-------------------------
The date of this prospectus is April , 2001.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information.......................................................................................i
Forward-Looking Statements................................................................................................i
Industry Data............................................................................................................ii
Measurements.............................................................................................................ii
Summary...................................................................................................................1
Risk Factors..............................................................................................................4
Use of Proceeds..........................................................................................................12
Capitalization...........................................................................................................12
Selected Financial Data..................................................................................................13
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................................................14
Business.................................................................................................................21
Management...............................................................................................................29
Certain Relationships and Related Transactions...........................................................................35
Security Ownership of Certain Beneficial Owners and Management...........................................................36
Description of the Senior Secured Credit Agreement.......................................................................39
Description of the Notes.................................................................................................42
Book-Entry; Delivery and Form............................................................................................76
Plan of Distribution.....................................................................................................79
Legal Matters............................................................................................................79
Experts..................................................................................................................79
Index to Consolidated Financial Statements..............................................................................F-1
WHERE YOU CAN FIND MORE INFORMATION
We file annual and quarterly reports and other information with the
Securities and Exchange Commission. You may read and copy any reports, documents
and other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., in Washington, D.C. 20549. Please call
1-800-SEC-0330 for further information on the operation of the public reference
room. Our filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Securities and Exchange
Commission at http://www.sec.gov.
We filed a registration statement on Form S-4 to register the notes with
the Securities and Exchange Commission. This prospectus is part of that
registration statement. As allowed by the Securities and Exchange Commission's
rules, this prospectus does not contain all of the information you can find in
the registration statement and the exhibits to the registration statement.
We have not authorized anyone to give you any information or to make any
representations about us or the transactions we discuss in this prospectus other
than those contained in this prospectus. If you are given any information or
representations about these matters that is not discussed in this prospectus,
you must not rely on that information. This prospectus is not an offer to sell
or a solicitation of an offer to buy securities anywhere or to anyone where or
to whom we are not permitted to offer or sell securities under applicable law.
The delivery of this prospectus does not, under any circumstances, mean that
there has not been a change in our affairs since the date of this prospectus. It
also does not mean that the information in this prospectus is correct after this
date.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We have based these
forward-looking statements on our current expectations and projections about
future events. Although we believe that our plans, intentions and expectations
reflected in or suggested by those forward-looking statements are reasonable, we
can give no assurance that our plans, intentions or expectations will be
achieved. We caution investors that all forward-looking statements involve risks
and uncertainties, including those arising out of economic, climatic, political,
regulatory, competitive and other factors. The forward-looking statements in
this document are intended to be subject to the safe harbor protection provided
by Section 27A and Section 21E. Important factors that could cause actual
results to differ materially from those expressed or implied by the
forward-looking statements we make in this prospectus are set forth in this
prospectus. We believe that the following factors, among others, could affect
our future performance and cause actual results to differ materially from those
expressed or implied by forward-looking statements made in this prospectus:
o general and regional economic conditions, including the economy in the
states in which we have production facilities and in which we sell our
products;
o demand for residential and commercial construction;
o demand for automobiles and other vehicles;
o interest rate changes and changes in financial markets generally;
o levels of government spending on road and other infrastructure
construction;
o the competitive nature of the industrial minerals and aggregates
industries;
o operating risks typical of the industrial minerals and aggregates
industries;
o difficulties in, and unanticipated expense of, assimilating
newly-acquired businesses;
o fluctuations in prices for, and availability of, transportation,
power, petroleum-based products and other energy products;
o unfavorable weather conditions;
o regulatory compliance, including compliance with environmental and
silica exposure regulations, by us and our customers;
i
o litigation affecting us and our customers;
o changes in the demand for our products due to the availability of
substitutes for products of our customers; and
o labor unrest.
Except for our obligations under the federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. In light of these
risks, uncertainties and assumptions, our future performance may differ
materially from that expressed or implied by the forward-looking statements
discussed in this prospectus.
INDUSTRY DATA
Information contained in this prospectus concerning the industrial
minerals and aggregates industries, our general expectations concerning these
industries and our market position and market share within these industries and
the end use markets we serve are based on estimates prepared by us using data
from various sources (primarily the U.S. Geological Survey, including its web
site at www.usgs.gov, the Committee on Environment and Public Works of the
United States Senate and data from our internal research) and on assumptions
made by us, based on that data and our knowledge of these industries, which we
believe to be reasonable. We believe data regarding the industrial minerals and
aggregates industries and our market position and market share within those
industries and the end use markets we serve are inherently imprecise, but are
generally indicative of their size and our market position and market share
within those industries and end use markets. While we are not aware of any
misstatements regarding any industry data presented in this prospectus, our
estimates, particularly as they relate to our general expectations concerning
the industrial minerals and aggregates industries, involve risks and
uncertainties and are subject to change based on various factors, including
those discussed under the caption "Risk Factors" and elsewhere in this
prospectus. Information contained in this prospectus relating to the
Transportation Equity Act for the 21st Century ("TEA-21") comes primarily from
the United States Department of Transportation's web site located at
www.fhwa.dot.gov. The information contained in, or linked to, the web sites
referenced in this paragraph does not constitute part of this prospectus.
MEASUREMENTS
When used in this prospectus:
o data in tons or tonnage is measured in "short" tons (2,000 pounds);
o mesh refers to size measured in sieve openings per square inch and
thus as mesh size increases, particle size decreases; and
o microns refer to size (one micron is equal to 0.00004 of an inch).
ii
- --------------------------------------------------------------------------------
SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This prospectus includes information about the notes, as well as
information regarding our business. You should read this entire prospectus
carefully, including the "Risk Factors" section and the financial statements and
the notes thereto. Unless otherwise indicated or the context otherwise requires,
all references in this prospectus to "we," "us," "our" and similar terms refer
to Better Minerals & Aggregates Company and its direct and indirect
subsidiaries, and all references to the "issuer" refer to Better Minerals &
Aggregates Company only and not to any of its subsidiaries.
Better Minerals & Aggregates Company
We mine, process and market industrial minerals, principally industrial
silica, in the eastern and midwestern United States. We also mine, process and
market aggregates and produce and market hot mixed asphalt in certain parts of
Pennsylvania and New Jersey.
We are the second leading producer of industrial silica in the United
States, accounting for approximately 24% of industry volume in 2000, and believe
that we have leading positions in most of our key end use markets for our silica
products, typically occupying the number one or two position by sales. These end
use markets include container glass, fiberglass, specialty glass, flat glass,
fillers and extenders, chemicals and ceramics. We also supply our silica
products to the foundry, building materials and other end use markets.
Our customers use our aggregates, which consist of high quality crushed
stone, construction sand and gravel, for road construction and maintenance,
other infrastructure projects and residential and commercial construction and to
produce hot mixed asphalt and concrete products. We also use our aggregates to
produce hot mixed asphalt.
We operate a network of 26 production facilities in 14 states. Many of our
production facilities are located near major modes of transportation and our
significant customers, which reduces transportation costs and enhances customer
service. Our principal industrial minerals and aggregates properties each have
deposits that we believe will support production in excess of 15 years. Our
industrial minerals business (substantially all the sales of which consist of
silica products) and our aggregates business accounted for 64% and 36% of our
sales, respectively, for the year ended December 31, 2000.
The issuer is incorporated in Delaware with principal executive offices
located at Route 522 North, P.O. Box 187, Berkeley Springs, West Virginia 25411.
Its telephone number is (304) 258-2500.
Summary of the Terms of the Notes
The following summary contains basic information about the notes. It does
not contain all the information that may be important to you. For a more
complete description of the notes, please refer to the section of this
prospectus entitled "Description of the Notes."
Issuer.................................... Better Minerals & Aggregates Company.
Notes Outstanding......................... $150,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2009.
Maturity.................................. September 15, 2009.
Interest.................................. Annual rate: 13%.
Payment frequency: every six months on March 15 and September 15.
Optional Redemption....................... After September 15, 2004, the issuer may redeem some or all of
the notes at the redemption prices listed in the "Description of the
Notes" section of this prospectus under the heading "Optional
Redemption." Prior to that date, the issuer may not redeem the notes,
except as described in the following paragraph.
At any time prior to September 15, 2002, the issuer may redeem up to
35% of the original aggregate principal amount of the notes with
the net cash proceeds of certain equity offerings at a redemption
price equal to 113% of the principal amount thereof plus
accrued and unpaid interest, so long as (a) at least 65% of the
original
1
aggregate amount of the notes remains outstanding after each
such redemption and (b) any such redemption by the issuer is made
within 90 days of that equity offering. See "Description of the
Notes--Optional Redemption."
Change of Control......................... Upon the occurrence of a transaction meeting the definition of a change of control,
unless the issuer has exercised its right to redeem all of the notes as described
above, you will have the right to require the issuer to purchase all or a portion
of your notes at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase. See "Description
of the Notes--Change of Control."
Note Guarantees........................... The notes will be fully and unconditionally guaranteed by an
unsecured note guarantee made by each of the issuer's existing and
future Domestic Subsidiaries (as defined in "Description of the
Notes--Certain Definitions"). The notes will also be fully and
unconditionally guaranteed by an unsecured note guarantee made by
each existing and future Foreign Subsidiary (as defined in
"Description of the Notes--Certain Definitions") that guarantees any
debt (other than debt of a Restricted Subsidiary (as defined
in "Description of the Notes--Certain Definitions") that
is not a note guarantor)(collectively, the "note
guarantors"). The notes are currently guaranteed by all of the
issuer's subsidiaries except its Canadian subsidiary, which has an
immaterial amount of assets and iabilities. The note guarantees
are subordinated to the guarantees of senior debt of the issuer
issued by the note guarantors under the senior secured credit
agreement. See "Description of the Notes--Note Guarantees."
Ranking................................... The notes are unsecured and:
o are subordinated in right of payment to all of the existing and future
senior debt of the issuer;
o rank equally in right of payment with any of the issuer's existing and
future senior subordinated debt;
o rank senior in right of payment to any of the issuer's existing and future
subordinated debt;
o are effectively subordinated to any secured debt of the issuer and its
subsidiaries to the extent of the value of the assets securing that debt;
and
o are effectively subordinated to all liabilities (including trade payables)
and preferred stock of each subsidiary of the issuer that is not a note
guarantor.
The issuer is a holding company that derives all of its operating
income and cash flow from its subsidiaries.
Similarly, the note guarantees of each note guarantor are unsecured and:
o are subordinated in right of payment to all of that note guarantor's
existing and future senior debt;
o rank equally in right of payment with any of that note guarantor's
existing and future senior subordinated debt;
o rank senior in right of payment to any of that note guarantor's existing
and future subordinated debt; and
o are effectively subordinated to any secured debt of that note
guarantor and its subsidiaries to the extent of the value of
the assets securing that debt. See "Description of
the Notes--Ranking."
As of December 31, 2000:
2
o the issuer had $138.1 million of senior debt (excluding unused
commitments under the senior secured credit agreement), all of which
was secured debt;
o the issuer did not have any senior subordinated debt other than the notes
or any debt that was subordinate in right of payment to the notes;
o the note guarantors had $1.35 million of senior debt (excluding their
guarantees of the issuer's debt under the senior secured credit
agreement);
o the note guarantors did not have any senior subordinated debt other
than their note guarantees or any debt that was subordinate in
right of payment to the note guarantees; and
o the issuer's Canadian subsidiary had an immaterial amount of liabilities.
The indenture governing the notes permits us to incur a significant
amount of additional senior debt.
Certain Covenants......................... The indenture, among other things, restricts the issuer's ability and the ability
of its Restricted Subsidiaries to:
o incur debt;
o guarantee other debt;
o make distributions, redeem equity interests or redeem subordinated debt;
o make investments;
o sell assets;
o enter into agreements that restrict dividends from subsidiaries;
o merge or consolidate;
o enter into transactions with affiliates; and
o sell capital stock of subsidiaries.
These covenants are subject to a number of important exceptions and
qualifications. See "Description of the Notes--Certain Covenants"
and "Description of the Notes--Merger and Consolidation."
Risk Factors
You should carefully consider all of the information in this prospectus
and, in particular, should evaluate the specific factors under "Risk Factors"
beginning on page 4 for risks involved with an investment in the notes.
3
RISK FACTORS
You should carefully consider the following factors in addition to the
other information set forth in this prospectus in evaluating an investment in
the notes.
Our High Level of Debt May Adversely Affect Our Ability To Repay the Notes
As a result of our acquisitions, we have a substantial amount of debt. As
of December 31, 2000, we had total debt of $289.4 million (excluding unused
commitments) and total stockholder's equity of $53.2 million, giving us total
debt representing 84% of total capitalization. In addition, subject to
restrictions in the senior secured credit agreement and in the indenture, we may
borrow more money for working capital, capital expenditures, acquisitions or
other purposes.
Our high level of debt could have important consequences for you,
including the following:
o we will need to use a large portion of the cash earned by our
subsidiaries to pay principal and interest on the senior secured
credit agreement, the notes and other debt, which will reduce the
amount of cash available to us to finance our operations, to invest in
additional plant and equipment, to make improvements to existing plant
and equipment and to improve our technology capabilities;
o our debt level makes us more vulnerable to economic downturns and
adverse developments in our business;
o we may have a much higher level of debt than certain of our
competitors, which may put us at a competitive disadvantage;
o we may have difficulty borrowing money in the future for working
capital, capital expenditures, acquisitions or other purposes; and
o some of our debt has a variable rate of interest, which exposes us to
the risk of increased interest rates.
To Service Our Indebtedness, We Will Require a Significant Amount of Cash. Our
Ability to Generate Cash Depends on Many Factors Beyond Our Control
We expect to obtain the cash to pay our expenses and to pay the principal
and interest on the notes, the senior secured credit agreement and other debt
from the operations of our subsidiaries. Availability under the revolving credit
facility will be important for us to maintain liquidity to pay obligations as
they become due. Our ability to meet our expenses and debt service obligations
depends on the future performance of our subsidiaries, which will be affected by
financial, business, economic and other factors. We will not be able to control
many of these factors, such as economic conditions and pressure from
competitors. We cannot be certain that the cash earned by our subsidiaries will
be sufficient to allow us to pay principal and interest on our debt (including
the notes) and meet our other obligations. If we do not have enough cash, we may
be required to refinance all or part of our existing debt, including the notes,
sell assets, borrow more money or raise equity. We cannot guarantee that we will
be able to refinance our debt, sell assets, borrow more money or raise equity on
terms acceptable to us, or at all. For example, neither J.P. Morgan Partners,
LLC ("JPMP LLC") nor D. George Harris & Associates, LLC ("DGHA") is obligated to
make any additional equity investments in USS Holdings, Inc., our parent. In
addition, the terms of existing or future debt agreements, including the senior
secured credit agreement and the indenture, may restrict us from adopting any of
these alternatives.
The indenture contains certain limitations on our operating flexibility.
See "Description of the Notes--Certain Covenants." In addition, the senior
secured credit agreement contains many similar and more stringent limitations
and will prohibit us from prepaying certain of our other debt (including the
notes) while debt under the senior secured credit agreement is outstanding. In
addition, under the senior secured credit agreement, we must also comply with
certain specified financial ratios. On February 22, 2001, the lenders under our
senior secured credit agreement approved an amendment effective December 31,
2000 that revised the required leverage ratio and interest coverage ratio
covenants under the senior secured credit agreement for the period of December
31, 2000 through December 31, 2001. As a result of this amendment, we were in
compliance with these financial ratio covenants, as revised, as of December 31,
2000. If we do not comply with these or other covenants and restrictions
contained in the senior secured credit agreement, we could default under the
senior secured credit agreement.
Upon the occurrence of an event of default under the senior secured credit
agreement, the lenders could declare all amounts outstanding under the senior
secured credit agreement, together with accrued interest, to be immediately due
and
4
payable, which could cause all or a portion of our other debt, including the
notes, to become immediately due and payable. If we were unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure that debt. If the lenders under the senior secured credit agreement
accelerate the payment of the debt, we cannot assure you that our assets would
be sufficient to repay in full that debt and our other debt, including the
notes. Furthermore, our ability to comply with the provisions of the senior
secured credit agreement may be affected by events beyond our control. See
"Description of the Senior Secured Credit Agreement."
Demand for Our Products Is Affected by External Factors
Demand in the markets served by the industrial minerals and aggregates
industries is affected by many external factors, including the following:
o the general and regional economic conditions in the states in which we
produce and sell our products;
o demand for automobiles and other vehicles;
o the substitution of plastic or other materials for glass;
o levels of government spending on road and other infrastructure
construction; and
o demand for residential and commercial construction.
General or localized economic downturns or other external factors
adversely affecting demand in the areas where we sell our products could result
in a decrease in sales and operating income and, therefore, could have a
material adverse effect on us. For example, because our aggregates business is
more geographically concentrated than the businesses of some of our competitors,
we may be more vulnerable to local economic conditions in Pennsylvania and New
Jersey.
Demand for Our Aggregates May Be Affected by Weather
Poor weather during the peak season of our aggregates business from April
through November could result in lower sales of aggregates by reducing or
delaying road construction and maintenance, other infrastructure projects and
residential and commercial construction. In the past, significant changes in
weather conditions during this period have caused variations in demand for
aggregates. In addition, because we are not as geographically diverse as some of
our aggregates competitors, we may be more vulnerable than these competitors to
poor weather conditions in the geographic areas in which we operate.
Our Business Is Subject to Operating Risks, Including Fluctuations in Oil and
Energy Prices
All of our revenue is and will be derived from our industrial minerals and
aggregates businesses. The mining, processing and related infrastructure
facilities of these businesses are subject to risks normally encountered in the
industrial minerals and aggregates industries. These risks include environmental
hazards, industrial accidents, technical difficulties or failures, late delivery
of supplies, the price and availability of power, the price and availability of
transportation, unusual or unexpected geological formations or pressures,
cave-ins, pit wall failures, rock falls, unanticipated ground, grade or water
conditions, flooding and periodic or extended interruptions due to the
unavailability of materials and equipment, inclement or hazardous weather
conditions, fires, explosions or other accidents or acts of force majeure. Any
of these risks could result in damage to, or destruction of, our mining
properties or production facilities, personal injury, environmental damage,
delays in mining or processing, losses or possible legal liability. Any
prolonged downtime or shutdowns at our mining properties or production
facilities could have a material adverse effect on us.
In addition, the price or availability of oil, a raw material of hot mixed
asphalt, could adversely affect operating costs, which could in turn adversely
affect our operating results if we cannot pass these increased costs through to
our customers or if customers use less asphalt due to higher prices.
Furthermore, increased energy prices, particularly relating to natural gas,
propane, diesel fuel and other petroleum-based products, could adversely affect
operating costs and, therefore, operating results.
We Rely Heavily on Third Party Transportation
We rely heavily on railroads and trucking companies to ship our industrial
minerals and aggregates products to our customers. Because freight costs
represent a significant portion of the total cost to the customer, fluctuations
in freight rates can change the relative competitive position of our production
facilities. Rail and trucking operations are subject to various hazards,
including extreme weather conditions, work stoppages and operating hazards. If
we are unable to ship our products
5
as a result of the railroads or trucking companies failing to operate or if
there are material changes in the cost or availability of railroad or trucking
services, we may not be able to arrange alternative and timely means to ship our
products, which could lead to interruptions or slowdowns in our businesses and,
therefore, have a material adverse effect on us.
Our Future Performance Will Depend on Our Ability To Succeed in Competitive
Markets
We compete in highly competitive industries. Transportation costs are a
significant portion of the total cost of industrial minerals and aggregates to
customers, typically representing up to 50% of that cost. As a result, the
industrial minerals and aggregates markets are typically local, and competition
from beyond the local area is limited.
The industrial silica industry is a competitive market that is
characterized by a small number of large, national producers and a larger number
of small, regional producers. We are the second leading producer of industrial
silica in the United States, accounting for approximately 24% of industry volume
in 2000. We compete with, among others, Unimin Corporation, Fairmount Minerals,
Inc., Oglebay Norton Industrial Sands, Inc. and Badger Mining Corporation.
Competition in the industrial minerals industry is based on price, consistency
and quality of product, site location, distribution capability, customer
service, reliability of supply, breadth of product offering and technical
support. In addition, there is significant unutilized capacity in the industrial
minerals industry that could adversely affect the pricing of our industrial
minerals products.
In recent years, the aggregates industry has seen increasing
consolidation, although competition remains primarily local. Competition in the
aggregates industry is based primarily on price, quality of product, site
location, distribution capability and customer service. Due to the high cost of
transportation relative to the value of the product, competition within the
aggregates industry favors producers with aggregates production facilities in
close proximity to transportation modes and customers. Accordingly, in
Pennsylvania and New Jersey, we compete primarily with local or regional
operations. In addition, in western Pennsylvania, slag, a residue from steel
processing, also competes with our aggregates products.
Many of our competitors are large companies that have greater financial
resources than we do, may develop technology superior to ours and have
production facilities that are located closer to key customers. We cannot
guarantee that we will be able to compete successfully against our competitors
in the future or that competition will not have a material adverse effect on us.
Silica Health Issues and Litigation Could Have a Material Adverse Effect on Our
Business
The exposure of persons to silica and the accompanying health risks have
been, and will continue to be, a significant issue confronting the industrial
minerals industry. Concerns over silicosis and other potential adverse health
effects, as well as concerns regarding potential liability from the use of
silica, may have the effect of discouraging our customers' use of our silica
products. The actual or perceived health risks of mining, processing and
handling silica could materially and adversely affect silica producers,
including us, through reduced use of silica products, the threat of product
liability or employee lawsuits, increased levels of scrutiny by federal and
state regulatory authorities of us and our customers (see "--Our Business Is
Subject to Extensive Environmental, Health and Safety Regulations") or reduced
financing sources available to the silica industry.
The inhalation of respirable crystalline silica is associated with
silicosis. There is recent evidence of an association between crystalline silica
exposure or silicosis and lung cancer and a possible association with other
diseases, such as immune system disorders like scleroderma. Since 1975, U.S.
Silica Company, one of our subsidiaries, has been named as a defendant in
numerous products liability lawsuits brought by alleged employees or former
employees of our customers alleging damages caused by silica exposure. As of
March 1, 2001, there were an estimated 1,472 silica-related products liability
claims pending in which U.S. Silica is a defendant. Almost all of the claims
pending against U.S. Silica arise out of the alleged use of U.S. Silica products
in foundries or as an abrasive blast media and have been filed in the states of
Texas and Mississippi.
We currently have certain limited sources of recovery for silica-related
products liability claims, including an indemnity for those claims (including
litigation expenses) from ITT Industries, Inc., successor to the former owner of
U.S. Silica, and insurance coverage. The ITT Industries indemnity expires in
2005, only covers alleged exposure to U.S. Silica products for the period prior
to September 12, 1985 and contains other limitations. Existing and potential
insurance coverage only applies to occurrences of alleged silica exposure prior
to certain dates in 1985 and 1986, respectively. We have no insurance or
indemnity for claims relating to silica exposure after these dates. The
silica-related litigation brought against us to date has not resulted in
material liability to us. However, it is likely that we will continue to have
silica-related products liability claims filed against us, including claims that
allege silica exposure for periods after 1986. Any such claims or inadequacies
of the ITT Industries indemnity or insurance coverage could have a material
adverse effect on us. See "Business--Product Liability."
6
Our Business Is Subject to Extensive Environmental, Health and Safety
Regulations
Environmental and Silica Exposure Regulations. We are subject to a variety
of governmental regulatory requirements relating to the environment, including
those relating to our handling of hazardous materials and air and wastewater
emissions. Some environmental laws impose substantial penalties for
noncompliance, and others, such as the federal Comprehensive Environmental
Response, Compensation, and Liability Act, impose strict, retroactive and joint
and several liability upon persons responsible for releases of hazardous
substances. If we fail to comply with present and future environmental laws and
regulations, we could be subject to liabilities or our operations could be
interrupted. In addition, future environmental laws and regulations could
restrict our ability to expand our facilities or extract our mineral deposits or
could require us to acquire costly equipment or to incur other significant
expenses in connection with our business. Although we believe we have made
sufficient capital expenditures to achieve substantial compliance with existing
environmental laws and regulations, future events, including changes in any
environmental requirements and the costs associated with complying with such
requirements, could have a material adverse effect on us. See
"Business--Government Regulation--Environmental Matters."
In addition to environmental regulation, we are also subject to laws
relating to human exposure to crystalline silica. We believe that we materially
comply with governmental requirements for crystalline silica exposure and
emissions and other regulations relating to silica and plan to continue to
comply with these regulations. Several federal and state regulatory authorities,
including the Occupational Safety and Health Administration and the Mining
Safety and Health Administration, have indicated that they will propose changes
in their regulations regarding workplace exposure to crystalline silica. We
cannot guarantee that we will be able to comply with any new standards that are
adopted or that these new standards will not have a material adverse effect on
us by requiring us to modify our operations or equipment or shut down some of
our plants. Additionally, we cannot guarantee that our customers will be able to
comply with any new standards or that any such new standards will not have a
material adverse effect on our customers by requiring them to shut down old
plants or to relocate plants to locations with less stringent regulations that
are further away from us. Accordingly, we cannot at this time reasonably
estimate our costs of compliance or the timing of any costs associated with any
new standards, or any material adverse effects that any new standards will have
on our customers and, consequently, on us. See "Business--Government
Regulation--Regulation of Silica."
Other Regulations Affecting Mining Activity. In addition to the regulatory
matters described above, the industrial minerals and aggregates industries are
subject to extensive governmental regulation on matters such as permitting and
licensing requirements, plant and wildlife protection, wetlands protection,
reclamation and restoration of mining properties after mining is completed, the
discharge of materials into the environment, surface subsidence from underground
mining and the effects that mining has on groundwater quality and availability.
Our future success depends upon the quantity of our industrial minerals and
aggregates deposits and our ability to extract these deposits profitably. It is
difficult for us to estimate quantities of recoverable deposits, in part due to
future permitting and licensing requirements. We believe we have obtained all
material permits and licenses required to conduct our present mining operations.
However, we will need additional permits and renewals of permits in the future.
We may be required to prepare and present to governmental authorities data
pertaining to the impact that any proposed exploration or production activities
may have upon the environment. New site approval procedures may require the
preparation of archaeological surveys, endangered species studies and other
studies to assess the environmental impact of new sites. Compliance with these
regulatory requirements is expensive, requires an investment of funds well
before the potential producer knows if its operation will be economically
successful and significantly lengthens the time needed to develop a new site.
Furthermore, obtaining or renewing required permits is sometimes delayed or
prevented due to community opposition and other factors beyond our control. New
legal requirements, including those related to the protection of the
environment, could be adopted that could materially adversely affect our mining
operations (including the ability to extract mineral deposits), our cost
structure or our customers' ability to use our industrial minerals or aggregates
products. Finally, we could be adversely affected if our current provisions for
mine reclamation and closure costs were later determined to be insufficient, or
if future costs associated with reclamation are significantly greater than our
current estimates. Accordingly, there can be no assurance that current or future
mining regulation will not have a material adverse effect on our business or
that we will be able to obtain or renew permits in the future.
The Notes and Note Guarantees Are Contractually Subordinated to Senior Debt
The notes are contractually subordinated in right of payment to all senior
debt of the issuer and the note guarantees are contractually subordinated in
right of payment to all senior debt of the applicable note guarantor. As of
December 31, 2000, the issuer had approximately $138.1 million of senior debt
(excluding unused commitments under the senior secured credit agreement), all of
which was secured debt, and the note guarantors had approximately $1.35 million
of senior debt (excluding their guarantees of the issuer's debt under the senior
secured credit agreement). The indenture permits us to borrow certain additional
debt, which may be senior debt, subject to certain restrictions.
7
The issuer or the applicable note guarantor may not pay principal, premium
(if any), interest or other amounts on account of the notes or a note guarantee
in the event of a payment default or certain other defaults in respect of
certain senior debt (including debt under the senior secured credit agreement)
unless that senior debt has been paid in full or the default has been cured or
waived. In addition, in the event of certain other defaults with respect to that
senior debt, the issuer or the applicable note guarantor may not be permitted to
pay any amount on account of the notes or the note guarantees for a designated
period of time. If the issuer or a note guarantor is declared bankrupt or
insolvent, or if there is a payment default under, or an acceleration of, any
senior debt, the assets of the issuer or the applicable note guarantor, as the
case may be, will be available to pay obligations on the notes or that note
guarantor's note guarantee, as applicable, only after the senior debt of the
issuer or the note guarantor has been paid in full. In such a case, there can be
no assurance that there will be sufficient assets remaining to pay amounts due
on all or any of the notes or any note guarantee.
Further, the senior secured credit agreement prohibits us, and our future
senior debt may prohibit us, from purchasing any notes prior to maturity, even
though the indenture requires the issuer to offer to purchase notes in certain
circumstances. If the issuer or a note guarantor makes certain asset sales or if
a change of control occurs when we are prohibited from purchasing notes, the
issuer could ask the lenders under the senior secured credit agreement (or such
future senior debt) for permission to purchase the notes or the issuer could
attempt to refinance the borrowings that contain those prohibitions. If the
issuer does not obtain such a consent to repay those borrowings or is unable to
refinance those borrowings, it would be unable to purchase the notes. The
failure to purchase tendered notes at a time when their purchase is required by
the indenture would constitute an event of default under the indenture, which,
in turn, would constitute a default under the senior secured credit agreement
and may constitute an event of default under our future senior debt. In those
circumstances, the subordination provisions in the indenture restrict payments
to you.
Our Holding Company Structure Causes Us To Rely on Funds from Our Subsidiaries
The issuer is a holding company and as such it conducts substantially all
its operations through its subsidiaries. As a holding company, the issuer is
dependent upon dividends or other intercompany transfers of funds from its
subsidiaries to meet its debt service and other obligations. Generally,
creditors of a subsidiary will have a superior claim to the assets and earnings
of that subsidiary than the claims of creditors of its parent company, except to
the extent the claims of the parent's creditors are guaranteed by the
subsidiary.
Although the note guarantees provide the holders of the notes with a
direct claim against the assets of the note guarantors, enforcement of the note
guarantees against any note guarantor may be subject to legal challenge in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
that note guarantor, and would be subject to certain defenses available to
guarantors generally. See "--The Notes and the Note Guarantees Are Subject to
Fraudulent Conveyance and Preferential Transfer Laws." To the extent that a note
guarantee is not enforceable, the notes would be effectively subordinated to all
liabilities (including trade payables) and preferred stock of the relevant note
guarantor. In any event, the notes will be effectively subordinated to all
liabilities (including trade payables) and preferred stock of the issuer's
Canadian subsidiary, which will not be a guarantor of the notes unless it
guarantees any indebtedness (other than indebtedness of a Restricted Subsidiary
that is not a note guarantor) in the future. This Canadian subsidiary has an
immaterial amount of assets and liabilities. As of December 31, 2000, the note
guarantors had total liabilities of $482.7 million (excluding the note
guarantees and liabilities owed to the issuer).
In addition, the payment of dividends and other payments to the issuer by
its subsidiaries may be restricted by, among other things, applicable corporate
and other laws and regulations and agreements of the subsidiaries. Although the
indenture will limit the ability of those subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments, those
limitations are subject to a number of significant qualifications and
exceptions. See "Description of the Notes--Certain Covenants--Limitations on
Restrictions on Distributions from Restricted Subsidiaries."
The Notes Are Unsecured Obligations, While the Senior Secured Credit Agreement
Is Secured
In addition to being contractually subordinated to all existing and future
senior debt, the issuer's obligations under the notes are unsecured while our
obligations under the senior secured credit agreement are secured by a security
interest in substantially all the tangible and intangible assets of BMAC
Holdings, Inc., our direct parent, the issuer and each existing and subsequently
acquired or organized domestic subsidiary of the issuer, including a pledge of
(a) all the capital stock of the issuer, and (b) all the capital stock held by
BMAC Holdings, the issuer and any domestic subsidiary of the issuer in each of
the issuer's existing or subsequently acquired or organized domestic
subsidiaries and 65% of the capital stock held by those entities in each of the
issuer's existing or subsequently acquired or organized foreign subsidiaries. If
we are declared bankrupt or insolvent or if we default under the senior secured
credit agreement, the lenders could declare all of the funds borrowed
thereunder, together with accrued interest, immediately due and payable. If we
were unable to repay that debt, the lenders could foreclose on the pledged stock
of our subsidiaries and on the assets in which they have been granted a security
interest, in each case to your exclusion, even if an event of default exists
under the indenture at that time. Furthermore, under the note
8
guarantees, if all shares of any note guarantor are sold to persons pursuant to
an enforcement of the pledge of shares in that note guarantor for the benefit of
the lenders under the senior secured credit agreement, then the applicable note
guarantor will be released from its note guarantee automatically and immediately
upon such sale. See "Description of the Senior Secured Credit Agreement."
Our Aggregates Business Depends Heavily on Government Funding of Highways
Many of our aggregates customers depend substantially on government
funding of highway construction and maintenance and other infrastructure
projects. Although TEA-21 provides for increased federal funding for highways
and related infrastructure improvements through 2003, there can be no assurance
that any successor program adopted by Congress, if one is adopted at all, will
provide for equivalent or increased government funding. Furthermore, although
TEA-21 provides for federal funding through 2003, state and municipal
governmental entities need to provide for matching funds in order to obtain
federal funding under TEA-21, and state and municipal governmental entities have
separate approval processes relating to the matching of any federal funding for
highways that have not been completed. Accordingly, a decrease in federal
funding of highways and related infrastructure improvements after the expiration
of TEA-21, or a failure of states or municipalities to match the federal funding
to be provided by TEA-21, could adversely affect our revenue and profits in our
aggregates business. In addition, unlike some of our competitors, we currently
sell our aggregates products almost entirely in only two states, Pennsylvania
and New Jersey. As a result, we are more vulnerable than our more geographically
diverse competitors to decreases in state government highway spending in those
states.
We Depend on Good Labor Relations
As of March 1, 2001, we had approximately 1,053 employees, of which
approximately 538 were represented by 12 local unions under 12 union contracts.
These union contracts have remaining durations ranging from one to five years.
Over the last 10 years, we have been involved in numerous labor negotiations,
only two of which have resulted in a work disruption at two of our 26
facilities. During these disruptions, the operations of the facilities and the
ability to serve our customers were not materially affected. Although we
consider our current relations with our employees to be good, if we do not
maintain these good relations, or if a work disruption were to occur, we could
suffer a material adverse effect.
Future Acquisitions May Adversely Affect Our Operations
We intend to actively pursue acquisition opportunities, some of which
could be material. We may finance future acquisitions through internally
generated funds, bank borrowings, public offerings or private placements of
equity or debt securities, or a combination of these sources. We might not be
able to make acquisitions on terms that are favorable to us, or at all. If we do
complete any future acquisitions, we will face many risks, including the
possible inability to integrate an acquired business into our operations,
diversion of our management's attention, failure to retain key acquired
personnel and unanticipated problems or liabilities, some or all of which could
have a material adverse effect on us. Acquisitions could place a significant
strain on management, operating, financial and other resources and increased
demands on our systems and controls.
Control of USS Holdings; Stockholders Agreement
The holders of all of the capital stock of USS Holdings are party to a
stockholders agreement. Subject to certain exceptions, the stockholders
agreement provides that the holders of USS Holdings' capital stock have to vote
their shares of USS Holdings to elect to the board of directors two directors
designated by D. George Harris, a principal of DGHA, one director designated by
Anthony J. Petrocelli, a principal of DGHA, and three directors designated by an
affiliate of JPMP LLC. In addition, upon the occurrence of certain "trigger
events" described in the stockholders agreement, the JPMP LLC affiliates will
collectively have the right to appoint two additional directors to the board of
USS Holdings, thus giving them the right to appoint a majority of directors of
USS Holdings. The interests of these stockholders may conflict with your
interests as a holder of the notes. See "Security Ownership of Certain
Beneficial Owners and Management--The Stockholders Agreement."
We May Be Unable To Purchase Your Notes upon a Change in Control
Upon a change of control, the issuer will be required to offer to purchase
all of the notes then outstanding at 101% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase. If a change of control were
to occur, the issuer may not have sufficient funds to pay the purchase price for
the outstanding notes tendered, and the issuer expects that it would require
third-party financing; however, the issuer may not be able to obtain financing
on favorable terms, if at all. In addition, the senior secured credit agreement
restricts our ability to purchase the notes, including pursuant to an offer in
connection with a change of control. A change of control under the indenture may
also result in an event of default under the senior secured credit agreement and
may cause the acceleration of other senior debt, if any, in which case the
subordination
9
provisions of the notes would require payment in full of the senior secured
credit agreement and any other senior debt before purchase of the notes. Our
future debt may also contain restrictions on our ability to repay the notes upon
certain events or transactions that could constitute a change of control under
the indenture. The inability to repay senior debt upon a change of control or to
purchase all of the tendered notes would each constitute an event of default
under the indenture. See "--The Notes and the Note Guarantees Are Contractually
Subordinated to Senior Debt," "Description of the Notes--Change of Control" and
"Description of the Senior Secured Credit Agreement."
The change of control provisions in the indenture will not necessarily
afford you protection in the event of a highly leveraged transaction, including
a reorganization, restructuring, merger or other similar transaction involving
us, that may adversely affect you. This type of transaction may not involve a
change in voting power or beneficial ownership, or, even if it does, may not
involve a change of the magnitude required under the definition of change of
control in the indenture to trigger those provisions. Except as described under
"Description of the Notes--Change of Control," the indenture does not contain
provisions that permit the holders of the notes to require us to purchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.
The Notes and the Note Guarantees Are Subject to Fraudulent Conveyance and
Preferential Transfer Laws
The incurrence of debt by the issuer or the note guarantors, such as the
notes or the note guarantees that were originally issued in October 1999 in
connection with our acquisition of Commercial Stone (as defined in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview") and related transactions, may be subject to review under
federal bankruptcy law or relevant state fraudulent conveyance laws if a
bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors.
