UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
|_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
2005
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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OR
|_| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this
shell company report
Commission file number 1-14946
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CEMEX, S.A. de C.V.
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(Exact name of the registrant as specified in its charter)
CEMEX MEXICO, S.A. de C.V.
EMPRESAS TOLTECA DE MEXICO, S.A. de C.V.
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(Exact names of co-registrants and guarantors as specified
in their respective charters)
CEMEX CORPORATION
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(Translation of registrant's name into English)
CEMEX MEXICO CORPORATION
EMPRESAS TOLTECA DE MEXICO CORPORATION
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(Translation of co-registrants' and guarantors' names into English)
United Mexican States
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(Jurisdiction of incorporation or organization)
Av. Ricardo Margain Zozaya #325, Colonia Valle del Campestre, Garza
Garcia, Nuevo Leon, Mexico 66265
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b)
of the Act.
Title of each class Name of each exchange on
which registered
American Depositary Shares
("ADSs"), each ADS representing ten
Ordinary Participation Certificates
(Certificados de Participacion
Ordinarios)("CPOs"), each CPO
representing two Series A shares
and one Series B share New York Stock Exchange
- ------------------------------------- ----------------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
9.625% Notes due 2009 guaranteed by CEMEX Mexico, S.A. de C.V. and Empresas
Tolteca de Mexico, S.A. de C.V.
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(Title of Class)
Guarantees of the 9.625% Notes due 2009 by CEMEX Mexico, S.A. de C.V. and
Empresas Tolteca de Mexico, S.A. de C.V.
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(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
3,714,456,977 CPOs (1)
7,676,571,754 Series A shares (including Series A shares underlying CPOs) (1)
3,838,285,877 Series B shares (including Series B shares underlying CPOs) (1)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes X No
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If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. Yes No X
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Note--checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer X Accelerated Filer
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Non-accelerated filer
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Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 Item 18 X
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If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
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(1) This information does not give effect to the two-for-one stock split
approved by shareholders on April 27, 2006, which is expected to be effected
in July 2006. For further description of the stock split, see "Presentation
of Financial Information."
TABLE OF CONTENTS
Page
----
PART I.........................................................................3
Item 1 - Identity of Directors, Senior Management and Advisors.............3
Item 2 - Offer Statistics and Expected Timetable...........................3
Item 3 - Key Information...................................................3
Risk Factors..............................................................3
Mexican Peso Exchange Rates...............................................9
Selected Consolidated Financial Information..............................10
Item 4 - Information on the Company.......................................14
Business Overview........................................................14
Our Production Processes.................................................19
User Base................................................................19
Our Business Strategy....................................................20
Our Corporate Structure..................................................23
North America............................................................24
Europe...................................................................31
South America, Central America and the Caribbean.........................41
Africa and the Middle East...............................................47
Asia.....................................................................48
Our Trading Operations...................................................50
Regulatory Matters and Legal Proceedings.................................50
Recent Developments......................................................58
Item 4A - Unresolved Staff Comments.......................................59
Item 5 - Operating and Financial Review and Prospects.....................60
Cautionary Statement Regarding Forward Looking Statements................60
Overview.................................................................60
Critical Accounting Policies.............................................61
Results of Operations....................................................64
Liquidity and Capital Resources..........................................87
Research and Development, Patents and Licenses, etc......................92
Trend Information........................................................92
Summary of Material Contractual Obligations and Commercial
Commitments............................................................95
Off-Balance Sheet Arrangements...........................................96
Qualitative and Quantitative Market Disclosure...........................96
Investments, Acquisitions and Divestitures..............................100
U.S. GAAP Reconciliation................................................102
Newly Issued Accounting Pronouncements Under U.S. GAAP..................102
Item 6 - Directors, Senior Management and Employees.......................105
Senior Management and Directors.........................................105
Board Practices.........................................................110
Compensation of Our Directors and Members of Our Senior Management......111
Employees...............................................................115
Share Ownership.........................................................116
Item 7 - Major Shareholders and Related Party Transactions...............116
Major Shareholders......................................................116
Related Party Transactions..............................................117
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Item 8 - Financial Information...........................................117
Consolidated Financial Statements and Other Financial Information.......117
Legal Proceedings.......................................................117
Dividends...............................................................117
Significant Changes.....................................................119
Item 9 - Offer and Listing...............................................120
Market Price Information................................................120
Item 10 - Additional Information.........................................121
Articles of Association and By-laws.....................................121
Material Contracts......................................................129
Exchange Controls.......................................................132
Taxation................................................................132
Documents on Display....................................................135
Item 11 - Quantitative and Qualitative Disclosures About Market Risk.....135
Item 12 - Description of Securities Other than Equity Securities.........135
PART II......................................................................136
Item 13 - Defaults, Dividend Arrearages and Delinquencies................136
Item 14 - Material Modifications to the Rights of Security Holders
and Use of Proceeds............................................136
Item 15 - Controls and Procedures........................................136
Item 16A - Audit Committee Financial Expert..............................137
Item 16B - Code of Ethics................................................137
Item 16C - Principal Accountant Fees and Services........................137
Item 16D - Exemptions from the Listing Standards for Audit Committees....138
Item 16E - Purchases of Equity Securities by the Issuer and Affiliated
Purchasers....................................................138
PART III.....................................................................139
Item 17 - Financial Statements...........................................139
Item 18 - Financial Statements...........................................139
Item 19 - Exhibits.......................................................139
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES ....................F-1
SCHEDULE I - Parent Company Only Financial Statements .......................S-2
SCHEDULE II - Valuation and Qualifying Accounts .............................S-9
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INTRODUCTION
CEMEX, S.A. de C.V. is incorporated as a stock corporation with
variable capital organized under the laws of the United Mexican States, or
Mexico. Except as the context otherwise may require, references in this annual
report to "CEMEX," "we," "us" or "our" refer to CEMEX, S.A. de C.V., its
consolidated subsidiaries and, except for accounting purposes, its
non-consolidated affiliates. For accounting purposes, references in this annual
report to "CEMEX," "we," "us" or "our" refer solely to CEMEX, S.A. de C.V. and
its consolidated subsidiaries. See note 1 to our consolidated financial
statements included elsewhere in this annual report. At our 2005 annual
shareholders' meeting held on April 27, 2006, our shareholders authorized the
change of CEMEX's legal and commercial name to CEMEX, Sociedad Anonima Bursatil
de Capital Variable, or CEMEX, S.A.B. de C.V., effective as of July 3, 2006.
The change in our corporate name, which means that we will now be called a
Publicly Held Company (Sociedad Anonima Bursatil), was made to comply with the
requirements of the new Mexican Securities Law enacted on December 28, 2005,
which will become effective on June 28, 2006.
PRESENTATION OF FINANCIAL INFORMATION
Our consolidated financial statements included elsewhere in this
annual report have been prepared in accordance with Generally Accepted
Accounting Principles in Mexico ("Mexican GAAP"), which differ in significant
respects from U.S. GAAP. We are required, pursuant to Mexican GAAP, to present
our financial statements in constant Pesos representing the same purchasing
power for each period presented. Accordingly, unless otherwise indicated, all
financial data presented in this annual report are stated in constant Pesos as
of December 31, 2005. See note 25 to our consolidated financial statements
included elsewhere in this annual report for a description of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to us. Non-Peso
amounts included in those statements are first translated into Dollar amounts,
in each case at a commercially available or an official government exchange
rate for the relevant period or date, as applicable. Those Dollar amounts are
then translated into Peso amounts at the CEMEX accounting rate, described under
Item 3 -- "Key Information -- Mexican Peso Exchange Rates" as of the relevant
period or date, as applicable.
On April 27, 2006, our shareholders approved a new stock split, which
we expect to occur in July 2006. In connection with the stock split, each of
our existing series A shares will be surrendered in exchange for two new series
A shares, and each of our existing series B shares will be surrendered in
exchange for two new series B shares. Concurrent with this stock split, our
shareholders authorized the amendment of the CPO trust agreement pursuant to
which our CPOs are issued to provide for the substitution of two new CPOs for
each of our existing CPOs, with each new CPO representing two new series A
shares and one new series B share. In connection with the stock split and at
our request, Citibank, N.A., as depositary for the ADSs, will distribute one
additional ADS for each ADS outstanding as of the record date for the stock
split. The ratio of CPOs to ADSs will not change as a result of the stock
split; each ADS will represent ten (10) new CPOs following the stock split and
the CPO trust amendment. The proportional equity interest participation of
existing shareholders will not change as a result of the stock split. The
financial data set forth in this annual report have not been adjusted to give
retroactive effect to the stock split.