Under these laws, if in such case or lawsuit a court were to find that, at the
time the issuer or any note guarantor incurred debt (including debt under the
notes or the note guarantees):
o the issuer or any note guarantor, as applicable, incurred that debt
with the intent of hindering, delaying or defrauding current or future
creditors, or
o the issuer or any note guarantor, as applicable, received less than
reasonably equivalent value or fair consideration for incurring that
debt, and
o was insolvent or was rendered insolvent by reason of any of the
transactions consummated at the time the debt was incurred,
o was engaged, or about to engage, in a business or transaction for
which the assets remaining with the issuer or that note guarantor
constituted unreasonably small capital to carry on our or its
business,
o intended to incur, or believed that the issuer or that note
guarantor would incur, debts beyond its ability to pay as those
debts matured (as all of the foregoing terms are defined in or
interpreted under the relevant fraudulent transfer or conveyance
statutes), or
o was a defendant in an action for money damages, or had a judgment
for money damages docketed against the issuer or that note
guarantor (in either case, if, after final judgment, the judgment
is unsatisfied),
then that court could void or subordinate the amounts owing under the notes or
the note guarantees to the issuer's or that note guarantor's existing and future
debt and take other actions detrimental to you.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law of the jurisdiction that is being applied in
any such proceeding. Generally, however, a debtor would be considered insolvent
if, at the time that debtor incurred the debt, either (a) the sum of its debts
(including contingent liabilities) is greater than its assets, at fair
valuation, or (b) the present fair saleable value of its assets is less than the
amount required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the issuer or any note guarantor were solvent at the relevant
time, or whether, whatever standard was used, the notes would not be voided or
further subordinated on another of the grounds set forth above. In rendering
their opinions in connection with the transactions consummated at the time the
debt was incurred, our counsel did not express any opinion as to the
applicability of federal or state fraudulent transfer and conveyance laws.
10
You Cannot Be Sure that an Active Trading Market Will Develop for the Notes
We do not intend to apply for a listing of the notes on a securities
exchange or any automated dealer quotation system. We have been advised by CSI
that, subject to applicable laws and regulations, it currently intends to
continue making a market in the notes. However, CSI is not obligated to do so
and any such market-making may be interrupted or discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act of 1933 and the Securities Exchange Act of
1934. Because CSI is our affiliate, CSI is required to deliver a current
"market-making" prospectus and otherwise comply with the registration
requirements of the Securities Act of 1933 in any secondary market sale of the
notes. Accordingly, the ability of CSI to make a market in the notes may, in
part, depend on our ability to maintain a current market-making prospectus.
The liquidity of the trading market in the notes, and the market price
quoted for the notes, may be adversely affected by changes in the overall market
for high yield securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry generally. As a
result, you cannot be sure that an active trading market will develop for the
notes.
11
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by
CSI in market-making transactions. We will not receive any of the proceeds from
these transactions.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2000.
This information should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes thereto
included elsewhere in this prospectus.
At December 31, 2000
(Dollars in Thousands)
----------------------
Debt (including current maturities):
Senior secured credit agreement:
Tranche A term loan facility...................................... $39,057
Tranche B term loan facility...................................... 93,500
Revolving credit facility(1)...................................... 5,500
Other debt.......................................................... 1,348
Senior subordinated notes........................................... 150,000
-------
Total debt........................................................ 289,405
Stockholder's equity:
Common stock........................................................ --
Loans to related party.............................................. (1,507)
Additional paid-in capital.......................................... 81,377
Retained deficit.................................................... (26,654)
--------
Total stockholder's equity........................................ 53,216
------
Total capitalization............................................ $ 342,621
=========
- -------------------
(1) The revolving credit facility provides for borrowings of up to $50.0
million with a sublimit of $12.0 million for letters of credit and a
sublimit of $3.0 million for swingline loans. As of December 31, 2000, in
addition to the $5.5 million drawn thereunder, $6.6 million was allocated
to letters of credit, leaving $37.9 million available for our use. As of
March 15, 2001, borrowings under the revolving credit facility increased to
$19.1 million, and $6.7 million was allocated for letters of credit,
leaving $24.2 million available for our use.
12
SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
and other data of U.S. Silica (Predecessor) and us (Successor) as of the end of
and for the periods presented. We acquired U.S. Silica on February 9, 1996. U.S.
Silica is therefore the Predecessor for financial reporting purposes. The
selected historical consolidated financial data as of and for the years ended
December 31, 2000, 1999 and 1998 have been derived from our audited consolidated
financial statements and the notes thereto included elsewhere in this
prospectus. The selected historical consolidated financial data as of and for
the years ended December 31, 1997 and 1996 are derived from the audited
consolidated financial statements of the Successor and the Predecessor,
respectively, that are not included in this prospectus. This information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and the notes thereto included elsewhere in this prospectus.
Successor Predecessor
------------------------------------------------------------- --------------
February 10, January 1,
1996 through 1996 through
Year Ended December 31, December 31, February 9,
------------------------------------------------ ------------ --------------
2000 1999(1) 1998(2) 1997 1996 1996
---------- ------------- ------------ ---------- ------------ --------------
(Dollars in Thousands)
Statement of Operations Data:
Sales............................... $299,335 $244,802 $169,943 $154,470 $129,061 $ 14,247
Cost of goods sold.................. 222,754 175,971 126,127 114,055 95,904 11,814
Depreciation, depletion and
amortization........................ 35,895 28,481 19,888 17,886 15,225 1,033
Selling, general and administrative. 25,543 21,843 16,930 14,345 12,077 1,404
Incentive stock compensation expense
(3)................................. 998 -- 14,227 -- -- --
Operating income (loss)............. 14,145 18,507 (7,229) 8,184 5,855 (4)
Interest expense.................... 36,359 19,590 10,269 10,513 10,074 13
Accretion of preferred stock warrants
(4)................................. -- 56 1,254 1,374 -- --
Other income net, including
interest income.................. (1,575) (2,171) (1,881) (1,742) (598) (534)
(Loss) income before income taxes... (20,639) 1,032 (16,871) (1,961) (3,621) 517
Provision (Benefit) for income taxes (11,091) (2,714) (2,204) (2,239) (2,101) 963
Net income (loss) before
extraordinary loss............... (9,548) 3,746 (14,667) 278 (1,520) (446)
Extraordinary loss (5).............. -- (2,747) (2,102) -- -- --
Net income (loss)................... $ (9,548) $ 999 $(16,769) $ 278 $ (1,520) $ (446)
Balance Sheet Data:
Cash................................ $ 860 $ 13,573 $ 2,222 $ 402 $ 954 $ 748
Working capital..................... 38,086 45,715 19,508 12,277 11,724 16,573
Total assets........................ 538,286 551,603 274,678 188,647 195,787 104,112
Total debt.......................... 289,405 287,505 137,448 88,163 89,154 --
Stockholder's equity................ 53,216 64,335 23,396 26,022 22,755 54,984
Other Financial Data:
Capital expenditures................ $ 20,319 $ 14,572 $ 9,399 $ 5,537 $ 7,216 $ 567
Cash interest expense............... 33,266 10,925 9,269 8,731 6,609 --
Ratio of earnings to fixed charges (6) -- (7) 1.1 -- (7) -- (7) -- (7) 25.6
- -------------------
(1) Includes the results of the Morie Assets from April 9, 1999, the date of
acquisition, and the results of (1) Commercial Stone from October 1, 1999,
the date of acquisition.
(2) Includes (i) with respect to the year ended December 31, 1998, the results
of Pettinos from July 25, 1998, the date of acquisition, and (ii) with
respect to the year ended December 31, 1998, the results of Better
Materials from December 14, 1998, the date of acquisition.
(3) Represents non-cash compensation expense recorded in 2000 for stock grants
to our new Chief Executive Officer and in 1998 due to the waiver by USS
Holdings, our parent, of its right to repurchase certain capital stock
held by our management.
(4) Represents the non-cash accretion in value of certain warrants granted
with respect to preferred stock of USS Holdings. We recognize this charge
as part of push down accounting because the warrants were issued in
connection with debt issued by U.S. Silica. The obligation to satisfy any
payments due in connection with these warrants was forgiven by USS
Holdings during 1999.
(5) Represents non-cash charges and write-offs recorded in connection with our
early retirement of certain (5) subordinated debt in 1998, and the early
retirement of certain senior debt in 1999.
(6) Under Item 503 of Regulation S-K, "earnings" for purposes of this
calculation have been computed by adding to "income before extraordinary
items" all taxes based on income or profits, total interest charges and
the estimated interest element of rentals charged to income. "Fixed
charges" include total interest charges and the estimated interest element
of rentals charged to income.
(7) Earnings were insufficient to cover fixed charges by $20.6 million, $16.9
million, $2.0 million and $3.6 million for the years ended December 31,
2000, 1998 and 1997 and the period February 10, 1996 through December 31,
1996, respectively.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with our audited
consolidated financial statements and the notes thereto included elsewhere in
this prospectus.
Overview
We mine, process and market industrial minerals, principally industrial
silica, in the eastern and midwestern United States. We also mine, process and
market aggregates and produce and market hot mixed asphalt in certain parts of
Pennsylvania and New Jersey. We are a holding company that conducts
substantially all our operations through our subsidiaries.
We were incorporated in Delaware in January 1996 and purchased U.S. Silica
Company, which was organized in 1927 as the Pennsylvania Glass Sand Corporation,
from U.S. Borax in February 1996. After purchasing U.S. Silica, we subsequently
completed the following acquisitions and disposition:
o In July 1998, we acquired George F. Pettinos, Inc. ("Pettinos"), a
producer of aggregates with operations in Berlin, New Jersey and a
processor of silica with operations in Ontario, Canada.
o In December 1998, we acquired Better Materials Corporation ("Better
Materials"), an aggregates producer in southeastern Pennsylvania.
o In April 1999, we acquired certain operating assets in southern New
Jersey from Unimin Corporation (the "Morie Assets"), which are used in
the production and sale of silica and aggregates.
o In October 1999, we acquired Commercial Stone Co., Inc., a crushed
stone and hot mixed asphalt producer in southwestern Pennsylvania,
Commercial Aggregates Transportation and Sales, LLC ("CATS") and
related quarry properties (collectively, "Commercial Stone").
o In February 2000, we sold one of our two Canadian subsidiaries, George
F. Pettinos (Canada) Limited ("PECAL").
In November 2000 we incorporated a new Delaware subsidiary, BMAC Services
Co., Inc., to provide consulting and management services to our other
subsidiaries. In April 2001, Commercial Stone Co., Inc. merged with Better
Materials, with Better Materials surviving. As a result of this merger, CATS
became a wholly-owned subsidiary of Better Materials.
Significant Accounting Policies
We recognize sales at the time the product is shipped to our customers and
title passes (generally when the product leaves our facility). Sales include the
costs of transportation borne by our customers when we pay the costs on their
behalf and are reimbursed.
Cost of goods sold includes the ongoing mining and processing costs of our
operations (primarily labor costs, power costs, repair and maintenance costs,
transportation costs on customer shipments, costs of hiring third party
subcontractors to drill and blast in our mining operations, as well as lease
royalty payments, where applicable) and non-cash charges associated with
estimated net future costs of restoring and reclaiming operating mine sites.
This provision is made at each operating location based on units of production
and engineering estimates of total deposits. Selling, general and administrative
expenses are the costs of operating our business, including corporate overhead
and associated fees and expenses related to acquisitions. Management fees to our
acquisition advisors and due diligence costs for any acquisitions that we are
unable to complete are also included in this category.
Acquired property and mineral deposits are recorded at cost. The purchase
price of business acquisitions is allocated based on the fair values of assets
acquired and liabilities assumed at that time. Depreciation is computed using
the straight line method over the estimated useful lives of the assets, which
ranges from 3 to 15 years. Depletion of mineral deposits is accounted for as the
minerals or aggregates are extracted, based on units of production and
engineering estimates of total deposits. Accordingly, depletion expense will
increase or decrease with changes in the volumes of minerals or aggregates
extracted or, prospectively, for changes in engineering estimates of total
deposits. Amortization of various non-current assets such as non-competition
agreements are made on a straight line basis over the life of the related
agreement. Goodwill related to purchased acquisitions is amortized over 15
years.
14
Results of Operations
The following table sets forth our consolidated statement of operations
data for the three years ended December 31, 2000, 1999 and 1998, and the
percentage of sales of each line item for the periods presented. This statement
of operations data is derived from our consolidated financial statements and the
notes thereto included elsewhere in this prospectus.
Year Ended December 31,
----------------------------------------------------------------------------
2000 1999 1998
------------------------ -------------------------- -----------------------
(Dollars in Thousands)
Sales:
Industrial minerals......... $192,280 64.2% $191,263 78.1% $166,446 97.9%
Aggregates.................. 107,055 35.8 53,539 21.9 3,497 2.1
-------- ----- -------- ------ -------- -----
Total sales.................... 299,335 100.0 244,802 100.0 169,943 100.0
Cost of goods sold............. 222,754 74.4 175,971 71.9 126,127 74.2
Depreciation, depletion and
amortization................. 35,895 12.0 28,481 11.6 19,888 11.7
Selling, general and
administrative .............. 25,543 8.5 21,843 8.9 16,930 10.0
Incentive stock compensation
expense...................... 998 0.3 -- -- 14,227 8.4
-------- ----- -------- ----- -------- -----
Operating income (loss)........ 14,145 4.7 18,507 7.6 (7,229) (4.3)
Interest expense............... 36,359 12.1 19,590 8.0 10,269 6.0
Accretion of preferred stock
warrants..................... -- -- 56 -- 1,254 0.7
Other income, net of interest
income....................... (1,575) (0.5) (2,171) (0.9) (1,881) (1.1)
-------- ----- --------- ------- --------- ------
(Loss) income before income
taxes........................ (20,639) (6.9) 1,032 0.4 (16,871) (9.9)
Benefit for income taxes....... (11,091) (3.7) (2,714) (1.1) (2,204) 1.3
--------- ----- -------- ------- --------- -----
Net income (loss) before
extraordinary loss........... (9,548) (3.2) 3,746 1.5 (14,667) (8.6)
Extraordinary loss............. -- -- (2,747) (1.1) (2,102) (1.2)
-------- ----- --------- ------- --------- ------
Net income (loss).............. $ (9,548) (3.2)% $ 999 0.4% $(16,769) (9.9)%
========= ======== ==========
Year Ended December 31, 2000 Compared with Year Ended December 31, 1999
Sales. Sales increased $54.5 million, or 22.3%, to $299.3 million in the
year ended December 31, 2000 from $244.8 million in the year ended December 31,
1999.
Sales of industrial minerals increased $1.0 million to $192.3 million in
the year ended December 31, 2000 from $191.3 million in the year ended December
31, 1999. Sales decreased $7.1 million due to the February 2000 sale of PECAL.
Excluding PECAL's results for both periods, sales of industrial minerals
increased $8.1 million, or 4.4%, to $190.5 million in the year ended December
31, 2000 from $182.4 million in the year ended December 31, 1999. The primary
reasons behind the increase in industrial minerals sales were a $4.6 million
increase in transportation costs billed to customers (increasing from $32.1
million in 1999 to $36.7 million in 2000), $2.4 million from the full year
results from the acquisition of the Morie Assets, and an increase in sales to
the oil and gas extraction market segment, partially offset by a decline in
sales of calcined kaolin to the fillers and extenders market segment.
Sales of aggregates increased $53.6 million to $107.1 million in the year
ended December 31, 2000 from $53.5 million in the year ended December 31, 1999.
The increase was primarily due to the full year results from the acquisitions of
Commercial Stone and the Morie Assets, which resulted in the inclusion of
additional sales of $52.1 million in the year ended December 31, 2000.
Cost of Goods Sold. Cost of goods sold increased $46.8 million, or 26.6%,
to $222.8 million in the year ended December 31, 2000 from $176.0 million in the
year ended December 31, 1999.
Cost of goods sold for industrial minerals increased $0.9 million to
$140.7 million in the year ended December 31, 2000 from $139.8 million in the
year ended December 31, 1999. Cost of goods sold decreased $5.9 million due to
the February 2000 sale of PECAL. Excluding PECAL's results for both periods,
cost of goods sold for industrial minerals increased $6.8 million, or 5.1%, to
$139.2 million in the year ended December 31, 2000 from $132.4 million in the
year ended December 31, 1999. The increase was primarily due to an increase of
$4.6 million in transportation costs billed to customers, and a $4.0 million
increase in the cost of drier fuel partially offset by reductions in other
operating expenses.
Cost of goods sold for aggregates increased $45.3 million to $81.4 million
in the year ended December 31, 2000 from $36.1 million in the year ended
December 31, 1999. The increase was primarily due to the inclusion of the full
year results from the acquisitions of Commercial Stone and the Morie Assets,
which resulted in an additional $42.7 million in cost of goods sold in the year
ended December 31, 2000, along with $0.8 million in increased costs for
petroleum based products in our eastern Pennsylvania and New Jersey aggregates
operations, and $0.6 million in additional costs from a new aggregate sand plant
which began operations in mid-2000.
15
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization increased $7.4 million, or 26.0%, to $35.9 million in the year
ended December 31, 2000 from $28.5 million in the year ended December 31, 1999.
The increase was primarily due to a $5.1 million increase from the acquisition
of Commercial Stone, including a $0.5 million increase in annual depletion rates
made at Commercial Stone in September 2000 after a reduction in the estimated
available reserves at our related aggregates sites following a reserve analysis.
Selling, General and Administrative. Selling, general and administrative
expenses increased $3.7 million, or 17.0%, to $25.5 million in the year ended
December 31, 2000 from $21.8 million in the year ended December 31, 1999. The
increase was primarily due to the acquisition of Commercial Stone, which
resulted in the inclusion of $2.6 million in additional expense, partially
offset by a reduction of $0.5 million from the sale of PECAL in February 2000.
Excluding the acquisition and divestiture, selling, general and administrative
expenses increased $1.7 million, or 8.5%, to $21.8 million in the year ended
December 31, 2000 from $20.1 million in the year ended December 31, 1999 due to
a $1.3 million non-recurring compensation charge for the recruitment of our new
chief executive officer.
Incentive Stock Compensation Expense. Incentive stock compensation expense
amounted to $1.0 million in the year ended December 31, 2000 as a result of the
issuance of stock of our parent as part of the non-recurring costs associated
with the recruitment of our new chief executive officer.
Operating Income. Operating income decreased $4.4 million to $14.1 million
in the year ended December 31, 2000 from $18.5 million in the year ended
December 31, 1999.
Operating income for industrial minerals increased $0.8 million to $13.7
million in the year ended December 31, 2000 from $12.9 million in the year ended
December 31, 1999. The increase is primarily due to the factors noted earlier,
and a reduction of $2.7 million in direct and allocated selling, general and
administrative expense.
Operating income for aggregates decreased $2.2 million to $4.5 million in
the year ended December 31, 2000 from $6.7 million in the year ended December
31, 1999 due to the factors noted earlier and an increase of $3.1 million in
allocated corporate overhead expense.
Corporate expenses not allocated to the business segments increased $2.9
million to $4.0 million in the year ended December 31, 2000 from $1.1 million in
the year ended December 31, 1999, primarily as a result of the non-recurring
compensation expenses noted earlier, and an increase in consulting costs.
Interest Expense. Interest expense increased $16.8 million, or 85.7%, to
$36.4 million in the year ended December 31, 2000 from $19.6 million in the year
ended December 31, 1999. The increase was primarily due to increased borrowings
related to prior year acquisitions and increased interest rates.
Net Income (Loss). Net income decreased $10.5 million to a $9.5 million
net loss in the year ended December 31, 2000 from $1.0 million in net income in
the year ended December 31, 1999. The decrease in net income is primarily due to
the factors noted earlier, especially the increases in interest expense,
depreciation and non-recurring compensation expenses recognized in 2000,
partially offset by an $8.4 million increase in the benefit for income taxes.
Extraordinary losses incurred in 1999 were $2.7 million, reflecting the
after-tax charge recognized to write off debt issuance fees that were previously
capitalized in connection with our 1998 financing.
Year Ended December 31, 1999 Compared with Year Ended December 31, 1998
Sales. Sales increased $74.9 million, or 44.1%, to $244.8 million in the
year ended December 31, 1999 from $169.9 million in the year ended December 31,
1998.
Sales of industrial minerals increased $24.9 million, or 15.0%, to $191.3
million in the year ended December 31, 1999 from $166.4 million in the year
ended December 31, 1998. The increase was primarily due to the acquisition of
the Morie Assets, which resulted in the inclusion of $8.7 million for the period
of April 8, 1999 through December 31, 1999, and the full year results of the
Pettinos acquisition, which resulted in an increase of $5.3 million in the year
ended December 31, 1999 from the year ended December 31, 1998. Excluding these
results from acquisitions, sales of industrial minerals increased $10.9 million,
or 6.6%, to $177.3 million in the year ended December 31, 1999 from $166.4
million in the year ended December 31, 1998, primarily from $4.1 million of
increased silica sales to the glass container, flat glass, specialty glass and
filler extender and use markets, and $4.5 million in increased transportation
costs billed to customers.
Sales of aggregates increased $50.0 million to $53.5 million in the year
ended December 31, 1999 from $3.5 million in the year ended December 31, 1998.
The increase was primarily due to the full year results from the 1998
acquisitions of
16
Better Materials and Pettinos, which resulted in the inclusion of additional
sales of $27.9 million in the year ended December 31, 1999, the acquisition of
the Morie Assets, which resulted in the inclusion of sales of $6.1 million for
the period of April 8, 1999 through December 31, 1999 and the acquisition of
Commercial Stone, which resulted in the inclusion of sales of $16.0 million for
the period of October 1, 1999 through December 31, 1999.
Cost of Goods Sold. Cost of goods sold increased $49.9 million, or 39.6%,
to $176.0 million in the year ended December 31, 1999 from $126.1 million in the
year ended December 31, 1998.
Cost of goods sold of industrial minerals increased $16.6 million, or
13.5%, to $139.9 million in the year ended December 31, 1999 from $123.3 million
in the year ended December 31, 1998. The increase was primarily due to the
acquisition of the Morie Assets and the full year results from the Pettinos
acquisition, which resulted in the inclusion of $9.7 million in cost of goods
sold. Excluding acquisitions, cost of goods sold increased $4.5 million on
increased transportation costs billed to customers, and $2.3 million, or 2.5%,
on a volume increase of 4.6% in the year ended December 31, 1999 compared to the
year ended December 31, 1998.
Cost of goods sold of aggregates increased $33.3 million to $36.1 million
in the year ended December 31, 1999 from $2.8 million in the year ended December
31, 1998. The increase was due to the inclusion of the full year results from
the 1998 acquisitions of Better Materials and Pettinos, and the 1999 acquisition
of the Morie Assets and Commercial Stone, which resulted in the inclusion of
$33.3 million in additional cost of goods sold in the year ended December 31,
1999.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization increased $8.6 million, or 43.2%, to $28.5 million in the year
ended December 31, 1999 from $19.9 million in the year ended December 31, 1998.
The increase was primarily due to the acquisitions of Better Materials, the
Morie Assets and Commercial Stone.
Selling, General and Administrative. Selling, general and administrative
expenses increased $4.9 million, or 29.0%, to $21.8 million in the year ended
December 31, 1999 from $16.9 million in the year ended December 31, 1998. The
increase was primarily due to the acquisitions of Pettinos, Better Materials,
the Morie Assets and Commercial Stone, which resulted in the inclusion of $4.3
million in additional expense in the year ended December 31, 1999. Excluding
these items, selling, general and administrative expenses increased $0.6
million, or 3.6%, to $17.5 million in the year ended December 31, 1999 from
$16.9 million in the year ended December 31, 1998 due to normal annual
increases.
Operating Income. Operating income increased $25.7 million to $18.5
million in the year ended December 31, 1999 from a $7.2 million operating loss
in the year ended December 31, 1998.
Operating income of industrial minerals increased $4.5 million to $12.9
million in the year ended December 31, 1999 from $8.4 million in the year ended
December 31, 1998. The increase is primarily due to the results from the
acquisitions and other factors noted earlier.
Operating income of aggregates increased $7.0 million to $6.7 million in
the year ended December 31, 1999 from an operating loss of $0.3 million in the
year ended December 31, 1998 as a result of the acquisitions noted earlier.
Corporate expenses not allocated to the business segments decreased $14.2
million to $1.1 million in the year ended December 31, 1999, from $15.3 million
in the year ended December 31, 1998 primarily due to the non-recurring incentive
stock compensation recognized in 1998.
Interest (Income) Expense. Interest expense increased $9.3 million, or
90.3%, to $19.6 million in the year ended December 31, 1999 from $10.3 million
in the year ended December 31, 1998. The increase was primarily due to increased
borrowings related to acquisitions and increased interest rates.
Net Income (Loss). Net income increased $17.8 million to $1.0 million in
the year ended December 31, 1999 from a $16.8 million net loss in the year ended
December 31, 1998. The increase in net income is primarily due to the factors
noted above, especially the incentive stock compensation expense recognized in
1998. This is partially offset by an increase of $0.6 million in extraordinary
losses to $2.7 million in the year ended December 31, 1999 from $2.1 million in
the year ended December 31, 1998. The 1999 loss reflects the after-tax charge
recognized to write off debt issuance fees that were previously capitalized in
connection with our 1998 financing. The 1998 extraordinary loss reflects the
after-tax charge to write off capitalized debt issuance fees for subordinated
debt first issued in 1996 and retired in 1998.
17
Liquidity and Capital Resources
Our principal liquidity requirements have historically been to service our
debt, meet our working capital, capital expenditure and mine development
expenditure needs and finance acquisitions. We are a holding company and as such
we conduct substantially all our operations through our subsidiaries. As a
holding company, we are dependent upon dividends or other intercompany transfers
of funds from our subsidiaries to meet our debt service and other obligations,
and have historically met our liquidity and capital investment needs with
internally generated funds. Conversely, we have funded our acquisitions through
borrowings and equity investments. Our total debt as of December 31, 2000 was
$289.4 million and our total stockholder's equity as of that date was $53.2
million, giving us total debt representing 84% of total capitalization. Our debt
level makes us more vulnerable to economic downturns and adverse developments in
our business.
Net cash provided by operating activities was $7.7 million for the year
ended December 31, 2000 compared to $29.5 million of net cash provided by
operating activities in the year ended December 31, 1999. Cash provided by
operating activities decreased $21.8 million in 2000 due primarily to reduced
earnings, including increased interest expense. Cash interest paid in the year
ended December 31, 2000 was $33.3 million, an increase of $22.4 million from the
$10.9 million paid in the year ended December 31, 1999, primarily as a result of
increased borrowings in 1999.
Net cash used for investing activities decreased $161.5 million to $24.1
million in the year ended December 31, 2000 from $185.6 million for the year
ended December 31, 1999. This decrease primarily resulted from the $172.4
million acquisition of Commercial Stone and the Morie Assets that occurred in
1999, the $3.1 million received from the PECAL sale in February 2000 partially
offset by a $5.7 million increase in capital expenditures, and the $6.1 million
spent to acquire a fourth hot mixed asphalt plant in Pittsburgh.
Cash flow provided by financing activities was $3.6 million for the year
ended December 31, 2000 and $167.5 million for the year ended December 31, 1999.
There was a $3.6 million reduction in long-term debt in the year ended December
31, 2000 and a $155.8 million increase in long-term debt in the same period in
1999. Advances under the revolving credit facility were $5.5 million in the year
ended December 31, 2000, compared to a $6.1 million reduction in the same period
in 1999. In addition, we received a $35.0 million equity contribution from USS
Holdings, our parent, in 1999. Financing fees decreased $15.4 million to $0.4
million in 2000 from $15.8 million in 1999.
Interest payments on our 13% senior subordinated notes due 2009 ($150
million outstanding as of December 31, 2000), which are unconditionally and
irrevocably guaranteed, jointly and severally, by each of our domestic
subsidiaries, debt service under our senior secured credit agreement, working
capital, capital expenditures and mine development expenditures, incurred in the
normal course of business as current deposits are depleted, represent our
significant liquidity requirements. Future acquisition opportunities will also
represent potentially significant liquidity requirements.
Under our senior secured credit agreement, as of December 31, 2000, we had
$39.1 million outstanding under the tranche A term loan facility and $94.0
million outstanding under the tranche B term loan facility. In addition, this
credit agreement provides us with a $50 million revolving credit facility. The
revolving credit facility was partially drawn for $5.5 million as of December
31, 2000, and $6.6 million was allocated for letters of credit, leaving $37.9
million available for our use. As of March 15, 2001, borrowings under the
revolving credit facility increased to $19.1 million, and $6.7 million was
allocated for letters of credit, leaving $24.2 million available for our use.
The revolving credit facility is available for general corporate purposes,
including working capital and capital expenditures, but excluding acquisitions,
and includes sublimits of $12.0 million and $3.0 million, respectively, for
letters of credit and swingline loans. Debt under the senior secured credit
agreement is collateralized by substantially all of our assets, including our
real and personal property, inventory, accounts receivable and other
intangibles. For a further description of our senior secured credit agreement,
including certain restrictions that it imposes upon us and certain financial
covenants that it requires us to maintain, please see "Description of the Senior
Secured Credit Agreement" and note 6 to our consolidated financial statements
included elsewhere in this prospectus.
On February 22, 2001, the lenders under our senior secured credit
agreement approved an amendment effective December 31, 2000 that revised the
required leverage ratio and interest coverage ratio covenants under the credit
agreement for the period of December 31, 2000 through December 31, 2001. As a
result of this amendment, we were in compliance with these financial ratio
covenants, as revised, as of December 31, 2000. In connection with this
amendment, we agreed to a 25 basis point increase in interest rates for any
period in which our leverage ratio is greater than 5.0. In addition, we agreed
to cancel the undrawn $40.0 million acquisition term loan facility, which also
resulted in a $300,000 reduction in our annual loan commitment fees, as of
February 22, 2001. A one-time amendment fee of approximately $400,000 was paid
to the lenders as part of the amendment. This amendment to our credit agreement
was filed as an exhibit to our Current Report on Form 8-K dated February 22,
2001.
18
We believe, based on our calendar year 2001 forecast, that we will be in
compliance with the amended leverage ratio and interest coverage ratio covenants
contained in the senior secured credit agreement throughout calendar year 2001.
In the event that we do not substantially achieve our 2001 forecast, it will be
necessary to seek further amendments to the senior secured credit agreement
covenants. While we have obtained amendments and waivers under the senior
secured credit agreement in the past, there can be no assurance that future
amendments or waivers will be granted or that any amendments or waivers, if
granted, would be on terms satisfactory to us.
Capital expenditures increased $5.7 million, or 39%, to $20.3 million in
the year ended December 31, 2000 from $14.6 million in the year ended December
31, 1999. Excluding possible acquisitions, our expected capital expenditure and
mine development requirements for 2001 is $18.5 million.
Our ability to satisfy our debt obligations and to pay principal and
interest on our debt, fund working capital, mine development and acquisition
requirements and make anticipated capital expenditures will depend on the future
performance of our subsidiaries, which is subject to general economic, financial
and other factors, some of which are beyond our control. We cannot be certain
that the cash earned by our subsidiaries will be sufficient to allow us to pay
principal and interest on our debts and meet our other obligations. We believe,
however, that based on current levels of operations and anticipated growth, cash
flow from operations, together with borrowings under the revolving credit
facility, will be adequate for at least the next twelve months to make required
payments of principal and interest on our debt and fund working capital, mine
development and capital expenditure requirements. There can be no assurance,
however, that our business will generate sufficient cash flow from operations or
that future borrowings will be available under the revolving credit facility in
an amount sufficient to enable us to service our debt or to fund our other
liquidity needs. If we do not have enough cash, we may be required to refinance
all or part of our existing debt, including the notes, sell assets, borrow more
money or raise equity. We cannot guarantee that we will be able to refinance our
debt, sell assets, borrow more money or raise equity on terms acceptable to us,
or at all.
Inflation
We do not believe that inflation has had a material impact on our
financial position or results of operations during the periods covered by the
financial statements included in this prospectus.
Seasonality
Our aggregates business is seasonal, due primarily to the effect of
weather conditions in winter months on construction activity in our Pennsylvania
and New Jersey markets. Due to this, peak sales of aggregates occur primarily in
the months of April through November. Accordingly, our results of operations in
any individual quarter may not be indicative of our results of operations for
the full year.
Quantitative and Qualitative Disclosures About Market Risk
We do not expect to enter into financial instruments for trading purposes.
We anticipate periodically entering into interest rate swap agreements to
effectively convert all or a portion of our floating-rate debt to fixed-rate
debt in order to reduce our exposure to movements in interest rates. Such
agreements would involve the exchange of fixed and floating interest rate
payments over the life of the agreement without the exchange of the underlying
principal amounts. The impact of fluctuations in interest rates on the interest
rate swap agreements is expected to be offset by the opposite impact on the
related debt. We record the payments or receipts on the agreements as
adjustments to interest expense. Swap agreements will only be entered into with
syndicate banks. In addition, we may enter into interest rate cap agreements,
which limit our variable rate interest to a specified level. In the future, we
may enter into natural gas and other energy related hedge arrangements in order
to reduce our exposure to changes in commodity energy prices. At this time, we
have no energy hedge agreements outstanding.
We are exposed to various market risks, including changes in interest
rates. Market risk related to interest rates is the potential loss arising from
adverse changes in interest rates.
At December 31, 2000, we had outstanding interest rate swap agreements
maturing in 2001 with an aggregate notional principal amount of $30.0 million.
At December 31, 1999, we had outstanding interest rate swap agreements maturing
in 2001 with an aggregate notional principal amount of $30.0 million. At
December 31, 1998, we had outstanding interest rate swap agreements maturing in
1999 and 2001 with an aggregate notional principal amount of $85.0 million.
These swaps effectively convert the variable interest rates on the notional
principal amounts to a fixed interest rate. In addition, we had interest rate
cap agreements at December 31, 2000, 1999 and 1998 with aggregate notional
principal amounts of $57.0 million, $51.0 million and $30.0 million,
respectively. These agreements effectively limit the variable interest rate on
the notional principal amount of variable rate debt to 6.5%.
19
The fair value of interest rate swap and cap agreements represents the
estimated receipts or payments that we would make to terminate the agreements.
At December 31, 2000, we would have received $100,000 to terminate the interest
rate swap agreements and $10,000 to terminate the interest rate cap agreements.
The fair market value of our long-term fixed interest rate debt is subject
to interest rate risk. Generally, the fair market value of the fixed interest
rate debt will increase as the interest rates fall and decrease as interest
rates rise. At December 31, 2000, the estimated fair value of our fixed interest
rate long-term debt (including current portion) was approximately $33.0 million
less than its carrying value of $150.0 million due to changes in market
conditions for the senior subordinated notes, which were trading at 78% of their
face value as of December 28, 2000. If the prevailing interest rates at December
31, 2000 increased by 1.0%, the fair market value of our total long-term debt
would decrease by approximately $5.2 million.
Environmental and Related Matters
We discuss certain environmental matters relating to our various
production and other facilities, certain regulatory requirements relating to
human exposure to crystalline silica and our mining activity and how such
matters may affect our business in the future under "Business--Government
Regulation."
Recent Accounting Pronouncements
During 2000, the Emerging Issues Task Force ("EITF") issued EITF No.
00-10, "Accounting for Shipping and Handling Fees and Costs." EITF No. 00-10
addresses the statement of earnings classification of shipping and handling
costs billed to customers and became effective in the fourth quarter of 2000. We
adopted the provisions of EITF No. 00-10 in our consolidated financial
statements for all periods presented contained in this prospectus. Accordingly,
our sales and cost of goods sold include shipping and handling costs billed to
customers in the years ended December 31, 2000, 1999 and 1998 totaling $60.8
million, $35.7 million and $27.7 million, respectively.
On December 3, 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." The guidelines set forth in SAB No. 101 stipulate that revenue
should not be recognized until it is realized or realizable and earned. We
adopted SAB No. 101 on January 1, 2000 without effect on our consolidated
financial position and results of operations.
In June 1998, Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," was issued.
SFAS No. 133 requires that all derivatives be recognized either as assets or
liabilities in the statement of financial position and be measured at fair
value. SFAS No. 133, as amended by SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB," is
effective for fiscal years beginning after June 15, 2000. The effect of adopting
this standard at January 1, 2001 was immaterial to our consolidated financial
position and results of operations.
20
BUSINESS
General
We mine, process and market industrial minerals, principally industrial
silica, in the eastern and midwestern United States. We also mine, process and
market aggregates and produce and market hot mixed asphalt in certain parts of
Pennsylvania and New Jersey.
We are the second leading producer of industrial silica in the United
States, accounting for approximately 24% of industry volume in 2000, and believe
that we have leading positions in most of our key end use markets for our silica
products, typically occupying the number one or two position by sales. These end
use markets include container glass, fiberglass, specialty glass, flat glass,
fillers and extenders, chemicals and ceramics. We also supply our silica
products to the foundry, building materials and other end use markets.
Our customers use our aggregates, which consist of high quality crushed
stone, construction sand and gravel, for road construction and maintenance,
other infrastructure projects and residential and commercial construction and to
produce hot mixed asphalt and concrete products. We also use our aggregates to
produce hot mixed asphalt.
We operate a network of 26 production facilities in 14 states. Many of our
production facilities are located near major modes of transportation and our
significant customers, which reduces transportation costs and enhances customer
service. Our principal industrial minerals and aggregates properties each have
deposits that we believe will support production in excess of 15 years. Our
industrial minerals business (substantially all the sales of which consists of
silica products) and our aggregates business accounted for 64% and 36% of our
sales, respectively, for the year ended December 31, 2000.
Products
We operate in two business segments: industrial minerals products and
aggregates products.
Industrial Minerals. Our industrial minerals products are processed to
meet a broad range of chemical purity, particle shape and sizing specifications.
Our key industrial minerals products are known as unground silica, ground
silica, fine ground silica, kaolin and aplite. Our unground silica products
consist of silica of various size grades ranging from 120 to 20 mesh. For the
year ended December 31, 2000, we sold 5.4 million tons of unground silica. Our
ground silica products consist of unground silica that is further processed into
sizes of 40 to 125 microns. For the year ended December 31, 2000, we sold
600,000 tons of ground silica. Our fine ground silica products consist of ground
silica that we have further processed with highly engineered equipment into size
grades of 5 to 40 microns. For the year ended December 31, 2000, we sold 57,000
tons of fine ground silica. In addition to our silica products we also produce a
limited amount of kaolin and aplite. Kaolin is a mineral co-product in our
production of silica in Kosse, Texas that we sell primarily as a filler and
extender to the paints and coatings industry. Aplite is an alumina source
produced at our Montpelier, Virginia facility that we sell primarily to the
glass industry.
Aggregates. Our aggregates products include high quality crushed stone,
construction sand and gravel, which we provide in various sizes, and hot mixed
asphalt. Hot mixed asphalt is a densely packed combination of approximately 95%
crushed stone, sand or gravel bound together by asphalt oil. A major component
of the road system in the United States, hot mixed asphalt covers approximately
95% of the paved roads in the United States, and the hot mixed asphalt industry
generates over $10 billion in sales annually in the United States. Market growth
and demand is primarily driven by road construction and population growth. We
sold 4.9 million tons of our aggregates products (excluding sales of hot mixed
asphalt) and 1.8 million tons of our hot mixed asphalt for the year ended
December 31, 2000.
We produce a high quality, anti-skid asphalt using the Superpave system.
Superpave is a relatively new approach to asphalt mix design, which provides
designers with standards for customizing roadway mixes for specific weather and
traffic conditions. This new set of standards generally requires high quality
aggregates that conform to a variety of specific characteristics, including
hardness, absorption, size and shape. Many state governments have elected to
require their roadways to conform to the Superpave standards. For example, the
Pennsylvania Department of Transportation requires all roadway contracts to
include the use of the Superpave standards. We have the ability both to supply
our customers with the quality of aggregates required by the Superpave system as
well as to manufacture Superpave-compliant asphalt from our own aggregates.
21
End Use Markets and Customers
Our industrial minerals and aggregates businesses generate sales from a
diversified base of customers and end use markets. During the year ended
December 31, 2000, we exceeded $10 million in sales in each of 9 distinct end
use markets, and no single customer accounted for more than 6% of our sales.
Industrial Minerals. Our industrial mineral products are sold into a
variety of end use markets, as described below.
Container Glass. We supply unground silica and aplite to the container
glass end use market for use in the production of food, beverage and liquor
bottles.
Fiberglass. We supply unground and ground silica and aplite to the textile
and insulation fiberglass end use markets. Textile fiberglass is used in the
production of roofing products and composites for automotive parts, sports
equipment and boats. Insulation fiberglass is used to maximize energy efficiency
in buildings by insulating heating and cooling ducts, attics, basements and
exterior walls.
Specialty Glass. We supply unground and ground silica and aplite to the
specialty glass end use market for use in the production of television tubes,
lights and tableware. Because of the higher quality standards in this market,
certain of our industrial minerals for specialty glass are shipped nationally
and regionally and also are exported.
Flat Glass. We supply unground silica to the flat glass end use market for
use in the production of automotive glass and windows. Windows are primarily
used in commercial and residential construction and remodeling.
We estimate that in 2000 our shipments of industrial silica to the
container glass, fiberglass, specialty glass and flat glass end use markets
accounted for approximately 29% of the total volume of industrial silica shipped
to the glass end use markets in the United States.
Foundry. We supply unground and ground silica to the foundry end use
market for use in the production of automotive, heavy equipment and machine tool
castings. We estimate that in 2000 we accounted for approximately 14% of the
silica volume shipped to the foundry end use market in the United States.
Fillers and Extenders. We supply unground, ground and fine ground silica
and kaolin to the paints and coatings end use market as fillers and extenders in
the production of architectural, industrial and traffic paints, and to the
rubber and plastic end use market for use in the production of epoxy molded
countertops and silicone rubber. We estimate that in 2000 we accounted for
approximately 30% of the silica volume shipped to the fillers and extenders end
use market in the United States. We are able to ship certain of these products,
which are primarily marketed on a local basis, to customers nationally as well
as regionally. In addition, we are also able to compete internationally with
some of these products.
Building Materials. We supply unground, ground and fine ground silica and
kaolin to the building materials end use market for use in the production of
bricks, stucco, concrete and asphalt shingles. We estimate that in 2000 we
accounted for approximately 24% of the silica volume shipped to the building
materials end use market in the United States.
Chemicals. We supply unground and ground silica to the chemicals end use
market where it is used in the manufacture of sodium silicate, which is used in
products such as detergents, paper textile, finishing and dental products. We
estimate that in 2000 we accounted for approximately 73% of the silica volume
shipped to the chemicals end use market in the United States.
Ceramics. We supply unground, ground and fine ground silica and kaolin to
the ceramics end use market for use in the production of ceramic whiteware,
floor tiles and glaze formulations. We estimate that in 2000 we accounted for
approximately 29% of the silica volume shipped to the ceramics end use market in
the United States.
Other. We also supply our silica, kaolin and aplite to a variety of
additional markets. For example, our silica is used as fracturing sand in the
oil and gas end use market and in athletic fields, race tracks, sand boxes,
playgrounds and golf courses.
Aggregates. We supply our aggregates products primarily to the paving and
construction end use market in southern New Jersey and southeastern and western
Pennsylvania for use in pavements. We also supply our aggregates for use in
outside recreational facilities, sport stadiums and residential and commercial
construction. We use the remainder of our aggregates to produce hot mixed
asphalt.
22
Our aggregates business is highly seasonal, due primarily to the effect of
weather conditions on construction activity in the markets that we serve. Poor
weather during the peak season of our aggregates business from April through
November could result in lower sales of aggregates by reducing or delaying road
construction and maintenance, other infrastructure projects and residential and
commercial construction. In the past, significant changes in weather conditions
during this period have caused variations in demand for aggregates. In addition,
because we are not as geographically diverse as some of our aggregates
competitors, we may be more vulnerable than these competitors to poor weather
conditions in the geographic areas in which we operate.
In 1998, Congress established TEA-21. TEA-21 establishes a $218 billion
transportation program that provides for increased federal funding for highways
and related infrastructure improvements through 2003. TEA-21 authorizes average
annual federal spending on highways and related infrastructure improvements of
approximately $26 billion. In Pennsylvania and New Jersey, our primary
aggregates markets, average annual federal spending on highways and related
infrastructure improvements under TEA-21 is projected to be approximately 47%
and 30% higher, respectively, than under the predecessor program.
Many of our aggregates customers depend substantially on government
funding of highway construction and maintenance and other infrastructure
projects. Although TEA-21 provides for increased federal funding for highways
and related infrastructure improvements through 2003, there can be no assurance
that any successor program adopted by Congress, if one is adopted at all, will
provide for equivalent or increased government funding. Furthermore, although
TEA-21 provides for federal funding through 2003, state and municipal
governmental entities need to provide for matching funds in order to obtain
federal funding under TEA-21, and state and municipal governmental entities have
separate approval processes relating to the matching of any federal funding for
highways that have not been completed. Accordingly, a decrease in federal
funding of highways and related infrastructure improvements after the expiration
of TEA-21, or a failure of states or municipalities to match the federal funding
to be provided by TEA-21, could adversely affect our revenue and profits in our
aggregates business. In addition, unlike some of our competitors, we currently
sell our aggregates products almost entirely in only two states, Pennsylvania
and New Jersey. As a result, we are more vulnerable than our more geographically
diverse competitors to decreases in state government highway spending in those
states.
Sales and Marketing
We market our industrial minerals products primarily on a local basis. Our
local sales and marketing efforts are each managed by a regional sales person,
and are directed to meet our local customers' specific needs. Our technical and
customer service personnel support our local sales and marketing personnel.
Certain of our smaller local customers are primarily serviced by customer
service representatives located at our facilities. We also sell to distributors
for resale to customers who desire to purchase a combination of our industrial
minerals and other products that the distributor supplies.
In the case of our customers that have facilities in multiple states, we
also direct our sales and marketing efforts at the corporate headquarters level.
While competition for these customers generally remains at the local level, the
terms of certain of our agreements are negotiated with the customer at the
corporate level. Our national account managers also coordinate
multi-disciplinary teams that work with these customers and their technical and
engineering departments to jointly develop specifications for industrial
minerals to meet their local product and application needs. In addition, we
provide technical and customer service to these customers' individual facility
locations at the local level.
We market our aggregates products, including our hot mixed asphalt,
directly through our local sales force, which calls on our customers at their
facilities.
Competition
We operate in the highly competitive industrial silica and aggregates
industries. Transportation costs are a significant portion of the total cost of
industrial minerals and aggregates to customers, typically representing up to
50% of that cost. As a result, the industrial minerals and aggregates markets
are typically local, and competition from beyond the local area is limited.
Although we experience competition in all of our end use markets, we believe
that we are a leading producer in the key end use markets and geographic areas
that we serve.
The industrial silica industry is a competitive market that is
characterized by a small number of large, national producers and a larger number
of small, regional producers. We are the second leading producer of industrial
silica in the United States, accounting for approximately 24% of industry volume
in 2000. We compete with, among others, Unimin Corporation, Fairmount Minerals,
Inc., Oglebay Norton Industrial Sands, Inc. and Badger Mining Corporation.
Competition in the industrial minerals industry is based on price, consistency
and quality of product, site location, distribution capability, customer
service, reliability of supply, breadth of product offering and technical
support. In addition, there is significant
23
underutilized capacity in the industrial minerals industry that could adversely
affect the pricing of our industrial minerals products.
In recent years, the aggregates industry has seen increasing
consolidation, although competition remains primarily local. Competition in the
aggregates industry is based primarily on price, quality of product, site
location, distribution capability and customer service. Due to the high cost of
transportation relative to the value of the product, competition within the
aggregates industry favors producers with aggregates production facilities in
close proximity to transportation modes and customers. Accordingly, in
Pennsylvania and New Jersey, we compete primarily with local or regional
operations. In addition, in western Pennsylvania, slag, a residue from steel
processing, also competes with our aggregates products.
Many of our competitors are large companies that have greater financial
resources than we do, may develop technology superior to ours and have
production facilities that are located closer to key customers. We cannot
guarantee that we will be able to compete successfully against our competitors
in the future or that competition will not have a material adverse effect on us.
Production and Distribution
Our production process for our industrial minerals generally consists of
mining mineral ore followed by a number of processing steps. All of our
industrial minerals mining operations involve surface mining. As is customary in
our industry, some of our mining operations, particularly drilling and blasting,
are outsourced to third parties. After the mineral ore is mined we crush it into
various sizes, depending on the specific customer application. We then remove
impurities from the materials in a washing process and remove oversized
particles by screening. Moisture is removed through a drying process and the
product is loaded into trucks or rail cars for shipment or is bagged before
shipping.
We ship our industrial mineral products direct to our customers by either
truck or rail. Bagged product is generally distributed by truck. We sometimes
utilize rail-truck transfer stations to deliver our products if we can thereby
achieve lower delivery costs to a given customer or region. Almost all our truck
shipments of industrial minerals are carried out by third parties. Our rail
shipments are generally made by railcar equipment owned by the railroad,
although for some customers and regions we lease our own railcars. Given the
value to weight ratio of most of our industrial mineral products, the
cost-effective distribution range is approximately 200 miles. For some of our
high margin fine ground silica and other specialty products such as kaolin, we
can effectively distribute our products nationally and, in some cases,
internationally.
Our production process for our aggregates consists of mining mineral ore
and then crushing it into various sizes based on customer specifications. All of
our aggregates mining operations involve surface mining, except for two that
involve underground mining. Generally, surface mining is subject to less
operational risk than underground mining. We either ship our aggregates products
directly to our customers by truck, typically within 75 miles of the plant, or
store it at our facility to meet future customer demand. In certain instances we
deliver large orders by rail. Our hot mixed asphalt is produced by mixing our
aggregates with asphalt oil, blending to customer specifications and then
delivering by truck typically within 30 miles of the plant.
Our CATS subsidiary runs a cooperative fleet of dump trucks owned by
independent contractors. CATS hires these trucks for hauling aggregates and
other bulk materials. In return, the independent trucking contractors benefit
from a steady source of work and bulk discounts on fuel, tires and other
services. CATS enables us to secure reliable access to a fleet of approximately
200 dump trucks on a cost-effective basis.
Technical Support
We operate an industrial minerals laboratory to monitor the quality of our
products, plants and services. The laboratory has four principal functions. The
technical service function provides support to both current and prospective
customers and performs controlled tests for a variety of applications. The lab
also assists foundries in their quality control programs through periodic
testing of their sand and equipment, a service that has enabled us to increase
our business by acquiring several large foundries as customers. The application
function evaluates the chemical, physical and performance characteristics of our
products and those of our competitors. These evaluations assist us in developing
new products and applications and enable us to provide our customers with
technical support and recommendations. The analytical function both provides
support for plants lacking the ability to provide certain technical information
to customers, and analyzes drill core samples to provide data for short- and
long-term mine planning. The mineral processing function is designed to simulate
all plant processes, primarily preparing and analyzing drill core samples for
mine planning purposes and providing expertise in plant problem troubleshooting.
We are ISO 9002 registered at nine plants.
24
Employees
As of March 1, 2001, we had approximately 1,053 employees, of which
approximately 538 were represented by 12 local unions under 12 union contracts.
These union contracts have remaining durations ranging from one to five years.
Over the last 10 years, we have been involved in numerous labor negotiations,
only two of which have resulted in a work disruption at two of our 26
facilities. During these disruptions, the operations of the facilities and our
ability to serve our customers were not materially affected. Although we
consider our current relations with our employees to be good, if we do not
maintain these good relations, or if a work disruption were to occur, we could
suffer a material adverse effect.
Properties
We own or lease a number of properties located in the eastern and
midwestern United States. Our headquarters is in Berkeley Springs, West
Virginia. Set forth below is the location, use, status and number of years of
remaining reserves as of December 31, 2000 for each of our principal properties:
Number of Years
Remaining
Location Use Status Reserves(1)
- -------- --- ------ ---------
Berkeley Springs, WV Corporate offices Owned N/A
Industrial Minerals
Berkeley Springs, WV Silica mining and processing Owned 25
Cedar Lake, NJ Silica mining and processing Owned 6
Columbia, SC Silica mining and processing Leased 27
Dubberly, LA Silica mining and processing Owned/Leased 35
Dundee, OH Silica mining and processing Owned 78
Hurtsboro, AL Silica mining and processing Owned/Leased 9
Jackson, TN Silica mining and processing Owned 32
Kosse, TX Silica and kaolin mining and processing Owned/Leased 32
Mapleton Depot, PA Silica mining and processing Owned/Leased 26
Mauricetown, NJ Silica processing Owned N/A
Mill Creek, OK Silica mining and processing Owned/Leased 25
Millville, NJ Silica mining and processing Owned/Leased 24
Montpelier, VA Aplite mining and processing Owned/Leased 47
Ottawa, IL Silica mining and processing Owned 63
Pacific, MO Silica mining and processing Owned 70
Port Elizabeth, NJ Silica mining and processing Owned 40
Rockwood, MI Silica processing Owned N/A
Aggregates
Adamsburg, PA Hot mixed asphalt plant Owned N/A
Berlin, NJ Construction sand mining and processing Owned 14
Ottsville, PA Stone quarry; hot mixed asphalt plant Owned 30
Penns Park, PA Stone quarry; hot mixed asphalt plant Owned 31
Rich Hill, PA Stone quarry Owned/Leased 30
Sewickly, PA Hot mixed asphalt plant Owned N/A
Springfield Pike, PA Stone quarry; hot mixed asphalt plant; offices Owned 46
Upper Township, NJ Construction sand mining and processing Owned/Leased 4
Washington, PA Hot mixed asphalt plant Owned N/A
- -------------------
(1) The number of years of remaining reserves for each of our principal
properties as of December 31, 2000 is based on extraction and production
information collected during 2000.
With respect to each operation at which we mine industrial minerals and
aggregates, we obtain permits from various governmental authorities prior to the
commencement of mining. The current permitted deposits on our properties are
sufficient to support production, based on historical rates of production, for
an average of approximately 10 years, ranging from approximately four years to
approximately 78 years. We obtain permits to mine deposits as needed in the
normal course of business based on our mine plans and state and local regulatory
provisions regarding mine permitting and licensing. Based on our historical
permitting experience, we expect to be able to continue to obtain necessary
mining permits to support historical rates of production. Industrial minerals
and aggregates properties which have deposits (which include both permitted and
unpermitted deposits) that we believe are sufficient to support production for
over 15 years accounted for
25
approximately 97% of our sales for the year ended December 31, 2000.
Additionally, to further assure sufficient deposits and adequate facilities to
meet future demand, we plan to obtain new deposits through expansion of existing
sites, where feasible, and acquisitions of industrial minerals and aggregates
businesses.
Some of our mining leases can be indefinitely renewed by us on an annual
basis while others have terms ranging from two to 50 years (including unilateral
renewal rights). These leases generally provide for royalty payments to the
lessor based on a specific amount per ton or a percentage of revenue. In
addition, we have a number of non-mining leases that relate to the above
properties that permit us to perform activities that are ancillary to the mining
of industrial minerals or aggregates such as surface use leases that allow haul
trucks to transport material from the mine to the plant site.
Legal Proceedings
We are a defendant in various lawsuits related to our business. These
matters include lawsuits relating to the exposure of persons to silica, as
discussed in detail below. Although we cannot predict what the full effect of
these or other lawsuits will be, we currently believe that these claims and
proceedings in the aggregate are unlikely to have a material adverse effect on
us.
Product Liability
The inhalation of respirable crystalline silica is associated with several
adverse health effects. First, it has been known since at least the 1930s that
prolonged inhalation of respirable crystalline silica can cause silicosis, an
occupational disease characterized by fibrosis, or scarring, of the lungs.
Second, since the mid-1980s, the carcinogenicity of crystalline silica has been
at issue and the subject of much debate and research. In 1987, the International
Agency for Research on Cancer, or IARC, an agency of the World Health
Organization, classified crystalline silica as a probable human carcinogen. In
1996, a working group of IARC voted to reclassify crystalline silica as a known
human carcinogen. On May 15, 2000, the National Toxicology Program, part of the
Department of Health and Human Services, issued its ninth report on carcinogens,
which reclassified crystalline silica (respirable size) from its previous
classification as "a reasonably anticipated carcinogen" to "a known human
carcinogen." Third, the disease silicosis is associated with an increased risk
of tuberculosis. Finally, there is recent evidence of an association between
crystalline silica exposure or silicosis and lung cancer and a possible
association between crystalline silica exposure or silicosis and other diseases
such as immune system disorders, like scleroderma, and end-stage renal disease.
One of our subsidiaries, U.S. Silica, has been named as a defendant in an
estimated 185 product liability claims alleging silica exposure filed in the
period January 1, 2001 to March 1, 2001. U.S. Silica was named as a defendant in
154 similar claims filed in 1998, 497 filed in 1999 and 610 filed in 2000. U.S.
Silica has been named as a defendant in similar suits since 1975; in each of the
years 1983, 1987, 1995 and 1996, more than 100 claims were filed against U.S.
Silica. The plaintiffs, who allege that they are employees or former employees
of our customers, claim that our silica products were defective or that we acted
negligently in selling our silica products without a warning, or with an
inadequate warning. The plaintiffs further claim that these alleged defects or
negligent actions caused them to suffer injuries and sustain damages as a result
of exposure to our products. In almost all cases, the injuries alleged by the
plaintiffs are silicosis or "mixed dust disease," a claim that allows the
plaintiffs to pursue litigation against the sellers of both crystalline silica
and other minerals. There are no pending claims of this nature against any of
our other subsidiaries.
As of March 1, 2001, there were an estimated 1,472 silica-related products
liability claims pending in which U.S. Silica is a defendant. Almost all of the
claims pending against U.S. Silica arise out of the alleged use of U.S. Silica
products in foundries or as an abrasive blast media and have been filed in the
states of Texas and Mississippi. Our financial liability to date for all
silica-related claims has not been material.
ITT Industries, Inc., successor to a former owner of U.S. Silica, has
agreed to indemnify U.S. Silica for third party silicosis claims (including
litigation expenses) filed against it prior to September 12, 2005 alleging
exposure to U.S. Silica products for the period prior to September 12, 1985, to
the extent of the alleged exposure prior to that date. This indemnity is subject
to an annual deductible of $275,000, which is cumulative and subject to
carry-forward adjustments. Pennsylvania Glass Sand Corporation, as a predecessor
to U.S. Silica, was a named insured on insurance policies issued to ITT
Industries for the period April 1, 1974 to September 12, 1985 and to U.S. Borax
(another former owner) for the period September 12, 1985 to December 31, 1985.
To date, we have not sought coverage under these policies. Although we cannot
provide any assurance, coverage under these policies may be available to us.
Ottawa Silica Company (a predecessor that merged into U.S. Silica in 1987) had
insurance coverage on an occurrence basis prior to July 1, 1985.
The silica-related litigation brought against us to date has not resulted
in any material liability to us. However, it is likely that we will continue to
have silica-related product liability claims filed against us, including claims
that allege silica exposure for periods after January 1, 1986. We cannot
guarantee that our current indemnity agreement with ITT Industries
26
(which currently expires in 2005 and in any event only covers alleged exposure
to U.S. Silica products for the period prior to September 12, 1985), or
potential insurance coverage (which, in any event, only covers periods prior to
January 1, 1986) will be adequate to cover any amount for which we may be found
liable in such suits. Any such claims or inadequacies of the ITT Industries
indemnity or insurance coverage could have a material adverse effect on us.
The exposure of persons to silica and the accompanying health risks have
been, and will continue to be, a significant issue confronting the industrial
minerals industry. Concerns over silicosis and other potential adverse health
effects, as well as concerns regarding potential liability arising from the use
of silica, may have the effect of discouraging our customers' use of our silica
products. The actual or perceived health risks of mining, processing and
handling silica could materially and adversely affect silica producers,
including us, through reduced use of silica products, the threat of product
liability or employee lawsuits, increased levels of scrutiny by federal and
state regulatory authorities of us and our customers or reduced financing
sources available to the silica industry.
Government Regulation
Environmental Matters. We are subject to a variety of governmental
regulatory requirements relating to the environment, including those relating to
our handling of hazardous materials and air and wastewater emissions. Some
environmental laws impose substantial penalties for noncompliance, and others,
such as the federal Comprehensive Environmental Response, Compensation, and
Liability Act, impose strict, retroactive and joint and several liability upon
persons responsible for releases of hazardous substances.
We believe that we have all material environmental permits, that our
operations are in substantial compliance with applicable laws and that any
noncompliance is not likely to have a material adverse effect on us. Through
periodic self-audits, we continually evaluate whether we must take additional
steps to ensure compliance with existing environmental laws. However, if we fail
to comply with present and future environmental laws and regulations, we could
be subject to liabilities or our operations could be interrupted. In addition,
future environmental laws and regulations could restrict our ability to expand
our facilities or extract our mineral deposits or could require us to acquire
costly equipment or to incur other significant expenses in connection with our
business. Although we believe we have made sufficient capital expenditures to
achieve substantial compliance with existing environmental laws and regulations,
future events, including changes in any environmental requirements and the costs
associated with complying with such requirements, could have a material adverse
effect on us.
We have taken a number of steps to minimize potential environmental
liabilities and address environmental activities in a proactive manner,
including performing regular environmental audits, performing Phase 1
environmental assessments on all of our properties in 1995 and, prior to
acquisition, on all properties acquired after that time, removing all known
underground storage tanks, replacing PCB-containing transformers with non-PCB
transformers, entering into a national waste disposal contract that limits our
waste disposal liability and developing and implementing an "environmental
information management system" to allow us to better track permits and
compliance matters.
Some of our facilities have a long history of industrial operations. As
such, we may have liability for cleanup of contamination from historical
discharges of hazardous materials. For example, we may be required to remediate
groundwater contamination at our Rockwood, Michigan facility. Although the
contamination has not moved off of our site and has not affected drinking water
supplies, further action may be required by state authorities. Our Ottawa,
Illinois facility has trace levels of arsenic contamination in the groundwater
beneath the quarries. Studies show that there is no health risk to workers and
that the product is not contaminated. We believe that we have claims against
responsible third parties or have insurance coverage for these matters. We also
believe that, even assuming third-party or insurance recoveries were not
successful, all such remediation matters, individually or in the aggregate,
would not have a material adverse effect on us. We have identified other areas
of historic waste disposal on our properties. Historically, the waste, pallets,
bags, scrap metal and other wastes from the plant sites were dumped on certain
of our lands. The presence of the disposal areas has not materially impacted,
and is not expected to materially impact, our operations or otherwise have a
material adverse effect on us.
Regulation of Silica. The Occupational Safety and Health Administration,
or OSHA, regulates work place exposure to crystalline silica at our customer
locations through a "permissible exposure level," commonly referred to as a PEL.
OSHA has designated crystalline silica as a priority for rulemaking and
announced that it will publish a Notice of Proposed Rule Making, or NPRM, on
crystalline silica in 2001. The NPRM is expected to propose a lower PEL for
crystalline silica. Although we are uncertain as to what OSHA will ultimately
propose, it is probable that a significantly lower PEL will be proposed for
quartz, the form of silica mined, processed and sold by us. However, we do not
expect any final OSHA rule on crystalline silica to be adopted until several
years after the NPRM is published.
The Mining Safety and Health Administration, or MSHA, regulates
occupational health and safety matters for mining. Accordingly, MSHA regulates
our quarries, underground mines and industrial mineral processing facilities.
The MSHA
27
"threshold limit value" for crystalline silica as quartz is the same as
the current OSHA PEL. MSHA is expected to follow OSHA's actions regarding the
permissible limits of exposure to crystalline silica for mining.
The Environmental Protection Agency, or EPA, recently announced that it
would begin its review of crystalline silica in 1999 under its Integrated Risk
Information System, or IRIS, program. Essentially, the EPA will conduct a risk
assessment regarding the cancer and non-cancer health effects of crystalline
silica and possibly develop reference concentrations for non-cancer health
effects and unit risk factors for cancer health effects. These reference
concentrations and unit risk factors, if developed, will be entered into the EPA
IRIS database. In addition, several states have considered, and a few have
promulgated, regulations regarding crystalline silica air emissions. For
example, in Oklahoma and Texas, crystalline silica is considered a toxic air
contaminant. As such, these states have established maximum allowable ambient
concentrations, or MAACs, for crystalline silica (quartz). Generally, these
MAACs establish limits for facility crystalline silica emissions, measured at
the facility property line. The IRIS initiative and state MAAC standards could
result in lower permit limits requiring costly equipment upgrades or operational
restrictions.
In 1999, Massachusetts proposed that crystalline silica be defined as a
toxic substance for purposes of the state's toxic use reduction act program. The
toxic use reduction act program imposes fees on the use of toxic substances and
requires certain users of toxic substances to develop plans to reduce the use of
the toxic substance. California requires that a warning accompany any chemical
that the state has published as being known to cause cancer. "Silica,
crystalline (airborne particles of respirable size)" has been included as a
carcinogen under these criteria since 1988. These state programs may have the
effect of reducing our customers' demand for silica products.
We believe that we materially comply with governmental requirements for
crystalline silica exposure and emissions and other regulations relating to
silica and plan to continue to comply with these regulations. However, we cannot
guarantee that we will be able to comply with any new standards that are adopted
or that these new standards will not have a material adverse effect on us by
requiring us to modify our operations or equipment or shut down some of our
plants. Additionally, we cannot guarantee that our customers will be able to
comply with any new standards or that any such new standards will not have a
material adverse effect on our customers by requiring them to shut down old
plants and to relocate plants to locations with less stringent regulations that
are further away from us. Accordingly, we cannot at this time reasonably
estimate our costs of compliance or the timing of any costs associated with any
new standards, or any material adverse effects that any new standards will have
on our customers and, consequently, on us.
Mining and Processing of Minerals. In addition to the regulatory matters
described above, the industrial minerals and aggregates industries are subject
to extensive governmental regulation on matters such as permitting and licensing
requirements, plant and wildlife protection, wetlands protection, reclamation
and restoration of mining properties after mining is completed, the discharge of
materials into the environment, surface subsidence from underground mining and
the effects that mining has on groundwater quality and availability. Our future
success depends upon the quantity of our industrial minerals and aggregates
deposits and our ability to extract these deposits profitably. It is difficult
for us to estimate quantities of recoverable deposits, in part due to future
permitting and licensing requirements. We believe we have obtained all material
permits and licenses required to conduct our present mining operations. However,
we will need additional permits and renewals of permits in the future. We may be
required to prepare and present to governmental authorities data pertaining to
the impact that any proposed exploration or production activities may have upon
the environment. New site approval procedures may require the preparation of
archaeological surveys, endangered species studies and other studies to assess
the environmental impact of new sites. Compliance with these regulatory
requirements is expensive, requires an investment of funds well before the
potential producer knows if its operation will be economically successful and
significantly lengthens the time needed to develop a new site. Furthermore,
obtaining or renewing required permits is sometimes delayed or prevented due to
community opposition and other factors beyond our control. New legal
requirements, including those related to the protection of the environment,
could be adopted that could materially adversely affect our mining operations
(including the ability to extract mineral deposits), our cost structure or our
customers' ability to use our industrial minerals or aggregates products.
For most of our operations, state statutes and regulations or local
ordinances require that mine property be restored in accordance with specific
standards and an approved reclamation plan. We believe that we are making
adequate provisions for all expected reclamation and other costs relating to
expected mine closures in the reasonably foreseeable future. We believe that
future costs associated with reclamation provisions and mine closures will not
have a material adverse effect on us. Nevertheless, we could be adversely
affected if these provisions were later determined to be insufficient, or if
future costs associated with reclamation are significantly greater than our
current estimates. Accordingly, there can be no assurance that current or future
mining regulation will not have a material adverse effect on our business or
that we will be able to obtain or renew permits in the future.
28
MANAGEMENT
Our Directors and Executive Officers
The following table identifies members of the Board of Directors and the
executive officers of USS Holdings, our parent, and us.
Year Assumed Other Positions and Other Business
Present Position at Present Experience Within the Last Five
Name Age March 1, 2001 Position(s) Years
- ---- --- ---------------------- --------------- -------------------------------------
D. George Harris............. 67 Chairman and Director 1996 Chairman and director, D. George
Harris & Associates, LLC
(1987-present); officer or
director of various companies,
including Harris Chemical Group,
Inc. (1993-1998), Harris Specialty
Chemicals, Inc. (1994-1999) and
Penrice Pty Ltd. (1996-1998);
Chairman, Shareholders Committee,
Vestolit Holdings GmbH & Co., KG
(1999-present); director,
McWhorter Technologies, Inc.(1994-2000)
Anthony J. Petrocelli........ 63 Vice Chairman and 1996 Vice Chairman, D. George Harris &
Director Associates, LLC (1987-present);
officer or director of various
companies, including Harris
Chemical Group, Inc. (1993-1998),
Harris Specialty Chemicals, Inc.
(1994-1999) and Penrice Pty Ltd.
(1996-1998); Vice Chairman,
Shareholders Committee, Vestolit
Holdings GmbH & Co., KG (1999-present)
Richard E. Goodell........... 56 Vice Chairman; Director 2001; 1996 Chief Executive Officer
(1999-2000); President
(1996-2000); President,
Pennsylvania Glass Sand
Corporation (renamed U.S. Silica
Company) (our subsidiary)(1985-1998)
Roy D. Reeves................ 55 President and Chief 2001 President, Stone Materials
Executive Officer Company, LLC (our subsidiary)
(2000); President and Chief
Operating Officer, Hanson
Aggregates East (1997-2000);
President and Chief Operating
Officer, Sloan Construction
Company (1993-1997)
Gary E. Bockrath............. 48 Vice President and 1996 Senior Vice President of Finance,
Chief Financial Officer U.S. Silica (1993-present);
director, U.S. Silica
(1994-present)
Craig S. Cinalli............. 42 President and Chief 1989
Operating Officer,
Better Materials
Corporation (our
subsidiary)
Walter C. Pellish............ 60 Vice President-- 2000 Vice President--Administration,
Administration U.S. Silica (1981-present)
29
Richard J. Donahue........... 57 Vice President, 1996 Managing Director, D. George
Assistant Treasurer, Harris & Associates, LLC
Assistant Secretary and (1987-present); officer of various
Director companies, including Harris
Chemical Group, Inc. (1993-1998)
and Harris Specialty Chemicals,
Inc. (1994-1999)
Richard J. Nick.............. 57 Vice President, 1996 Managing Director, D. George
Treasurer and Assistant Harris & Associates, LLC
Secretary (1989-present); officer of various
companies, including Harris
Chemical Group, Inc. (1993-1998)
and Harris Specialty Chemicals,
Inc. (1994-1999)
Richard J. Shearer........... 50 President, U.S. Silica 1999 Executive Vice President, U.S.
Company (our subsidiary) Silica (1997-1999); Vice
President, General Manager, North
American Chemical Company
(1996-1997)
John A. Ulizio............... 45 Vice President, General 1996 Associate General Counsel, U.S.
Counsel and Assistant Silica (1991-1995); manager of
Secretary environmental, health and safety
matters (1994-present)
Arnold L. Chavkin............ 49 Director 1996 Executive Partner, J.P. Morgan
Partners, LLC (formerly Chase
Capital Partners) (1992-present);
director, American Tower
Corporation, Carrizo Oil & Gas,
Inc., Crown Media Holdings, Inc.,
Encore Acquisition Partners,
Triton PCS, Inc.
Ruth Dreessen................ 45 Director 1996 Managing Director, Chase
Securities Inc. (1997-present);
Vice President, Chase Securities
Inc. (prior to 1997)
Timothy J. Walsh............. 37 Director 1998 Partner, J.P. Morgan Partners, LLC
(formerly Chase Capital Partners)
(1999-present); associate, J.P.
Morgan Partners, LLC (1993-1999);
director, MetoKote Corporation,
Inc., Pliant Corporation
30
Executive and Director Compensation
Executive Compensation
The following table sets forth information regarding annual compensation
for services rendered to us during the fiscal years ended December 31, 2000,
1999 and 1998 by our (i) chief executive officer and (ii) five most highly
compensated executive officers (collectively, the "Named Executive Officers").
Summary Compensation Table
Long-term
Compensation
Annual Compensation Awards
--------------------------------------------- --------------
Restricted
Other Annual Stock All Other
Compensation Award(s)(4) Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($) ($) (6) (7) ($)
- ---------------------------- ---- ---------- ---------- ------------- -------------- -------------
Richard E. Goodell 2000 404,367 -- -- 57,260 4,690
Chief Executive Officer (1) 1999 238,125 196,685 -- 61,350 8,569
1998 215,700 94,512 -- -- 8,929
Roy D. Reeves 2000 300,000 200,000 2,103,368(3) 102,250 112,168(8)
President and Chief 1999 -- -- -- -- --
Operating Officer (2) 1998 -- -- -- -- --
Richard J. Shearer 2000 240,400 -- -- -- 15,114
President 1999 219,675 123,018 -- 69,530 19,244
(U.S. Silica Company) 1998 196,200 78,480 40,825(5) -- 14,479
Gary E. Bockrath 2000 176,400 -- -- -- 11,034
Vice President and Chief 1999 168,000 109,672 -- 24,540 14,100
Financial Officer 1998 164,400 59,184 -- -- 13,716
Craig S. Cinalli
President 2000 175,000 -- -- -- 13,228(9)
(Better Materials 1999 175,000 138,600 -- 24,540 10,536
Corporation) 1998 8,000 -- -- -- 165,000
John A. Ulizio 2000 175,000 -- -- -- 10,950
Vice President and General 1999 150,000 75,600 -- 24,540 12,376
Counsel 1998 135,800 48,888 -- -- 11,703
- -------------------
(1) Mr. Goodell served as our Chief Executive Officer until December 31, 2000.
Effective January 1, 2001, Mr. Goodell became our Vice Chairman.
(2) Mr. Reeves served as our President and Chief Operating Officer until
December 31, 2000. Effective January 1, 2001, Mr. Reeves became our Chief
Executive Officer.
(3) Includes reimbursement by us to Mr. Reeves for his purchase of 25,000
shares of Class A common stock at $39.90 per share, the purchase by Mr.
Reeves for $0.01 per share of 25,000 shares of Class C common stock valued
at $4.10 per share, and the gross-up for the tax liability attributable to
these purchases and to his signing bonus of $100,000, described in
footnote 8 below.
(4) As of December 31, 2000, the Named Executive Officers held the following
amounts of restricted stock: Mr. Goodell, 29,000 shares; Mr. Reeves,
25,000 shares; Mr. Shearer, 17,000 shares; Mr. Bockrath, 6,000 shares; Mr.
Cinalli, 6,000 shares; and Mr. Ulizio, 6,000 shares. The value of the
restricted stock as of December 31, 2000 is equal to the value as of the
date of grant reflected in the above table.
(5) Reflects payment by us of expenses for relocation.
(6) Includes life insurance premiums paid by us in 2000 on behalf of the Named
Executive Officers as follows: Mr. Goodell, $1,290; Mr. Reeves, $8,768;
Mr. Shearer, $690; Mr. Bockrath, $450; Mr. Cinalli, $60; and Mr. Ulizio,
$450.
(7) Includes matching contributions by us to the U.S. Silica Company
Retirement Savings and Investment Plan for Salaried Employees in 2000 on
behalf of the Named Executive Officers as follows: Mr. Goodell, $3,400;
Mr. Reeves, $3,400; Mr. Shearer, $4,808; Mr. Bockrath, $3,528; Mr.
Cinalli, $2,692; and Mr. Ulizio, $3,500. Also includes other contributions
by us to this plan in 2000 on behalf of certain Named Executive Officers
as follows: Mr. Shearer, $9,616; Mr. Bockrath, $7,056; and Mr. Ulizio,
$7,000.
(8) Includes a one-time signing bonus of $100,000 received by Mr. Reeves upon
entering into his employment agreement with us.
(9) Includes income imputed to Mr. Cinalli from the personal use of a
company-owned vehicle and residence in the amount of $10,476.
31
U.S. Silica Company Retirement Plan for Salaried Employees
Years of Service
------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
----------------- ------------------- --------------- ---------------- -------------- ------------
$ 125,000 $ 29,100 $ 38,800 $ 48,400 $ 58,100 $ 67,800
150,000 35,400 47,200 59,000 70,700 82,500
175,000 41,700 55,600 69,500 83,400 97,200
200,000 48,000 64,000 80,000 96,000 112,000
225,000 54,300 72,400 90,500 108,600 126,700
250,000 60,600 80,800 101,000 121,200 141,400
300,000 73,200 97,600 122,000 146,400 170,800
400,000 98,400 131,300 164,100 196,900 229,700
At December 31, 2000, credited years of service under the U.S. Silica
Company Retirement Plan for Salaried Employees (the "Retirement Plan") for the
only Named Executive Officer who participates, Mr. Goodell, were 19 years. The
compensation covered by the Retirement Plan includes the amount listed in the
salary column of the Summary Compensation Table only. The estimated annual
retirement benefit indicated in the Retirement Plan table includes enhanced
pension provisions under the U.S. Silica Company Pension Restoration Plan, which
is an unfunded plan providing benefits to participants in the Retirement Plan
that are not payable under the Retirement Plan because of the limitations
stipulated by the Internal Revenue Code. Estimated benefits set forth in the
Retirement Plan table were calculated on the basis of a single life annuity.
Annual benefits payable under the Retirement Plan are not offset by any amount.
Better Materials Corporation Pension Plan
Years of Service
------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
----------------- ------------------- --------------- ---------------- -------------- ------------
$ 125,000 $ 18,710 $ 24,947 $ 31,183 $ 37,420 $ 43,657
150,000 23,142 30,857 38,571 46,285 53,999
175,000 27,120 36,160 45,199 54,239 63,279
200,000 27,749 36,998 46,248 55,497 64,747
At December 31, 2000, credited years of service under the Better Materials
Corporation Pension Plan (the "BMC Plan") for the only Named Executive Officer
who participates, Mr. Cinalli, were 20 years. The compensation covered under the
BMC Plan includes total cash remuneration paid to the Named Executive Officer up
to the statutory limits stipulated by the Internal Revenue Service. Estimated
benefits set forth in the BMC Plan table were calculated on the basis of a
single life annuity and are not offset by any amount.