References in this annual report to "U.S.$" and "Dollars" are to U.S.
Dollars, references to "(euro)" are to Euros, references to "(pound)"and
"Pounds" are to British Pounds, references to "(Y)" and "Yen" are to Japanese
Yen and, unless otherwise indicated, references to "Ps," "Mexican Pesos" and
"Pesos" are to constant Mexican Pesos as of December 31, 2005. The Dollar
amounts provided in this annual report and the financial statements included
elsewhere in this annual report, unless otherwise indicated, are translations
of constant Peso amounts, at an exchange rate of Ps10.62 to U.S.$1.00, the
CEMEX accounting rate as of December 31, 2005. However, in the case of
transactions conducted in Dollars, we have presented the Dollar amount of the
transaction and the corresponding Peso amount that is presented in our
consolidated financial statements. These translations have been prepared solely
for the convenience of the reader and should not be construed as
representations that the Peso amounts actually represent those Dollar amounts
or could be converted into Dollars at the rate indicated. See Item 3 -- "Key
Information -- Selected Consolidated Financial Information."
The noon buying rate for Pesos on December 30, 2005 was Ps10.63 to
U.S.$1.00 and on May 31, 2006 was Ps11.29 to U.S.$1.00.
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CO-REGISTRANTS
Our co-registrants are wholly-owned subsidiaries that have provided a
corporate guarantee guaranteeing payment of our 9.625% Notes due 2009. These
subsidiaries, which we refer to as our guarantors, are CEMEX Mexico, S.A. de
C.V., or CEMEX Mexico, and Empresas Tolteca de Mexico, S.A. de C.V., or
Empresas Tolteca de Mexico. The guarantors, together with their subsidiaries,
account for substantially all of our revenues and operating income. See Item 4
- -- "Information on the Company -- North America -- Our Mexican Operations."
Pursuant to Rule 12h-5 under the Securities Exchange Act of 1934 (the "Exchange
Act"), no separate financial statements or other disclosures concerning the
guarantors other than the narrative disclosures and financial information set
forth in note 25(x) to our consolidated financial statements have been
presented in this annual report.
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PART I
Item 1 - Identity of Directors, Senior Management and Advisors
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Not applicable.
Item 2 - Offer Statistics and Expected Timetable
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Not applicable.
Item 3 - Key Information
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Risk Factors
Many factors could have an effect on our financial condition, cash
flows and results of operations. We are subject to various risks resulting from
changing economic, environmental, political, industry, business, financial and
climate conditions. The principal factors are described below.
WE ARE CONTINUALLY ANALYZING POSSIBLE ACQUISITIONS OF NEW OPERATIONS, SOME OF
WHICH MAY HAVE A MATERIAL IMPACT ON OUR FINANCIAL POSITION, AND WE MAY NOT BE
ABLE TO REALIZE THE EXPECTED BENEFITS FROM ANY SUCH FUTURE ACQUISITIONS OR FROM
THE RMC ACQUISITION.
A key element of our growth strategy is to acquire new operations and
integrate such operations with our existing operations. Our ability to realize
the expected benefits from these acquisitions depends, in large part, on our
ability to integrate the new operations with existing operations and to apply
our business practices in the new operations in a timely and effective manner.
These efforts may not be successful. Furthermore, our growth strategy depends
on our ability to identify and acquire suitable assets at desirable prices. We
are continually analyzing possible acquisitions of assets which in some cases,
such as the case of the RMC acquisition described below, may have a material
impact on our financial position. We cannot assure you that we will be
successful in identifying or purchasing suitable assets in the future. If we
fail to make further acquisitions, we may not be able to continue to grow in
the long term at our historic rate.
On March 1, 2005, we completed our acquisition of RMC Group p.l.c., or
RMC, a leading international producer and supplier of cement, ready-mix
concrete and aggregates, for a total purchase price of approximately U.S.$6.5
billion, which included approximately U.S.$2.2 billion of assumed debt. RMC,
which was headquartered in the United Kingdom, had significant operations in
the United Kingdom, Germany, France and the United States, as well as
operations in other European countries and globally. As of December 31, 2005,
we had identified approximately U.S.$360 million of annual savings that we
expect to achieve by 2007 through cost-saving synergies, including
approximately U.S.$240 million during 2006. Our success in realizing these cost
savings and deriving significant benefits from this acquisition will depend on
our ability to standardize management processes, capitalize on trading network
benefits, consolidate logistics and improve global procurement and energy
efficiency.
In addition, although we have substantially realized our expected
benefits from acquisitions in the past, the acquired companies prior to the RMC
acquisition were primarily engaged in cement operations, which have
traditionally been the focus of our business. Also, the companies we have
acquired in the past have had significant operations in only one country. The
integration of RMC's worldwide operations, which consist primarily of ready-mix
concrete and aggregates operations, has presented new challenges as it requires
us to simultaneously integrate operations in many different countries and focus
on ready-mix concrete and aggregates operations on a global scale, in addition
to our traditional focus on cement operations. Additional acquisitions may also
present formidable integration challenges. See Item 4 "Information on the
Company -- Our Business Strategy."
OUR ABILITY TO PAY DIVIDENDS AND REPAY DEBT DEPENDS ON OUR SUBSIDIARIES'
ABILITY TO TRANSFER INCOME AND DIVIDENDS TO US.
We are a holding company with no significant assets other than the
stock of our wholly-owned and non-wholly-owned subsidiaries and our holdings of
cash and marketable securities. Our ability to pay dividends and
3
repay debt depends on the continued transfer to us of dividends and other income
from our wholly-owned and non-wholly-owned subsidiaries. The ability of our
subsidiaries to pay dividends and make other transfers to us is limited by
various regulatory, contractual and legal constraints that affect our
subsidiaries.
WE HAVE INCURRED AND WILL CONTINUE TO INCUR DEBT, WHICH COULD HAVE AN ADVERSE
EFFECT ON THE PRICE OF OUR CPOS AND ADSS, RESULT IN US INCURRING INCREASED
INTEREST COSTS AND LIMIT OUR ABILITY TO DISTRIBUTE DIVIDENDS, FINANCE
ACQUISITIONS AND EXPANSIONS AND MAINTAIN FLEXIBILITY IN MANAGING OUR BUSINESS
ACTIVITIES.
We have incurred and will continue to incur significant amounts of
debt, particularly in connection with financing acquisitions, which could have
an adverse effect on the price of our Ordinary Participation Certificates, or
CPOs, and American Depositary Shares, or ADSs. Our indebtedness may have
important consequences, including increased interest costs if we are unable to
refinance existing indebtedness on satisfactory terms. In addition, the debt
instruments governing a substantial portion of our indebtedness contain various
covenants that require us to maintain financial ratios, restrict asset sales
and restrict our ability to use the proceeds from a sale of assets.
Consequently, our ability to distribute dividends, finance acquisitions and
expansions and maintain flexibility in managing our business activities could
be limited. As of December 31, 2005, we had outstanding debt equal to Ps101
billion (U.S.$9.5 billion). The aggregate amount of debt we incurred in
connection with the RMC acquisition was approximately U.S.$6.5 billion,
including our assumption of approximately U.S.$2.2 billion of RMC's debt.
WE HAVE TO SERVICE OUR DOLLAR DENOMINATED DEBT WITH REVENUES GENERATED IN PESOS
OR OTHER CURRENCIES, AS WE DO NOT GENERATE SUFFICIENT REVENUE IN DOLLARS FROM
OUR OPERATIONS TO SERVICE ALL OUR DOLLAR DENOMINATED DEBT. THIS COULD ADVERSELY
AFFECT OUR ABILITY TO SERVICE OUR DEBT IN THE EVENT OF A DEVALUATION OR
DEPRECIATION IN THE VALUE OF THE PESO, OR ANY OF THE OTHER CURRENCIES OF THE
COUNTRIES IN WHICH WE OPERATE.