Supplemental Executive Retirement Plan
Years of Service
------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
----------------- ------------------- --------------- ---------------- -------------- ------------
$ 125,000 $0 $0 $4,123 $ 12,330 $ 20,537
150,000 0 3,190 13,215 23,240 33,266
175,000 0 10,463 22,307 34,151 45,994
200,000 4,075 17,737 31,399 45,061 58,723
225,000 9,530 25,010 40,491 55,971 71,452
250,000 14,985 32,284 49,583 66,882 84,180
300,000 25,895 46,831 67,767 88,702 109,638
400,000 47,716 75,925 104,134 132,343 160,552
450,000 58,626 90,472 122,318 154,164 186,010
500,000 69,537 105,019 140,502 175,984 211,467
At December 31, 2000, credited years of service under a Supplemental
Executive Retirement Plan ("SERP") for Mr. Reeves were 16 years. The
compensation covered under the SERP includes total cash remuneration paid to the
Named Executive Officer. Estimated benefits set forth in the SERP table were
calculated on the basis of a single life annuity and are offset by the benefit
Mr. Reeves will receive under a retirement plan with his previous employer in
the amount of $36,911.
32
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Employment Agreement with Mr. Cinalli. In December 2000, Better Materials
Corporation, one of our subsidiaries, renewed Mr. Cinalli's two-year term
employment agreement. The agreement provides for annual compensation of at least
$195,000, a performance-based bonus, eligibility to receive restricted stock and
the use of a company-owned vehicle and residence.
Under this agreement, Better Materials Corporation may terminate Mr.
Cinalli for any reason other than "cause," as defined in the agreement, with
thirty days' prior written notice. This agreement provides for severance in the
amount of two years' annual salary upon termination without "cause." This
agreement contains confidentiality and non-compete covenants.
Severance Agreement with Mr. Shearer. In August 2000, U.S. Silica Company,
one of our subsidiaries, entered into a severance agreement with Mr. Shearer to
provide for severance and benefits in the event his employment is terminated for
any reason other than "cause," as defined in the agreement. Under this severance
agreement, Mr. Shearer is entitled to continue to receive his salary for a
maximum period of two years following termination of employment. In addition,
U.S. Silica will pay medical premiums for Mr. Shearer and his family under the
U.S. Silica Health Plan for a maximum period of six months beyond the required
COBRA continuation coverage period and, upon the sale of Mr. Shearer's house,
U.S. Silica will pay a percentage of the unrecovered cost of improvements to his
residence up to approximately $47,000. This agreement contains confidentiality
and non-compete covenants.
Employment and Change-in-Control Agreements with Mr. Reeves. In April
2000, we entered into an employment agreement with Mr. Reeves with an initial
three-year term, automatically renewable annually, which provides for annual
compensation of $400,000 (subject to salary reviews), a performance-based bonus,
a signing bonus of $100,000, net of applicable taxes, and supplemental
retirement benefits.
Mr. Reeves is also entitled to a number of stock incentives under this
agreement. First, he purchased from USS Holdings, our parent, 25,000 restricted
shares of USS Holdings Class C common stock for one cent ($.01) per share. If we
terminate Mr. Reeves' employment under certain circumstances, or in the event of
certain corporate transactions, such as a sale, merger or initial public
offering involving USS Holdings, we may be obligated to repurchase these shares,
depending on the value of USS Holdings Class A common stock at the time of such
event. We reimbursed Mr. Reeves for the tax liability for these shares at the
time of purchase. Second, Mr. Reeves purchased 25,000 shares of USS Holdings
Class A common stock, for which we reimbursed him at a price of $39.90 per
share, plus tax liability resulting from this reimbursement.
We may terminate Mr. Reeves for any reason other than for "cause," as
defined in the agreement, or he may resign for "good reason," as defined in the
agreement, with thirty days' prior written notice. If we terminate Mr. Reeves
without "cause," he is entitled to severance in an amount equal to his annual
salary plus full bonus for the remainder of the term of the agreement. If Mr.
Reeves' employment is terminated following a change in control involving us, as
defined in the agreement, he is entitled to severance in an amount equal to his
annual salary plus full bonus for the remainder of the term of the agreement,
which is reduced to 18 months following the change in control. This agreement
contains confidentiality and non-compete covenants.
Mr. Reeves has also entered into an agreement with USS Holdings that
provides for payment upon the occurrence of certain corporate transactions
involving USS Holdings, such as a sale, merger or initial public offering. If
one of these events occurs, Mr. Reeves will be entitled to a bonus based on the
extent to which the price for USS Holdings Class A common stock, as valued in
such event, exceeds a target price set for the year in which the event occurs.
If the target price is exceeded by 100% or more, Mr. Reeves will receive a bonus
of $8 million net of any excise tax liability to Mr. Reeves if the payment is
determined to be an excess parachute payment under IRS regulations. If the
target price is exceeded by less than 100%, Mr. Reeves will receive a prorated
portion of the $8 million maximum. No bonus is payable if the target price for
the year of the triggering event is not exceeded. If we experience a change in
control as a result of the triggering event and Mr. Reeves' employment is
terminated following the change in control, USS Holdings may cause us to pay the
bonus amount to Mr. Reeves.
Employment and Consulting Agreement with Mr. Goodell. In December 2000,
Mr. Goodell entered into an employment and consulting agreement with USS
Holdings, BMAC Holdings, U.S. Silica Company and us extending the term of his
employment through July 7, 2004 at an annual base salary of $212,500, plus
participation in employee benefit plans, rights to use of certain property of
ours for hunting purposes and eligibility for a performance-based bonus.
Under his agreement, in the event of a change in control, as defined in
the agreement, Mr. Goodell is entitled to terminate his employment and receive
severance in the amount of his salary through July 7, 2004. Alternatively, if
Mr. Goodell remains employed following a change in control, he is entitled to
receive at the time of the change in control a bonus
33
equal to one year's salary and to receive a stay bonus equal to one year's
salary payable and conditioned upon his continued employment until a period of
six months after the change in control. If his employment is terminated
following a change in control, he is deemed to have been employed through July
7, 2004 for purposes of determining eligibility for, and calculation of benefits
under, the U.S. Silica benefit plans.
For a period of ten years following his termination of employment, Mr.
Goodell will serve as a consultant to USS Holdings, BMAC Holdings, U.S. Silica
Company and us for which he will be compensated at an annual salary of $50,000
for up to 30 days of consulting plus $1,000 per day for his services for a
maximum additional period of 30 days.
This agreement may be terminated for cause, as defined in the agreement,
upon Mr. Goodell's death, or in the event of disability. This agreement contains
non-compete and non-solicitation provisions.
Director Compensation
Members of our Board of Directors are not compensated for their services
as directors, but may be reimbursed for actual expenses incurred in attending
meetings of the Board of Directors or committees thereof.
34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans to Management
In 2000, our parent, USS Holdings, made loans to certain of its management
stockholders to finance their purchase of shares of USS Holdings' Class A common
stock and Series D preferred stock. The loans are evidenced by promissory notes
that accrue interest at 9% per annum payable quarterly, and are collateralized
by the stock. During 2000, the largest aggregate amount of indebtedness under
these loans for Richard E. Goodell, our Vice Chairman, was $200,000, and for
Richard J. Shearer, the President of U.S. Silica, was $83,000. As of December
31, 2000, Mr. Goodell's outstanding loan was $100,000 and Mr. Shearer's was
$83,000.
Relationship with J.P. Morgan Chase & Co.
The Chase Manhattan Bank ("CMB"), an affiliate of CSI, is a lender under
our senior secured credit agreement. From time to time, CSI acts as a principal
or agent in connection with offers and sales of our senior subordinated notes in
market-making transactions. Both CSI and CMB are affiliates of JPMP LLC, which
serves as investment advisor to J.P. Morgan Partners (23A SBIC), LLC ("JPMP (23A
SBIC)") and J.P. Morgan Partners (SBIC), LLC ("JPMP (SBIC)"). Certain affiliates
of J.P. Morgan Chase own a majority of the outstanding preferred stock of USS
Holdings and thus have the right under the stockholders agreement to appoint
three directors of USS Holdings. Arnold L. Chavkin, one of our directors, is
also an executive partner at JPMP LLC. Ruth Dreessen, one of our directors, is
also a managing director of CSI. Timothy J. Walsh, one of our directors, is also
a partner at JPMP LLC. Messrs. Chavkin and Walsh are also executive officers of
the managing member of JPMP (23A SBIC) and executive officers of JPMP (SBIC).
Management Services Agreement
Pursuant to an agreement among USS Holdings, BMAC Holdings, DGHA and us,
DGHA (the principals of which are stockholders of USS Holdings) provides
management advisory services to us from time to time. In consideration of these
management services, we have agreed to pay an annual management fee to DGHA. The
base annual fee is $500,000 but is adjusted based on the amount that our actual
EBITDA (as defined in the agreement) for a fiscal year exceeds or falls short of
a budgeted EBITDA for that fiscal year. Pursuant to the agreement, the budgeted
EBITDA for a fiscal year and the amount of the fee are adjusted for acquisitions
approved by the stockholders as provided in the stockholders agreement or any
disposition of stock or assets. The agreement provides that in the event of a
business acquisition by us, we will pay DGHA an acquisition fee equal to 1% of
the total purchase price of the acquisition, including all third party
indebtedness assumed by us in connection with the acquisition.
The agreement also provides that, at DGHA's request, we are obligated to
provide DGHA with one or more interest-free loans not exceeding an aggregate of
$1.0 million in any calendar year. As of December 31, 2000, a loan of $1.0
million was currently outstanding. This loan is guaranteed by D. George Harris,
Anthony J. Petrocelli, Richard J. Donahue, Donald G. Kilpatrick and Richard J.
Nick. Finally, pursuant to the agreement, the other companies party to the
agreement will reimburse DGHA for all transaction expenses incurred in relation
to completed acquisitions; those companies will also reimburse DGHA for other
expenses incurred relating to company business up to $100,000 in any calendar
year. The agreement initially terminated on December 31, 2000, but, pursuant to
its terms, was automatically extended and will continue in full force and effect
unless terminated (i) by USS Holdings or DGHA upon nine months' prior written
notice, (ii) upon certain events of sale, merger, change of stock ownership or
appointment of additional directors or (iii) at the option of USS Holdings if
neither Messrs. Harris or Petrocelli is actively involved in the management of
DGHA.
We paid approximately $1,209,000 in management fees and $925,000 in
acquisition fees to DGHA for the year ended December 31, 2000 under this
agreement, and we expect to pay approximately $668,000 in management fees to
DGHA for the year ended December 31, 2001.
Tax Sharing Agreement
Pursuant to a tax sharing agreement, USS Holdings has agreed to file
consolidated federal income tax returns (and, in certain circumstances, state
and local income tax returns) with us and our domestic subsidiaries. Under this
agreement, we have agreed to pay USS Holdings amounts designed to approximate
the amount of income tax that we and our domestic subsidiaries would have paid
had we filed consolidated federal income tax returns (and, if applicable, state
and local income tax returns) separate from USS Holdings.
35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership
All of our outstanding capital stock is directly owned by BMAC Holdings,
which in turn is wholly owned by USS Holdings. The following table sets forth,
to the best of our knowledge, certain information regarding the ownership of the
capital stock of USS Holdings as of March 1, 2001 with respect to the following:
(i) each person known by us to own beneficially more than 5% of the outstanding
shares of any class of capital stock of USS Holdings; (ii) each of our
directors; (iii) each of the Named Executive Officers set forth in the table
under "Executive Compensation" above; and (iv) all of our directors and
executive officers as a group.
Except as otherwise indicated, each person listed in the following table
has sole voting and investment power with respect to the shares listed opposite
that person's name.
Beneficial Owners(1) Shares of Common Stock Percentage of Common Stock(2)*
- --------------------------------------------- ------------------------------------- --------------------------------
Class A(3) Class B(4) Class C(5) Class A Class B Class C
---------- ---------- ---------- ------- ------- -------
J.P. Morgan Chase & Co.(9)(10) ........... 0 340,069 8,800 ** 79.9% 2.0%
Massachusetts Mutual Life Insurance
Company(11) .............................. 0 104,211 2,697 ** 27.1% **
D. George Harris(12) ..................... 124,653 8,186 42,291 22.7% 2.2% 9.8%
Anthony J. Petrocelli(13)(15) ............ 73,222 5,184 41,850 13.3% 1.4% 9.7%
Richard E. Goodell........................ 11,640 0 29,000 2.1% ** 6.7%
Richard J. Donahue........................ 65,972 1,950 41,376 12.0% ** 9.6%
Richard J. Shearer........................ 5,203 0 17,000 1.0% ** 4.0%
Craig S. Cinalli.......................... 2,000 0 6,000 ** ** 1.4%
Walter C. Pellish......................... 5,755 0 6,000 1.1% ** 1.4%
Richard J. Nick(15) ...................... 34,296 1,744 41,346 6.2% ** 9.6%
Donald G. Kilpatrick(13) ................. 50,962 0 41,090 9.3% ** 9.5%
Roy D. Reeves............................. 27,500 0 25,000 5.0% ** 5.8%
John A. Ulizio............................ 5,755 0 6,000 1.1% ** 1.4%
Gary E. Bockrath.......................... 6,109 0 6,000 1.1% ** 1.4%
Arnold L. Chavkin(10)(14) ................ 0 0 0 ** ** **
Ruth Dreessen............................. 0 0 0 ** ** **
Timothy J. Walsh(10)(14) ................. 0 0 0 ** ** **
All directors and executive officers as a
group (14 persons) (10)(12)(14) .......... 362,104 17,063 261,863 65.8% 4.5% 60.2%
Beneficial Owners(1) Shares of Preferred Stock Percentage of Preferred Stock(2)*
- --------------------------------------------- ------------------------------------- --------------------------------
Series A(6) Series B(7) Series D(8) Series A Series B Series D
---------- ---------- ---------- ------- ------- -------
J.P. Morgan Chase & Co. (9)(10) .......... 678,035 1,356,070 9,232 75.0% 66.9% 52.2%
Massachusetts Mutual Life Insurance
Company(11) .............................. 207,778 415,556 2,829 22.7% 20.2% 16.0%
D. George Harris(12) ..................... 15,268 58,016 1,260 1.7% 2.9% 7.1%
Anthony J. Petrocelli(13) ................ 9,035 27,070 798 1.0% 1.4% 4.5%
Richard E. Goodell........................ 0 20,000 0 ** 1.0% **
Richard J. Donahue........................ 1,104 16,291 300 ** ** 1.7%
Richard J. Shearer........................ 596 1,775 0 ** ** **
Craig S. Cinalli.......................... 0 0 0 ** ** **
Walter C. Pellish......................... 0 10,000 0 ** ** **
Richard J. Nick........................... 3,312 17,771 268 ** ** 1.5%
Donald G. Kilpatrick(13) ................. 1,534 9,422 0 ** ** **
Roy D. Reeves............................. 0 0 0 ** ** **
John A. Ulizio............................ 0 10,000 0 ** ** **
Gary E. Bockrath.......................... 0 10,000 0 ** ** **
Arnold L. Chavkin(10)(14) ................ 0 0 0 ** ** **
Ruth Dreessen............................. 0 0 0 ** ** **
Timothy J. Walsh(10)(14) ................. 0 0 0 ** ** **
All directors and executive officers as a
group (14 persons) (10)(12)(14) .......... 29,315 170,923 2,626 3.3% 8.6% 14.9%
- -----------------------
* All share percentages assume that each respective beneficial owner, and
only that owner, has exercised its warrants to purchase shares of
preferred stock or common stock, as the case may be, of USS Holdings, if
any.
** Less than 1%.
(1) The address of J.P. Morgan Chase & Co. ("J.P. Morgan Chase") and its
affiliates referred to in note (9) below is 270 Park Avenue, New York, New
York, New York 10017. The address of Massachusetts Mutual Life Insurance
Company and its affiliates is 1295 State Street, Springfield,
Massachusetts 01111. The address of Mr. Kilpatrick is c/o Pillsbury
Winthrop LLP, One Battery Park Plaza, New York, New York 10004. The
address of each other person is c/o D. George Harris & Associates, LLC,
399 Park Avenue, 32nd Floor, New York, New York 10022.
(2) Notwithstanding the enumerated percentage shares of beneficial ownership
of common and preferred stock, a stockholders agreement dated as of
February 9, 1996, as amended (the "stockholders agreement"), among all of
the stockholders of USS Holdings (the "Stockholders") governs the
Stockholders' exercise of their voting rights with respect to election of
directors and certain other material events. The parties to the
stockholders agreement have agreed to vote their shares of USS Holdings to
elect the Board of Directors as set forth therein. See "--The Stockholders
Agreement."
36
(3) Holders of Class A common stock are entitled to one vote with respect to
all matters to be voted on by USS Holdings' Stockholders for each share of
Class A common stock held, subject to the stockholders agreement.
(4) Holders of Class B common stock, except as otherwise required by law, have
no voting rights. The Class B common stock will automatically be converted
into shares of Class A common stock on a one-for-one basis at the time of
a trigger event or an event of conversion. A "trigger event" is defined in
the stockholders agreement as (i) a default under certain debt documents
or a failure to achieve a designated level of EBITDA (as defined in the
stockholders agreement), (ii) after February 9, 2000, the passage of 180
days after JPMP (23A SBIC) has exercised its right to demand a sale of USS
Holdings and the failure of the principals of DGHA to sell USS Holdings or
purchase the shares of the Institutional Stockholders (as defined below)
or (iii) both D. George Harris and Anthony J. Petrocelli no longer serving
on the USS Holdings' Board of Directors due to death, disability or
resignation. An "event of conversion" is defined in the stockholders
agreement as (i) the consummation of an initial public offering resulting
in net proceeds to USS Holdings and/or any selling stockholders of not
less than $30 million or (ii) the conversion of more than 50% of the
Series B preferred stock originally issued. Holders (other than Mass
Mutual (as defined in note (11))) of at least 50% of the then outstanding
common stock purchase warrants and shares issued or issuable under the
stockholders agreement, and Mass Mutual, if it holds at least 50% of the
then outstanding common stock purchase warrants and shares issued or
issuable under the stockholders agreement upon the exercise of the
warrants then outstanding and held by Mass Mutual, have the right to
require USS Holdings to purchase their warrants to purchase Class B common
stock and shares issued thereunder held by JPMP (23A SBIC), Mass Mutual
and certain DGHA principals at any time after October 1, 2004 and prior to
a sale, public offering of common stock or liquidation of USS Holdings.
Upon the exercise of those put rights, if USS Holdings cannot obtain the
consents from third parties necessary to purchase those shares after using
reasonable efforts, USS Holdings will be released from its obligation to
purchase the warrants. At any time after October 1, 2005, USS Holdings has
the right to purchase all (but not less than all) of the warrants to
purchase shares of Class B common stock held by JPMP (23A SBIC), Mass
Mutual and certain DGHA principals.
(5) Holders of Class C common stock are entitled to one vote with respect to
all matters to be voted on by USS Holdings' stockholders for each share of
Class C common stock held, subject to the stockholders agreement. Those
shares are subject to repurchase by USS Holdings in certain circumstances
upon the occurrence of certain liquidity events, including the sale of all
or substantially all of the assets of USS Holdings and its subsidiaries, a
merger of USS Holdings or any subsidiary and a sale of USS Holdings and
upon the occurrence of certain termination events, including death,
disability, retirement or termination of employment. The total number of
shares of Class C common stock issuable under the warrants will be reduced
by the number of shares of Class C common stock which did not vest and/or
which are repurchased in accordance with the terms of the restricted stock
purchase agreements pursuant to which the shares of Class C common stock
are issued. Holders (other than Mass Mutual (as defined in note (11))) of
at least 50% of the then outstanding common stock purchase warrants and
shares issued or issuable under the stockholders agreement, and Mass
Mutual, if it holds at least 50% of the then outstanding common stock
purchase warrants and shares issued or issuable under the stockholders
agreement upon the exercise of the warrants then outstanding and held by
Mass Mutual, have the right to require USS Holdings to purchase their
warrants to purchase shares of common stock and shares issued thereunder
held by JPMP (23A SBIC), Mass Mutual and certain DGHA principals at any
time after October 1, 2004 and prior to a sale, public offering of common
stock or liquidation of USS Holdings. Upon the exercise of those put
rights, if USS Holdings cannot obtain the consents from third parties
necessary to purchase those shares after using reasonable efforts, USS
Holdings will be released from its obligation to purchase the warrants. At
any time after October 1, 2005, USS Holdings has the right to purchase all
(but not less than all) of the warrants to purchase shares of Class C
common stock held by JPMP (23A SBIC), Mass Mutual and certain DGHA
principals.
(6) Holders of Series A preferred stock, except as otherwise required by law,
have no voting rights, except in the event that there is a proposal to
amend the terms of the Series A preferred stock so as to affect it
adversely or a proposal to authorize or issue (i) any equity or
convertible debt securities or (ii) certain rights to purchase equity or
convertible debt securities, in either case ranking equal or superior to
the Series A preferred stock (with certain exceptions), which shall then
require the consent of the holders of two-thirds of the outstanding shares
of Series A preferred stock. Holders of more than 50% of the Series B
preferred stock originally issued have the right to require USS Holdings
to purchase all (but not less than all) of the shares of Series A
preferred stock and warrants to purchase Series A preferred stock held by
JPMP (SBIC) and Mass Mutual (as defined in note (11)) at any time after
October 1, 2004 and prior to a sale, public offering of common stock or
liquidation of USS Holdings. Upon the exercise of those put rights, if USS
Holdings cannot obtain the consents from third parties necessary to
purchase those shares and warrants after using reasonable efforts, USS
Holdings will be released from its obligation to purchase the shares and
warrants. At any time after October 1, 2005, USS Holdings has the right to
purchase all (but not less than all) of the Series A preferred stock held
by JPMP (SBIC) and Mass Mutual.
(7) Holders of Series B preferred stock shall not, prior to the occurrence of
a "trigger event" (as defined in note (4) above), have any voting rights,
except as otherwise required by law and except in the event of a proposal
to authorize or issue additional shares of Series B preferred stock or
change the preferences, rights or powers of the Series B preferred stock
so as to affect it adversely, which shall then require the consent of the
holders of a majority of the outstanding shares of Series B preferred
stock. After a trigger event, the holders of Series B preferred stock
shall vote, together with the holders of Class A common stock, as one
class, with each share of Series B preferred stock entitling its holder to
that number of votes equal to the number of shares of common stock
issuable upon conversion thereof (currently one share of Class B common
stock for each share of Series B preferred stock (subject to adjustment))
on the date of any such vote, subject to the Stockholders Agreement.
Holders of more than 50% of the Series B preferred stock originally issued
have the right to require USS Holdings to purchase all (but not less than
all) of the shares of Series B preferred stock and warrants to purchase
Series B preferred stock held by JPMP (SBIC) and Mass Mutual (as defined
in note (11)) at any time after October 1, 2004 and prior to a sale,
public offering of common stock or liquidation of USS Holdings. Upon the
exercise of those put rights, if USS Holdings cannot obtain the consents
from third parties necessary to purchase those shares and warrants after
using reasonable efforts, USS Holdings will be released from its
obligation to purchase the shares and warrants. At any time after October
1, 2005, USS Holdings has the right to purchase all (but not less than
all) of the Series B preferred stock held by JPMP (SBIC) and Mass Mutual.
The Series B preferred stock will automatically be converted into an equal
number of shares of Class B common stock (before a trigger event) or Class
A common stock (after a trigger event) upon an event of conversion (as
defined in note (4) above). Moreover, any holder of the Series B preferred
stock can at any time and from time to time convert all or a portion of
his Series B preferred stock into an equal number of shares of Class B
common stock (before a trigger event) or Class A common stock (after a
trigger event).
(8) Holders of Series D preferred stock, except as otherwise required by law,
have no voting rights, except in the event there is a proposal to amend
the terms of the Series D preferred stock so as to affect it adversely or
a proposal to authorize or issue (i) any equity or convertible debt
securities or (ii) certain rights to purchase equity or convertible debt
securities, in either case ranking equal or superior to the Series D
preferred stock, which shall then require the consent of the holders of a
majority of the outstanding shares of Series D preferred stock.
(9) Includes (i) 664,146 shares of Series A preferred stock, 1,328,292 shares
of Series B preferred stock, 9,232 shares of Series D preferred stock,
280,076 shares of Class B common stock, 59,993 shares of Class B common
stock issuable upon exercise of common stock warrants and 8,800 shares of
Class C common stock issuable upon exercise of common stock purchase
warrants, in each case held by JPMP (23A SBIC), the managing member of
which is J.P. Morgan Partners (23A SBIC Manager), Inc. ("JPMP (23A SBIC
Manager)"), the sole stockholder of which is CMB, the sole stockholder of
which is J.P. Morgan Chase and (ii) 13,889 shares of Series A preferred
stock issuable upon exercise of preferred stock warrants and 27,778 shares
of Series B preferred stock issuable upon exercise of preferred stock
warrants, in each case held by JPMP (SBIC), the sole member of which is
J.P. Morgan Partners (BHCA), L.P. ("JPMP (BHCA)"), the general partner of
which is JPMP Master Fund Manager, L.P. ("JPMP MFM"), the general partner
of which is JPMP Capital Corp. ("JPMP CC"), the sole stockholder of which
is J.P. Morgan Chase. Each of JPMP (23A SBIC), JPMP (23A SBIC Manager),
CMB, JPMP (SBIC), JPMP (BHCA), JPMP MFM, JPMP CC and J.P. Morgan Chase may
be deemed the beneficial owner of the foregoing shares. Messrs. Chavkin
and Walsh are executive officers of JPMP (23A SBIC Manager), JPMP (SBIC),
JPMP CC and JPMP LLC, which serves as investment advisor to JPMP (23A
SBIC), JPMP (SBIC) and JPMP (BHCA). JPMP (23A SBIC) and JPMP (SBIC) are
37
licensed small business investment companies (an "SBIC") and as such are
subject to certain restrictions imposed upon SBICs by the regulations
established and enforced by the United States Small Business
Administration. Among these restrictions are certain limitations on the
extent to which an SBIC may exercise control over companies in which it
invests.
(10) Messrs. Chavkin and Walsh may be deemed the beneficial owners of the
shares of common stock and preferred stock and warrants to purchase
preferred and common stock referred to in note (9) above given their
positions as executive officers of JPMP (23A SBIC Manager), JPMP (SBIC),
JPMP CC and JPMP LLC.
(11) Includes (i) 180,000 shares of Series A preferred stock and warrants to
purchase 27,778 shares of Series A preferred stock, (ii) 360,000 shares of
Series B preferred stock and warrants to purchase 55,556 shares of Series
B preferred stock (iii) 2,829 shares of Series D preferred stock, (iv)
85,827 shares of Class B common stock, (v) warrants to purchase 18,384
shares of Class B common stock issuable upon exercise of common stock
purchase warrants and (vi) 2,697 shares of Class C common stock issuable
upon exercise of common stock purchase warrants owned by Massachusetts
Mutual Life Insurance Company, MassMutual Participation Investors,
MassMutual Corporate Investors and Gerlach & Co. (collectively, "Mass
Mutual").
(12) Does not include 19,691 shares of Class A common stock, 938 shares of
Series A preferred stock, 31,575 shares of Series B preferred stock, 219
shares of Series D preferred stock, 1,420 shares of Class B common stock
issuable upon exercise of common stock purchase warrants and 208 shares of
Class C common stock issuable upon exercise of common stock purchase
warrants held in two trusts over which Mr. Harris, as co-trustee, shares
voting control and investment control.
(13) Does not include 7,075 shares of Class A common stock, 18,537 shares of
Series B preferred stock, 78 shares of Series D preferred stock, 84 shares
of Class B common stock issuable upon exercise of common stock purchase
warrants and 12 shares of Class C common stock issuable upon exercise of
common stock purchase warrants held in twelve trusts over which Messrs.
Petrocelli and Kilpatrick, as co-trustees, share voting control and
investment control.
(14) Does not include the shares of common stock and preferred stock and
warrants to purchase preferred and common stock referred to in note (9)
above.
(15) Does not include 750 shares of Class A Common held in two trusts over
which Messrs. Nick and Petrocelli as co-trustees share voting control and
investment control.
The Stockholders Agreement
The holders of all of the capital stock of USS Holdings are party to a
stockholders agreement. The stockholders agreement governs the holders' exercise
of their voting rights with respect to the election of directors and certain
other material events. The parties to the agreement have agreed to vote their
shares of USS Holdings to elect (i) for as long as Mr. Harris owns 50% or more
of the securities of USS Holdings (subject to certain exceptions set forth in
the agreement) held by him on February 9, 1996 (the date of the U.S. Silica
acquisition), two directors designated by Mr. Harris, including himself, (ii)
for as long as Mr. Petrocelli owns 50% or more of the securities of USS Holdings
(subject to certain exceptions set forth in the agreement) held by him on
February 9, 1996, one director designated by Mr. Petrocelli, and (iii) three
directors designated by a majority of the institutional stockholders party to
the stockholders agreement (the "Institutional Stockholders"). JPMP (23A SBIC)
and JPMP (SBIC) currently hold 76.5% of the stock owned by the Institutional
Stockholders. For so long as each shall be a director, Mr. Harris will always be
elected as Chairman of the Board of Directors, and Mr. Petrocelli will always be
elected as Vice Chairman of the Board of Directors. Upon a trigger event, a
majority of the Institutional Stockholders have the right to designate two
additional directors, thus enabling them to choose the majority of directors
serving on the Board of Directors.
The provisions of the stockholders agreement also govern:
o restrictions on certain actions by USS Holdings and its subsidiaries
without the consent of (i) prior to the occurrence of a trigger event,
a majority of the Institutional Stockholders and the DGHA Stockholders
(as defined in the stockholders agreement), and (ii) after the
occurrence of a trigger event, a majority of the Institutional
Stockholders only; these restricted actions include, among other
things, the consummation of a public offering, the issuance of certain
equity securities, the merger or consolidation with or into another
entity, the acquisition of another entity, certain sales of assets,
the liquidation or reorganization of USS Holdings and the incurrence
of certain debt;
o stockholder rights of first refusal to purchase certain capital stock
or equity securities to be issued by USS Holdings;
o USS Holdings' and stockholder rights of first offer to purchase
certain shares of USS Holdings to be sold by stockholders;
o USS Holdings' and stockholder rights to purchase, and stockholder
rights to sell, certain shares of USS Holdings held by stockholders in
certain instances (including a person's termination of employment);
o rights of certain stockholders to cause all of the other stockholders
to sell stock in connection with the sale of USS Holdings; and
o rights of certain stockholders to participate in certain sales of the
shares of USS Holdings by other stockholders.
38
DESCRIPTION OF THE SENIOR SECURED CREDIT AGREEMENT
The following is a summary of the material terms of the senior secured
credit agreement, as amended, among BMAC Holdings, the issuer, certain financial
institutions party thereto, as lenders, and BNP Paribas (formerly Banque
Nationale de Paris), as agent. The following summary of the senior secured
credit agreement is qualified in its entirety by reference to the complete text
of the agreement itself and all ancillary documents, copies of which have been
filed as an exhibit to the registration statement of which this prospectus is a
part.
General
The senior secured credit agreement, as amended, provides for:
o a $45.0 million tranche A term loan facility, of which $39.1 million
remained outstanding at December 31, 2000;
o a $95.0 million tranche B term loan facility, of which $93.5 million
remained outstanding at December 31, 2000; and
o a $50.0 million revolving credit facility, of which $5.5 million was
drawn (and $6.6 million was allocated to letters of credit) at
December 31, 2000.
Term Loans
The full amounts of the term loans were drawn in October 1999 in
connection with our acquisition of Commercial Stone. Amounts repaid or prepaid
under the term loans are not permitted to be reborrowed.
The tranche A term loan facility will mature on September 30, 2005 and has
the remaining amortization schedule: $1.55 million per quarter for the quarters
ending June 30, 2001 and September 30, 2001 and $2.15 million per quarter for
the last sixteen quarters.
The tranche B term loan facility will mature on September 30, 2007 and has
the remaining amortization schedule: $0.5 million per quarter for the twenty
quarters commencing with the quarter ending December 31, 2000, $9.0 million per
quarter for the following four quarters and $12.0 million per quarter for the
last four quarters.
Revolving Credit Facility
The revolving credit facility will mature on September 30, 2005 and
includes sublimits of $12.0 million and $3.0 million, respectively, for letters
of credit and swingline loans. Availability under the revolving credit facility
is subject to various conditions precedent typical of bank loans. Amounts repaid
under the revolving credit facility may be reborrowed. We have agreed to use the
proceeds of the revolving credit facility for general corporate purposes,
including working capital and capital expenditures, but excluding acquisitions.
At December 31, 2000, there was $37.9 million available for our use under the
revolving credit facility.
Guarantees and Security
Our obligations under the senior secured credit agreement are
unconditionally and irrevocably guaranteed, jointly and severally, by BMAC
Holdings and each of the issuer's existing and subsequently acquired or
organized domestic subsidiaries. The senior secured credit agreement is secured
by liens on substantially all the assets of BMAC Holdings, the issuer and each
of the issuer's existing and subsequently acquired or organized domestic
subsidiaries, including but not limited to, and subject to customary exceptions,
the following:
o a first priority pledge of all the capital stock of the issuer;
o a first priority pledge of all the capital stock held by BMAC
Holdings, the issuer and each existing or subsequently acquired or
organized domestic subsidiary of the issuer in each existing or
subsequently acquired or organized domestic subsidiary of the issuer
and 65% of the capital stock held by those entities in that existing
or subsequently acquired or organized foreign subsidiary of the
issuer; and
o perfected first-priority security interests in substantially all of
the tangible and intangible assets (including, but not limited to,
accounts receivable, inventory, trademarks, other intellectual
property, licensing agreements, real
39
property, leasehold mortgages, cash and proceeds of the foregoing)
held by BMAC Holdings, the issuer and each of the issuer's existing or
subsequently acquired or organized domestic subsidiaries.
Interest Rates
Borrowings under the senior secured credit agreement bear variable
interest at our option at either (i) the bank's base rate plus a margin
percentage, ranging from 1.00% to 2.75% per annum or (ii) LIBOR plus a margin
percentage ranging from 2.00% to 3.75% per annum, in each case, subject to
increase or reduction based on our leverage ratio.
Amounts outstanding under the senior secured credit agreement not paid
when due bear interest at a default rate equal to 2.00% above the rates
otherwise applicable to the loans under the senior secured credit agreement.
Fees
We have paid or are currently paying (i) commitment fees ranging from
0.375% to 0.75% per annum on the undrawn portion of the commitments in respect
of the revolving credit facility, subject to increase or reduction based on our
leverage ratio, (ii) letter of credit fees on the aggregate face amount of
outstanding letters of credit equal to the then applicable borrowing margin for
LIBOR loans under the revolving credit facility, (iii) annual administration
fees and (iv) agent, arrangement and other similar fees.
Optional and Mandatory Prepayment
We have the right to prepay borrowings under the senior secured credit
agreement, subject to paying certain costs and expenses in certain
circumstances. In addition, the term loans are subject to mandatory prepayments
in an amount equal to (i) 100% of the net cash proceeds of certain equity
issuances by BMAC Holdings or any of its subsidiaries, (ii) 100% of the net cash
proceeds of certain debt issuances by BMAC Holdings or any of its subsidiaries,
(iii) 75% of the excess cash flow of the issuer and its subsidiaries (subject to
decrease to 50% upon satisfaction of certain financial criteria) and (iv) 100%
of the net cash proceeds of certain asset sales or other dispositions of
property by BMAC Holdings or any of its subsidiaries, in each case subject to
certain exceptions.
Certain Covenants
The senior secured credit agreement contains customary covenants,
including restrictions on our ability to:
o pay dividends or other distributions;
o redeem or repurchase capital stock;
o dispose of assets;
o prepay other debt or amend other debt instruments (including the
indenture);
o create liens on assets;
o make investments, loans or advances;
o change the business conducted by us;
o make capital expenditures;
o engage in certain transactions with affiliates;
o incur lease obligations;
o incur other debt and enter into other credit facilities; and
o merge with and acquire other entities.
40
The senior secured credit agreement also requires us to comply with
certain maintenance covenants, including a maximum leverage ratio and a minimum
interest coverage ratio. On February 22, 2001, the lenders under the senior
secured credit agreement approved an amendment effective December 31, 2000 that
revised these ratios for the period of December 31, 2000 through December 31,
2001.
Events of Default
The senior secured credit agreement contains customary events of default
including, but not limited to:
o nonpayment of principal, interest or fees;
o violation of covenants;
o incorrectness of representations or warranties in any material
respect;
o cross-default to other debt;
o ERISA events;
o material judgments and liabilities;
o invalidity of security interests;
o bankruptcy; and
o change in control.
41
DESCRIPTION OF THE NOTES
Definitions of certain terms used in this description of the notes may be
found under the heading "--Certain Definitions." For purposes of this section,
the term (i) "Company" refers only to Better Minerals & Aggregates Company and
not any of its subsidiaries, (ii) "Parent" refers only to BMAC Holdings, Inc.
and not any of its subsidiaries and (iii) "Holdings" refers only to USS
Holdings, Inc. and not any of its subsidiaries, in each case until a successor
replaces it, and thereafter means the successor. All of the Company's Domestic
Subsidiaries guarantee the notes and therefore are subject to many of the
provisions contained in this description of the notes. Each company which
guarantees the notes is referred to in this section as a "Note Guarantor." Each
such guarantee is termed a "Note Guarantee."
The Company issued the notes under the indenture, dated as of October 1,
1999, among the Company, the Note Guarantors and The Bank of New York, as
trustee (the "Trustee"), as supplemented, a copy of which has been filed as an
exhibit to the registration statement of which this prospectus is a part. The
indenture contains provisions which define your rights under the notes. In
addition, the indenture governs the obligations of the Company and of each Note
Guarantor under the notes. The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the TIA.
The following description is meant to be only a summary of certain
provisions of the indenture. It does not restate the terms of the indenture in
their entirety. We urge that you carefully read the indenture as it, and not
this description, governs your rights as Holders.
Overview of the Notes and the Note Guarantees
The Notes
The notes:
o are general unsecured obligations of the Company;
o rank equally in right of payment with all existing and future Senior
Subordinated Indebtedness of the Company;
o are subordinated in right of payment to all existing and future Senior
Indebtedness of the Company;
o are senior in right of payment to all existing and future Subordinated
Obligations of the Company;
o are effectively subordinated to any Secured Indebtedness of the
Company and its Subsidiaries to the extent of the value of the assets
securing such Indebtedness; and
o are effectively subordinated to all liabilities (including Trade
Payables) and Preferred Stock of each Subsidiary of the Company that
is not a Note Guarantor.