A substantial portion of our outstanding debt is denominated in
Dollars; as of March 31, 2006, our Dollar denominated debt represented
approximately 75% of our total debt (after giving effect to our
currency-related derivatives as of such date). This debt, however, must be
serviced by funds generated from sales by our subsidiaries. As of the date of
this annual report, we do not generate sufficient revenue in Dollars from our
operations to service all our Dollar denominated debt. Consequently, we have to
use revenues generated in Pesos, Euros or other currencies to service our
Dollar denominated debt. See Item 5 -- "Operating and Financial Review and
Prospects -- Qualitative and Quantitative Market Disclosure -- Interest Rate
Risk, Foreign Currency Risk and Equity Risk -- Foreign Currency Risk." A
devaluation or depreciation in the value of the Peso, Euro or any of the other
currencies of the countries in which we operate, compared to the Dollar, could
adversely affect our ability to service our debt. During 2005, Mexico, Spain,
the United Kingdom and the Rest of Europe region, our main
non-Dollar-denominated operations, together generated approximately 53% of our
sales (approximately 19%, 9%, 9% and 16%, respectively), before eliminations
resulting from consolidation. In 2005, approximately 25% of our sales were
generated in the United States, with the remaining 22% of our sales being
generated in several countries, with a number of currencies having material
depreciations against the Dollar. During 2005, the Peso appreciated
approximately 5% against the Dollar, while the Euro and the Pound depreciated
approximately 13% and 11%, respectively, against the Dollar. Although we have
foreign exchange forward contracts and cross currency swap contracts in place
to mitigate our currency-related risks and expect to enter into future currency
hedges, they may not be effective in covering all our currency-related risks.
As of March 31, 2006, our Euro denominated debt represented
approximately 20% of our total debt (after giving effect to our
currency-related derivatives as of such date). However, we believe that our
generation of revenues in Euros from our operations in Spain and the Rest of
Europe region will be sufficient to service these obligations. As of March 31,
2006, our Yen denominated debt represented approximately 5% of our total debt
(after giving effect to our currency-related derivatives as of such date). As
of that date, we had no Pound denominated debt outstanding.
WE ARE DISPUTING SOME TAX CLAIMS, AN ADVERSE RESOLUTION OF WHICH MAY RESULT IN
A SIGNIFICANT ADDITIONAL TAX EXPENSE.
We have received notices from tax authorities in Mexico and the
Philippines of tax claims in respect of several prior tax years for a total
amount of approximately U.S.$70 million and U.S.$59 million, respectively,
4
including interest and penalties through December 31, 2005. We believe that
these claims will not have a material adverse effect on our net income.
In addition, during May 2006, we and some of our Mexican subsidiaries
were notified by the Mexican tax office of several tax assessments with respect
to tax years 1992 and 2002 in a total amount of approximately Ps3,793 million
(U.S.$335 million). The tax assessments are based primarily on: (i) disallowed
restatement of consolidated tax loss carryforwards in the same period in which
they occurred and (ii) investments made in entities incorporated in foreign
countries with preferential tax regimes (Regimenes Fiscales Preferentes). We
plan to contest these tax claims, and we are in the process of filing an appeal
for each of these tax claims before the Mexican federal tax court. If we fail
to obtain favorable rulings on appeal, these tax claims may have a material
impact on us.
We are also challenging the constitutionality of several amendments to
Mexican income tax legislation that became effective in 2005 and that would
increase taxes we pay on passive income from some of our foreign operations. We
believe these amendments are contrary to Mexican constitutional principles, and
on August 8, 2005, we filed a motion in the Mexican federal court challenging
the constitutionality of the amendments. On December 23, 2005, we obtained a
favorable ruling from the Mexican federal court that the amendments were
unconstitutional; however, the Mexican tax authority has appealed this ruling.
If the final ruling is not favorable to us, these amendments may have a material
impact on us. See Item 4 -- "Information on the Company --Regulatory Matters
and Legal Proceedings -- Tax Matters."
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS.
Our operations are subject to laws and regulations relating to the
protection of the environment in the various jurisdictions in which we operate,
such as regulations regarding the release of cement into the air or emissions
of greenhouse gases. Stricter laws and regulations, or stricter interpretation
of existing laws or regulations, may impose new liabilities on us or result in
the need for additional investments in pollution control equipment, either of
which could result in a material decline in our profitability in the short
term.
In addition, our operations in the United Kingdom, Spain and the Rest
of Europe are subject to binding caps on carbon dioxide emissions imposed by
Member States of the European Union as a result of the European Union's
directive implementing the Kyoto Protocol on climate change. Under this
directive, companies receive from the relevant Member States allowances that
set limitations on the levels of carbon dioxide emissions from their industrial
facilities. These allowances are tradable so as to enable companies that manage
to reduce their emissions to sell their excess allowances to companies that are
not reaching their emissions objectives. Failure to meet the emissions caps is
subject to heavy penalties. Based on our production forecasts, we expect to
have a consolidated surplus of carbon dioxide allowances for the initial
allocation period of 2005 to 2007. However, for the next allocation period of
2008 through 2012, we expect a reduction in the allowances granted by the
environmental agencies in substantially all the Member States, which may result
in a consolidated deficit in our carbon dioxide allowances during that period.
We believe we may be able to reduce the impact of any deficit by either
reducing carbon dioxide emissions in our facilities or by implementing Clean
Development Mechanism (CDM) projects that reduce greenhouse gas emissions in
emerging markets authorized by the United Nations. If we are not successful in
implementing emission reductions in our facilities or obtaining credits from
CDM projects, we may have to purchase a significant amount of allowances in the
market, the cost of which may have an impact on our operating results. See Item
4 -- "Information on the Company -- Regulatory Matters and Legal Proceedings --
Environmental Matters."
WE ARE SUBJECT TO RESTRICTIONS DUE TO MINORITY INTERESTS IN OUR CONSOLIDATED
SUBSIDIARIES.
We conduct our business through subsidiaries. In some cases,
third-party shareholders hold minority interests in these subsidiaries. Various
disadvantages may result from the participation of minority shareholders whose
interests may not always coincide with ours. Some of these disadvantages may,
among other things, result in our inability to implement organizational
efficiencies and transfer cash and assets from one subsidiary to another in
order to allocate assets most effectively.
5
HIGHER ENERGY AND FUEL COSTS MAY HAVE A MATERIAL ADVERSE AFFECT ON OUR
OPERATING RESULTS.
Our operations consume significant amounts of energy and fuel, the
cost of which has significantly increased worldwide in recent years. To
mitigate high energy and fuel costs and volatility, we have implemented the use
of alternative fuels such as petcoke and tires, which has resulted in reduced
energy and fuel costs and less vulnerability to potential price spikes. We have
also implemented technical improvements in several facilities and entered into
long term supply contracts of petcoke and electricity to mitigate price
volatility. Despite these measures, we cannot assure you that our operations
would not be materially adversely affected in the future if prevailing
conditions remain for a long period of time or if energy and fuel costs
continue to increase.
OUR OPERATIONS CAN BE AFFECTED BY ADVERSE WEATHER CONDITIONS.
Construction activity, and thus demand for our products, decreases
substantially during periods of cold weather, when it snows or when heavy or
sustained rainfalls occur. Consequently, demand for our products is
significantly lower during the winter in temperate countries and during the
rainy season in tropical countries. With the acquisition of RMC in 2005,
particularly its operations in Europe and the United States, our operations are
more exposed to weather seasonality. Winter weather in our European and North
American operations significantly reduces our first quarter sales volumes, and
to a lesser extent our fourth quarter sales volumes. Sales volumes in these and
similar markets generally increase during the second and third quarters because
of normally better weather conditions. However, high levels of rainfall can
adversely affect our operations during these periods as well. Such adverse
weather conditions can adversely affect our results of operations and
profitability if they occur with unusual intensity, during abnormal periods, or
last longer than usual in our major markets, especially during peak
construction periods.
WE ARE AN INTERNATIONAL COMPANY AND ARE EXPOSED TO RISKS IN THE COUNTRIES IN
WHICH WE HAVE SIGNIFICANT OPERATIONS OR INTERESTS.
We are dependent, in large part, on the economies of the countries in
which we market our products. The economies of these countries are in different
stages of socioeconomic development. Consequently, like many other companies
with significant international operations, we are exposed to risks from changes
in foreign currency exchange rates, interest rates, inflation, governmental
spending, social instability and other political, economic or social
developments that may materially reduce our net income.
With the acquisition of RMC in 2005, our geographic diversity has
significantly increased. We currently have operations in Mexico, the United
States, the United Kingdom, Spain, the Rest of Europe region (including Germany
and France), South America, Central America and the Caribbean (including
Venezuela and Colombia), Africa and the Middle East and Asia. As of December
31, 2005, our U.S. operations represented approximately 18% of our total
assets, our Mexican operations represented approximately 18% of our total
assets, our United Kingdom operations represented approximately 12% of our
total assets, our Spanish operations represented approximately 7% of our total
assets, our Rest of Europe operations represented approximately 12% of our
total assets, our South America, Central America and the Caribbean operations
represented approximately 7% of our total assets, our Africa and the Middle
East operations represented approximately 2% of our total assets and our Asia
operations represented approximately 3% of our total assets. For the year ended
December 31, 2005, before eliminations resulting from consolidation, our U.S.
operations represented approximately 25% of our net sales, our Mexican
operations represented approximately 19% of our net sales, our United Kingdom
operations represented approximately 9% of our net sales, our Spanish
operations represented approximately 9% of our net sales, our Rest of Europe
operations represented approximately 16% of our net sales, our South America,
Central America and the Caribbean operations represented approximately 9% of
our net sales, our Africa and the Middle East operations represented
approximately 3% of our net sales and our Asia operations represented
approximately 2% of our net sales. Adverse economic conditions in any of these
countries or regions may produce a negative impact on our net income from our
operations in that country or region. For a geographic breakdown of our net
sales for the year ended December 31, 2005 on a pro forma basis giving effect
to the RMC acquisition as though it had been completed on January 1, 2005,
please see Item 4 -- "Information on the Company -- Geographic Breakdown of Pro
Forma 2005 Net Sales."
6
If the Mexican economy experiences a recession or if Mexican inflation
and interest rates increase significantly, our net income from our Mexican
operations may decline materially because construction activity may decrease,
which may lead to a decrease in sales of cement and ready-mix concrete. The
Mexican government does not currently restrict the ability of Mexicans or
others to convert Pesos to Dollars, or vice versa. The Mexican Central Bank has
consistently made foreign currency available to Mexican private sector entities
to meet their foreign currency obligations. Nevertheless, if shortages of
foreign currency occur, the Mexican Central Bank may not continue its practice
of making foreign currency available to private sector companies, and we may
not be able to purchase the foreign currency we need to service our foreign
currency obligations without substantial additional cost.
Although we have a diversification of revenue sources in Europe, a
number of countries, particularly Germany and Italy, have experienced economic
stagnation recently, while France and the United Kingdom have experienced slow
economic growth. To the extent recovery from these economic conditions does not
materialize or otherwise takes place over an extended period of time, our
business, financial condition and results of operations may be adversely
affected. In addition, the economic stagnation in Germany and Italy and slow
economic growth in France and the United Kingdom may negatively impact the
economic growth and integration of the ten new countries admitted into the
European Union in May 2004, including Poland, the Czech Republic, Hungary,
Latvia and Lithuania, in which we acquired operations in the RMC acquisition.
Our operations in South America, Central America and the Caribbean are
faced with several risks that are more significant than in other countries.
These risks include political instability and economic volatility. For example,
in recent years, Venezuela has experienced volatility and depreciation of its
currency, high interest rates, political instability, increased inflation,
decreased gross domestic product and labor unrest, including a general strike.
In response to this situation, and in an effort to shore up the economy and
control inflation, Venezuelan authorities have imposed foreign exchange and
price controls on specified products, including cement. Any significant
political instability or political instability and economic volatility in the
countries in South America, Central America and the Caribbean in which we have
operations may have an impact on cement prices and demand for cement and
ready-mix concrete, which may adversely affect our results of operations.
Our operations in Africa and the Middle East have faced rising
instability as a result of, among other things, civil unrest, extremism, the
continued deterioration of Israeli-Palestinian relations and the war in Iraq.
There can be no assurance that political turbulence in the Middle East will
abate at any time in the near future or that neighboring countries, including
Egypt and the United Arab Emirates, will not be drawn into the conflict or
experience instability.
There have been terrorist attacks in the United States, Indonesia,
Spain and the United Kingdom, countries in which we maintain operations, and
ongoing threats of future terrorist attacks in the United States and abroad.
Although it is not possible at this time to determine the long-term effect of
these terrorist threats, there can be no assurance that there will not be other
attacks or threats in the United States or abroad that will lead to economic
contraction in the United States or any other of our major markets. Economic
contraction in the United States or any of our major markets could affect
domestic demand for cement and have a material adverse effect on our
operations.
PT Semen Gresik (Persero) Tbk., or Gresik, an Indonesian cement
producer in which we own a 25.5% interest, has experienced ongoing difficulties
at PT Semen Padang, or Semen Padang, the subsidiary of Gresik that owns and
operates the Padang plant, including the effective loss of operational and
financial control of Semen Padang, and until recently, the inability to prepare
consolidated financial statements that include Semen Padang's operations and
the inability of its independent auditors to provide an unqualified audit
opinion on such financial statements. In April 2006, after making several
adjustments suggested by its independent auditors, unqualified audited
financial statements for 2004 and 2005 were finally presented by Semen Gresik.
In December 2003, we filed a request for arbitration against the Republic of
Indonesia and the Indonesian government before the International Centre for
Settlement of Investment Disputes, or ICSID, based in Washington D.C. seeking,
among other things, rescission of the purchase agreement entered into with the
Republic of Indonesia in 1998, plus repayment of all costs and expenses, and
compensatory damages. In 2004, an Arbitral Tribunal was established by the
ICSID to hear the dispute and held its first hearings, at which the Indonesian
government objected to the Arbitral Tribunal's jurisdiction. As of the date of
this annual report, the Arbitral Tribunal had not yet rendered its
jurisdictional decision. We cannot predict what effect, if any, this action
will have on our investment in Gresik, how the Arbitral
7
Tribunal will rule on the Indonesian government's jurisdictional objections or
the merits of the dispute, or the time-frame in which the Arbitral Tribunal will
rule. See Item 4 -- "Information on the Company -- Asia -- Our Indonesian Equity
Investment" and "-- Regulatory Matters and Legal Proceedings -- Other Legal
Proceedings."
On May 3, 2006, we agreed to sell 24.9% of Gresik to Indonesia-based
Rajawali Group for approximately U.S.$337 million. The purchaser's obligations
under our sales contract are subject to obtaining the approval of the
Indonesian government and the fulfillment of other conditions. In the event
this sale is consummated, our remaining interest in Gresik will be 0.6%.
On May 17, 2006, we received a letter from the Indonesian government
purporting to exercise its right to repurchase, under the 1998 purchase
agreement, pursuant to which we acquired our interest in Gresik, the Gresik
shares we have agreed to sell to the Rajawali Group. However, we believe that
the Indonesian government's purported exercise of this right did not comply
with the requirements set forth in the 1998 purchase agreement, and we are in
correspondence and in discussions with the Indonesian government concerning
this issue. No assurance can be given either that the sale to the Rajawali
Group will be consummated, or that the Indonesian government will purchase the
Gresik shares, on the terms outlined above, or that a sale transaction on
similar or different terms may be consummated with any other purchaser.
YOU MAY BE UNABLE TO ENFORCE JUDGMENTS AGAINST US.
You may be unable to enforce judgments against us. We are a stock
corporation with variable capital (sociedad anonima de capital variable),
organized under the laws of Mexico. Substantially all our directors and
officers and some of the experts named in this annual report reside in Mexico,
and all or a significant portion of the assets of those persons may be, and the
majority of our assets are, located outside the United States. As a result, it
may not be possible for investors to effect service of process within the
United States upon those persons or to enforce judgments against them or
against us in U.S. courts, including judgments predicated upon the civil
liability provisions of the U.S. federal securities laws. We have been advised
by Lic. Ramiro G. Villarreal, General Counsel of CEMEX, that it may not be
possible to enforce, in original actions in Mexican courts, liabilities
predicated solely on the U.S. federal securities laws and it may not be
possible to enforce, in Mexican courts, judgments of U.S. courts obtained in
actions predicated upon the civil liability provisions of the U.S. federal
securities laws.
PREEMPTIVE RIGHTS MAY BE UNAVAILABLE TO ADS HOLDERS.
ADS holders may be unable to exercise preemptive rights granted to our
shareholders, in which case ADS holders could be substantially diluted. Under
Mexican law, whenever we issue new shares for payment in cash or in kind, we
are generally required to grant preemptive rights to our shareholders. However,
ADS holders may not be able to exercise these preemptive rights to acquire new
shares unless both the rights and the new shares are registered in the United
States or an exemption from registration is available.
We cannot assure you that we would file a registration statement in
the United States at the time of any rights offering. In addition, while the
depositary is permitted, if lawful and feasible at that time, to sell those
rights and distribute the proceeds of that sale to ADS holders who are entitled
to those rights, current Mexican law does not permit sales of that kind.