The Note Guarantees
The notes are guaranteed by each of the Company's Domestic Subsidiaries.
The Note Guarantee of each Note Guarantor, and each Note Guarantee, if
any, made by future subsidiaries of the Company:
o is a general unsecured obligation of such Note Guarantor;
o ranks equally in right of payment with all existing and future Senior
Subordinated Indebtedness of such Note Guarantor;
o is subordinated in right of payment to all existing and future Senior
Indebtedness of such Note Guarantor;
o is senior in right of payment to all existing and future Subordinated
Obligations of such Note Guarantor; and
42
o is effectively subordinated to any Secured Indebtedness of that Note
Guarantor and its Subsidiaries to the extent of the value of the
assets securing that Indebtedness.
The notes will not be guaranteed by the Company's Canadian Subsidiary
unless such Subsidiary Guarantees any Indebtedness (other than Indebtedness of a
Restricted Subsidiary that is not a Note Guarantor). This Canadian Subsidiary
has an immaterial amount of assets and liabilities.
Principal, Maturity and Interest
We issued the notes in an aggregate principal amount of $150.0 million.
The notes are limited to $150.0 million in aggregate principal amount and will
mature on September 15, 2009. The notes are in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000.
Each note bears interest at a rate of 13% per annum from October 1, 1999
or from the most recent date to which interest has been paid or provided for. We
pay interest semiannually, on March 15 and September 15 of each year, to Holders
of record at the close of business on the March 1 or September 1 immediately
preceding the interest payment date. We pay interest on overdue principal and,
to the extent lawful, overdue installments of interest at the rate borne by the
notes.
Paying Agent and Registrar
We pay the principal of, premium, if any, and interest on the notes at any
office of ours or any agency designated by us which is located in the Borough of
Manhattan, The City of New York, New York. We have initially designated the
corporate trust office of the Trustee to act as the agent of the Company in such
matters. The location of the corporate trust office is 101 Barclay Street, Floor
21 West, New York, New York 10286. We reserve the right, however, to pay
interest to Holders by check mailed directly to Holders at their registered
addresses.
Holders may exchange or transfer their notes at the same location given in
the preceding paragraph. No service charge will be made for any registration of
transfer or exchange of notes. We may require Holders, however, to pay any
transfer tax or other similar governmental charge payable in connection with any
such transfer or exchange.
Optional Redemption
Except as set forth in the following paragraph, we may not redeem the
notes prior to September 15, 2004. After this date, we may redeem the notes, in
whole or in part, on not less than 30 nor more than 60 days' prior notice, at
the following redemption prices (expressed as percentages of principal amount),
plus accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on September 15 of the years set
forth below:
Year Redemption Price
---- ----------------
2004................................................ 106.500%
2005................................................ 104.333%
2006................................................ 102.167%
2007 and thereafter................................. 100.000%
Prior to September 15, 2002, we may, on one or more occasions, also redeem
up to a maximum of 35% of the original aggregate principal amount of the notes
with the Net Cash Proceeds of one or more Public Equity Offerings (1) by the
Company or (2) by Parent or Holdings to the extent the Net Cash Proceeds thereof
are contributed to the Company or used to purchase Capital Stock (other than
Disqualified Stock) of the Company from the Company following which there is a
Public Market, at a redemption price equal to 113% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages thereon, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); provided, however, that after giving effect to any such redemption:
(1) at least 65% of the original aggregate principal amount of the
notes remains outstanding; and
(2) any such redemption by the Company must be made within 90 days of
such Public Equity Offering and must be made in accordance with certain
procedures set forth in the indenture.
43
Selection
If we partially redeem notes, the Trustee will select the notes to be
redeemed on a pro rata basis, by lot or by such other method as the Trustee
shall deem to be fair and appropriate, although no note of $1,000 in original
principal amount or less will be redeemed in part. If we redeem any note in part
only, the notice of redemption relating to such note shall state the portion of
the principal amount thereof to be redeemed. A new note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption so long as we have deposited with the Paying Agent funds sufficient
to pay the principal of, plus accrued and unpaid interest and liquidated
damages, if any, on, the notes to be redeemed.
Ranking
The notes are unsecured Senior Subordinated Indebtedness of the Company,
are subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, rank equally in right of payment with all existing
and future Senior Subordinated Indebtedness of the Company and are senior in
right of payment to all existing and future Subordinated Obligations of the
Company. The notes also are effectively subordinated to any Secured Indebtedness
of the Company and its Subsidiaries to the extent of the value of the assets
securing such Indebtedness. However, payment from the money or the proceeds of
U.S. Government Obligations held in any defeasance trust described below under
the caption "--Defeasance" will not be subordinated to any Senior Indebtedness
or subject to the restrictions described herein.
The Note Guarantees are unsecured Senior Subordinated Indebtedness of the
applicable Note Guarantor, are subordinated in right of payment to all existing
and future Senior Indebtedness of such Note Guarantor, rank equally in right of
payment with all existing and future Senior Subordinated Indebtedness of such
Note Guarantor and are senior in right of payment to all existing and future
Subordinated Obligations of such Note Guarantor. The Note Guarantees also are
effectively subordinated to any Secured Indebtedness of the applicable Note
Guarantor and its Subsidiaries to the extent of the value of the assets securing
such Secured Indebtedness. As of December 31, 2000, our subsidiaries had total
liabilities, including trade payables, of approximately $485.1 million.
The Company currently conducts all of its operations through its
Subsidiaries. To the extent such Subsidiaries are not Guarantors, creditors of
such Subsidiaries, including trade creditors, and preferred stockholders, if
any, of such Subsidiaries generally will have priority with respect to the
assets and earnings of such Subsidiaries over the claims of creditors of the
Company, including Holders. The notes, therefore, are effectively subordinated
to the claims of creditors, including trade creditors, and preferred
stockholders, if any, of Subsidiaries of the Company that are not Note
Guarantors. The Company's Canadian subsidiary, which has an immaterial amount of
assets and liabilities, will not guarantee the notes.
As of December 31, 2000, there was outstanding:
(1) $138.1 million of Senior Indebtedness of the Company (exclusive
of unused commitments under the Credit Agreement), all of which was
Secured Indebtedness;
(2) no Senior Subordinated Indebtedness of the Company (other than
the notes) and no indebtedness of the Company that is subordinate in right
of repayment to the notes;
(3) $1.35 million of Senior Indebtedness of the Note Guarantors
(exclusive of guarantees of Indebtedness under the Credit Agreement); and
(4) no Senior Subordinated Indebtedness of the Note Guarantors (other
than the Note Guarantees) and no Indebtedness of the Note Guarantors that
is subordinate or junior in right of payment to the Note Guarantees.
Although the indenture limits the Incurrence of Indebtedness by the
Company and the Restricted Subsidiaries and the issuance of Preferred Stock by
the Restricted Subsidiaries, such limitation is subject to a number of
significant qualifications. The Company and its Subsidiaries may be able to
Incur substantial amounts of Indebtedness in certain circumstances. Such
Indebtedness may be Senior Indebtedness.
"Senior Indebtedness" of the Company or any Note Guarantor means the
principal of, premium (if any) and accrued and unpaid interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization of the Company or any Note Guarantor, regardless of whether or
not a claim for post-filing interest is allowed in such proceedings), and fees
and other amounts owing in respect of, Bank Indebtedness and all other
Indebtedness of the Company or any Note Guarantor, as applicable, whether
outstanding on the Closing Date or thereafter Incurred, unless in the instrument
creating or
44
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are not superior in right of payment to the notes or such
Note Guarantor's Note Guarantee, as applicable; provided, however, that Senior
Indebtedness of the Company or any Note Guarantor shall not include:
(1) any obligation of the Company to Parent, Holdings or any
Subsidiary of the Company or of such Note Guarantor to Parent, Holdings,
the Company or any other Subsidiary of the Company;
(2) any liability for federal, state, local or other taxes owed or
owing by the Company or such Note Guarantor, as applicable;
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof
or instruments evidencing such liabilities but excluding liabilities of
the Company or a Note Guarantor, as applicable, with respect to
performance or surety bonds or similar obligations, in each case entered
into in the ordinary course of business);
(4) any Indebtedness or obligation of the Company or such Note
Guarantor, as applicable (and any accrued and unpaid interest in respect
thereof) that by its terms is subordinate or junior in right of payment to
any other Indebtedness or obligation of the Company or such Note
Guarantor, as applicable, including any Senior Subordinated Indebtedness
and any Subordinated Obligations of the Company or such Note Guarantor, as
applicable;
(5) any obligations with respect to any Capital Stock; or
(6) any Indebtedness Incurred in violation of the indenture.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the notes. The notes will rank equally in right of payment with all
other Senior Subordinated Indebtedness of the Company. The Company will not
Incur, directly or indirectly, any Indebtedness which is subordinate or junior
in ranking in any respect to Senior Indebtedness unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured.
The Company may not pay principal of, premium (if any) or interest on the
notes, or make any deposit pursuant to the provisions described under
"Defeasance" below, and may not otherwise repurchase, redeem or otherwise
acquire or retire for value any notes (collectively, "pay the notes") if:
(1) any Designated Senior Indebtedness of the Company is not paid
when due, or
(2) any other default on any Designated Senior Indebtedness of the
Company occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such
acceleration has been rescinded, or
(y) such Designated Senior Indebtedness has been paid in full;
provided, however, that the Company may pay the notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (1) or (2) above has
occurred and is continuing.
During the continuance of any default (other than a default described in
clause (1) or (2) of the immediately preceding paragraph) with respect to any
Designated Senior Indebtedness of the Company pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, we may not pay the notes for a period (a "Payment
Blockage Period") commencing upon the receipt by a Responsible Officer of the
Trustee (with a copy to us) of written notice (a "Blockage Notice") of such
default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated:
(1) by written notice to the Trustee and the Company from the person
or persons who gave such Blockage Notice,
(2) by repayment in full of such Designated Senior Indebtedness, or
45
(3) because the default giving rise to such Blockage Notice is no
longer continuing).
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the second preceding and
in the immediately succeeding paragraph), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the notes after the end of such Payment Blockage Period, including any missed
payments.
Not more than one Blockage Notice may be given in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period. However, if any Blockage Notice within such
360-day period is given by or on behalf of any holders of Designated Senior
Indebtedness other than the Bank Indebtedness, the Representative of the Bank
Indebtedness may give another Blockage Notice within such period. In no event,
however, may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this paragraph, no default or event of
default that existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
Upon any payment or distribution of the assets of the Company to creditors
upon a liquidation or a dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) the holders of Senior Indebtedness of the Company will be
entitled to receive payment in full of such Senior Indebtedness before the
Holders are entitled to receive any payment of principal of or interest on
the notes; and
(2) until such Senior Indebtedness is paid in full any payment or
distribution to which Holders would be entitled but for the subordination
provisions of the indenture will be made to holders of such Senior
Indebtedness as their interests may appear, except that Holders may
receive:
(x) shares of stock; and
(y) any debt securities that are subordinated to such Senior
Indebtedness to at least the same extent as the notes.
If a payment or distribution is made to Holders that, due to the note
subordination provisions of the indenture, should not have been made to them,
such Holders will be required to hold it in trust for the holders of Senior
Indebtedness of the Company and pay it over to them as their interests may
appear.
If payment of the notes is accelerated because of an Event of Default, the
Company or the Trustee (provided that the Trustee shall have received written
notice thereof from the Company, on which notice the Trustee shall be entitled
to conclusively rely) shall promptly notify the holders of the Designated Senior
Indebtedness of the Company (or their Representative) of the acceleration. If
any Designated Senior Indebtedness of the Company is outstanding, the Company
may not pay the notes until five Business Days after such holders or the
Representative of such Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the notes only if the note subordination
provisions of the indenture otherwise permit payment at that time.
By reason of the subordination provisions of the indenture, in the event
of insolvency, creditors of the Company who are holders of Senior Indebtedness
of the Company may recover more, ratably, than the Holders, and creditors of the
Company who are not holders of Senior Indebtedness of the Company or of Senior
Subordinated Indebtedness of the Company (including the notes) may recover less,
ratably, than holders of Senior Indebtedness of the Company and may recover
more, ratably, than the holders of Senior Subordinated Indebtedness of the
Company.
The indenture contains substantially identical subordination provisions
relating to each Guarantor's obligations under its Note Guarantee.
46
Note Guarantees
The Note Guarantors, and certain future subsidiaries of the Company (as
described below), as primary obligors and not merely as sureties, jointly and
severally irrevocably and unconditionally Guarantee on an unsecured senior
subordinated basis the performance and full and punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all obligations of
the Company under the indenture (including obligations to the Trustee) and the
notes, whether for payment of principal of or interest on or liquidated damages
in respect of the old notes, expenses, indemnification or otherwise (all such
obligations guaranteed by such Note Guarantors being herein called the
"Guaranteed Obligations"). Such Note Guarantors agree or will agree to pay, in
addition to the amount stated above, any and all costs and expenses (including
reasonable counsel fees and expenses) incurred by the Trustee or the Holders in
enforcing any rights under the Note Guarantees. Each Note Guarantee is or will
be limited in amount to an amount not to exceed the maximum amount that can be
Guaranteed by the applicable Note Guarantor without rendering the Note
Guarantee, as it relates to such Note Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. The Company has agreed to cause (a)
each newly formed or acquired Domestic Subsidiary and (b) each existing, newly
formed or acquired Foreign Subsidiary that Guarantees any Indebtedness (other
than Indebtedness of a Restricted Subsidiary that is not a Note Guarantor), to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary will Guarantee payment of the notes. See "Certain
Covenants--Future Note Guarantors" below.
The obligations of a Note Guarantor under its Note Guarantee are senior
subordinated obligations. As such, the rights of Holders to receive payment by a
Note Guarantor pursuant to its Note Guarantee will be subordinated in right of
payment to the rights of holders of Senior Indebtedness of such Note Guarantor.
The terms of the subordination provisions described above with respect to the
Company's obligations under the notes apply equally to a Note Guarantor and the
obligations of such Note Guarantor under its Note Guarantee.
Each Note Guarantee is a continuing guarantee and shall
o remain in full force and effect until payment in full of all the
Guaranteed Obligations,
o be binding upon each Note Guarantor and its successors and
o inure to the benefit of, and be enforceable by, the Trustee, the
Holders and their successors, transferees and assigns.
Any Guarantee by a Subsidiary of the Company will be automatically
released upon the sale or other disposition (including through merger or
consolidation) of the Capital Stock, or of all or substantially all of the
assets, of the applicable Subsidiary if such sale or other disposition is made
in compliance with the covenant described under the caption "Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock".
Change of Control
Upon the occurrence of any of the following events (each, a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest (and, in the
case of the old notes, liquidated damages, if any), to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that notwithstanding the occurrence of a Change of Control, the Company shall
not be obligated to repurchase notes pursuant to this section in the event that
it has exercised its right to redeem all the notes under the terms of the
section titled "Optional Redemption":
(1) prior to the earliest to occur of
(A) the first public offering of common stock of Parent,
(B) the first public offering of common stock of Holdings or
(C) the first public offering of common stock of the Company
(each, a "Public Market Offering"), the Permitted Holders cease to be
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate
of the total voting power of the Voting Stock of Parent, Holdings or
the Company, whether as a result of issuance of securities of Parent,
Holdings or the Company, any merger, consolidation, liquidation or
dissolution of Parent, Holdings or the Company, any direct or indirect
transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (1) and clause (2) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of an
entity (the "specified entity") held
47
by any other entity (the "parent entity") so long as the Permitted
Holders beneficially own (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting Stock of
the parent entity);
(2) after a Public Market Offering has occurred,
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in clause (1) above),
whether by merger, consolidation, other business combination or
otherwise, directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company, Holdings or Parent
and
(B) the Permitted Holders "beneficially own" (as defined in
clause (1) above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the
Company, Holdings or Parent than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of the
Company, Holdings or Parent, as the case may be (for the purposes of
this clause (2), such other person shall be deemed to beneficially own
any Voting Stock of a specified entity held by a parent entity, if
such other person is the beneficial owner (as defined in clause (1)
above), directly or indirectly, of more than 35% of the voting power
of the Voting Stock of such parent entity and the Permitted Holders
"beneficially own" (as defined in clause (1) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power
of the Voting Stock of such parent entity and do not have the right or
ability by voting power, contract or otherwise to elect or designate
for election a majority of the board of directors of such parent
entity); or
(3) during any period of two consecutive years, individuals who at
the beginning of that period constituted the board of directors of the
Company, Holdings or Parent, as the case may be (together with any new
directors whose election by such board of directors of the Company,
Holdings or Parent, as the case may be, or whose nomination for election
by the shareholders of the Company, Holdings or Parent, as the case may
be, was approved by a vote of 66 2/3% of the directors of the Company,
Holdings or Parent, as the case may be, then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the board of directors of the Company,
Holdings or Parent, as the case may be, then in office; or
(4) the adoption of a plan relating to the liquidation or dissolution
of the Company, Holdings or Parent.
In the event that at the time of such Change of Control the terms of
the Bank Indebtedness restrict or prohibit the repurchase of notes
pursuant to this covenant, then prior to the mailing of the notice to
Holders provided for in the immediately following paragraph but in any
event within 45 days following any Change of Control, the Company shall:
(1) repay in full all Bank Indebtedness or, if doing so will allow
the purchase of notes, offer to repay in full all Bank Indebtedness and
repay the Bank Indebtedness of each lender who has accepted such offer; or
(2) obtain the requisite consent under the agreements governing the
Bank Indebtedness to permit the repurchase of the notes as provided for in
the immediately following paragraph.
Within 45 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee (the "Change of Control Offer")
stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or a portion of such
Holder's notes at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and liquidated damages,
if any, to the date of purchase (subject to the right of Holders of record
on the relevant record date to receive interest on the relevant interest
payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
covenant, that a Holder must follow in order to have its notes purchased.
48
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by the Company and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the purchase of notes pursuant to this covenant.
To the extent that the provisions of any securities laws or regulations conflict
with provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the initial purchasers of the notes in the original private
offering. Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the Company would
decide to do so in the future. Subject to the limitations discussed below, the
Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or recapitalizations, that would not constitute a
Change of Control under the indenture, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect the Company's capital
structure or credit ratings. Restrictions on the ability of the Company to Incur
additional Indebtedness are contained in the covenants described under "Certain
Covenants--Limitation on Indebtedness." Such restrictions can only be waived
with the consent of the Holders of a majority in principal amount of the notes
then outstanding. Except for the limitations contained in such covenants,
however, the indenture will not contain any covenants or provisions that may
afford Holders protection in the event of a highly leveraged transaction.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of the Company may contain prohibitions on certain events which
would constitute a Change of Control or require such Senior Indebtedness to be
repurchased or repaid upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to purchase the notes could cause
a default under such Senior Indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders 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. The provisions under the indenture relative to the Company's
obligation to make an offer to purchase the notes as a result of a Change of
Control may be waived or modified with the written consent of the Holders of a
majority in principal amount of the notes.
Certain Covenants
The indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company and the Note Guarantors may Incur
Indebtedness if on the date of such Incurrence and after giving effect thereto
the Consolidated Coverage Ratio would be greater than 2.00:1 if such
Indebtedness is Incurred on or prior to December 31, 2001 and 2.25:1 if such
Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(1) (A) Bank Indebtedness in an aggregate principal amount not to
exceed $190.0 million less the aggregate amount of all prepayments of
principal applied to permanently reduce any such Indebtedness pursuant to
the covenant described under "--Limitation on Sales of Assets and
Subsidiary Stock" and
(B) (i) Indebtedness under the acquisition term loan facility in
an aggregate principal amount not to exceed $40.0 million less the
aggregate amount of all prepayments applied to permanently reduce any
principal of such Indebtedness pursuant to the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock";
provided, however, that at the time the Company or any Restricted
Subsidiary Incurs any Indebtedness under this clause (b)(1)(B), the
Company has a Consolidated Leverage Ratio of 5.00:1 or less; and (ii)
any Refinancing Indebtedness in respect thereof;
(2) Indebtedness of the Company owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that
49
(A) any subsequent issuance or transfer of any Capital Stock or
any other event that results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of
any such Indebtedness (except to the Company or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof,
(B) if the Company is the obligor on such Indebtedness, such
Indebtedness is made subordinate and junior in right of payment to the
notes and
(C) if a Restricted Subsidiary that is a Note Guarantor is the
obligor on such Indebtedness and such Indebtedness is owed to and held
by a Wholly Owned Subsidiary that is not a Note Guarantor, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all obligations of such Restricted Subsidiary with respect to
its Note Guarantee;
(3) Indebtedness
(A) represented by the notes and the Note Guarantees,
(B) outstanding on the Closing Date (other than the Indebtedness
described in clauses (1) and (2) above),
(C) consisting of Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (3) (including Indebtedness
that is Refinancing Indebtedness) or the foregoing paragraph (a),
(D) consisting of Guarantees of any Indebtedness permitted under
clauses (1) and (2) of this paragraph (b) and
(E) consisting of (i) Guarantees by the Company of Indebtedness
or other obligations of any of its Restricted Subsidiaries or (ii)
Guarantees by any Note Guarantor of Indebtedness of the Company or a
Restricted Subsidiary, in each case so long as the Incurrence of the
Indebtedness being Guaranteed is permitted under the terms of the
indenture; provided that if such Guaranteed Indebtedness is by its
express terms subordinated in right of payment to the notes or the
Note Guarantee of such Restricted Subsidiary, as applicable, any such
Guarantee of the Company or such Note Guarantor with respect to such
Indebtedness shall be subordinated in right of payment to the notes or
such Note Guarantor's Note Guarantee with respect to the notes
substantially to the same extent as such Indebtedness is subordinated
to the notes or the Note Guarantee of such Restricted Subsidiary, as
applicable;
(4) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired (including by way of merger) by the Company or any Restricted
Subsidiary (other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary of or was otherwise
acquired by the Company); provided, however, that on the date that such
Restricted Subsidiary is acquired, the Company or such Restricted
Subsidiary would have been able to Incur such Indebtedness under this
covenant and
(B) Refinancing Indebtedness Incurred by a Restricted Subsidiary
in respect of Indebtedness Incurred by such Restricted Subsidiary
pursuant to this clause (4);
(5) Indebtedness
(A) in respect of performance bonds, bankers' acceptances,
letters of credit and surety or appeal bonds provided by the Company
or the Restricted Subsidiaries in the ordinary course of their
business, and
(B) under Currency Agreements, Interest Rate Agreements and
Commodity Agreements entered into for bona fide hedging purposes of
the Company or a Restricted Subsidiary in the ordinary course of
business; provided, however, that such agreements do not increase the
Indebtedness of the Company or the Restricted Subsidiaries outstanding
at any time other than as a result of fluctuations in interest rates,
currency exchange rates or commodity prices or by reason of fees,
indemnities and compensation payable thereunder;
(6) Indebtedness (including Capitalized Lease Obligations and
Attributable Debt) incurred by the Company or any of the Restricted
Subsidiaries to finance the purchase, lease or improvements of property
(real or personal) or equipment (whether through the direct purchase of
assets or the Capital Stock of any Person owning such assets) in an
aggregate principal amount which, when aggregated with the principal
amount of all other Indebtedness then outstanding and
50
incurred pursuant to this clause (6) and all Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (6), does not exceed the greater of $25.0 million
or 5.0% of Total Assets;
(7) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount not to exceed $15.0 million outstanding at any one time; or
(8) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this
clause (8) and then outstanding, shall not exceed $30.0 million.
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Indebtedness will be
subordinated to the notes to at least the same extent as such Subordinated
Obligations. The Company may not Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness. In
addition, the Company may not Incur any Secured Indebtedness which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the notes equally and ratably with (or on a senior basis to, in the case
of Indebtedness subordinated in right of payment to the notes) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A
Note Guarantor may not Incur any Indebtedness if such Indebtedness is by its
terms expressly subordinate or junior in ranking in any respect to any Senior
Indebtedness of such Note Guarantor unless such Indebtedness is Senior
Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In
addition, a Note Guarantor shall not Incur any Secured Indebtedness that is not
Senior Indebtedness of such Note Guarantor unless contemporaneously therewith
effective provision is made to secure the Note Guarantee of such Note Guarantor
equally and ratably with (or on a senior basis to, in the case of Indebtedness
subordinated in right of payment to such Note Guarantee) such Secured
Indebtedness for as long as such Secured Indebtedness is secured by a Lien.
(d) Notwithstanding any other provision of this covenant, the maximum
amount of Indebtedness that the Company or any Restricted Subsidiary may Incur
pursuant to this covenant shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rates of currencies. For purposes of determining
the outstanding principal amount of any particular Indebtedness Incurred
pursuant to this covenant:
(1) Indebtedness Incurred pursuant to the Credit Agreement prior to
or on the Closing Date shall be treated as Incurred pursuant to clause (1)
of paragraph (b) above,
(2) Indebtedness permitted by this covenant need not be permitted
solely by reference to one provision permitting such Indebtedness but may
be permitted in part by one such provision and in part by one or more
other provisions of this covenant permitting such Indebtedness, and
(3) in the event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in this covenant, the Company,
in its sole discretion, shall classify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such
clauses, and may from time to time reclassify Indebtedness permitted under
paragraph (b) of this covenant among the different clauses thereof.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(1) declare or pay any dividend, make any distribution on or in
respect of its Capital Stock or make any similar payment (including any
payment in connection with any merger or consolidation involving the
Company or any Subsidiary of the Company) to the direct or indirect
holders of its Capital Stock, except (x) dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
(y) dividends or distributions payable to the Company or a Restricted
Subsidiary (and, if such Restricted Subsidiary has shareholders other than
the Company or other Restricted Subsidiaries, to its other shareholders on
a pro rata basis),
(2) purchase, repurchase, redeem, retire or otherwise acquire for
value any Capital Stock of (i) Parent, Holdings or the Company held by
Persons other than the Company or a Restricted Subsidiary or (ii) any
Restricted Subsidiary (other than Preferred Stock that is not Voting
Stock) held by any Affiliate of the Company (other than a Restricted
Subsidiary),
51
(3) purchase, repurchase, redeem, retire, defease or otherwise
acquire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations of the Company
or any Note Guarantor (other than the purchase, repurchase redemption,
retirement, defeasance or other acquisition for value of Subordinated
Obligations acquired in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition), or
(4) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, payment, purchase, redemption,
repurchase, defeasance, retirement, or other acquisition or Investment
being herein referred to as a "Restricted Payment") if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment:
(A) a Default will have occurred and be continuing (or would
result therefrom);
(B) the Company could not Incur at least $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or
(C) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to
be determined in good faith by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the
Board of Directors) declared or made subsequent to the Closing Date
would exceed the sum, without duplication, of:
(i) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of
the fiscal quarter immediately following the fiscal quarter
during which the Closing Date occurs to the end of the most
recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such deficit);
(ii) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Closing Date (other than an
issuance or sale to
(x) a Subsidiary of the Company or
(y) an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries);
(iii) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet
upon the conversion or exchange (other than by or with a
Subsidiary of the Company) subsequent to the Closing Date of any
Indebtedness of the Company or its Restricted Subsidiaries issued
after the Closing Date which is convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company or a
Note Guarantor (less the amount of any cash or the Fair Market
Value of other property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange);
(iv) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from
(x) payments of dividends, repayments of the principal
of loans or advances or other transfers of assets to the
Company or any Restricted Subsidiary from Unrestricted
Subsidiaries or
(y) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in
the definition of "Investment") not to exceed, in the case
of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary; and
(v) $5.0 million.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any purchase, repurchase, redemption, retirement or other
acquisition for value of Capital Stock of the Company or Subordinated
Obligations of the Company or any Note Guarantor made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries); provided, however, that:
52
(A) such purchase, repurchase, redemption, retirement or other
acquisition for value will be excluded in the calculation of the
amount of Restricted Payments, and
(B) the Net Cash Proceeds from such sale applied in the manner
set forth in this clause (1) will be excluded from the calculation of
amounts under clause (4)(C)(ii) of paragraph (a) above;
(2) any prepayment, repayment, retirement, purchase, repurchase,
redemption, retirement, defeasance or other acquisition for value of
Subordinated Obligations of the Company or a Note Guarantor made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company or a Note Guarantor that is permitted to
be Incurred pursuant to the covenant described under "--Limitation on
Indebtedness"; provided, however, that such prepayment, repayment,
purchase, repurchase, redemption, retirement, defeasance or other
acquisition for value will be excluded in the calculation of the amount of
Restricted Payments;
(3) any prepayment, repayment, purchase, repurchase, redemption,
retirement, defeasance or other acquisition for value of Subordinated
Obligations from Net Available Cash to the extent permitted by the
covenant described under "--Limitation on Sales of Assets and Subsidiary
Stock"; provided, however, that such prepayment, repayment, purchase,
repurchase, redemption, retirement, defeasance or other acquisition for
value will be excluded in the calculation of the amount of Restricted
Payments;
(4) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividends would have complied
with this covenant; provided, however, that such dividends will be
included in the calculation of the amount of Restricted Payments;
(5) any purchase, repurchase, redemption, retirement or other
acquisition for value of shares of, or options to purchase shares of,
Capital Stock (other than Disqualified Stock) of Holdings, Parent, the
Company or any of its Subsidiaries from employees, former employees,
officers, former officers, directors or former directors of the Company or
any of its Subsidiaries (or permitted transferees of such employees,
former employees, officers, former officers, directors or former
directors), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the board of
directors of the Company, Parent or Holdings under which such individuals
purchase or sell, or are granted the option to purchase or sell, shares of
such Capital Stock; provided, however, that the aggregate amount of such
purchases, repurchases, redemptions, retirements and other acquisitions
for value, together with the aggregate amount of payments made under
clause (6)(C) of this paragraph (b), shall not exceed in any calendar year
the sum of
(x) $2.0 million and
(y) the cash proceeds received in such calendar year by the
Company or any Restricted Subsidiary from the sale of Capital Stock
(other than Disqualified Stock) of Holdings, Parent or the Company to
employees, officers or directors of the Company, provided that such
cash proceeds will not increase the amounts available for Restricted
Payments under clause (4)(C)(ii) of paragraph (a) above; provided
further, however, that such purchases, repurchases, redemptions,
retirements and other acquisitions for value shall be excluded in the
calculation of the amount of Restricted Payments; or
(6) any payment of dividends, other distributions or other amounts
(including in the form of loans or advances) by the Company for the
purposes set forth in clauses (A) through (C) below; provided, however,
that such dividends, distributions or other amounts set forth in clauses
(A) through (C) shall be excluded in the calculation of the amount of
Restricted Payments for the purposes of paragraph (a) above:
(A) to Parent or Holdings in amounts equal to the amounts
required for Parent or Holdings to pay franchise taxes and other fees
required to maintain its corporate existence and provide for other
operating costs in an aggregate amount of up to $350,000 per fiscal
year;
(B) to Parent or Holdings in amounts equal to amounts required
for Parent or Holdings to pay federal, state and local income taxes to
the extent such income taxes are attributable to the income of the
Company and its Restricted Subsidiaries (and, to the extent of amounts
actually received from its Unrestricted Subsidiaries, in amounts
required to pay such taxes to the extent attributable to the income of
such Unrestricted Subsidiaries); and
(C) to Parent or Holdings in amounts equal to amounts expended by
Parent or Holdings for any purchase, repurchase, redemption,
retirement or other acquisition for value of shares of, or options to
purchase shares of, Capital Stock (other than Disqualified Stock) of
Parent or Holdings from employees, former employees, officers,
53
former officers, directors or former directors of the Company or any
of its Subsidiaries (or permitted transferees of such employees,
former employees, officers, former officers, directors or former
directors), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the board of
directors of Parent or Holdings under which such individuals purchase
or sell or are granted the option to purchase or sell, shares of such
Capital Stock; provided, however, that the aggregate amount of such
purchases, repurchases, redemptions, retirements and other
acquisitions for value, together with the aggregate amount of payments
made under clause (5) of this paragraph (b), shall not exceed in any
calendar year the sum of
(x) $2.0 million and
(y) the cash proceeds received in such calendar year by the
Company or any Restricted Subsidiary from the sale of Capital
Stock (other than Disqualified Stock) of Holdings, Parent or the
Company to employees, officers or directors of the Company
(provided that such cash proceeds will not increase the amounts
available for Restricted Payments under clause (4)(C)(ii) of
paragraph (a) above).
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
or pay any Indebtedness or other obligations owed to the Company;
(2) make any loans or advances to the Company; or
(3) transfer any of its property or assets to the Company, except:
(A) any encumbrance or restriction pursuant to applicable law or
an agreement in effect at or entered into on the Closing Date;
(B) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company or a Restricted
Subsidiary (other than Indebtedness Incurred as consideration in, in
contemplation of, or to provide all or any portion of the funds or
credit support utilized to consummate the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by the
Company or a Restricted Subsidiary) and outstanding on such date;
(C) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (A) or (B) of this covenant or this
clause (3)(C) or contained in any amendment to an agreement referred
to in clause (A) or (B) of this covenant or this clause (3)(C);
provided, however, that the encumbrances and restrictions contained in
any such Refinancing agreement or amendment are no less favorable to
the Holders in any material respect than the encumbrances and
restrictions contained in such predecessor agreements;
(D) in the case of clause (3), any encumbrance or restriction
(i) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject
to a lease, license or similar contract, or
(ii) contained in security agreements securing Indebtedness
of the Company or a Restricted Subsidiary to the extent such
encumbrance or restriction restricts the transfer of the property
subject to such security agreements;
(E) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition; and
(F) any encumbrance or restriction existing or created pursuant
to Indebtedness permitted to be Incurred by a Restricted Subsidiary
subsequent to the Closing Date pursuant to the covenant described
under "--Limitations on Indebtedness"; provided, however, that any
such encumbrance or restrictions are reasonable and customary with
respect to the type of Indebtedness being Incurred (under the relevant
circumstances).
54
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the Fair Market Value of the
shares and assets subject to such Asset Disposition,
(2) except in the case of a Permitted Asset Swap, at least 75% of the
consideration thereof received by the Company or such Restricted
Subsidiary is in the form of cash, and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be)
(A) first, to the extent the Company elects (or is required by
the terms of any Indebtedness) to prepay, repay, purchase, repurchase,
redeem, retire, defease or otherwise acquire for value Senior
Indebtedness of the Company or Indebtedness of a Restricted Subsidiary
(in each case other than Indebtedness owed to the Company or an
Affiliate of the Company (other than an Affiliate of JPMP LLC/ which
is a lender in the ordinary course of business) and other than
obligations in respect of Disqualified Stock) within 180 days after
the later of the date of such Asset Disposition or the receipt of such
Net Available Cash;
(B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the
Company or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by
the Company or another Restricted Subsidiary) within 180 days from the
later of such Asset Disposition or the receipt of such Net Available
Cash;
(C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to make
an Offer (as defined in paragraph (b) of this covenant below) to
purchase notes pursuant to and subject to the conditions set forth in
paragraph (b) of this covenant; provided, however, that if the Company
elects (or is required by the terms of any other Senior Subordinated
Indebtedness), such Offer may be made ratably to purchase the notes
and other Senior Subordinated Indebtedness of the Company; and
(D) fourth, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A), (B) and (C),
for any general corporate purpose permitted by the terms of the
indenture;
provided, however, that in connection with any final prepayment, repayment,
purchase, repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness pursuant to clause (A), (C) or (D)
above, the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid, purchased, repurchased, redeemed, retired, defeased or otherwise
acquired for value. Pending final application of any Net Available Cash in
accordance with the foregoing, the Company or a Restricted Subsidiary may
use such Net Available Cash to temporarily reduce (and, within such 180-day
period, reborrow) Indebtedness or invest such Net Available Cash in
Temporary Cash Equivalents.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions that is not applied in accordance
with this covenant exceeds $7.5 million.
For the purposes of this covenant, the following are deemed to be cash:
o the assumption of Indebtedness of the Company (other than obligations
in respect of Disqualified Stock of the Company) or any Restricted
Subsidiary (other than obligations in respect of Disqualified Stock
and Preferred Stock of a Restricted Subsidiary that is not a Note
Guarantor) and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition, and
o securities received by the Company or any Restricted Subsidiary from
the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
notes pursuant to clause (a)(3)(C) of this covenant, the Company will be
required (i) to purchase notes tendered pursuant to an offer by the Company for
the notes (the "Offer")
55
at a purchase price of 100% of their principal amount plus accrued and unpaid
interest and liquidated damages thereon, if any, to the date of purchase
(subject to the right of Holders of record on the relevant date to receive
interest due on the relevant interest payment date) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the indenture and (ii) to purchase other Senior Subordinated Indebtedness of the
Company on the terms and to the extent contemplated thereby (provided that in no
event shall the Company offer to purchase such other Senior Subordinated
Indebtedness of the Company at a purchase price in excess of 100% of its
principal amount (without premium), plus accrued and unpaid interest thereon,
unless an equal premium is offered to Holders in the Offer). If the aggregate
purchase price of notes (and other Senior Subordinated Indebtedness) tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the notes (and other Senior Subordinated Indebtedness), the Company
will apply the remaining Net Available Cash in accordance with clause (a)(3)(D)
of this covenant. The Company will not be required to make an Offer for notes
(and other Senior Subordinated Indebtedness) pursuant to this covenant if the
Net Available Cash available therefor (after application of the proceeds as
provided in clauses (a)(3)(A) and (B)) is less than $5.0 million for any
particular Asset Disposition (which lesser amount will be carried forward for
purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
such Affiliate Transaction is on terms:
(1) that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could be obtained at the
time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate,
(2) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $1.0 million,
(A) are set forth in writing, and
(B) have been approved by a majority of the members of the Board
of Directors having no personal stake in such Affiliate Transaction
and,
(3) that, in the event such Affiliate Transaction involves an amount
in excess of $10.0 million, have been determined by a nationally
recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(1) any Restricted Payment permitted to be paid pursuant to the
covenant described under "Limitation on Restricted Payments,"
(2) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved
by the Board of Directors,
(3) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of
Directors,
(4) loans or advances to employees in the ordinary course of business
in accordance with past practices of the Company or any Restricted
Subsidiary, but in any event not to exceed $2.0 million in the aggregate
outstanding at any one time,
(5) the payment of reasonable fees to directors of the Company
and its Subsidiaries who are not employees of the Company or its
Subsidiaries,
(6) any transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries, or
56
(7) the performance of any agreement as in effect as of the Closing
Date (including the Tax Sharing Agreement, dated July 21, 1998, and the
Amended and Restated Management Services Agreement, dated October 1, 1998)
or any amendment or replacement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders of the
notes in any material respect than the original agreement as in effect as
of the Closing Date.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell or otherwise dispose of any shares of
Capital Stock (other than Preferred Stock that is not Voting Stock) of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell or otherwise dispose of any shares of its
Capital Stock (other than Preferred Stock that is not Voting Stock) except:
(1) to the Company or a Wholly Owned Subsidiary;
(2) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary, or
(3) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
thereto would have been permitted to be made under the covenant described
under "Limitation on Restricted Payments" if made on the date of such
issuance, sale or other disposition ( and such Investment shall be deemed
to be an Investment made for purposes of such covenant).