8
MEXICAN PESO EXCHANGE RATES
Mexico has had no exchange control system in place since the dual
exchange control system was abolished on November 11, 1991. The Mexican Peso
has floated freely in foreign exchange markets since December 1994, when the
Mexican Central Bank (Banco de Mexico) abandoned its prior policy of having an
official devaluation band. Since then, the Peso has been subject to substantial
fluctuations in value. The Peso depreciated against the Dollar by approximately
13% and 8% in 2002 and 2003, respectively, and appreciated against the Dollar
by approximately 1% and 5% in 2004 and 2005, respectively. These percentages
are based on the exchange rate that we use for accounting purposes, or the
CEMEX accounting rate. The CEMEX accounting rate represents the average of
three different exchange rates that are provided to us by Banco Nacional de
Mexico, S.A., or Banamex. For any given date, the CEMEX accounting rate may
differ from the noon buying rate for Pesos in New York City published by the
U.S. Federal Reserve Bank of New York.
The following table sets forth, for the periods and dates indicated,
the end-of-period, average and high and low points of the CEMEX accounting rate
as well as the noon buying rate for Pesos, expressed in Pesos per U.S.$1.00.
CEMEX Accounting Rate Noon Buying Rate
---------------------------------------------- --------------------------------------------
End of End of
Year ended December 31, Period Average(1) High Low Period Average(1) High Low
---------- ----------- -------- ---------- ---------- ----------- --------- --------
2001..................... 9.17 9.33 9.99 8.95 9.16 9.34 9.97 8.95
2002..................... 10.38 9.76 10.35 9.02 10.43 9.66 10.43 9.00
2003..................... 11.24 10.84 11.39 10.10 11.24 10.85 11.41 10.11
2004..................... 11.14 11.29 11.67 10.81 11.15 11.29 11.64 10.81
2005..................... 10.62 10.85 11.38 10.42 10.63 10.89 11.41 10.41
Monthly (2005-2006)
November.............. 10.56 -- 10.77 10.56 10.58 -- 10.77 10.57
December.............. 10.62 -- 10.78 10.42 10.63 -- 10.77 10.41
January............... 10.46 -- 10.64 10.45 10.44 -- 10.64 10.44
February.............. 10.48 -- 10.56 10.44 10.45 -- 10.53 10.43
March................. 10.88 -- 11.02 10.48 10.90 -- 10.95 10.46
April................. 11.07 -- 11.15 10.93 11.09 -- 11.16 10.86
May................... 11.34 -- 11.35 10.86 11.29 -- 11.31 10.84
(1) The average of the CEMEX accounting rate or the noon buying rate for
Pesos, as applicable, on the last day of each full month during the
relevant period.
On May 31, 2006, the noon buying rate for Pesos was Ps11.29 to
U.S.$1.00 and the CEMEX accounting rate was Ps11.34 to U.S.$1.00.
For a discussion of the financial treatment of our operations
conducted in other currencies, see Item 3 -- "Key Information -- Selected
Consolidated Financial Information."
9
Selected Consolidated Financial Information
The financial data set forth below as of and for each of the five
years ended December 31, 2005 have been derived from our audited consolidated
financial statements. The financial data set forth below as of December 31,
2005 and 2004 and for each of the three years ended December 31, 2005, have
been derived from, and should be read in conjunction with, and are qualified in
their entirety by reference to, the consolidated financial statements and the
notes thereto included elsewhere in this annual report. These financial
statements were approved by our shareholders at the 2005 annual general
meeting, which took place on April 27, 2006.
The audited consolidated financial statements for the year ended
December 31, 2005 include RMC's results of operations for the ten-month period
ended December 31, 2005, while the audited consolidated financial statements
for each of the four years ended December 31, 2004 do not include RMC's results
of operations. As a result, the financial data for the year ended December 31,
2005 are not comparable to the prior periods.
Our consolidated financial statements included elsewhere in this
annual report have been prepared in accordance with Mexican GAAP, which differs
in significant respects from U.S. GAAP. We are required, pursuant to Mexican
GAAP, to present our financial statements in constant Pesos representing the
same purchasing power for each period presented. Accordingly, unless otherwise
indicated, all financial data presented below and elsewhere in this annual
report are stated in constant Pesos as of December 31, 2005. See note 25 to our
consolidated financial statements included elsewhere in this annual report for
a description of the principal differences between Mexican GAAP and U.S. GAAP
as they relate to us.
Non-Peso amounts included in the financial statements are first
translated into Dollar amounts, in each case at a commercially available or an
official government exchange rate for the relevant period or date, as
applicable, and those Dollar amounts are then translated into Peso amounts at
the CEMEX accounting rate, described under Item 3 -- "Key Information --
Mexican Peso Exchange Rates," as of the relevant period or date, as applicable.
Under Mexican GAAP, each time we report results for the most recently
completed period, the Pesos previously reported in prior periods should be
adjusted to Pesos of constant purchasing power as of the most recent balance
sheet by multiplying the previously reported Pesos by a weighted average
inflation index. This index is calculated based upon the inflation rates of the
countries in which we operate and the changes in the exchange rates of each of
these countries, weighted according to the proportion that our assets in each
country represent of our total assets. The following table reflects the factors
that have been used to restate the originally reported Pesos to Pesos of
constant purchasing power as of December 31, 2005:
Cumulative Weighted
Annual Weighted Average Factor to
Average Factor December 31, 2005
-------------------------- -----------------------
2001................ 1.0916 1.2287
2002................ 1.1049 1.1256
2003................ 1.0624 1.0188
2004................ 0.9590 0.9590
-----------------------------------------------------------------------
The Dollar amounts provided below and, unless otherwise indicated,
elsewhere in this annual report are translations of constant Peso amounts at an
exchange rate of Ps10.62 to U.S.$1.00, the CEMEX accounting rate as of December
31, 2005. However, in the case of transactions conducted in Dollars, we have
presented the Dollar amount of the transaction and the corresponding Peso
amount that is presented in our consolidated financial statements. These
translations have been prepared solely for the convenience of the reader and
should not be construed as representations that the Peso amounts actually
represent those Dollar amounts or could be converted into Dollars at the rate
indicated. The noon buying rate for Pesos on December 31, 2005 was Ps10.63 to
U.S.$1.00 and on May 31, 2006 was Ps11.29 to U.S.$1.00. From December 31, 2005
through May 31, 2006, the Peso depreciated by approximately 6.2% against the
Dollar, based on the noon buying rate for Pesos.
10
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Selected Consolidated Financial Information
As of and for the year ended December 31,
-----------------------------------------------------------------------------
2001 2002 2003 2004 2005 2005
-------- ----------- ---------- ----------- ------------ ---------------
(in millions of constant Pesos as of December 31, 2005 and
Dollars, except ratios and share and per share amounts)
Income Statement Information:
Net sales...................................... Ps 78,015 Ps 76,456 Ps 82,045 Ps 87,062 Ps 162,709 U.S.$15,321
Cost of sales(1)............................... (43,882) (42,715) (47,296) (48,997) (98,460) (9,271)
Gross profit................................... 34,133 33,741 34,749 38,065 64,249 6,050
Operating expenses............................. (15,503) (18,429) (18,084) (18,282) (37,840) (3,563)
Operating income............................... 18,630 15,312 16,665 19,783 26,409 2,487
Comprehensive financing income (cost), net(2).. 2,982 (3,848) (3,063) 1,424 2,600 245
Other income (expense), net.................... (4,697) (4,550) (5,230) (5,169) (3,372) (318)
Income before income tax, business assets tax,
employees' statutory profit sharing and
equity in income of affiliates............ 16,915 6,914 8,372 16,038 25,637 2,414
Minority interest.............................. 1,728 433 348 224 585 55
Majority interest net income................... 13,273 6,079 7,201 13,965 22,425 2,112
Basic earnings per share(3)(4)................. 1.55 0.68 0.76 1.40 2.16 0.20
Diluted earnings per share(3)(4)............... 1.56 0.68 0.74 1.39 2.15 0.20
Dividends per share(3)(5)(6)................... 0.39 0.41 0.39 0.83 0.50 0.04
Number of shares outstanding(3)(7)............. 8,758 9,124 9,722 10,186 10,572 10,572
Balance Sheet Information:
Cash and temporary investments................. 4,828 4,220 3,336 3,657 6,387 601
Net working capital investment(8).............. 10,510 8,174 6,593 5,610 13,463 1,268
Property, machinery and equipment, net......... 100,744 104,734 106,106 102,703 165,055 15,542
Total assets................................... 182,888 186,194 183,409 185,684 284,228 26,764
Short-term debt................................ 11,579 16,281 15,219 11,151 12,647 1,191
Long-term debt................................. 48,960 51,109 51,955 52,207 88,006 8,287
Minority interest(9)........................... 22,259 14,101 6,092 4,155 5,613 529
Stockholders' equity (excluding minority
interest)(10)............................. 69,601 67,122 71,393 83,657 104,344 9,825
Book value per share(3)(7)(11)................. 7.95 7.36 7.35 8.21 8.71 0.93
Other Financial Information:
Operating margin............................... 23.9% 20.0% 20.3% 22.7% 16.2% 16.2%
EBITDA(12)..................................... 25,418 22,401 24,141 27,117 37,778 3,557
Ratio of EBITDA to interest expense, capital
securities dividends and preferred equity
dividends................................. 4.39 5.23 5.27 6.82 6.76 6.76
Investment in property, machinery and equipment,
net....................................... 5,756 4,954 4,510 4,637 8,341 785
Depreciation and amortization.................. 8,932 8,942 9,445 9,159 11,591 1,091
Net resources provided by operating
activities(13)............................ 26,596 19,440 17,937 23,811 36,300 3,418
Basic earnings per CPO(3)(4)................... 4.65 2.04 2.28 4.20 6.48 0.60
As of and for the year ended December 31,
-----------------------------------------------------------------------------
2001 2002 2003 2004 2005 2005
-------- ----------- ---------- ----------- ------------ ---------------
(in millions of constant Pesos as of December 31, 2005 and Dollars, except
per share amounts)
US. GAAP (14):
Income Statement Information:
Majority net sales............................. Ps74,936 Ps 75,858 Ps 86,568 Ps 92,553 Ps 159,516 U.S.$15,020
Operating income............................... 11,978 12,261 14,770 17,007 24,706 2,326
Majority net income............................ 11,989 6,367 8,984 18,505 22,115 2,082
Basic earnings per share....................... 1.49 0.71 0.95 1.85 2.13 0.20
Diluted earnings per share..................... 1.48 0.71 0.93 1.84 2.12 0.20
Balance Sheet Information:
Total assets................................... 184,153 191,179 202,230 212,550 293,743 27,659
Total long-term debt........................... 44,381 46,479 48,620 44,949 82,610 7,779
Shares subject to mandatory redemption (15).... -- -- 805 -- -- --
Minority interest.............................. 9,046 5,860 5,882 4,672 5,729 539
Other mezzanine items (15)..................... 19,169 14,761 -- -- -- --
Total majority stockholders' equity............ 55,402 58,289 77,204 95,412 111,381 10,488
(footnotes on next page)
11
________________
(1) Cost of sales includes depreciation.
(2) Comprehensive financing income (cost), net, includes financial expenses,
financial income, results from valuation and liquidation of financial
instruments, including derivatives and marketable securities, foreign
exchange result, net and monetary position result. See Item 5 "--
"Operating and Financial Review and Prospects."
(3) Our capital stock consists of series A shares and series B shares. Each of
our CPOs represents two series A shares and one series B share. As of
December 31, 2005, approximately 96.8% of our outstanding share capital
was represented by CPOs. On April 28, 2005, our shareholders approved a
two-for-one stock split in our series A shares, series B shares and CPOs,
which became effective on July 1, 2005. The number of our outstanding ADSs
did not change as a result of the stock split; instead the ratio of CPOs
to ADSs was modified so that each ADS now represents ten CPOs. All share
and per share amounts set forth in the table above have been adjusted to
give retroactive effect to this stock split. On April 27, 2006, our
shareholders approved a new two-for-one stock split, which we expect to
occur in July 2006. In connection with the new stock split, each of our
existing series A shares will be surrendered in exchange for two new
series A shares, and each of our existing series B shares will be
surrendered in exchange for two new series B shares. Concurrently with
this new stock split, our shareholders authorized the amendment of the CPO
trust agreement pursuant to which our CPOs are issued to provide for the
substitution of two new CPOs for each of our existing CPOs, with each new
CPO representing two new series A shares and one new series B share. In
connection with the stock split and at our request, Citibank, N.A., as
depositary for the ADSs, will distribute one additional ADS for each ADS
outstanding as of the record date for the stock split. The ratio of CPOs
to ADSs will not change as a result of the new stock split; each ADS will
represent ten (10) new CPOs following the new stock split and the CPO
trust amendment. Although earnings per share, dividends per share, book
value per share, earnings per CPO and the number of shares outstanding for
the years ended December 31, 2001 through 2005 were not adjusted to give
retroactive effect to the stock split, the following table presents such
line items on a pro forma basis giving effect to the stock split.
As of and for the year ended December 31,
---------------------------------------------------------------------
2001 2002 2003 2004 2005 2005
--------- ---------- ---------- --------- ---------- -----------
(in constant Pesos as of December 31, 2005 and Dollars, except share
amounts)
Pro forma per share information
under Mexican GAAP:
Basic earnings per share............. Ps 0.78 Ps 0.34 Ps 0.38 Ps 0.70 Ps 1.08 U.S.$ 0.10
Diluted earnings per share........... 0.78 0.34 0.37 0.70 1.08 0.10
Dividends per share.................. 0.20 0.21 0.20 0.42 0.25 0.02
Book value per share................. 3.98 3.68 3.68 4.11 4.93 0.47
Basic earnings per CPO.............. 2.33 1.02 1.14 2.10 3.24 0.31
Pro forma per share information
under U.S. GAAP:
Basic earnings per share............. 0.75 0.36 0.48 0.93 1.07 0.10
Diluted earnings per share........... 0.74 0.36 0.47 0.92 1.06 0.10
Pro forma number of shares:
Number of shares outstanding
(in millions)................... 17,516 18,248 19,444 20,372 21,144 21,144
(4) Earnings per share are calculated based upon the weighted average number
of shares outstanding during the year, as described in note 21 to the
consolidated financial statements included elsewhere in this annual
report. Basic earnings per CPO is determined by multiplying each year's
basic earnings per share by three (the number of shares underlying each
CPO). Basic earnings per CPO is presented solely for the convenience of
the reader and does not represent a measure under Mexican GAAP.
(5) Dividends declared at each year's annual shareholders' meeting are
reflected as dividends of the preceding year.
(6) In recent years, our board of directors has proposed, and our shareholders
have approved, dividend proposals, whereby our shareholders have had a
choice between stock dividends or cash dividends declared in respect of the
prior year's results, with the stock issuable to shareholders who elect the
stock dividend over the cash dividend being issued at a 20% discount from
then current market prices. The dividends declared per share or per CPO in
these years, expressed in constant Pesos as of December 31, 2005, were as
follows: 2002, Ps1.17 per CPO (or Ps0.39 per share); 2003, Ps1.23 per CPO
(or Ps0.41 per share); 2004, Ps1.17 per CPO (or Ps0.39 per share); and
2005, Ps2.49 per CPO (or Ps0.83 per share). As a result of dividend
elections made by shareholders, in 2002, Ps262 million in cash was paid and
approximately 128 million additional CPOs were issued in respect of
dividends declared for the 2001 fiscal year; in 2003, Ps68 million in cash
was paid and approximately 198 million additional CPOs were issued in
respect of dividends declared for the 2002 fiscal year; in 2004, Ps161
million in cash was paid and approximately 150 million additional CPOs were
issued in respect of dividends declared for the 2003 fiscal year; and in
2005, Ps380 million in cash was paid and approximately 133 million
additional CPOs were issued in respect of dividends declared for the 2004
fiscal year. All share and per share amounts set forth in this note 6 have
been adjusted to give retroactive effect to the stock split described
above, which became effective on July 1, 2005. At our 2005 annual
shareholders' meeting, which was held on April 27, 2006, our shareholders
approved a dividend for the 2005 fiscal year of the Peso equivalent of
U.S.$0.133 per CPO (U.S.$0.0443 per share) or Ps1.49 (Ps0.50 per share),
based on the Peso/Dollar exchange rate in effect for May 25, 2006 of
Ps11.1935 to U.S.$1.00, as published by the Mexican Central Bank. Holders
of our series A shares, series B shares and CPOs will be entitled to
receive the dividend in either stock or cash consistent with our past
practices; however, under the terms of the deposit agreement pursuant to
which our ADSs are issued, we have instructed the depositary for the ADSs
not to extend the option to elect to receive cash in lieu of the stock
dividend to the holders of ADSs, unlike our practice in connection with
previous dividends when ADS holders were extended this option. As a result
of dividend elections made by shareholders, in June 2006, approximately
Ps144 million in cash will be paid and approximately 106 million additional
CPOs will be issued in respect of dividends declared for the 2005 fiscal
year.