The proceeds of any sale of such Capital Stock subject to and permitted
hereby will be treated as Net Available Cash from an Asset Disposition and must
be applied in accordance with the terms of the covenant described under
"Limitation on Sales of Assets and Subsidiary Stock."
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the SEC (if it will accept such filing) and provide the Trustee
and Holders and prospective Holders (upon request) within 15 days after it files
them with the SEC, copies of its annual report and the information, documents
and other reports that are specified in Sections 13 and 15(d) of the Exchange
Act. In addition, following a Public Equity Offering, the Company shall furnish
to the Trustee and the Holders, promptly upon their becoming available, copies
of the annual report to shareholders and any other information provided by the
Company, Holdings or Parent to its public shareholders generally. The Company
also will comply with the other provisions of Section 314(a) of the TIA.
Future Note Guarantors. The Company will cause (1) each Domestic
Subsidiary and (2) each Foreign Subsidiary that Guarantees any Indebtedness
(other than Indebtedness of a Restricted Subsidiary that is not a Note
Guarantor) to become a Note Guarantor, and if applicable, execute and deliver to
the Trustee a supplemental indenture in the form set forth in the indenture
pursuant to which such Subsidiary will Guarantee payment of the notes. Each Note
Guarantee will be limited to an amount not to exceed the maximum amount that can
be Guaranteed by that Note Guarantor, without rendering the Note Guarantee, as
it relates to such Note Guarantor voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business, other than a Permitted
Business.
Merger and Consolidation
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") will be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) will expressly
assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the notes and the indenture;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
57
(3) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under
"Limitation on Indebtedness";
(4) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture; and
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel reasonably acceptable to the Trustee to the effect that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such transaction and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such transaction had not occurred.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay the
principal of and interest on the notes.
In addition, subject to certain exceptions, the Company will not permit
any Note Guarantor to consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (the "Successor
Guarantor") will be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia (unless the Successor Guarantor is a Foreign Subsidiary), and
such Person (if not a Note Guarantor) will expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such Note Guarantor
under its Note Guarantee;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Guarantor or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Guarantor or such Restricted Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing; and
(3) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture.
Notwithstanding the foregoing:
(A) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and
(B) the Company may merge with an Affiliate incorporated solely for
the purpose of reincorporating the Company in another jurisdiction to
realize tax or other benefits.
Defaults
Each of the following is an Event of Default:
(1) a default in any payment of interest on any note when due and
payable or in any payment of liquidated damages whether or not prohibited
by the provisions described under "Ranking" above, continued for 30 days;
(2) a default in the payment of principal of any note when due and
payable at its Stated Maturity, upon required redemption or repurchase,
upon declaration or otherwise, whether or not such payment is prohibited
by the provisions described under "Ranking" above;
(3) the failure by the Company or any Subsidiary to comply with its
obligations under the covenant described under "Merger and Consolidation"
above;
(4) the failure by the Company or any Subsidiary to comply for 30
days after receipt of notice with any of its obligations under the
covenants described under "Change of Control" or "Certain Covenants" above
(in each case, other than a failure to purchase notes);
58
(5) the failure by the Company or any Subsidiary to comply for 60
days after receipt of notice with its other agreements contained in the
notes or the indenture;
(6) the failure by the Company or any Restricted Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity
(which has not subsequently been paid) or the acceleration (which has not
been rescinded) of any such Indebtedness by the holders thereof because of
a default if the total amount of such Indebtedness unpaid or accelerated
exceeds $10.0 million or its foreign currency equivalent (the "cross
acceleration provision") and such failure continues for 10 days after
receipt of the notice specified in the indenture;
(7) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions");
(8) the rendering of any judgment or decree for the payment of money
(other than judgments or decrees which are covered by enforceable
insurance policies or indemnifications issued by or entered into with
solvent Persons) in excess of $10.0 million or its foreign currency
equivalent is rendered against the Company or a Restricted Subsidiary if:
(A) an enforcement proceeding thereon is commenced by any
creditor and is not stayed or dismissed within 10 days, or
(B) such judgment or decree remains outstanding for a period of
60 days following such judgment and is not discharged, waived or
stayed (the "judgment default provision"); or
(9) any Note Guarantee ceases to be in full force and effect (except
as contemplated by the terms thereof) or any Note Guarantor or Person
acting by or on behalf of such Note Guarantor denies or disaffirms such
Note Guarantor's obligations under the indenture or any Note Guarantee and
such Default continues for 10 days after receipt of the notice specified
in the indenture.
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
However, a default under clauses (4), (5), (6) or (9) will not constitute
an Event of Default until the Trustee notifies the Company or the Holders of at
least 25% in principal amount of the outstanding notes notify the Company and
the Trustee of the default and the Company or the Note Guarantor, as applicable,
does not cure such default within the time specified in clauses (4), (5), (6) or
(9) hereof after receipt of such notice.
If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the outstanding notes by notice to the Company and the
Trustee, may declare the principal of and accrued but unpaid interest on all the
notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company
occurs, the principal of and interest on all the notes will become immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holders. Under certain circumstances, the Holders of a majority in
principal amount of the outstanding notes may rescind any such acceleration with
respect to the notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the indenture or the notes unless:
(1) such Holder has previously given the Trustee notice that an Event
of Default is continuing;
(2) Holders of at least 25% in principal amount of the outstanding
notes have requested the Trustee in writing to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity;
and
59
(5) the Holders of a majority in principal amount of the outstanding
notes have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding notes will be given the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee in personal liability.
Prior to taking any action under the indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
If a Default occurs and is continuing and is known to a Responsible
Officer of the Trustee, the Trustee must mail to each Holder notice of the
Default within the earlier of 90 days after it occurs or 30 days after it is
known to a Trust Officer or written notice of it is received by the Trustee.
Except in the case of a Default in the payment of principal of, premium (if any)
or interest on any note (including payments pursuant to the redemption
provisions of such note), the Trustee may withhold notice if and so long as a
committee of its Trust Officers in good faith determines that withholding notice
is in the interests of the Holders. In addition, the Company will be required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company will also be required to deliver
to a Responsible Officer of the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Events of
Default, their status and what action the Company is taking or proposes to take
in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the indenture or the notes may be amended
with the written consent of the Holders of a majority in principal amount of the
notes then outstanding and any past default or compliance with any provisions
may be waived with the consent of the Holders of a majority in principal amount
of the notes then outstanding. However, without the consent of each Holder of an
outstanding note affected, no amendment may, among other things:
(1) reduce the amount of notes whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any note;
(3) reduce the principal of or extend the Stated Maturity of any note;
(4) reduce the premium payable upon the redemption of any note or
accelerate the time at which any note may be redeemed as described under
"Optional Redemption" above;
(5) make any note payable in money other than that stated in the note;
(6) make any change to the subordination provisions of the indenture
that adversely affects the rights of any Holder;
(7) impair the right of any Holder to receive payment of principal of,
and interest or any liquidated damages on, such Holder's notes on or after
the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's notes;
(8) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions; or
(9) modify the Note Guarantees in any manner adverse to the Holders in
a material respect.
Without the consent of any Holder, the Company and Trustee may amend the
indenture to:
o cure any ambiguity, omission, defect or inconsistency;
o provide for the assumption by a successor corporation of the
obligations of the Company under the indenture;
60
o provide for uncertificated notes in addition to or in place of
certificated notes (provided, however, that the uncertificated notes
are issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated notes are described
in Section 163(f)(2)(B) of the Code);
o make any change in the subordination provisions of the indenture that
would limit or terminate the benefits available to any holder of
Senior Indebtedness of the Company (or any representative thereof)
under such subordination provisions;
o add additional Guarantees with respect to the notes;
o secure the notes;
o add to the covenants of the Company for the benefit of the Holders or
to surrender any right or power conferred upon the Company;
o make any change that does not adversely affect the rights of any
Holder in a material respect, subject to the provisions of the
indenture;
o provide for the issuance of the notes; or
o comply with any requirement of the SEC in connection with the
qualification of the indenture under the TIA.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Indebtedness
of the Company then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent to
such change.
The consent of the Holders will not be necessary to approve the particular
form of any proposed amendment. It will be sufficient if such consent approves
the substance of the proposed amendment.
After an amendment becomes effective, the Company is required to mail to
Holders a notice briefly describing such amendment. However, the failure to give
such notice to all Holders, or any defect therein, will not impair or affect the
validity of the amendment.
Transfer and Exchange
A Holder will be able to transfer or exchange notes. Upon any transfer or
exchange, the registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes required by law or permitted by
the indenture. The Company will not be required to transfer or exchange any note
selected for redemption or to transfer or exchange any note for a period of 15
days prior to a selection of notes to be redeemed. The notes will be issued in
registered form and the Holder will be treated as the owner of such note for all
purposes.
Defeasance
The Company may at any time terminate all its obligations under the notes
and the indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the notes, to replace mutilated, destroyed, lost or
stolen notes and to maintain a registrar and paying agent in respect of the
notes.
In addition, the Company may at any time terminate:
(1) its obligations under the covenants described under "Certain
Covenants" and "Change of Control"; and
(2) the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries and the judgment
default provision described under "Defaults" above and the limitations
contained in clause (3) under the first paragraph of "Merger and
Consolidation" above ("covenant defeasance").
In the event that the Company exercises its legal defeasance option or its
covenant defeasance option, each Note Guarantor will be released from all of its
obligations with respect to its Note Guarantee.
61
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the notes may not be accelerated because of an
Event of Default specified in clause (4), (6), (7) (with respect only to
Significant Subsidiaries) or (8) under "Defaults" above or because of the
failure of the Company to comply with clause (3) under the first paragraph of
"Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money in
an amount sufficient or U.S. Government Obligations, the principal of and
interest on which will be sufficient, or a combination thereof sufficient, to
pay the of principal, premium (if any) and interest on, and liquidated damages,
if any, in respect of the notes to redemption or maturity, as the case may be,
and must comply with certain other conditions, including delivery to the Trustee
of an Opinion of Counsel reasonably acceptable to the Trustee to the effect that
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred (and, in the
case of legal defeasance only, such Opinion of Counsel must be based on a ruling
of the Internal Revenue Service or other change in applicable federal income tax
law).
Concerning the Trustee
The Bank of New York is the Trustee under the indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the notes.
Governing Law
The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
Certain Definitions
"Additional Assets" means:
(1) any property or assets (other than Indebtedness and Capital
Stock) to be used by the Company or a Restricted Subsidiary in a Permitted
Business;
(2) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the
Company or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary; provided, however, that: any such
Restricted Subsidiary described in clauses (2) or (3) above is primarily
engaged in a Permitted Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" 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; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Transactions with Affiliates" and "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial
owner of shares representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of Parent, Holdings or the Company or of rights
or warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Company or a Restricted Subsidiary);
62
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or
(3) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such
Restricted Subsidiary
other than, in the case of (1), (2) and (3) above,
(A) disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary,
(B) for purposes of the provisions described under "Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenant described under "Certain
Covenants--Limitation on Restricted Payments,"
(C) a disposition of assets with a Fair Market Value of less than
$500,000, and
(D) a transfer of real property to a state, county, local or
municipal governmental agency in exchange for the granting of a permit
or the taking of other regulatory action by such governmental agency
that enhances the value of mining properties owned by the Company or a
Restricted Subsidiary, provided that the Board of Directors has
determined in good faith that such exchange is in the best interest of
the Company.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest rate
borne by the notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or scheduled redemption or similar payment with
respect to such Preferred Stock multiplied by the amount of such payment
by
(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement and any Refinancing Indebtedness with respect thereto,
as amended from time to time, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of the Board of Directors of
the Company.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a
penalty.
"Closing Date" means October 1, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
63
"Commodity Agreement" means any agreement designed to hedge against
fluctuations in commodity prices, including natural gas prices, entered into in
the ordinary course of business.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of
(1) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date
of such determination to
(2) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that:
(A) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period;
(B) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on
the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense
for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the
Company or such Restricted Subsidiary has not earned the interest
income actually earned during such period in respect of cash or
Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness;
(C) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an
amount equal to the EBITDA (if negative) directly attributable thereto
for such period and Consolidated Interest Expense for such period
shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or
any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period
(or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to
the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale);
(D) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the
first day of such period; and
(E) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant
to clause (C) or (D) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets or other Investment, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible
64
financial or accounting Officer of the Company and shall comply with the
requirements of Rule 11-02 of Regulation S-X promulgated by the SEC.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Consolidated Restricted Subsidiaries, plus, to
the extent Incurred by the Company and its Consolidated Restricted Subsidiaries
in such period but not included in such interest expense, without duplication:
(1) interest expense attributable to Capitalized Lease Obligations
and the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;
(2) amortization of debt discount (but not debt issuance costs);
(3) capitalized interest;
(4) non-cash interest expense;
(5) commissions, discounts and other fees and charges attributable to
letters of credit and bankers' acceptance financing;
(6) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by the Company or any Restricted
Subsidiary;
(7) net costs associated with Hedging Obligations;
(8) dividends in respect of all Disqualified Stock of the Company and
all Preferred Stock of any Restricted Subsidiary, to the extent held by
Persons other than the Company or another Restricted Subsidiary;
(9) interest Incurred in connection with investments in discontinued
operations; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Leverage Ratio" as of any date of determination means the
ratio of
(1) Indebtedness of the Company and its Consolidated Restricted
Subsidiaries as of the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such determination to
(2) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date
of such determination;
provided, however, that:
(A) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding on such date of determination, Indebtedness and EBITDA for
such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period;
(B) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on
the date of the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio, Indebtedness and EBITDA for such period
shall be
65
calculated on a pro forma basis as if such discharge had occurred on
the first day of such period and as if the Company or such Restricted
Subsidiary has not earned the interest income actually earned during
such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness;
(C) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an
amount equal to the EBITDA (if negative) directly attributable thereto
for such period and Indebtedness shall be reduced by any Indebtedness
of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset
Disposition (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale);
(D) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, Indebtedness and
EBITDA for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if
such Investment or acquisition occurred on the first day of such
period; and
(E) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant
to clause (C) or (D) above if made by the Company or a Restricted
Subsidiary during such period, Indebtedness and EBITDA for such period
shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition of assets occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets or other Investment, the amount of income or
earnings relating thereto and the amount of any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company and shall
comply with the requirements of Rule 11-02 of Regulation S-X promulgated by the
SEC.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months).
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that
(A) subject to the limitations contained in clause (4) below, the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period
to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
made to a Restricted Subsidiary, to the limitations contained in
clause (3) below), and
(B) the Company's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net
Income;
(2) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income (or loss) of any Restricted Subsidiary to the
extent such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by
such Restricted
66
Subsidiary, directly or indirectly, to the Company, except that the
Company's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person;
(5) any extraordinary gain or loss; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of the covenant described
under "Certain Covenants--Limitation on Restricted Payments" only, there shall
be excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(4)(C)(iv) thereof.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement dated as of the Closing Date
among the Company, as borrower, Parent, as parent guarantor, George F. Pettinos
(Canada) Limited, as Canadian borrower, Banque Nationale de Paris, as agent, and
the financial institutions and other institutional lenders named therein, as the
same may be amended, restated, supplemented, waived, replaced, refinanced,
restructured or otherwise modified from time to time, in each case, whether or
not upon termination, whether with the original financial institutions, other
institutional lenders or agents, and whether with one or more credit agreements
with the Company or one or more Restricted Subsidiaries as borrowers.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreements or other similar agreement or arrangement to
which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" of the Company means
(1) the Bank Indebtedness and Indebtedness in respect of Hedging
Obligations, and
(2) any other Senior Indebtedness of the Company that, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to
lend up to at least $25 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior Indebtedness
as "Designated Senior Indebtedness" for purposes of the indenture.
"Designated Senior Indebtedness" of a Note Guarantor has a correlative
meaning.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock (excluding Capital Stock convertible or exchangeable solely at the
option of the Company or a Restricted Subsidiary; provided, however, that
any such conversion or exchange shall be deemed an Incurrence of
Indebtedness or Disqualified Stock, as applicable); or
(3) is redeemable at the option of the holder thereof, in whole or in
part, in the case of each of clauses (1), (2) and (3), on or prior to the
first anniversary of the Stated Maturity of the notes; provided, however,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change
67
of control" occurring prior to the Stated Maturity of the notes shall not
constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable in a
material respect to the holders of such Capital Stock than the provisions
of the covenants described under "Change of Control" and "Limitation on
Sales of Assets and Subsidiary Stock."
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus, without duplication, the following to the extent deducted in calculating
such Consolidated Net Income:
(1) income tax expense of the Company and its Consolidated Restricted
Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation expense of the Company and its Consolidated
Restricted Subsidiaries;
(4) amortization expense of the Company and its Consolidated
Restricted Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period);
(5) depletion expense of the Company and its Consolidated Restricted
Subsidiaries; and
(6) all other non-cash charges of the Company and its Consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent
it represents an accrual of or reserve for cash expenditures in any future
period) less all non-cash items of income of the Company and its Restricted
Subsidiary, in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation, amortization and depletion and non-cash
charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. For purposes of
the indenture, Fair Market Value will be determined in good faith by the Board
of Directors, whose determination will be conclusive and evidenced by a
resolution of the Board of Directors.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that
is not organized under the laws of the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting
Standards Board;
(3) such other statements by such other entities as are approved by a
significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in the indenture shall
be computed in conformity with GAAP.
68
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person:
(1) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise);
or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement, Currency Agreement or Commodity
Agreement.
"Holder" means the Person in whose name a note is registered on the
Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or redemption, repayment or
repurchase obligation in respect of Preferred Stock or Disqualified Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a
noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(1) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(2) the principal of and premium (if any) in respect of obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments;
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto);
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than twelve months after the date of placing
such property in service or taking delivery and title thereto or the
completion of such services;
(5) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(6) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of
(A) the Fair Market Value of such asset at such date of
determination, and
(B) the amount of such Indebtedness of such other Persons;
(8) Hedging Obligations of such Person; and
69
(9) all obligations of the type referred to in clauses (1) through (8)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee.
The amount of Indebtedness (other than Hedging Obligations) of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date. The amount of Indebtedness in respect of Hedging Obligations shall be
determined in accordance with GAAP.
Notwithstanding the foregoing, for the purposes of the definition of
Consolidated Leverage Ratio, Indebtedness shall not include any obligations in
respect of undrawn letters of credit or any Hedging Obligations.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "Certain
Covenants--Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of
the net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Company shall be deemed to continue to have a permanent "Investment"
in an Unrestricted Subsidiary in an amount (if positive) equal to:
(A) the Company's "Investment" in such Subsidiary at the time of
such redesignation less
(B) the portion (proportionate to the Company's equity interest
in such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value at the time of such transfer.
"Legal Holiday" means a Saturday, Sunday or other day on which banking
institutions are not required by law or regulation to be open in the State of
New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other non-cash form) therefrom, in each
case net of:
(1) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability
under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be repaid out of
the proceeds from such Asset Disposition;
70
(3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; and
(4) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property
or other assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Note Guarantee" means each Guarantee of the obligations with respect to
the notes issued by a Person pursuant to the terms of the indenture.
"Note Guarantor" means any Person that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the President, any Vice President, the Treasurer or
the Secretary of the Company. "Officer" of a Note Guarantor has a correlative
meaning.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company, a Note Guarantor or the Trustee.
"Permitted Asset Swap" means any one or more transactions in which the
Company or any Restricted Subsidiary exchanges assets for consideration
consisting of (i) Capital Stock in or assets of a Person engaged in a Permitted
Business and (ii) any cash, provided that such cash will be considered Net
Available Cash from an Asset Disposition.
"Permitted Business" means any business engaged in by the Company or any
Restricted Subsidiary on the Closing Date and any Related Business.
"Permitted Holders" means (i) JPMP LLC, its Affiliates and their
respective directors and officers, (ii) DGHA and individuals who are equity
owners, directors or employees of DGHA, the Company, Holdings or Parent (or the
estate or any beneficiary of any such individual or any immediate family member
of any such individual or any trust established for the benefit of any such
immediate family member) and (iii) any Person acting in the capacity of an
underwriter in connection with a public or private offering of the Company's,
Parent's or Holdings' Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Permitted Business;
(2) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted
Subsidiary; provided, however, that such Person's primary business is a
Permitted Business;
(3) Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary and not exceeding $1.0 million in the aggregate outstanding at
any one time;
71
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition that was
made pursuant to and in compliance with the covenant described under
"Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock";
(9) Investments the payment for which consists of (i) Capital Stock
(other than Disqualified Stock) or the cash proceeds from the sale of
Capital Stock (other than Disqualified Stock), in each case of the Company
or (ii) the proceeds of cash capital contributions to the Company;
provided, however, that such cash proceeds from sales of Capital Stock or
cash capital contributions will not increase the amount available for
Restricted Payments under clause (4)(C) of the first paragraph of the
"--Limitation on Restricted Payments" covenant;
(10) Loans to DGHA pursuant to the Amended and Restated Management
Services Agreement, dated October 1, 1998, or any amendment or replacement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders of the notes in any material respect than
the agreement as in effect as of the Closing Date;
(11) Investments in the ordinary course of business in an insurer
required as a condition to the provision by such insurer of insurance
coverage; and
(12) any Person having an aggregate Fair Market Value, taken together
with all other Investments made pursuant to this clause (12) that are at
the time outstanding, not to exceed the greater of 3.0% of Total Assets or
$15.0 million at the time of such Investment (with the Fair Market Value
of each Investment being measured at the time made and without giving
effect to subsequent changes in value).
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a note means the principal of the note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company, Parent or Holdings, as applicable, pursuant to an
effective registration statement under the Securities Act.
"Public Market" means any time after:
(1) a Public Equity Offering has been consummated; and
(2) at least 15% of the total issued and outstanding common stock of
the Company, Parent or Holdings (as applicable) has been distributed by
means of an effective registration statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) any Indebtedness of the Company or any Restricted
Subsidiary existing on the Closing Date or Incurred in compliance with the
indenture (including Indebtedness of the Company or any Restricted Subsidiary
that Refinances Refinancing Indebtedness); provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being Refinanced;
72
(2) the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced;
(3) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount
(or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being Refinanced plus any reasonable
premiums required to be paid with respect to the Indebtedness being
Refinanced; and
(4) if the Indebtedness being Refinanced is subordinated in right of
payment to the notes, such Refinancing Indebtedness is subordinated in
right of payment to the notes at least to the same extent as the
Indebtedness being Refinanced;
provided further, however, that (x) Refinancing Indebtedness shall not include:
(A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that
Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary, and (y) Refinancing Indebtedness referred to in the definition of
"Bank Indebtedness" or in respect of the Acquisition Term Loan Facility shall
not be subject to clauses (1), (2) or (3) of this definition.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the Closing
Date.
"Representative" means the trustee, agent or representative (if any) for
an issue of Senior Indebtedness.
"Responsible Officer" shall mean, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of the indenture.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or a Restricted Subsidiary transfers such property to a Person and
the Company or such Restricted Subsidiary leases it from such Person, other than
leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. Secured Indebtedness" of a Note Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank equally with the notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness. "Senior Subordinated
Indebtedness" of a Note Guarantor has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Closing Date or thereafter Incurred) that is subordinate or
junior in right of payment to the notes pursuant to a written agreement.
"Subordinated Obligation" of a Note Guarantor has a correlative meaning.
73
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations Guaranteed by the United
States of America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $250,000,000 (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act);
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Service, a division of The McGraw-Hill Companies, Inc. ("S&P"); and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust indenture Act of 1939 (15 U.S.C.ss.ss.77aaa-77bbbb)
as in effect on the Closing Date.
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Company.
"Trade Payables" means, with respect to any Person, any accounts payable
or any indebtedness or monetary obligation to trade creditors created, assumed
or Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in the indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any
property of, the Company or any Restricted Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided, however, that
either:
74
(A) the Subsidiary to be so designated has total Consolidated
assets of $1,000 or less; or
(B) if such Subsidiary has Consolidated assets greater than
$1,000, then such designation would be permitted under the covenant
entitled "Limitation on Restricted Payments."
The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, however, that
(x) immediately after giving effect to such designation no
Default shall have occurred and be continuing and
(y) at the time of such designation the Company or a Restricted
Subsidiary could have Incurred all of the outstanding Indebtedness of
such Subsidiary and its Subsidiaries under the covenant described
under "--Certain Covenants--Limitation on Indebtedness."
Any such designation of a Subsidiary as a Restricted Subsidiary or
Unrestricted Subsidiary by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees of the related corporation,
partnership or Person.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Voting Stock of which (other than directors' qualifying shares) is owned by
the Company and/or another Wholly Owned Subsidiary.
75
BOOK-ENTRY; DELIVERY AND FORM
The notes are represented by one permanent global note in definitive,
fully registered book-entry form, without interest coupons that is deposited
with, or on behalf of, DTC and registered in the name of DTC or its nominee, on
behalf of the acquirers of notes represented thereby for credit to the
respective accounts of the acquirers, or to such other accounts as they may have
directed, at DTC, or Morgan Guaranty Trust Company of New York, Brussels Office,
as operator of the Euroclear System, or Clearstream Banking, societe anonyme.
Except as set forth below, the global notes may be transferred, in whole
and not in part, solely to another nominee of DTC or to a successor of DTC or
its nominee. Beneficial interests in the global notes may not be exchanged for
notes in physical, certificated form except in the limited circumstances
described below.
All interests in the global notes, including those held through Euroclear
or Clearstream, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Clearstream may also be subject to the
procedures and requirements of those systems.
Certain Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC, Euroclear and
Clearstream set forth below are provided solely as a matter of convenience.
These operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. We do
not take any responsibility for these operations or procedures, and investors
are urged to contact the relevant system or its participants directly to discuss
these matters.
DTC has advised us that it is
(1) a limited purpose trust company organized under the laws of the
State of New York,
(2) a "banking organization" within the meaning of the New York
Banking Law,
(3) a member of the Federal Reserve System,
(4) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and
(5) a "clearing agency" registered pursuant to Section 17A of the
Exchange Act.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Indirect access to DTC's
system is also available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Investors who are not participants
may beneficially own securities held by or on behalf of DTC only through
participants or indirect participants.
Pursuant to procedures established by DTC, ownership of the notes is shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interests of participants) and the
records of participants and the indirect participants (with respect to the
interests of persons other than participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of those securities in definitive form.
Accordingly, the ability to transfer interests in the notes represented by a
global note to those persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in notes represented by a global note to pledge or transfer that interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of that interest, may be affected by the lack of a
physical definitive security in respect of that interest.
So long as DTC or its nominee is the registered owner of a global note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note:
76
o are not entitled to have notes represented by that global note
registered in their names,
o are not to receive or be entitled to receive physical delivery of
certificated notes, and
o are not considered the owners or holders thereof under the indenture
for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee thereunder.
Accordingly, each holder owning a beneficial interest in a global note
must rely on the procedures of DTC and, if that holder is not a participant or
an indirect participant, on the procedures of the participant through which that
holder owns its interest, to exercise any rights of a holder of notes under the
indenture or that global note. We understand that under existing industry
practice, in the event that we request any action of holders of notes, or a
holder that is an owner of a beneficial interest in a global note desires to
take any action that DTC, as the holder of that global note, is entitled to
take, DTC would authorize the participants to take such action and the
participants would authorize holders owning through those participants to take
such action or would otherwise act upon the instruction of those holders.
Neither we nor the trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to
those notes.
Payments with respect to the principal of, and premium, if any, and
interest on, any notes represented by a global note registered in the name of
DTC or its nominee on the applicable record date will be payable by the trustee
to or at the direction of DTC or its nominee in its capacity as the registered
holder of the global note representing the notes under the indenture. Under the
terms of the indenture, we and the trustee may treat the persons in whose names
the notes, including the global notes, are registered as the owners thereof for
the purpose of receiving payment thereon and for any and all other purposes
whatsoever. Accordingly, neither we nor the trustee has or will have any
responsibility or liability for the payment of those amounts to owners of
beneficial interests in a global note (including principal, premium, if any,
liquidated damages, if any, and interest). Payments by the participants and the
indirect participants to the owners of beneficial interests in a global note
will be governed by standing instructions and customary industry practice and
will be the responsibility of the participants or the indirect participants and
DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterpart in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant global notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of interests in a global note by
or through a Euroclear or Clearstream participant to a participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Clearstream cash account only as of the business day
for Euroclear or Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the global notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform these procedures, and the procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
77
Certificated Notes
If:
o we notify the trustee in writing that DTC is no longer willing or able
to act as a depositary or DTC ceases to be registered as a clearing
agency under the Securities Exchange Act of 1934 and a successor
depositary is not appointed within 90 days of that notice or
cessation;
o an Event of Default has occurred and is continuing; or
o we, at our option, notify the trustee in writing that we elect to
cause the issuance of notes in definitive form under the indenture,
then, upon surrender by DTC of the global notes, certificated notes will be
issued to each person that DTC identifies as the beneficial owner of the notes
represented by the global notes. Upon any such issuance, the trustee is required
to register those certificated notes in the name of that person or those persons
(or the nominee of any thereof) and cause the same to be delivered thereto.
Neither we nor the trustee shall be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the notes to be issued).
78
PLAN OF DISTRIBUTION
This prospectus has been prepared for use by CSI in connection with offers
and sales of the notes in market-making transactions. CSI may act as a principal
or agent in these transactions. These sales will be made at prevailing market
prices at the time of sale, at prices related thereto or at negotiated prices.
We will not receive any of the proceeds of these sales. We have agreed to
indemnify CSI against certain liabilities, including liabilities under the
Securities Act of 1933, and to contribute payments which CSI might be required
to make in respect thereof.
See "Security Ownership of Certain Beneficial Owners and Management" for
the ownership percentages of certain classes of securities of USS Holdings owned
by affiliates of CSI and for a summary of the stockholders agreement governing
the exercise of voting rights with respect to the election of directors and
certain other material events.
We have been advised by CSI that, subject to applicable laws and
regulations, CSI currently intends to continue making a market in the notes.
However, CSI is not obligated to do so and any such market-making may be
interrupted or discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act of 1933 and the Securities Exchange Act of 1934. There can be no assurance
that an active trading market will develop or be sustained. See "Risk
Factors--You Cannot Be Sure that an Active Trading Market Will Develop for the
Notes."
LEGAL MATTERS
The validity of the notes has been passed upon for us by Pillsbury
Winthrop LLP, New York, New York. Donald G. Kilpatrick, a member of Pillsbury
Winthrop LLP, is Secretary of USS Holdings and also owns certain equity
securities of USS Holdings. See "Security Ownership of Certain Beneficial Owners
and Management--Security Ownership."
EXPERTS
The consolidated financial statements for Better Minerals & Aggregates
Company as of December 31, 2000 and 1999 and for each of the three years in the
period ended December 31, 2000 included in this prospectus have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
79
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
BETTER MINERALS & AGGREGATES COMPANY AND SUBSIDIARIES
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets at December 31, 2000 and 1999............... F-3
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998........................................ F-4
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 2000, 1999 and 1998.................................. F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 20000, 1999 and 1998................................. F-6
Notes to Consolidated Financial Statements.............................. F-7
F-1
Report of Independent Accountants
To the Board of Directors and Stockholder of Better Minerals & Aggregates
Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholder's equity and cash flows
present fairly, in all material respects, the financial position of Better
Minerals & Aggregates Company at December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
March 16, 2001
New York, New York
F-2
Better Minerals & Aggregates Company and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
- --------------------------------------------------------------------------------
December 31, December 31,
Assets 2000 1999 Liabilities 2000 1999
Current: Current:
Cash and cash equivalents $ 860 $13,573 Book overdraft $ 7,264 $ 5,026
Accounts receivable: Accounts payable 15,908 16,845
Trade, less allowance for doubtful Accrued liabilities 11,490 13,053
accounts of $1,327 and $1,278 44,817 41,658 Due to parent 2,362 --
Other 1,173 1,060 Payable to related party -- 898
Due from parent -- 834 Accrued interest 8,654 7,829
Inventories 27,890 23,058 Current portion of long-term debt 9,076 2,039
Prepaid expenses and other current assets 3,221 2,018 ------- ------
Income tax deposit 2,070 1,056 Total current liabilities 54,754 45,690
Deferred income taxes 12,809 8,148
------- -------
Total current assets 92,840 91,405 Noncurrent liabilities:
Deferred income taxes 110,676 117,637
Property, plant and equipment: Long-term debt, net of current portion 280,329 285,466
Mining property 264,175 263,083 Other noncurrent liabilities 39,311 38,475
Mine development 8,156 2,945 ------- -------
Land 28,249 28,086 Total noncurrent liabilities 430,316 441,578
Land improvements 5,043 5,005
Buildings 36,556 37,143 Commitments and contingencies
Machinery and equipment 156,297 143,082
Furniture and fixtures 1,395 1,331
Construction-in-progress 5,317 4,387
------- -------
505,188 485,062
Accumulated depletion, depreciation Stockholder's Equity
and amortization (89,502) (59,838)
------- ------- Common stock, par value $.01, authorized
Property, plant and equipment, net 415,686 425,224 5,000 shares, issued 100 shares -- --
Loans to related party (1,507) --
Other noncurrent: Additional paid-in capital 81,377 81,377
Goodwill and non compete agreements, net 16,649 19,907 Retained deficit (26,560) (17,012)
Debt issuance costs 12,958 14,601 Accumulated other comprehensive (loss) (94) (30)
Other noncurrent assets 153 466 ------- -------
------- -------
Total other noncurrent 29,760 34,974 Total stockholder's equity 53,216 64,335
------- ------- ------- -------
Total assets $538,286 $551,603 Total liabilities and
======= ======= stockholder's equity $538,286 $551,603
======= =======
The accompanying notes are an integral part of these financial statements.
F-3
Better Minerals & Aggregates Company and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands)
- --------------------------------------------------------------------------------
Years Ended
December 31,
2000 1999 1998
Sales $299,335 $244,802 $169,943
Cost of goods sold 222,754 175,971 126,127
Depreciation, depletion and amortization 35,895 28,481 19,888
Selling, general and administrative 25,543 21,843 16,930
Incentive stock compensation expense (Note 13) 998 -- 14,227
-------- -------- --------
Operating income (loss) 14,145 18,507 (7,229)
Interest expense 36,359 19,590 10,269
Accretion of preferred stock warrants -- 56 1,254
Other income net, including interest income (1,575) (2,171) (1,881)
-------- -------- --------
Income (loss) before income taxes (20,639) 1,032 (16,871)
Benefit for income taxes (11,091) (2,714) (2,204)
-------- -------- --------
Net income (loss) before extraordinary loss (9,548) 3,746 (14,667)
Extraordinary loss (less applicable income taxes of
$1,752, and $713 in 1999 and 1998) (Note 7) -- (2,747) (2,102)
-------- -------- --------
Net income (loss) $ (9,548) $ 999 $(16,769)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
Better Minerals & Aggregates Company and Subsidiaries
Consolidated Statements of Stockholder's Equity
(Dollars in thousands)
- --------------------------------------------------------------------------------
Accumulated Other
Comprehensive Income
-----------------------------
Additional Loans to Foreign Minimum Total
Common Paid-In Retained Related Currency Pension Stockholder's
Stock Capital Deficit Party Translation Liability Total Equity
Balance, December 31, 1997 $ $ 27,264 $ (1,242) $ $ $ $ 26,022
Comprehensive income, net of income taxes:
Net (loss) (16,769) (16,769)
Foreign currency translation (44) (44) (44)
Minimum pension liability (40) (40) (40)
------- --------- --------- ------- --------- ---------- ------ ---------
Total comprehensive (loss) (16,853)
Issuance of incentive stock 14,227 14,227
------- --------- --------- ------- --------- ---------- ------ ---------
Balance, December 31, 1998 41,491 (18,011) (44) (84) 23,396
Comprehensive income, net of income taxes:
Net income 999 999
Foreign currency translation 14 14 14
Minimum pension liability 40 40 40
---------
Total comprehensive (loss) 1,053
Capital contributed by parent 39,886 39,886
------- --------- --------- ------- --------- ---------- ------ ---------
Balance, December 31, 1999 81,377 (17,012) (30) (30) 64,335
Comprehensive income, net of income taxes:
Net income (9,548) (9,548)
Foreign currency translation 30 30 30
Minimum pension liability (94) (94) (94)
---------
Total comprehensive income (9,612)
Loans to related party (1,507) (1,507)
------- --------- --------- ------- --------- ---------- ------ ---------
Balance, December 31, 2000 $ $ 81,377 $ (26,560) $(1,507) $ - $ (94) $ (94) $ 53,216
------- --------- --------- ------- --------- ---------- ------ ---------
The accompanying notes are an integral part of these financial statements.