(7) Based upon the total number of shares outstanding at the end of each
period, expressed in millions of shares, and includes shares subject to
financial derivative transactions, but does not include shares held by our
subsidiaries.
(8) Net working capital investment equals trade receivables plus inventories
less trade payables.
12
(9) In connection with a preferred equity transaction relating to the
financing of our acquisition of Southdown, Inc., now named CEMEX, Inc.,
the balance sheet item minority interest at December 31, 2001 and 2002
includes a notional amount of U.S.$900 million (Ps9.6 billion) and
U.S.$650 million (Ps6.9 billion), respectively, of preferred equity issued
in November 2000 by our Dutch subsidiary. In October 2003, we redeemed all
the U.S.$650 million of preferred equity outstanding. The balance sheet
item minority interest at December 31, 2003 includes an aggregate
liquidation amount of U.S.$66 million (Ps705 million) of 9.66% Putable
Capital Securities, which were initially issued by one of our subsidiaries
in May 1998 in an aggregate liquidation amount of U.S.$250 million. In
April 2002, approximately U.S.$184 million in aggregate liquidation amount
of these capital securities were tendered to, and accepted by, us in a
tender offer. In November 2004, we exercised a purchase option and
redeemed all the outstanding capital securities. Until January 1, 2004,
for accounting purposes under Mexican GAAP, this transaction was recorded
as minority interest in our balance sheet, and dividends paid on the
capital securities were recorded as minority interest net income in our
income statement. Accordingly, minority interest net income includes
capital securities dividends in the amount of approximately U.S.$76.1
million (Ps876 million) in 2001, U.S.$23.2 million (Ps265 million) in 2002
and U.S.$12.5 million (Ps147 million) in 2003. As of January 1, 2004, as a
result of new accounting pronouncements under Mexican GAAP, this
transaction was recorded as debt in our balance sheet, and dividends paid
on the capital securities during 2004, which amounted to approximately
U.S.$5.6 million (Ps64 million), were recorded as part of financial
expenses in our income statement.
(10) In December 1999, we entered into forward contracts with a number of banks
covering 21,000,000 ADSs. In December 2002, we agreed with the banks to
settle those forward contracts for cash and simultaneously entered into
new forward contracts with the same banks on similar terms to the original
forward transactions. Under the new forward contracts the banks retained
the ADSs underlying the original forward contracts, which had increased to
25,457,378 ADSs as a result of stock dividends through June 2003. As a
result of this net settlement, we recognized in December 2002 a decrease
of approximately U.S.$98.3 million (Ps1,050 million) in our stockholders'
equity, arising from changes in the valuation of the ADSs. In October
2003, in connection with an offering of all the ADSs underlying those
forward contracts, we agreed with the banks to settle those forward
contracts for cash. As a result of the final settlement in October 2003,
we recognized an increase of approximately U.S.$18.1 million (Ps193
million) in our stockholders' equity, arising from changes in the
valuation of the ADSs from December 2002 through October 2003. During the
life of these forward contracts, the underlying ADSs were considered to
have been owned by the banks and the forward contracts were treated as
equity transactions, and, therefore, changes in the fair value of the ADSs
were not recorded until settlement of the forward contracts.
(11) Book value per share is calculated by dividing stockholders' equity
(excluding minority interest) by the number of shares outstanding.
(12) EBITDA equals operating income before amortization expense and
depreciation. Under Mexican GAAP, amortization of goodwill is not included
in operating income, but instead is recorded in other income (expense).
EBITDA and the ratio of EBITDA to interest expense, capital securities
dividends and preferred equity dividends are presented herein because we
believe that they are widely accepted as financial indicators of our
ability to internally fund capital expenditures and service or incur debt
and preferred equity. EBITDA and such ratios should not be considered as
indicators of our financial performance, as alternatives to cash flow, as
measures of liquidity or as being comparable to other similarly titled
measures of other companies. EBITDA is reconciled below to operating
income, which we consider to be the most comparable measure as determined
under Mexican GAAP. We are not required to prepare a statement of cash
flows under Mexican GAAP and therefore do not have such Mexican GAAP cash
flow measures to present as comparable to EBITDA.
For the year ended December 31,
-----------------------------------------------------------------------
2001 2002 2003 2004 2005 2005
---------- ---------- ---------- ---------- ---------- -----------
(in millions of constant Pesos as of December 31, 2005 and Dollars)
Reconciliation of EBITDA to
operating income EBITDA.......... Ps 25,418 Ps 22,401 Ps 24,141 Ps 27,117 Ps 37,778 U.S.$3,557
Less:
Depreciation and
amortization expense 6,788 7,089 7,476 7,334 11,369 1,070
Operating income................... 18,630 15,312 16,665 19,783 26,409 2,487
========== ========== ========== ========== ========== ===========
(13) Net resources provided by operating activities equals majority interest
net income plus items not affecting cash flow plus investment in working
capital excluding effects from acquisitions.
(14) We have restated the information at and for the years ended December 31,
2001, 2002, 2003, and 2004 under U.S. GAAP using the inflation factor
derived from the national consumer price index, or NCPI, in Mexico, as
required by Regulation S-X under the Exchange Act, instead of using the
weighted average restatement factors used by us according to Mexican GAAP
and applied to the information presented under Mexican GAAP of prior
years. See note 25 to our consolidated financial statements included
elsewhere in this annual report for a description of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to CEMEX.
(15) For financial reporting under U.S. GAAP, until December 31, 2002, elements
that did not meet either the definition of equity, or the definition of
debt, were presented under a third group, commonly referred to as
"mezzanine items." As of December 31, 2002, these elements, as they
related to us, included our preferred equity and our putable capital
securities described in note 9 above and our obligation under the forward
contracts described in note 10 above. As of December 31, 2003, as a result
of the adoption of SFAS 150 "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity," these elements were
presented as a separate line item within liabilities. For a more detailed
description of these elements, as they related to us, see notes 15(E),
15(F) and 25(m) to our consolidated financial statements included
elsewhere in this annual report.
13
Item 4 - Information on the Company
--------------------------
Unless otherwise indicated, references in this annual report to our
sales and assets, including percentages, for a country or region are calculated
before eliminations resulting from consolidation, and thus include intercompany
balances between countries and regions. These intercompany balances are
eliminated when calculated on a consolidated basis.
Business Overview
We are a stock corporation with variable capital, or sociedad anonima
de capital variable, organized under the laws of the United Mexican States, or
Mexico, with our principal executive offices in Av. Ricardo Margain Zozaya
#325, Colonia Valle del Campestre, Garza Garcia, Nuevo Leon, Mexico 66265. Our
main phone number is (011-5281) 8888-8888. CEMEX's agent for service,
exclusively for actions brought by the Securities and Exchange Commission
pursuant to the requirements of the United States Federal securities laws, is
CEMEX, Inc., located at 840 Gessner Road, Suite 1400, Houston, Texas 77024.
CEMEX was founded in 1906 and was registered with the Mercantile
Section of the Public Register of Property and Commerce in Monterrey, N.L.,
Mexico, on June 11, 1920 for a period of 99 years. At our 2002 annual
shareholders' meeting, this period was extended to the year 2100. CEMEX's full
legal and commercial name is CEMEX, Sociedad Anonima de Capital Variable. At
our 2005 annual shareholders' meeting held on April 27, 2006, our shareholders
authorized the change of CEMEX's legal and commercial name to CEMEX, Sociedad
Anonima Bursatil de Capital Variable, or CEMEX, S.A.B. de C.V., effective as of
July 3, 2006. The change in our corporate name, which means that we will now be
called a Publicly Held Company (Sociedad Anonima Bursatil), was made to comply
with the requirements of the new Mexican Securities Law enacted on December 28,
2005, which will become effective on June 28, 2006.
CEMEX is the third largest cement company in the world, based on
installed capacity as of December 31, 2005 of approximately 98.2 million tons,
including approximately 17 million tons of installed capacity we acquired in
our acquisition of RMC in March 2005. We are the largest ready-mix concrete
company in the world with annual sales volumes of approximately 70 million
cubic meters, and one of the largest aggregates company in the world with
annual sales volumes of approximately 160 million tons, in each case based on
our annual sales volumes in 2005, including the sales volumes of the operations
we acquired from RMC since March 1, 2005. We are also one of the world's
largest traders of cement and clinker, having traded approximately 16 million
tons of cement and clinker in 2005, including the trading operations we
acquired from RMC since March 1, 2005. We are a holding company primarily
engaged, through our operating subsidiaries, in the production, distribution,
marketing and sale of cement, ready-mix concrete, aggregates and clinker. On
June 2, 2006, we had an equity market capitalization of approximately Ps241
billion (U.S.$21 billion).