F-5
Better Minerals & Aggregates Company and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
- --------------------------------------------------------------------------------
Years Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income (loss) $ (9,548) $ 999 $(16,769)
Adjustments to reconcile net income (loss) to cash flows from operations:
Depreciation 22,663 17,950 13,012
Depletion 6,412 4,111 1,108
Non compete agreements amortization 5,542 5,713 5,593
Accretion of preferred stock warrants - 56 1,254
Debt issuance amortization 2,078 1,148 1,237
Extraordinary loss - 4,499 2,815
Incentive stock compensation - - 14,227
Deferred income taxes (11,218) (6,962) (3,380)
Disposal of property, plant and equipment gain (237) (165) (208)
Loss on sale of investment 83 - -
Other 3,026 1,806 1,712
Changes in current assets and liabilities, net of the effects
from acquired companies:
Trade receivables (4,868) (360) 1,429
Non-trade receivables (229) 563 (949)
Receivable from parent 3,196 (838) 922
Payable to related party (898) 898 -
Inventories (5,098) (1,250) (256)
Prepaid expenses and other current assets (1,256) (668) (103)
Accounts payable and accrued liabilities (1,711) (4,565) (3,618)
Accrued interest 825 7,153 (753)
Income taxes (1,064) (569) (1,921)
---------- --------- --------
Net cash provided by operating activities 7,698 29,519 15,352
Cash flows from investing activities:
Capital expenditures (20,319) (14,572) (9,399)
Proceeds from sale of property, plant and equipment 670 1,310 362
Proceeds from sale of investment 3,136 - -
Loans to related party (1,507) - -
Purchase of non compete agreements - - (2,796)
Purchases of businesses, net of cash acquired (6,050) (172,379) (54,752)
---------- --------- --------
Net cash used for investing activities (24,070) (185,641) (66,585)
Cash flows from financing activities:
Change in book overdraft 2,238 (1,402) 3,930
Issuance of long-term debt - 325,006 136,382
Repayment of long-term debt (3,600) (169,205) (84,370)
Change in Working Capital Facility 5,500 (6,100) -
Principal payments on capital lease obligations (73) (44) (24)
Prepayment penalties - - (1,255)
Financing fees (435) (15,796) (1,550)
Capital contributed by parent - 35,000 -
---------- --------- --------
Net cash provided by financing activities 3,630 167,459 53,113
Effect of exchange rate on cash 29 14 (60)
---------- --------- --------
Net increase (decrease) in cash (12,713) 11,351 1,820
Cash and cash equivalents, beginning of period
Cash and cash equivalents, ending of period 13,573 2,222 402
---------- --------- --------
$ 860 $ 13,573 $ 2,222
Schedule of noncash investing and financing activities:
Assets acquired by assuming notes payable and capital lease obligations $ - $ - $ 1,058
========== ========= ========
Forgiveness of Series A and B Preferred Stock warrants of Holdings $ - $ 3,836 $ -
========== ========= ========
Forgiveness of payable to parent $ - $ 1,050 $ -
========== ========= ========
Cash paid during the year for:
Interest $ 33,266 $ 10,925 $ 9,269
========== ========= ========
Income taxes $ 2,447 $ 3,232 $ 2,393
========== ========= ========
The accompanying notes are an integral part of these financial statements.
F-6
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Better Minerals & Aggregates Company (the "Company"), an indirect wholly
owned subsidiary of USS Holdings, Inc. ("Holdings"), was organized in
January 1996. BMAC Holdings, Inc. ("BMAC Holdings"), a wholly owned
subsidiary of Holdings, is the direct parent of the Company.
On December 14, 1998 and July 24, 1998, U.S. Silica Company ("U.S.
Silica"), a subsidiary of the Company, acquired Better Materials
Corporation and George F. Pettinos, Inc., respectively (Note 3). On April
8, 1999, U.S. Silica acquired the assets (the "Morie Assets") of five New
Jersey-based operations owned by Unimin Corporation (Note 3). On October 1,
1999, the Company acquired Commercial Stone Co., Inc. and Commercial
Aggregates Transportation and Sales, L.P. and their related quarry
properties (Note 3). Commercial Stone Co., Inc. and Commercial Aggregates
Transportation and Sales, L.P. and their related quarry properties are
collectively referred to in the notes to the financial statements as
"Commercial Stone."
The Company and its subsidiaries are collectively referred to as the
"Company" in the accompanying financial statements and footnotes.
2. Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its direct and indirect wholly owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
(b) Reclassifications
Certain prior years' amounts have been reclassified to conform with
the current year's presentation.
(c) Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
(d) Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less
are considered cash equivalents.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out and average cost methods.
(f) Revenue Recognition
Revenue is recorded when legal title passes at the time of shipment to
the customer.
F-7
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- -------------------------------------------------------------------------------
(g) Deferred Financing Costs
Deferred financing costs consist of loan origination costs, which are
being amortized over the term of the related debt principal.
Amortization included in interest expense for each of the three years
in the period ended December 31, 2000 totaled approximately $2.1
million, $1.1 million and $1.0 million, respectively.
(h) Depreciable Properties
Depreciable properties, mining properties and mineral deposits
acquired in connection with the acquisitions of U.S. Silica, George F.
Pettinos, Inc., Better Materials Corporation, the Morie Assets and
Commercial Stone are recorded at fair market value as of the date of
acquisition. Additions and improvements occuring through the normal
course of business are capitalized at cost.
Upon retirement or disposal of assets, other than those of U.S. Silica
acquired on February 9, 1996, the cost and accumulated depreciation or
amortization are eliminated from the accounts and any gain or loss is
reflected in the statement of operations. Group asset accounting is
utilized for the U.S. Silica assets acquired on February 9, 1996.
Gains and losses on normal retirements or dispositions of these assets
are excluded from net income and proceeds for dispositions are
recorded as a reduction of the acquired cost. Expenditures for normal
repairs and maintenance are expensed as incurred.
Construction-in-progress is primarily comprised of machinery and
equipment which has not yet been placed in service.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, ranging from 3 to 15 years.
Depletion and amortization of mineral deposits are provided as the
minerals are extracted, based on units of production and engineering
estimates of total reserves. The impact of revisions to reserve
estimates is recognized on a prospective basis.
In September 2000 the Company revised its estimated aggregate ore
reserves related to properties at Commercial Stone. This revision is
estimated to increase annual depletion by approximately $500,000 based
on existing production levels.
(i) Mine Exploration and Development
Costs to develop new mining properties are capitalized and amortized
based on units of production.
(j) Mine Reclamation Costs
The estimated net future costs of dismantling, restoring and
reclaiming operating mines and related mine sites, in accordance with
federal, state and local regulatory requirements, are accrued during
operations. The provision is made based upon units of production and
estimated minable reserves as of the balance sheet date. The effect of
changes in estimated costs, production, and minable reserves is
recognized on a prospective basis.
(k) Intangible Assets
The Company's intangible assets include goodwill and non-compete
agreements. The cost of goodwill is being amortized on a straight-line
basis over 15 years. The costs of the non-compete agreements are being
amortized on a straight-line basis over the terms of the agreements,
which range from three to five years.
F-8
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
The Company periodically evaluates the recoverability of its goodwill
and measures any impairment by comparison to estimated undiscounted
cash flows from future operations.
(l) Income Taxes
The Company accounts for income taxes pursuant to the provisions under
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax
returns. Under this method, deferred tax liabilities and assets are
determined based upon the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the expenses are expected to reverse. The
Company is included in the consolidated federal tax return of
Holdings. The tax provision (benefit) included in the accompanying
financial statements has been computed on a separate return basis.
(m) Concentration of Credit Risk
The Company's five largest customers accounted for approximately 13%
and 20% of net product sales for the two years ended December 31, 2000
and 1999. The five largest customers accounted for approximately 30%
of net product sales and one customer accounted for more than 10% of
net product sales of the Company for the year ended December 31, 1998.
Management believes it maintains adequate reserves for potential
credit losses; ongoing credit evaluations are performed and collateral
is generally not required.
(n) Financial Instruments
The Company uses interest rate swap and cap agreements to manage
interest costs and the risk associated with changing interest rates.
Amounts to be paid or received under interest rate swap agreements are
accrued as interest rates change and are recognized over the life of
the swap agreements as an adjustment to interest expense. The
Company's practice is to not hold or issue derivative financial
instruments for trading or speculative purposes. When entered into,
these financial instruments are designated as hedges of underlying
exposures, associated with the Company's long-term debt, and are
monitored to determine if they remain effective hedges. The fair value
of the interest rate agreements and changes in these fair values as a
result of changes in market interest rates are not recognized in the
consolidated financial statements.
(o) Environmental Costs
Environmental costs, other than qualifying capital expenditures, are
accrued at the time the exposure becomes known and costs can be
reasonably estimated. Costs are accrued based upon management's
estimates of all direct costs, after taking into account expected
reimbursement by third parties (primarily the sellers of acquired
businesses), and are reviewed by outside consultants. Environmental
costs are charged to expense unless a settlement with an indemnifying
party has been reached.
(p) Comprehensive Income
Comprehensive income is defined as the change in equity from
transactions and other events from nonowner sources and consists of
net income and other comprehensive income. The Company includes
foreign currency translation adjustments and minimum pension liability
adjustments in other comprehensive income.
F-9
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
(q) Impact of Recent Accounting Standards/Pronouncements
During 2000, the Emerging Issues Task Force ("EITF") issued EITF
No.00-10, "Accounting for Shipping and Handling Fees and Costs." EITF
No. 00-10 addresses the statement of earnings classification of
shipping and handling costs billed to customers and was effective for
the fourth quarter of 2000. The Company adopted the provisions of EITF
No. 00-10 in these financial statements for all periods presented.
Accordingly, the Company's sales and cost of goods sold for each of
the three years in the period ended December 31, 2000, include
shipping and handling costs billed to customers, aggregating to $60.8
million, $ 35.7 million and $ 27.7 million, respectively.
On December 3, 1999, the SEC released Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements." The
guidelines set forth in SAB No. 101 stipulate that revenue should not
be recognized until it is realized or realizable and earned. The
Company adopted SAB No. 101 on January 1, 2000 without effect on the
Company's consolidated financial position and results of operations.
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 requires that all
derivatives be recognized either as assets or liabilities in the
statement of financial position and be measured at fair value. SFAS
No. 133, as amended by SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB", is effective for fiscal years beginning after June 15, 2000.
The effect of adopting this standard at January 1, 2001 was immaterial
to the Company's consolidated financial position and results of
operations.
3. Acquisitions
On October 1, 1999, the Company acquired Commercial Stone for total
consideration of $139.0 million in cash, $8.0 million of which was placed
in escrow to satisfy any future indemnity claims the Company may have
against the sellers. The Company financed the acquisition through the
issuance of $150.0 million Senior Subordinated Notes and the refinancing of
its existing senior debt by entering into new Senior Secured Credit
Facilities (Note 6). The acquisition was accounted for as a purchase and
the purchase price was allocated to the assets acquired and liabilities
assumed based on their fair values at the date of acquisition.
Approximately $175.9 million, inclusive of deferred income taxes of $76.0
million, has been allocated to mineral reserves and is being amortized
based on production. The allocation of the purchase price was as follows:
(In thousands)
Working capital, other than cash $ 7,443
Property, plant and equipment 27,207
Goodwill 7,403
Mineral reserves 175,856
Other assets 1,739
Other liabilities (818)
Deferred income taxes (79,830)
---------
Purchase price, net of cash received $ 139,000
=========
On April 8, 1999, the Company acquired the assets of five New Jersey-based
operations formerly owned by the Morie Company and owned at the time by
Unimin Corporation for total consideration of $33.4 million. Also on April
8, 1999, the Company amended its $155.0 million Credit Agreement to add a
F-10
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
$35.0 million dollar Senior Term C Facility (Note 6). The purchase price
was financed with proceeds from the addition of the Senior Term C Facility.
The acquisition was accounted for as a purchase and the purchase price was
allocated to the assets acquired and liabilities assumed based on their
fair values at the date of acquisition. Approximately $11.1 million has
been allocated to mineral reserves and is being amortized based on
production. The allocation of the purchase price was as follows:
(In thousands)
Working capital, other than cash $ 1,569
Property, plant and equipment 15,102
Goodwill 5,844
Mineral reserves 11,053
Other liabilities (308)
Deferred income taxes 120
---------
Purchase price, net of cash received $ 33,380
=========
On December 14, 1998, the Company acquired the stock of Better Materials
Corporation for total consideration of $40.6 million. The purchase price
was financed with cash and available borrowings under the Company's $155.0
million Credit Agreement's Acquisition and Working Capital Facilities (Note
6). The acquisition was accounted for as a purchase and the purchase price
was allocated to the assets acquired and liabilities assumed based on their
fair values at the date of acquisition. The excess of the purchase price
over the fair value of the net assets acquired of approximately $43.3
million, inclusive of deferred income taxes of $20.1 million, has been
allocated to mineral reserves and is being amortized based on production.
The allocation of the purchase price was as follows:
(In thousands)
Working capital, other than cash $ 708
Property, plant and equipment 17,206
Mineral reserves 43,266
Other liabilities (2,445)
Deferred income taxes (20,331)
---------
Purchase price, net of cash received $ 38,404
=========
On July 24, 1998, the Company acquired George F. Pettinos, Inc. for total
consideration of $14.9 million including a covenant not to compete for $1.1
million. The purchase price was financed with proceeds from the Company's
$155.0 million Credit Agreement (Note 6). The acquisition was accounted for
as a purchase and the purchase price was allocated to the assets acquired
and liabilities assumed based on their fair values at the date of
acquisition. The excess of the purchase price over the fair value of the
net assets acquired of approximately $14.5 million, inclusive of deferred
income taxes of $5.3 million, has been allocated to mineral reserves and is
being amortized based on production. The allocation of the purchase price
was as follows:
F-11
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
(In thousands)
Working capital, other than cash $ 1,162
Property, plant and equipment 3,234
Mineral reserves 14,531
Other assets 601
Other liabilities (1,252)
Deferred income taxes (5,490)
---------
Purchase price, net of cash received $ 12,786
=========
The following unaudited proforma consolidated results of operations have
been prepared as if the acquisitions of Commercial Stone, the Morie Assets,
Better Materials Corporation and George F. Pettinos, Inc. had occurred as
of the beginning of the periods presented, and reflect proforma adjustments
for the excess of the purchase price over the fair value of the net assets
acquired, salaries, mining royalties, interest expense and tax expense:
For the Year Ended
December 31, 1999
(In thousands)
----------------------------------------------
Commercial
Company Stone Morie Assets Total
------- ----- ----------- -----
Sales $244,802 $50,101 $3,548 $298,451
-------- ------- ------ --------
Net income (loss) before
extraordinary loss $ 3,746 $(4,212) $ (557) $ (1,023)
-------- ------- ------ --------
Net income (loss) (1) $ 999 $(4,212) $ (557) $ (3,770)
-------- ------- ------ --------
For the Year Ended
December 31, 1998
(In thousands)
----------------------------------------------
Commercial
Company Stone Acquisitions(2) Total
------- ----- --------------- -----
Sales $169,943 $53,794 $52,240 $275,977
-------- ------- ------- --------
Net income (loss) before
extraordinary loss $(14,667) $(6,016) $ 512 $(20,171)
-------- ------- ------ --------
Net income (loss) (1) $(16,769) $(6,016) $ 512 $(22,273)
-------- ------- ------ --------
(1) The Company recorded after-tax charges of $2.7 million and $2.1
million associated with the early extinguishment of U.S. Silica's
senior debt and subordinated debt during 1999 and 1998,
F-12
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
respectively. These after-tax charges are reflected within the
Company's historical results of operations.
(2) Amounts include the Morie Assets, Better Materials Corporation and
George F. Pettinos, Inc.
The proforma consolidated results do not purport to be indicative of
results that would have occurred had the acquisitions been in effect for
the periods presented, nor do they purport to be indicative of the results
that will be obtained in the future.
4. Inventories
At December 31, 2000 and 1999, inventory consisted of the following:
(In thousands) 2000 1999
Supplies (net of $66 and $38 obsolescence reserve) $ 11,820 $ 11,171
Raw materials and work in process 4,563 6,165
Finished goods 11,507 5,722
---------- -----------
$ 27,890 $ 23,058
--------- ----------
5. Lease Commitments
The Company is obligated under certain operating leases for railroad cars,
mining property, mining/processing equipment, office space and
transportation and other equipment. Certain of these agreements include
options to purchase the equipment for fair market value at the end of the
original lease term. Future minimum annual commitments under such leases at
December 31, 2000 are as follows:
Year Ending
December 31, (In thousands)
2001 $ 2,056
2002 1,191
2003 504
2004 286
2005 132
Thereafter 51
-------
$ 4,220
=======
Rental expense for operating leases for each of the three years in the
period ended December 31, 2000 totaled approximately $2.7 million, $2.0
million and $0.9 million, respectively.
In general, the above leases include renewal options and provide that the
Company pay for all utilities, insurance, taxes and maintenance.
F-13
Better Minerals & Aggregates Company and Subsdiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
6. Long-Term Debt
At December 31, 2000 and 1999, long-term debt consisted of the following:
(In thousands) 2000 1999
Senior Secured Credit Facilities
Tranche A Term Loan Facility (final maturity $ 39,057 $ 39,057
September 30, 2005)
Tranche B Term Loan Facility (final maturity 93,500 94,750
September 30, 2007)
Canadian Term Facility (final maturity -- 2,043
September 30, 2005)
Senior Subordinated Notes (final maturity 150,000 150,000
September 15, 2009)
Working Capital Facility (final maturity 5,500 --
September 30, 2005)
Secured Note (due December 31, 2001) 72 141
Mortgage Notes
0% Note, imputed at 10.0% (due January 16, 2008) 990 1,162
8.5% Note (due July 1, 2003) 49 65
7.0% Note (due July 31, 2004) 237 287
-------- --------
289,405 287,505
9,076 2,039
-------- --------
Less, current portion $280,329 $285,466
======== ========
At December 31, 2000, contractual maturities of long-term debt are as
follows:
(In thousands)
2001 $ 9,076
2002 10,711
2003 10,711
2004 10,857
2005 17,162
Thereafter 230,888
--------
$289,405
========
Debt Agreements
On September 30, 1999, the Company entered into a new $230.0 million Credit
Agreement (the "Agreement"), which consisted of a $50.0 million revolving
credit facility (the "Revolving Credit Facility"), a $45.0 million Tranche
A Term Loan Facility ("Term A Loan"), a $95.0 million Tranche B Term Loan
Facility ("Term B Loan") and a $40.0 million term loan acquisition facility
(the "Acquisition Term Loan Facility"). The Term A Loan included a tranche
of loans denominated in Canadian dollars (the "Canadian Term Facility")
equal to $2.0 million, which was borrowed by George F. Pettinos (Canada)
Limited, an indirect wholly owned subsidiary of the Company. The Revolving
Credit Facility, Term A Loan, Term B Loan, Acquisition Term Loan Facility
and the Canadian Term Facility are
F-14
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
collectively referred to in the notes to the financial statements as the
"Senior Secured Credit Facilities." In addition, on October 1, 1999 the
Company issued $150.0 million of Senior Subordinated Notes. Pursuant to an
Exchange and Registration Rights Agreement, in April 2000, the Company
consummated an exchange offer pursuant to which it exchanged the Senior
Subordinated Notes for registered notes having substantially the same
terms. The proceeds from the Senior Secured Credit Facilities and the
Senior Subordinated Notes were primarily used to pay off the outstanding
senior debt and to finance the acquisition of Commercial Stone.
Under the Agreement, the Company has available, until September 30, 2005,
the Revolving Credit Facility, which provides for the borrowings of up to
$50.0 million with a sublimit of $12.0 million for letters of credit and a
sublimit of $3.0 million for swingline loans. The borrowing capacity of the
Revolving Credit Facility is reduced by outstanding letters of credit and
swingline loans. At December 31, 2000, outstanding letters of credit
totaled $6.6 million. There were $5.5 million in borrowings under the
Revolving Credit Facility at December 31, 2000. There were no borrowings
under the swingline loans at December 31, 2000. In addition, there were no
borrowings under the Acquisition Term Loan Facility at December 31, 2000.
Borrowings under the Senior Secured Credit Facilities bear variable
interest at the Company's option at either (1) the bank's base rate plus a
margin percentage, ranging from 1.00% to 2.50% or (2) the London Interbank
Offered Rate ("LIBOR") plus a margin percentage, ranging from 2.00% to
3.50%. Commitment fees, ranging from .375% to .75%, on the average daily
unused Revolving Credit Facility and the unused Acquisition Term Loan
Facility are payable quarterly. Letter of credit fees are also payable
quarterly based upon the average daily balance of all letters of credit
outstanding. The Senior Subordinated Notes bear interest at a rate of 13%
per annum, payable semi-annually.
The obligations of the Company under the Senior Secured Credit Facilities
are unconditionally and irrevocably guaranteed, jointly and severally, by
BMAC Holdings and each of the Company's direct or indirect domestic
subsidiaries. BMAC Holdings has no operations or assets other than its
investment in its subsidiaries. In addition, the Senior Secured Credit
Facilities are secured by a first priority pledge of (i) all the capital
stock of BMAC Holdings, the Company, each of the Company's direct or
indirect domestic subsidiaries and 65% of the capital stock of each direct
foreign subsidiary of the Company or any of its domestic subsidiaries and
(ii) substantially all of the tangible and intangible assets held by BMAC
Holdings, the Company and each of the Company's direct or indirect domestic
subsidiaries.
The Agreement contains various restrictive covenants that, among other
things, limit the ability of the Company to engage in certain transactions
with affiliates, incur additional indebtedness, repay other indebtedness or
amend other debt instruments, create liens on assets, make investments or
acquisitions, engage in mergers or consolidations, dispose of assets, or
pay dividends. In addition, the Agreement requires the Company to maintain
certain financial covenants, including a leverage ratio, an interest
coverage ratio and a capital expenditures covenant. The Senior Subordinated
Notes are also subject to certain restrictive covenants that are similar to
those of the Senior Secured Credit Facilities.
On February 22, 2001 the lenders under the Senior Secured Credit Facilities
approved an amendment effective December 31, 2000 that revised the required
leverage ratio and interest coverage ratio covenants under the Agreement
for the period of December 31, 2000 through December 31, 2001. As a result
of this amendment, the Company was in compliance with all of its financial
covenants, as revised, as of December 31, 2000. In connection with this
amendment, the Company agreed to a 25 basis point increase in interest
rates for any period in which the leverage ratio is greater than 5.0. In
addition, the Company agreed to cancel the undrawn $40.0 million
Acquisition Term Loan Facility, which also resulted in a $300,000 reduction
in the annual loan commitment fees, as of February 22, 2001. A one-time
amendment fee of approximately $400,000 was paid to the lenders as part of
the amendment.
F-15
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
The Company believes, based on its calendar year 2001 forecast, that it
will be in compliance with the amended leverage ratio and interest coverage
ratio covenants contained in the Agreement throughout calendar year 2001.
In the event that the Company does not substantially achieve its 2001
forecast, it will be necessary to seek further amendments to the Agreement
covenants. While the Company obtained amendments and waivers under the
Agreement in the past, there can be no assurance that future amendments or
waivers will be granted or that such amendments or waivers, if granted,
would be on terms satisfactory to the Company.
The obligation of the Company under the Senior Subordinated Notes is
unconditionally and irrevocably guaranteed, jointly and severally, on an
unsecured senior subordinated basis to the Company's Senior Secured Credit
Facilities, by each of the Company's domestic subsidiaries. The Senior
Subordinated Notes are not guaranteed by the Company's inactive Canadian
subsidiary.
On February 29, 2000, the Company completed the sale of the stock of its
Canadian operating subsidiary, George F. Pettinos (Canada) Limited for $3.2
million. The proceeds from the sale were used to retire the Canadian Term
Facility and for general corporate uses.
At December 31, 2000, the fair value of the Company's long-term debt
approximated $256 million. At December 31, 1999 the carrying value
approximated the fair value of the Company's long-term debt.
Warrants
Warrants to purchase 41,667 shares of Series A Preferred Stock ("Series A
warrants") and 83,334 shares of Series B Preferred Stock ("Series B
warrants") of the Company's ultimate parent, Holdings, were issued to
holders of subordinated debt as part of a Note Purchase Agreement dated
February 9, 1996.
The Series A warrants and Series B warrants are exercisable at any time
until December 19, 2005 at an exercise price of $.01 per share or less as
defined by the warrant issuance agreement. The holder of the warrants has
the right to require Holdings to purchase any and all of the warrants and
shares subject to the warrants at fair value in cash after December 19,
2001 and prior to a "liquidity event" which is defined as the sale or
liquidation of Holdings or the consummation of a public offering. Holdings
may call all of the outstanding warrants and shares subject to warrants
after December 19, 2002, subject to approval of the holders of the senior
debt. Fair value is defined as the liquidation preference value of $7.78
per share (plus all accrued and unpaid dividends thereon) for the Series A
warrants and the common equity value per share as determined by the Board
of Directors for the Series B warrants. The accretion of the Series A
warrants and the Series B warrants to fair value is accounted for by
charges to earnings. The holders of the Series A warrants and the Series B
warrants are entitled to dividends as if they had held underlying shares
from February 9, 1996.
Effective December 31, 1999, Holdings agreed to forgive the Company and its
subsidiaries for the obligation associated with the Series A warrants and
the Series B warrants. The forgiveness of the obligation resulted in a
credit to additional paid-in capital of approximately $3.8 million during
the year ended December 31, 1999.
7. Extraordinary Items
During the year ended December 31, 1999, the Company recorded an
extraordinary after-tax charge of $2.7 million in connection with the early
extinguishment of outstanding senior debt under its $155.0 million Credit
Agreement. The extraordinary loss of $4.5 million (before an income tax
benefit of $1.8 million) consisted of the write-off of related unamortized
debt issuance costs.
F-16
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
The Company recorded an extraordinary after-tax charge of $2.1 million
during the year ended December 31, 1998 in connection with the early
extinguishment of subordinated debt. The extraordinary loss of $2.8 million
(before an income tax benefit of $713,000) consisted of the subordinated
debt's discount, prepayment penalties and the write-off of related
unamortized debt issuance costs of approximately $983,000, $1.3 million and
$577,000, respectively.
8. Financial Instruments
Interest rate swap and cap agreements are utilized in the normal course of
business to manage the Company's interest costs and the risk associated
with changing interest rates. Interest rate swap agreements are used to
exchange the difference between fixed and variable-rate interest amounts
calculated by reference to an agreed-upon notional principal amount. In
addition, the Company utilizes interest rate cap agreements to limit the
impact of increases in interest rates on its floating rate debt. Interest
rate cap agreements entitle the Company to receive from the counterparties
the amounts, if any, by which the selected market interest rates exceed the
strike rates stated per the agreements. The Company does not use derivative
financial instruments for trading or speculative purposes. By their nature,
all such instruments involve risk, including the possibility that a loss
may occur from the failure of another party to perform according to the
terms of a contract (credit risk) or the possibility that future changes in
market price may make a financial instrument less valuable or more onerous
(market risk). As is customary for these types of instruments, the Company
does not require collateral or other security from other parties to these
instruments. In management's opinion there is no significant risk of loss
in the event of nonperformance of the counterparties to these financial
instruments.
The fair value of the interest rate agreements represents the estimated
receipts or payments that would be required to settle the agreements at
year-end. Quoted market prices were used to estimate the fair values of the
interest rate swap and cap agreements. The notional amount represents
agreed upon amounts on which calculations of dollars to be exchanged are
based. They do not represent amounts exchanged by the parties and,
therefore, are not a measure of the Company's exposure. The Company's
credit exposure is limited to the fair value of the contracts with a
positive fair value plus interest receivable, if any, at the reporting
date.
December 31, 2000 December 31, 1999
--------------------------- ----------------------------
Contract/ Contract/
Maturity Notional Carrying Fair Notional Carrying Fair
(In thousands) Date Amount Amount Value Amount Amount Value
---- ------ ------ ----- ------ ------ -----
Derivatives
Interest rate swap
agreements 2001 $30,000 (1) $ -- $ 97 $30,000 (1) $ -- $389
Interest rate cap
agreements 2001 $30,000 (2) $ -- $ 15 $30,000 (2) $ -- $ 83
2002 $21,000 (2) $ 57 $(25) $21,000 (2) $ 99 $256
(1) Agreement effectively exchanges the LIBOR floating interest rate for a
fixed interest rate of 5.74%.
(2) Agreement limits the LIBOR floating interest rate to 6.50%.
F-17
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
9. Commitments and Contingencies
The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. Management
believes, through discussions with counsel, that its liability arising from
or the resolution of these legal proceedings, claims and litigation, in the
aggregate will not have a material adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.
U.S. Silica is self-insured for product liability insurance as it relates
to occupational disease. In addition, U.S. Silica is self-insured for
health care costs and, in some states, workers' compensation. The Company
provides for estimated future losses based on reported cases and past claim
history. Management believes that the provision for estimated future losses
is adequate.
Certain product liability claims related to occupational disease are
indemnified by ITT Corporation under an agreement whereby claims presented
with an exposure period prior to September 12, 1985 are shared ratably
based on the claimant's total exposure period. The indemnity is subject to
a cumulative annual deductible and expires September 12, 2005.
F-18
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
10. Income Taxes
The provision (benefit) for income taxes consisted of the following for
each of the three years in the period ended December 31, 2000:
(In thousands) 2000 1999 1998
Current:
Federal $ 26 $ -- $ 375
State 358 378 39
Foreign (52) 180 23
-------- -------- --------
332 558 437
Deferred:
Federal (9,981) (4,307) (2,819)
State (1,416) (642) (439)
Foreign (26) (75) (96)
-------- -------- --------
(11,423) (5,024) (3,354)
-------- -------- --------
Tax effect of extraordinary items -- 1,752 713
-------- -------- --------
Benefit for income taxes $(11,091) $ (2,714) $ (2,204)
======== ======== ========
Under SFAS No. 109, deferred tax assets and liabilities are recognized for
the estimated future tax effects, based on enacted tax laws, of temporary
differences between the values of assets and liabilities recorded for
financial reporting and for tax purposes and of net operating loss and
other carryforwards. The tax effects of the types of temporary differences
and carryforwards that gave rise to deferred tax assets and liabilities at
December 31, 2000 and 1999 consisted of the following:
F-19
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- ---------------------------------------------------------------------------------------
(In thousands) 2000 1999
Gross deferred tax liabilities
Land and mineral property basis difference $(114,891) $(116,743)
Fixed assets and depreciation (29,274) (31,971)
Restricted stock vesting (562) (525)
Debt fee amortization (90) --
Other (5,176) (7,025)
--------- ---------
Total deferred tax liabilities (149,993) (156,264)
--------- ---------
Gross deferred tax assets
Royalty 2,025 2,025
Post retirement benefit costs 7,789 8,100
Reserves for self-insurance 2,415 2,652
Plant closure liability 3,010 2,762
State deferred tax 8,994 9,369
Covenants not to compete 7,155 5,618
Alternative minimum tax credit carryforward 5,295 5,483
Reserves for vacation 1,040 910
Pensions 1,587 2,100
Inventories 840 535
Net operating loss carryforward 9,308 4,605
Bad debts 512 496
Reclamation 1,028 1,032
Other 1,128 1,088
--------- ---------
Total deferred tax assets 52,126 46,775
--------- ---------
Net deferred tax liabilities (97,867) (109,489)
Less net current deferred tax assets (12,809) (8,148)
--------- ---------
Net long-term deferred tax liabilities $(110,676) $(117,637)
========= =========
At December 31, 2000 and 1999, the Company had a federal net operating loss
carryforward ("NOL") of $24.0 million and $11.1 million, respectively,
which begins to expire in 2011.
The Company believes that it is more likely than not that the NOL
carryforward will be utilized prior to its expiration. The NOL carryforward
and existing deductible temporary differences are offset by existing
taxable temporary differences reversing within the carryforward period.
In addition, the Company has an alternative minimum tax credit carryforward
at December 31, 2000 and 1999 of approximately $5.3 million and $5.5
million, respectively. The credit carryforward may be carried forward
indefinitely to offset any excess of regular tax liability over alternative
minimum tax liability subject to certain limitations. This alternative
minimum tax credit carryforward has been reflected as a reduction of net
noncurrent deferred income tax liabilities for financial reporting
purposes.
F-20
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
The effective income tax rate on pretax earnings before extraordinary items
differed from the U.S. federal statutory rate for each of the three years
in the period ended December 31, 2000 for the following reasons:
2000 1999 1998
Provision (benefit) computed at U.S. federal statutory rate (35.0%) 35.0% (35.0%)
Increase (decrease) resulting from:
Percentage depletion (19.4) (253.7) (9.6)
Disallowed interest expense -- -- .4
Restricted stock vesting -- -- 29.5
Accretion of preferred stock warrants -- 1.9 2.6
Prior year tax return reconciliation (3.1) (61.2) --
State income taxes, net of federal benefit (3.0) 5.4 (1.2)
Sale of Canadian operation 5.5 -- --
Other, net 1.3 9.6 .2
----- ------ -----
Provision for income taxes (53.7%) (263.0%) (13.1%)
===== ====== =====
11. Pension and Postretirement Benefits
The Company maintains a number of single-employer noncontributory defined
benefit pension plans covering substantially all employees. The plans
provide benefits based on each covered employee's years of qualifying
service. The Company's funding policy is to contribute amounts within the
range of the minimum required and maximum deductible contributions for each
plan consistent with a goal of appropriate minimization of the unfunded
projected benefit obligation. The majority of the Company's pension plans
use a benefit level per year of service (hourly) with one plan using final
average pay method (salaried). All Company plans use the projected unit
credit cost method to determine the actuarial valuation.
In addition, the Company provides defined benefit postretirement healthcare
and life insurance benefits to substantially all employees. Covered
employees become eligible for these benefits at retirement after meeting
minimum age and service requirements. The projected future cost of
providing postretirement benefits, such as healthcare and life insurance,
is recognized as an expense as employees render services.
The Company contributes to a Voluntary Employees' Beneficiary Association
trust that will be used to partially fund health care benefits for future
retirees. Benefits are funded to the extent contributions are tax
deductible, which under current legislation is limited. In general, retiree
health benefits are paid as covered expenses are incurred.
F-21
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
Net pension and postretirement cost consisted of the following for each of
the three years in the period ended December 31, 2000:
Pension Benefits Postretirement Benefits
---------------- -----------------------
(In thousands) 2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Service cost - benefits earned
during the period $ 974 $ 1,040 $ 920 $ 140 $ 144 $ 128
Interest cost 4,306 3,886 3,791 844 946 958
Expected return on plan assets (4,739) (3,739) (3,585) (18) (19) (18)
Net amortization and deferral 71 235 109 (764) (449) (551)
------- ------- ------- ------- ------- -------
Net pension and
postretirement cost $ 612 $ 1,422 $ 1,235 $ 202 $ 622 $ 517
======= ======= ======= ======= ======= =======
The changes in benefit obligations and plan assets, as well as the funded
status of the Company's pension and postretirement plans at December 31,
2000 and 1999 were as follows:
Pension Benefits Postretirement Benefits
----------------------- -----------------------
(In thousands) 2000 1999 2000 1999
-------- -------- -------- --------
Benefit obligation at January 1 $ 55,640 $ 56,697 $ 13,173 $ 14,683
Service cost 974 1,040 140 144
Interest cost 4,306 3,886 844 946
Actuarial (gain)/loss 2,411 (5,664) (1,683) (1,716)
Acquisitions -- 3,039 -- --
Benefits paid (3,978) (3,636) (1,117) (1,097)
Other 240 278 236 213
-------- -------- -------- --------
Benefit obligation at December 31 59,593 55,640 11,593 13,173
-------- -------- -------- --------
Fair value of plan assets at January 1 66,711 56,078 198 236
Actual return on plan assets 373 8,991 (11) (38)
Acquisitions -- 4,871 -- --
Employer contributions 190 407 881 884
Benefits paid (3,978) (3,636) (1,117) (1,097)
Other -- -- 236 213
-------- -------- -------- --------
Fair value of plan assets at December 31 63,296 66,711 187 198
-------- -------- -------- --------
Plan assets in excess (less than)
benefit obligations at December 31 3,703 11,071 (11,406) (12,975)
Unrecognized net loss (gain) (7,709) (14,486) (7,674) (6,785)
Unrecognized prior service cost 932 763 -- --
-------- -------- -------- --------
Accrued benefit cost recognized in the
Company's consolidated balance sheet
before additional pension liability (3,074) (2,652) (19,080) (19,760)
-------- -------- -------- --------
Adjustment to recognize minimum
pension liability (145) -- -- --
-------- -------- -------- --------
Net accrued benefit cost
recognized in the Company's
consolidated balance sheet $ (3,219) $ (2,652) $(19,080) $(19,760)
======== ======== ======== ========
The adjustment to recognize the minimum pension liability on the Company's
consolidated balance sheet of $145,000 at December 31, 2000 provides
financial statement recognition to the unfunded status of the pension
plans. The pension liability adjustment has been recorded as a long-term
liability offset by a
F-22
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
reduction to stockholder's equity and deferred taxes of $94,000 and
$51,000, respectively, at December 31, 2000.
The following weighted-average assumptions were used to determine the
Company's obligations under the plans:
Pension Benefits Postretirement Benefits
---------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
Discount rate 7.50% 7.75% 7.50% 7.75%
Long-term rate of compensation increase 3.50% 3.50% -- --
Long-term rate of return on plan assets 9.00% 8.00% 9.00% 8.00%
Health care cost trend rate -- -- 5.00% 6.00%
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 5.00% in 2000 and for all periods
thereafter. For the 1999 obligation, the rate used was 6.00%, gradually
declining to 3.00% by the year 2014 and remaining at that level thereafter.
A one-percentage-point increase in the assumed health care cost trend rates
for each year would increase the accumulated postretirement benefit
obligation at December 31, 2000 and net postretirement health care cost
(service cost and interest cost) for the year then ended by approximately
$1.3 million and $131,000, respectively. A one-percentage-point decrease in
the assumed health care cost trend rates for each year would decrease the
accumulated postretirement benefit obligation at December 31, 2000 and net
postretirement health care cost (service cost and interest cost) for the
year then ended by approximately $1.1 million and $109,000, respectively.
Certain hourly employees are covered under a multi-employer defined benefit
pension plan. The pension cost recognized for these plans for each of the
three years in the period ended December 31, 2000 totaled approximately
$186,000, $176,000, and $147,000, respectively.
The Company also sponsors a defined contribution plan covering certain
employees. The Company contributes to the plan in two ways. For certain
employees not covered by the defined benefit plan, the Company makes a
contribution equal to 4% of their salary. The Company also contributes an
employee match which can range from 25 to 100 cents, based on financial
performance, for each dollar contributed by an employee, up to 8% of their
earnings. Contributions for each of the three years in the period ended
December 31, 2000 totaled approximately $680,000, $746,000 and $678,000,
respectively. The Company also sponsors a defined contribution thrift plan
for hourly employees to which employees may contribute up to 15% of their
earnings. There is no contributing match for the thrift plan.
12. Related Party Transactions
Pursuant to an agreement between the Company and principals of D. George
Harris & Associates, LLC ("DGH&A"), who are also stockholders of the
Company's ultimate parent, DGH&A provides certain management advisory
services to the Company. The Company paid approximately $923,000, $877,000
and $583,000 to DGH&A for each of the three years in the period ended
December 31, 2000, respectively, associated with these management services.
The agreement also provides that the Company will pay DGH&A an acquisition
fee in the event of a business acquisition by the Company. The Company paid
approximately $325,000 for services in connection with the acquisition of
the Morie Assets during 1999. In addition, approximately $600,000 was paid
to DGH&A during 1999 associated with the Better Materials Corporation and
George F. Pettinos, Inc. acquisitions. The management
F-23
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
advisory services and acquisition fees have been charged to selling,
general and administrative expense during each of the respective periods
noted above.
Prior to the acquisition of Commercial Stone, certain operations of DGH&A
were conducted as a subsidiary of the Company. Subsequent to the
acquisition, the DGH&A operations have been handled separately from the
Company. The Company does not have an ownership interest in DGH&A.
Consequently, the DGH&A acquisition fee of approximately $1,387,000
associated with the acquisition of Commercial Stone was capitalized and
allocated to mineral reserves as part of the purchase price.
The agreement also provides that, at DGH&A's request, U.S. Silica provide
DGH&A with an interest-free loan not to exceed $1.0 million annually. At
December 31, 2000, a loan receivable from DGH&A of $1.0 million is
currently outstanding. The loan is guaranteed by certain principals of
DGH&A. Additionally, at December 31, 2000, there is a receivable of
$507,000 from DGH&A, principally related to reimbursement of general and
administrative costs.
On occasion, the Company and its ultimate parent make non-interest bearing
cash advances to each other. At December 31, 2000, the Company had a
payable to its ultimate parent of approximately $2.4 million. At December
31, 1999, the Company had a receivable from its ultimate parent of
approximately $834,000.
13. Incentive Stock Compensation
On April 10, 2000, the Company entered into an employment agreement with an
executive to manage its aggregates business segment. In the second quarter
of 2000, a one-time charge of approximately $2.3 million was recorded
representing the cost to replace certain benefits forfeited by the
executive officer in order to join the Company, of which $998,000 is the
cost of non-cash stock grants in the Company's ultimate parent company,
Holdings, and is recorded as incentive stock compensation expense.
Under the terms of a repurchase agreement between Holdings and holders of
Holdings' Class A Common Stock (the "Class A Holders"), the Class A Holders
were required to sell some or all of their Class A Common Stock to Holdings
at par value if the holders of Holdings' Series A and Series B Preferred
Stock did not achieve a specified internal rate of return upon the
occurrence of certain liquidity events as described in the Stockholders
Agreement. In 1998, Holdings agreed to waive the repurchase requirements
associated with the Class A Common Stock, which effectively gave the Class
A Holders the right to put the Class A Common Stock back to Holdings for
fair value consideration subject to certain conditions. This resulted in a
$14.2 million one-time, non-cash charge to the Company's operations, which
was the difference between the fair market value of the Class A Common
Stock and its par value at the time the repurchase requirements were
waived.
14. Segment Information
The Company operates in the industrial minerals and aggregates business
segments, principally in the United States, and conducts limited operations
in Canada. Industrial minerals includes the mining, processing and
marketing of industrial minerals, principally industrial silica, to a wide
variety of end use markets, including foundry, glass, chemicals, fillers
and extenders (primarily used in paints and coatings), building materials,
ceramics, and oil and gas. Aggregates includes the mining, processing and
marketing of high quality crushed stone, construction sand and gravel. The
Company's customers use its aggregates for road construction and
maintenance, other infrastructure projects and residential and commercial
construction and to produce hot mixed asphalt and concrete products. The
Company also uses its aggregates to produce hot mixed asphalt at production
facilities the Company owns or operates. The industrial minerals and
aggregates business segments constitute the reportable segments of the
Company.
F-24
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
The Company's management reviews operating company income to evaluate
segment performance and allocate resources. Certain corporate expenses
(income) including unusual items, business development costs and fees paid
to DGH&A, interest expense, the accretion of preferred stock warrants,
other income (net of interest income) and the provision (benefit) for
income taxes are not included in segment operating income since they are
excluded from the measure of segment profitability reviewed by the
Company's management. The Company's assets are managed based on segment and
accordingly, asset information is reported for the commercial aggregates
and industrial minerals segments. Corporate assets consist primarily of
cash and cash equivalents, debt issuance costs and equipment. The
accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies.
F-25
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- -----------------------------------------------------
Reportable segment information for each of the three years in the
period ended December 31, 2000 was as follows:
(In thousands) 2000 1999 1998
Sales:
Aggregates $ 107,055 $ 53,539 $ 3,497
Industrial Minerals 192,280 191,263 166,446
--------- --------- ---------
Total sales $ 299,335 $ 244,802 $ 169,943
========= ========= =========
Operating company income (loss):
Aggregates $ 4,496 $ 6,725 $ (258)
Industrial Minerals 13,696 12,887 8,352
--------- --------- ---------
Total operating company income (loss) 18,192 19,612 8,094
General corporate expense (4,047) (1,105) (15,323)
--------- --------- ---------
Total operating income (loss) $ 14,145 $ 18,507 $ (7,229)
========= ========= =========
Depreciation, depletion and amortization expense:
Aggregates $ 11,729 $ 6,328 $ 309
Industrial Minerals 24,104 22,152 19,579
Corporate 62 1 --
--------- --------- ---------
Total depreciation, depletion and
amortization expense $ 35,895 $ 28,481 $ 19,888
========= ========= =========
Capital expenditures:
Aggregates $ 7,628 $ 3,282 $ 517
Industrial Minerals 12,507 11,120 8,882
Corporate 184 170 --
--------- --------- ---------
Total capital expenditures $ 20,319 $ 14,572 $ 9,399
========= ========= =========
Reportable segment information at December 31, 2000, 1999 and 1998 was
as follows:
(In thousands) 2000 1999 1998
Assets:
Aggregates $ 332,324 $ 323,470 $ 86,928
Industrial Minerals 223,321 201,390 187,574
Corporate 20,533 29,169 176
Elimination of intersegment receivables (37,892) (2,426) --
--------- --------- ---------
Total assets $ 538,286 $ 551,603 $ 274,678
========= ========= =========
15. Guarantor Financial Data
Except for the Company's Canadian subsidiary, which is an inactive company with
an immaterial amount of assets and liabilities, each of the Company's
subsidiaries has fully and unconditionally guaranteed the Senior Subordinated
Notes on a joint and several basis. The separate financial statements of the
subsidiary guarantors are not included in this report because (a) the Company is
a holding company with no independent assets or operations other than its
investments in its subsidiaries, (b) the subsidiary guarantors each are wholly
owned by the Company, comprise all of the direct and indirect subsidiaries of
F-26
Better Minerals & Aggregates Company and Subsidiaries
Notes to Consolidated Financial Statements, cont.
- --------------------------------------------------------------------------------
the Company (other than a minor subsidiary) and have jointly and severally
guaranteed the Company's obligations under the Senior Subordinated Notes on a
full and unconditional basis, (c) the aggregate assets, liabilities, earnings
and equity of the subsidiary guarantors are substantially equivalent to the
assets, liabilities, earnings and equity of the Company on a consolidated basis
and (d) management has determined that separate financial statements and other
disclosures concerning the subsidiary guarantors are not material to investors.
F-27
$150,000,000
Better Minerals & Aggregates Company
13% Senior Subordinated Notes due 2009
Chase Securities Inc.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Amended and Restated Certificate of Incorporation provides for
indemnification of our directors, officers, employees and agents to the full
extent authorized or permitted by law.
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any person who was or is, or is threatened to
be made, a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, such person had no reasonable cause to believe his conduct was
unlawful. A Delaware corporation may indemnify such persons against expenses
(including attorneys' fees) in actions brought by or in the right of the
corporation to procure a judgment in its favor under the same conditions, except
that no indemnification is permitted in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent the Court of Chancery of the State of Delaware or
the court in which such action or suit was brought shall determine upon
application that, in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the Court of
Chancery or other such court shall deem proper. To the extent such person has
been successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify such person against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. The indemnification
and advancement of expenses provided for in, or granted pursuant to, Section 145
is not exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
Section 145 also provides that a corporation may maintain insurance
against liabilities for which indemnification is not expressly provided by the
statute.
In addition, Article Sixth of our Amended and Restated Certificate of
Incorporation, as permitted by Section 102(b)(7) of the DGCL, states:
"The Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or in the right
of the Corporation, by reason of the fact that he, or the person whose
legal representative he is, (1) is or was a stockholder, director,
officer, employee or agent of the Corporation (including the
incorporator thereof), or (2) is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or
(3) is or was a director, officer or employee of the Corporation
serving at the request of the Corporation as a fiduciary of an employee
benefit plan or trust maintained for the benefit of employees of the
Corporation or employees of any such other enterprise, partnership,
joint venture, trust, or other enterprise, against judgments, fines,
penalties, amounts paid in settlement, and expenses, including
attorneys' fees, actually and reasonably incurred by him and the person
whose legal representative he is, in connection with such action, suit
or proceeding, or any appeal therein, to the fullest extent permitted
by law.
II-1
Expenses which may be indemnifiable under this Article SIXTH in
defending an action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors upon agreement by or on behalf
of the stockholder, director, officer, employee or agent, or his legal
representative, to repay such amount if he is later found not entitled
to be indemnified by the Corporation as authorized in this Article
SIXTH.
The Corporation shall not indemnify any stockholder, director,
officer, employee or agent against judgments, fines, amounts paid in
settlement and expenses, including attorneys' fees, to an extent
greater than that authorized by this Article SIXTH, but the Corporation
may procure insurance providing greater indemnification and may share
the premium cost with any stockholder, director, officer, employee or
agent on such basis as may be agreed upon."
As limited by Section 102(b)(7) of the DGCL, this provision cannot,
however, have the effect of indemnifying any of our directors in the case of
liability (i) for a breach of the director's duty of loyalty, (ii) for acts of
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
purchases or redemptions as provided in Section 174 of the DGCL or (iv) for any
transactions for which the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
2.1* Purchase Agreement dated as of August 26, 1999 by and among U.S. Silica Company and Joseph H.
Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer
Grandchildren's Trust.
2.1.1* Amendment No. 1 to Purchase Agreement dated as of October 1, 1999 among U.S. Silica Company and
Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell
H. Shearer Grandchildren's Trust.
3.1* Amended and Restated Certificate of Incorporation of Better Minerals & Aggregates Company
(formerly USS Intermediate Holdco, Inc.) dated as of February 9, 1996.
3.1.1* Certificate of Amendment of Amended and Restated Certificate of Incorporation of Better
Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated September 30, 1999.
3.2* By-laws of Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.).
3.3* Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated June 3, 1968.
3.3.1* Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly
ITT-PGS, Inc.) dated June 20, 1968.
3.3.2* Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly
ITT-PGS, Inc.) dated December 15, 1986.
3.3.3* Certificate of Ownership and Merger Merging U.S. Silica Company (OSC) into U.S. Silica Company
dated December 17, 1987.
3.3.4* Certificate of Ownership and Merger Merging Each of Louisiana Industrial Sand Transportation
Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S.
II-2
Silica Co. of Connecticut, U.S. Silica Co. of Illinois, U.S. Silica Co. of Louisiana, U.S.
Silica Co. of Michigan and U.S. Silica Co. of Texas into U.S. Silica Company dated December 17,
1987.
3.3.5* Certificate of Ownership and Merger Merging Warrior Sand and Gravel Company, Inc. into U.S.
Silica Company dated December 9, 1988.
3.3.6* Certificate of Ownership and Merger Merging USS Acquisitions, Inc. into U.S. Silica Company
dated February 9, 1996.
3.4* By-laws of U.S. Silica Company (formerly ITT-PGS, Inc.).
3.5* Restated Articles of Incorporation and Articles of Amendment of Better Materials Corporation
dated December 3, 1990.
3.5.1* Articles of Merger of Better Materials Corporation dated December 14, 1998.
3.5.2** Amended and Restated Articles of Incorporation of Better Materials Corporation dated March 30,
2001.
3.6* Amended and Restated By-laws of Better Materials Corporation.
3.7* Certificate of Incorporation of BMC Trucking, Inc. dated November 30, 1998.
3.8* By-laws of BMC Trucking, Inc.
3.9* Restated Articles of Incorporation and Articles of Amendment of Bucks County Crushed Stone
Company dated December 21, 1990.
3.10* Amended and Restated By-laws of Bucks County Crushed Stone Company.
3.11* Certificate of Incorporation of Chippewa Farms Corporation dated January 16, 1981.
3.12* Amended and Restated By-laws of Chippewa Farms Corporation.
3.13* Certificate of Incorporation of Shore Stone Company, Inc. dated May 6, 1983.
3.13.1* Certificate of Amendment to the Certificate of Incorporation of Shore Stone Company, Inc. dated
November 28, 1990.
3.14* Amended and Restated By-laws of Shore Stone Company, Inc.
3.15* Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National
Silica Co.) dated October 24, 1986.
3.15.1* Certificate of Amendment of Certificate of Incorporation of Pennsylvania Glass Sand Corporation
(formerly Morgan National Silica Co.) dated December 15, 1986.
3.16* By-laws of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.).
3.17* Amended and Restated Certificate of Incorporation of George F. Pettinos, Inc. dated July 31,
1998.
3.18* By-laws of George F. Pettinos, Inc.
3.19* Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.)
dated October 24, 1986.
II-3
3.19.1* Certificate of Amendment of Certificate of Incorporation of Ottawa Silica Company (formerly
LaSalle National Silica Co.) dated December 15, 1986.
3.20* By-laws of Ottawa Silica Company (formerly LaSalle National Silica Co.).
3.21* Articles of Incorporation of The Fulton Land and Timber Company dated April 13, 1942.
3.22* Amended and Restated By-laws of Fulton Land and Timber Company.
3.23* Certificate of Incorporation of Ellen Jay, Inc. dated March 1, 1974.
3.24* Amended and Restated By-laws of Ellen Jay, Inc.
3.25* Certificate of Formation of Stone Materials Company, LLC dated September 24, 1999.
3.26* Limited Liability Company Operating Agreement of Stone Materials Company, LLC dated as of
September 30, 1999.
3.27* Articles of Incorporation of Commercial Stone Co., Inc. dated January 27, 1972.
3.27.1* Certificate of Amendment of Commercial Stone Co., Inc. dated December 29, 1983.
3.27.2* Statement of Change of Registered Office of Commercial Stone Co., Inc. dated February 9, 1984.
3.27.3* Certificate of Amendment of Commercial Stone Co., Inc. dated December 24, 1986.
3.28* By-laws of Commercial Stone Co., Inc.
3.29* Certificate of Formation of Commercial Aggregates Transportation and Sales, LLC dated September
27, 1999.
3.29.1* Contribution Agreement dated as of October 1, 1999 between Stone Materials Company, LLC and
Commercial Stone Co., Inc.
3.30* Limited Liability Company Operating Agreement of Commercial Aggregates Transportation and
Sales, LLC dated as of September 30, 1999.
3.31** Certificate of Incorporation of BMAC Services Co., Inc. dated November 16, 2000.
3.32** By-laws of BMAC Services Co., Inc.
4.1* Indenture, dated as of October 1, 1999, among the Better Minerals & Aggregates Company, the
subsidiary guarantors named therein and The Bank of New York, as trustee (including the forms
of the Better Minerals & Aggregates Company's 13% Senior Subordinated Notes due 2009 attached
thereto as exhibits).
4.2* Exchange and Registration Rights Agreement, dated October 1, 1999, among the Better Minerals &
Aggregates Company, the subsidiary guarantors named therein, Chase Securities Inc. and BNP
Capital Markets, LLC.
4.3*** Supplemental Indenture, dated as of December 1, 2000, among Better Minerals & Aggregates
Company, BMAC Services Co., Inc. and the other subsidiary guarantors named therein and The
Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 of the Better Minerals
& Aggregates Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
II-4
5.1* Opinion of Winthrop, Stimson, Putnam & Roberts regarding the legality of the securities.
8.1* Opinion of Winthrop, Stimson, Putnam & Roberts regarding tax matters.
10.1* The Stockholders Agreement, dated as of February 9, 1996, among USS Holdings, Inc. and the
stockholders of the USS Holdings, Inc.
10.1.1* Amendment No. 1 to Stockholders Agreement dated as of October 15, 1996.
10.1.2* Amendment No. 2 to Stockholders Agreement dated as of October 6, 1998.
10.2* Amended and Restated Management Services Agreement, dated October 1, 1998, among USS
Intermediate Holdco, Inc. (now Better Minerals & Aggregates Company), USS Holdings, Inc., BMAC
Holdings and DGHA.
10.2.1* Assignment and Assumption Agreement dated as of September 30, 1999.
10.3* Amended and Restated Tax Sharing Agreement, dated as of October 1, 1999, among USS Intermediate
Holdco, Inc. (now Better Minerals & Aggregates Company), its domestic subsidiaries, and USS
Holdings, Inc.
10.4* Credit Agreement, dated as of September 30, 1999, among Better Minerals & Aggregates Company,
BMAC Holdings, Inc., George F. Pettinos (Canada) Limited, Banque Nationale de Paris, and the
financial institutions and other institutional lenders named therein.
10.4.1*** Amendment and Waiver No. 1 to the Credit Agreement and Security Agreement, dated as of
December 31, 1999, among BMAC Holdings, Inc., Better Minerals & Aggregates Company, George
F. Pettinos (Canada) Limited, the banks, financial institutions and other institutional lenders parties to
the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris (incorporated
by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000).
10.4.2*** Amendment No. 2 to the Credit Agreement, dated as of March 15, 2000, among BMAC Holdings,
Inc., Better Minerals & Aggregates Company, the banks, financial institutions and other institutional
lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de
Paris (incorporated by reference to Exhibit 10.2 of the Better Minerals & Aggregates Company
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.4.3*** Amendment No. 3 to the Credit Agreement, dated as of December 31, 2000, among BMAC Holdings,
Inc., Better Minerals & Aggregates Company, the banks, financial institutions and other institutional
lenders parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris
(incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company Current Report
on Form 8-K filed on March 5, 2001).
10.5* Security Agreement, dated September 30, 1999, among Better Minerals & Aggregates Company, the
subsidiary guarantors named therein and Banque Nationale de Paris.
10.6* Intellectual Property Security Agreement, dated September 30, 1999, among Better Minerals &
Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris.
10.7* Parent Guarantor Security Agreement, dated September 30, 1999, between BMAC Holdings, Inc. and
Banque Nationale de Paris.
10.8* Canadian Security Agreement, dated September 30, 1999, between George F. Pettinos (Canada)
Limited and Banque Nationale de Paris.
II-5
10.9* Parent Guaranty, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de
Paris.
10.10* Subsidiary Guaranty, dated September 30, 1999, between each of the subsidiary guarantors named
therein and Banque Nationale de Paris.
10.11*** Employment Agreement, dated December 14, 1998, between Better Materials Corporation and Craig
S. Cinalli (incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates
Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.12*** Amendment No. 1, dated March 15, 2001, to Employment Agreement dated December 14, 1998 between
Better Materials Corporation and Craig S. Cinalli (incorporated by reference to Exhibit 10.11
of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year ended
December 31, 2000).
10.13*** Severance Agreement, dated August 15, 2000, between U.S. Silica Company and Richard Shearer
(incorporated by reference to Exhibit 10.12 of the Better Minerals & Aggregates Company Annual
Report on Form 10-K/A for the year ended December 31, 2000).
10.14*** Employment Agreement, dated April 19, 2000, between Better Minerals & Aggregates Company and
Roy Reeves (incorporated by reference to Exhibit 10.13 of the Better Minerals & Aggregates
Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
10.15*** Employment Agreement, dated April 19, 2000, between USS Holdings, Inc. and Roy Reeves
(incorporated by reference to Exhibit 10.14 of the Better Minerals & Aggregates Company Annual
Report on Form 10-K/A for the year ended December 31, 2000).
10.16*** Employment, Consulting and Non-Competition Agreement, dated December 31, 2000, between USS
Holdings, BMAC Holdings, Inc., U.S. Silica Company and Better Minerals & Aggregates Company
and Richard Goodell (incorporated by reference to Exhibit 10.15 of the Better Minerals &
Aggregates Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
12.1*** Statement regarding ratio of earnings to fixed charges (incorporated by reference to Exhibit
12.1 of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year
ended December 31, 2000).
21.1*** Subsidiaries of Better Minerals & Aggregates Company (incorporated by reference to Exhibit
21.1 of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year
ended December 31, 2000).
23.1* Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibits 5.1 and 8.1 to this
Registration Statement).
23.2** Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Schneider Downs & Co., Inc.
24.1** Powers of Attorney.
25.1* Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee
under the Indenture.
--------------------------------------------
* Previously filed herewith
** Filed herewith
II-6
*** Incorporated by reference herein as indicated
(b) FINANCIAL STATEMENT SCHEDULES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL
STATEMENT SCHEDULE
To the Board of Directors and Stockholder of
Better Minerals & Aggregates Company:
Our audits of the consolidated financial statements of Better Minerals &
Aggregates Company referred to in our report dated March 16, 2001 included in
the Registration Statement on Form S-4 also included an audit of the financial
statement listed in Item 21(b) of this Registration Statement on Form S-4. In
our opinion, the financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
New York, New York
March 16, 2001
Schedule II - Valuation and Qualifying Accounts and Reserves
Better Minerals & Aggregates Company
For the Years Ended December 31, 2000, 1999 and 1998
(in thousands of dollars)
Additions
---------
Balance at Charged to Resulting Accounts Balance at
Beginning of Costs and from -------- End of
Description Period Expenses Acquisitions Written Off Recovered Period
- ----------- ------ -------- ------------ ----------- --------- ------
Allowance for
Doubtful Accounts
2000 $1,278 $638 $-- $(624) $35 $1,327
1999 $1,060 $222 $100 $(145) $41 $1,278
1998 $ 422 $146 $520 $ (29) $ 1 $1,060
------------------
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the Corporation Law, the Certificate of
Incorporation and By-laws, or otherwise, the Registrants have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the
II-7
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of that issue.
(b) The undersigned Registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 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 the request.
(c) The undersigned Registrants hereby undertake 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-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
BETTER MINERALS & AGGREGATES COMPANY
By: /s/ John A. Ulizio
---------------------------------------------
Name: John A. Ulizio
Title: Vice President, General Counsel and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President and Chief Executive Officer (Principal 4/12/01
* Executive Officer)
- --------------------------------------------
Roy D. Reeves
Vice President and Chief Financial Officer (Principal 4/12/01
* Financial Officer and Principal Accounting Officer)
- --------------------------------------------
Gary E. Bockrath
- -------------------------------------------- Director
D. George Harris
* Director 4/12/01
- --------------------------------------------
Anthony J. Petrocelli
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
Richard J. Donahue
* Director 4/12/01
- --------------------------------------------
Arnold Chavkin
- -------------------------------------------- Director
Ruth Dreessen
II-9
SIGNATURE TITLE DATE
- --------- ----- ----
* Director 4/12/01
- --------------------------------------------
Timothy J. Walsh
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
U.S. SILICA COMPANY
By: /s/ John A. Ulizio
---------------------------------------------
Name: John A. Ulizio
Title: Senior Vice President, General Counsel
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Chief Operating Officer
- --------------------------------------------
Richard J. Shearer
Senior Vice President (Principal Financial Officer 4/12/01
* and Principal Accounting Officer) and Director
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
BMAC SERVICES CO., INC.
By: /s/ John A. Ulizio
------------------------------------------
Name: John A. Ulizio
Title: Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President and Chief Executive Officer 4/12/01
* (Principal Executive Officer)
- --------------------------------------------
Roy D. Reeves
Vice President, Chief Financial Officer 4/12/01
* (Principal Financial Officer) and Director
- --------------------------------------------
Gary E. Bockrath
* Treasurer (Principal Accounting Officer) 4/12/01
- --------------------------------------------
Michael L. Thompson
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
BETTER MATERIALS CORPORATION
By: /s/ John A. Ulizio
------------------------------------------------
Name: John A. Ulizio
Title: Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Director
- --------------------------------------------
Craig S. Cinalli
Vice President and Chief Financial 4/12/01
* Officer (Principal Accounting Officer)
- --------------------------------------------
Brian Hessenthaler
Vice President and Assistant 4/12/01
* Treasurer (Principal Financial Officer)
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
BMC TRUCKING, INC.
By: /s/ John A. Ulizio
---------------------------------------------
Name: John A. Ulizio
Title: Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Director
- --------------------------------------------
Craig S. Cinalli
Vice President and Chief Financial 4/12/01
* Officer (Principal Accounting Officer)
- --------------------------------------------
Brian Hessenthaler
Vice President and Assistant 4/12/01
* Treasurer (Principal Financial Officer)
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
CHIPPEWA FARMS CORPORATION
By: /s/ John A. Ulizio
------------------------------------------------
Name: John A. Ulizio
Title: Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
* President (Principal Executive Officer) and Director 4/12/01
- --------------------------------------------
Craig S. Cinalli
Vice President of Finance and Treasurer 4/12/01
* (Principal Accounting Officer)
- --------------------------------------------
Brian Hessenthaler
Vice President and Assistant Treasurer 4/12/01
* (Principal Financial Officer)
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
COMMERCIAL AGGREGATES TRANSPORTATION
AND SALES, LLC
By: Better Materials Corporation,
as Sole Member and Sole Manager
By: /s/ John A. Ulizio
---------------------------------------------
Name: John A. Ulizio
Title: Vice President and Assistant Secretary
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Post-Effective Amendment No. 1 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, on the
12th day of April, 2001.
THE FULTON LAND AND TIMBER COMPANY
By: /s/ John A. Ulizio
------------------------------------------
Name: John A. Ulizio
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Director
- --------------------------------------------
Roy D. Reeves
Treasurer (Principal Financial Officer and 4/12/01
* Principal Accounting Officer) and Director
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
GEORGE F. PETTINOS, INC.
By: /s/ John A. Ulizio
-----------------------------------------
Name: John A. Ulizio
Title: Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Director
- --------------------------------------------
Roy D. Reeves
Vice President and Treasurer (Principal Financial 4/12/01
* Officer and Principal Accounting Officer)
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
OTTAWA SILICA COMPANY
By: /s/ John A. Ulizio
---------------------------------------------
Name: John A. Ulizio
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal Executive Officer) 4/12/01
* and Director
- --------------------------------------------
Roy D. Reeves
Treasurer (Principal Financial Officer and 4/12/01
* Principal Accounting Officer) and Director
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
PENNSYLVANIA GLASS SAND CORPORATION
By: /s/ John A. Ulizio
-------------------------------
Name: John A. Ulizio
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to this Registration Statement has been signed by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- --------- ----- ----
* President (Principal Executive Officer) 4/12/01
- --------------------------------------------
Roy D. Reeves
Treasurer (Principal Financial Officer and 4/12/01
* Principal Accounting Officer)
- --------------------------------------------
Richard J. Nick
* Director 4/12/01
- --------------------------------------------
Richard E. Goodell
* Director 4/12/01
- --------------------------------------------
Gary E. Bockrath
* Director 4/12/01
- --------------------------------------------
John A. Ulizio
* By: /s/ John A. Ulizio
---------------------------------------
John A. Ulizio
Attorney-in-fact
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 12th day of April, 2001.
STONE MATERIALS COMPANY, LLC
By: Better Minerals & Aggregates Company,
as Sole Member and Sole Manager
By: /s/ John A. Ulizio
------------------------------------------------
Name: John A. Ulizio
Title: Vice President, General Counsel
and Assistant Secretary
II-21
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
2.1* Purchase Agreement dated as of August 26, 1999 by and among U.S. Silica Company and Joseph H.
Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell H. Shearer
Grandchildren's Trust.
2.1.1* Amendment No. 1 to Purchase Agreement dated as of October 1, 1999 among U.S. Silica Company and
Joseph H. Shearer, R. Scott Shearer, CATS, Inc., JHS Partnership, RSS Partnership and The Dell
H. Shearer Grandchildren's Trust.
3.1* Amended and Restated Certificate of Incorporation of Better Minerals & Aggregates Company
(formerly USS Intermediate Holdco, Inc.) dated as of February 9, 1996.
3.1.1* Certificate of Amendment of Amended and Restated Certificate of Incorporation of Better
Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.) dated September 30, 1999.
3.2* By-laws of Better Minerals & Aggregates Company (formerly USS Intermediate Holdco, Inc.).
3.3* Certificate of Incorporation of U.S. Silica Company (formerly ITT-PGS, Inc.) dated June 3, 1968.
3.3.1* Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly
ITT-PGS, Inc.) dated June 20, 1968.
3.3.2* Certificate of Amendment of Certificate of Incorporation of U.S. Silica Company (formerly
ITT-PGS, Inc.) dated December 15, 1986.
3.3.3* Certificate of Ownership and Merger Merging U.S. Silica Company (OSC) into U.S. Silica Company
dated December 17, 1987.
3.3.4* Certificate of Ownership and Merger Merging Each of Louisiana Industrial Sand Transportation
Company, Texas Industrial Minerals Transportation Company, U.S. Silica Co. of California, U.S.
Silica Co. of Connecticut, U.S. Silica Co. of Illinois, U.S. Silica Co. of Louisiana, U.S.
Silica Co. of Michigan and U.S. Silica Co. of Texas into U.S. Silica Company dated December 17,
1987.
3.3.5* Certificate of Ownership and Merger Merging Warrior Sand and Gravel Company, Inc. into U.S.
Silica Company dated December 9, 1988.
3.3.6* Certificate of Ownership and Merger Merging USS Acquisitions, Inc. into U.S. Silica Company
dated February 9, 1996.
3.4* By-laws of U.S. Silica Company (formerly ITT-PGS, Inc.).
3.5* Restated Articles of Incorporation and Articles of Amendment of Better Materials Corporation
dated December 3, 1990.
3.5.1* Articles of Merger of Better Materials Corporation dated December 14, 1998.
3.5.2** Amended and Restated Articles of Incorporation of Better Materials Corporation dated March 30,
2001.
3.6* Amended and Restated By-laws of Better Materials Corporation.
3.7* Certificate of Incorporation of BMC Trucking, Inc. dated November 30, 1998.
3.8* By-laws of BMC Trucking, Inc.
3.9* Restated Articles of Incorporation and Articles of Amendment of Bucks County Crushed Stone
Company dated December 21, 1990.
3.10* Amended and Restated By-laws of Bucks County Crushed Stone Company.
3.11* Certificate of Incorporation of Chippewa Farms Corporation dated January 16, 1981.
3.12* Amended and Restated By-laws of Chippewa Farms Corporation.
3.13* Certificate of Incorporation of Shore Stone Company, Inc. dated May 6, 1983.
3.13.1* Certificate of Amendment to the Certificate of Incorporation of Shore Stone Company, Inc. dated
November 28, 1990.
3.14* Amended and Restated By-laws of Shore Stone Company, Inc.
3.15* Certificate of Incorporation of Pennsylvania Glass Sand Corporation (formerly Morgan National
Silica Co.) dated October 24, 1986.
3.15.1* Certificate of Amendment of Certificate of Incorporation of Pennsylvania Glass Sand Corporation
(formerly Morgan National Silica Co.) dated December 15, 1986.
3.16* By-laws of Pennsylvania Glass Sand Corporation (formerly Morgan National Silica Co.).
3.17* Amended and Restated Certificate of Incorporation of George F. Pettinos, Inc. dated July 31,
1998.
3.18* By-laws of George F. Pettinos, Inc.
3.19* Certificate of Incorporation of Ottawa Silica Company (formerly LaSalle National Silica Co.)
dated October 24, 1986.
3.19.1* Certificate of Amendment of Certificate of Incorporation of Ottawa Silica Company (formerly
LaSalle National Silica Co.) dated December 15, 1986.
3.20* By-laws of Ottawa Silica Company (formerly LaSalle National Silica Co.).
3.21* Articles of Incorporation of The Fulton Land and Timber Company dated April 13, 1942.
3.22* Amended and Restated By-laws of Fulton Land and Timber Company.
3.23* Certificate of Incorporation of Ellen Jay, Inc. dated March 1, 1974.
3.24* Amended and Restated By-laws of Ellen Jay, Inc.
3.25* Certificate of Formation of Stone Materials Company, LLC dated September 24, 1999.
3.26* Limited Liability Company Operating Agreement of Stone Materials Company, LLC dated as of
September 30, 1999.
3.27* Articles of Incorporation of Commercial Stone Co., Inc. dated January 27, 1972.
3.27.1* Certificate of Amendment of Commercial Stone Co., Inc. dated December 29, 1983.
3.27.2* Statement of Change of Registered Office of Commercial Stone Co., Inc. dated February 9, 1984.
3.27.3* Certificate of Amendment of Commercial Stone Co., Inc. dated December 24, 1986.
3.28* By-laws of Commercial Stone Co., Inc.
3.29* Certificate of Formation of Commercial Aggregates Transportation and Sales, LLC dated September
27, 1999.
3.29.1* Contribution Agreement dated as of October 1, 1999 between Stone Materials Company, LLC and
Commercial Stone Co., Inc.
3.30* Limited Liability Company Operating Agreement of Commercial Aggregates Transportation and
Sales, LLC dated as of September 30, 1999.
3.31** Certificate of Incorporation of BMAC Services Co., Inc. dated November 16, 2000.
3.32** By-laws of BMAC Services Co., Inc.
4.1* Indenture, dated as of October 1, 1999, among the Better Minerals & Aggregates Company, the
subsidiary guarantors named therein and The Bank of New York, as trustee (including the forms
of the Better Minerals & Aggregates Company's 13% Senior Subordinated Notes due 2009 attached
thereto as exhibits).
4.2* Exchange and Registration Rights Agreement, dated October 1, 1999, among the Better Minerals &
Aggregates Company, the subsidiary guarantors named therein, Chase Securities Inc. and BNP
Capital Markets, LLC.
4.3*** Supplemental Indenture, dated as of December 1, 2000, among Better Minerals & Aggregates
Company, BMAC Services Co., Inc. and the other subsidiary guarantors named therein and The
Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 of the Better Minerals
& Aggregates Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
5.1* Opinion of Winthrop, Stimson, Putnam & Roberts regarding the legality of the securities.
8.1* Opinion of Winthrop, Stimson, Putnam & Roberts regarding tax matters.
10.1* The Stockholders Agreement, dated as of February 9, 1996, among USS Holdings, Inc. and the
stockholders of the USS Holdings, Inc.
10.1.1* Amendment No. 1 to Stockholders Agreement dated as of October 15, 1996.
10.1.2* Amendment No. 2 to Stockholders Agreement dated as of October 6, 1998.
10.2* Amended and Restated Management Services Agreement, dated October 1, 1998, among USS
Intermediate Holdco, Inc. (now Better Minerals & Aggregates Company), USS Holdings, Inc., BMAC
Holdings and DGHA.
10.2.1* Assignment and Assumption Agreement dated as of September 30, 1999.
10.3* Amended and Restated Tax Sharing Agreement, dated as of October 1, 1999, among USS Intermediate
Holdco, Inc. (now Better Minerals & Aggregates Company), its domestic subsidiaries, and USS
Holdings, Inc.
10.4* Credit Agreement, dated as of September 30, 1999, among Better Minerals & Aggregates Company,
BMAC Holdings, Inc., George F. Pettinos (Canada) Limited, Banque Nationale de Paris, and the
financial institutions and other institutional lenders named therein.
10.4.1*** Amendment and Waiver No. 1 to the Credit Agreement and Security Agreement, dated as of
December 31, 1999, among BMAC Holdings, Inc., Better Minerals & Aggregates Company, George F.
Pettinos (Canada) Limited, the banks, financial institutions and other institutional lenders
parties to the Credit Agreement dated as of September 30, 1999, and Banque Nationale de Paris
(incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates Company
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.4.2*** Amendment No. 2 to the Credit Agreement, dated as of March 15, 2000, among BMAC Holdings,
Inc., Better Minerals & Aggregates Company, the banks, financial institutions and other
institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and
Banque Nationale de Paris (incorporated by reference to Exhibit 10.2 of the Better Minerals &
Aggregates Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
10.4.3*** Amendment No. 3 to the Credit Agreement, dated as of December 31, 2000, among BMAC Holdings,
Inc., Better Minerals & Aggregates Company, the banks, financial institutions and other
institutional lenders parties to the Credit Agreement dated as of September 30, 1999, and
Banque Nationale de Paris (incorporated by reference to Exhibit 10.1 of the Better Minerals &
Aggregates Company Current Report on Form 8-K filed on March 5, 2001).
10.5* Security Agreement, dated September 30, 1999, among Better Minerals & Aggregates Company, the
subsidiary guarantors named therein and Banque Nationale de Paris.
10.6* Intellectual Property Security Agreement, dated September 30, 1999, among Better Minerals &
Aggregates Company, the subsidiary guarantors named therein and Banque Nationale de Paris.
10.7* Parent Guarantor Security Agreement, dated September 30, 1999, between BMAC Holdings, Inc. and
Banque Nationale de Paris.
10.8* Canadian Security Agreement, dated September 30, 1999, between George F. Pettinos (Canada)
Limited and Banque Nationale de Paris.
10.9* Parent Guaranty, dated September 30, 1999, between BMAC Holdings, Inc. and Banque Nationale de
Paris.
10.10* Subsidiary Guaranty, dated September 30, 1999, between each of the subsidiary guarantors named
therein and Banque Nationale de Paris.
10.11*** Employment Agreement, dated December 14, 1998, between Better Materials Corporation and Craig
S. Cinalli (incorporated by reference to Exhibit 10.1 of the Better Minerals & Aggregates
Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
10.12*** Amendment No. 1, dated March 15, 2001, to Employment Agreement dated December 14, 1998 between
Better Materials Corporation and Craig S. Cinalli (incorporated by reference to Exhibit 10.11
of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year ended
December 31, 2000).
10.13*** Severance Agreement, dated August 15, 2000, between U.S. Silica Company and Richard Shearer
(incorporated by reference to Exhibit 10.12 of the Better Minerals & Aggregates Company Annual
Report on Form 10-K/A for the year ended December 31, 2000).
10.14*** Employment Agreement, dated April 19, 2000, between Better Minerals & Aggregates Company and
Roy Reeves (incorporated by reference to Exhibit 10.13 of the Better Minerals & Aggregates
Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
10.15*** Employment Agreement, dated April 19, 2000, between USS Holdings, Inc. and Roy Reeves
(incorporated by reference to Exhibit 10.14 of the Better Minerals & Aggregates Company Annual
Report on Form 10-K/A for the year ended December 31, 2000).
10.16*** Employment, Consulting and Non-Competition Agreement, dated December 31, 2000, between USS
Holdings, BMAC Holdings, Inc., U.S. Silica Company and Better Minerals & Aggregates Company
and Richard Goodell (incorporated by reference to Exhibit 10.15 of the Better Minerals &
Aggregates Company Annual Report on Form 10-K/A for the year ended December 31, 2000).
12.1*** Statement regarding ratio of earnings to fixed charges (incorporated by reference to Exhibit
12.1 of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year
ended December 31, 2000).
21.1*** Subsidiaries of Better Minerals & Aggregates Company (incorporated by reference to Exhibit
21.1 of the Better Minerals & Aggregates Company Annual Report on Form 10-K/A for the year
ended December 31, 2000).
23.1* Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibits 5.1 and 8.1 to this
Registration Statement).
23.2** Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Schneider Downs & Co., Inc.
24.1** Powers of Attorney.
25.1* Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee
under the Indenture.
--------------------------------------------
* Previously filed herewith
** Filed herewith
*** Incorporated by reference herein as indicated