We are a global cement manufacturer with operations in North America,
Europe, South America, Central America, the Caribbean, Africa, the Middle East
and Asia. As of December 31, 2005, we had worldwide assets of approximately
Ps284 billion (U.S.$27 billion).
As of December 31, 2005, our main cement production facilities were
located in Mexico, the United States, Spain, the United Kingdom, Germany,
Poland, Croatia, Latvia, Venezuela, Colombia, Costa Rica, the Dominican
Republic, Panama, Nicaragua, Puerto Rico, Egypt, the Philippines and Thailand.
As of December 31, 2005, our assets, cement plants and installed capacity, on
an unconsolidated basis by region, were as set forth below. Installed capacity,
which refers to theoretical annual production capacity, represents gray cement
equivalent capacity, which counts each ton of white cement capacity as
approximately two tons of gray cement capacity. The table below also includes
our proportional interest in the installed capacity of companies in which we
hold a minority interest.
14
As of December 31, 2005
------------------------------------------
Installed
Assets Number of Capacity
(in billions of Cement (millions of
constant Pesos) Plants tons per annum)
--------------- --------- --------------
North America
Mexico........................ Ps 72 15 27.2
United States................. 72 12 13.3
Europe
Spain......................... 28 8 11.0
United Kingdom................ 49 3 2.7
Rest of Europe................ 48 9 13.0
South America, Central
America and the Caribbean........ 33 13 15.4
Africa and the Middle East.......... 9 1 4.9
Asia................................ 12 4 10.7
Cement and Clinker Trading
Assets and Other Operations...... 89 -- --
In the above table, "Rest of Europe" includes our subsidiaries in
Germany, France, Ireland, Austria, Poland, Croatia, the Czech Republic,
Denmark, Hungary, Latvia and other assets in the European region, and, for
purposes of the columns labeled "Assets" and "Installed Capacity," includes our
34% interest, as of December 31, 2005, in a Lithuanian cement producer that
operated one cement plant with an installed capacity of 2.7 million tons as of
December 31, 2005. In the above table, "South America, Central America and the
Caribbean" includes our subsidiaries in Venezuela, Colombia, Costa Rica, the
Dominican Republic, Panama, Nicaragua, Puerto Rico, Argentina and other assets
in the Caribbean region. In the above table, "Africa and the Middle East"
includes our subsidiaries in Egypt, the United Arab Emirates and Israel. In the
above table, "Asia" includes our subsidiaries in the Philippines, Thailand,
Malaysia, Bangladesh and other assets in the Asian region, and, for purposes of
the columns labeled "Assets" and "Installed Capacity," includes our 25.5%
interest, as of December 31, 2005, in Gresik, an Indonesian cement producer. As
of December 31, 2005, in addition to the four cement plants owned by our Asian
subsidiaries, Gresik operated four cement plants with an installed capacity of
17.3 million tons. In the above table, "Cement and Clinker Trading Assets and
Other Operations" includes intercompany accounts receivable of CEMEX (the
parent company only) in the amount of approximately Ps21 billion as of December
31, 2005, which are eliminated in consolidation.
During the last two decades, we embarked on a major geographic
expansion program to diversify our cash flows and enter markets whose economic
cycles within the cement industry largely operate independently from that of
Mexico and which offer long-term growth potential. We have built an extensive
network of marine and land-based distribution centers and terminals that give
us marketing access around the world. The following have been our most
significant acquisitions over the last five years:
o On September 27, 2004, in connection with a public offer to
purchase RMC's outstanding shares, CEMEX UK Limited, our indirect
wholly-owned subsidiary, acquired 50 million shares of RMC for
approximately (pound)432 million (U.S.$786 million, based on a
Pound/Dollar exchange rate of (pound)0.5496 to U.S.$1.00 on
September 27, 2004), which represented approximately 18.8% of
RMC's outstanding shares. On March 1, 2005, following board and
shareholder approval and clearance from applicable regulators,
CEMEX UK Limited purchased the remaining 81.2% of RMC's
outstanding shares and completed our acquisition of RMC. The
transaction value of this acquisition, including our assumption
of approximately U.S.$2.2 billion of RMC's debt, was
approximately U.S.$6.5 billion.
o In August and September 2003, we acquired 100% of the outstanding
shares of Mineral Resource Technologies Inc., and the cement
assets of Dixon-Marquette Cement for a combined purchase price of
approximately U.S.$100 million. Located in Dixon, Illinois, the
single cement plant has an annual production capacity of 560,000
tons. This cement plant was sold on March 31, 2005 as part of the
U.S. asset sale described below.
15
o In July and August 2002, through a tender offer and subsequent
merger, we acquired 100% of the outstanding shares of Puerto
Rican Cement Company, Inc. The aggregate value of the transaction
was approximately U.S.$281.0 million, including approximately
U.S.$100.8 million of assumed net debt. In July, 2005, Puerto
Rican Cement Company, Inc., changed its legal name to CEMEX de
Puerto Rico, Inc.
o In July 2002, we increased our equity interest in CEMEX Asia
Holdings, Ltd., or CAH, a subsidiary originally created to
co-invest with institutional investors in Asian cement
operations, from 77.4% to 77.7%. At the same time, we entered
into agreements with other CAH investors to purchase their CAH
shares in exchange for CPOs through quarterly share exchanges in
2003 and 2004. For accounting purposes, these exchanges were
considered effective as of July 2002. With these exchanges, we
further increased our equity interest in CAH to 92.3%. In August
2004, we acquired an additional 6.83% interest in CAH for
approximately U.S.$70 million, and in December 2005, we acquired
the remaining 0.9% interest in CAH for approximately U.S.$8
million, thereby increasing our total equity interest in CAH to
100%.
o In July 2002, we purchased, through a wholly-owned indirect
subsidiary, the remaining 30% economic interest that was not
previously acquired by CAH in the Philippine cement company Solid
Cement Corporation, or Solid, for approximately U.S.$95 million.
o In May 2001, we acquired, through CAH, a 100% economic interest
in Saraburi Cement Company Ltd., a cement company based in
Thailand with an installed capacity of approximately 700,000
tons, for a total consideration of approximately U.S.$73 million.
In July 2002, Saraburi Cement Company changed its legal name to
CEMEX (Thailand) Co. Ltd., or CEMEX (Thailand).
As part of our strategy, we periodically review and reconfigure our
operations in implementing our post-merger integration process, and we
sometimes divest assets that we believe are less important to our strategic
objectives.
On March 31, 2005, we sold our Charlevoix, Michigan and Dixon,
Illinois cement plants and several distribution terminals located in the Great
Lakes region to Votorantim Participacoes S.A, a cement company in Brazil, for
an aggregate purchase price of approximately U.S.$389 million. The combined
capacity of the two cement plants sold was approximately two million tons per
year. On June 1, 2005, we sold a cement terminal adjacent to the Detroit river
to the City of Detroit for a purchase price of approximately U.S.$24 million.
The proceeds of these sales were used to reduce debt.
On April 26, 2005, we divested our 11.9% interest in Cementos Bio Bio,
S.A., a cement company in Chile, for approximately U.S.$65 million. The
proceeds of this sale were used to reduce debt.
As a condition to closing the RMC acquisition, we agreed with the U.S.
Federal Trade Commission, or FTC, to divest several ready-mix and related
assets in the Tucson, Arizona area. Following FTC approval, we sold RMC's
operations in the Tucson area to California Portland Cement Company for a
purchase price of approximately U.S.$16 million on August 29, 2005. The
proceeds of this sale were used to reduce debt.
On July 1, 2005, we and Ready Mix USA, Inc., a privately-owned
ready-mix concrete producer with operations in the southeastern United States,
established two jointly-owned limited liability companies, CEMEX Southeast, LLC,
a cement company, and Ready Mix USA, LLC, a ready-mix concrete company, to serve
the construction materials market in the southeast region of the United States.
Under the terms of the limited liability company agreements and related asset
contribution agreements, we contributed two cement plants (Demopolis, Alabama
and Clinchfield, Georgia) and eleven cement terminals to CEMEX Southeast, LLC,
representing approximately 98% of its contributed capital, while Ready Mix USA
contributed cash to CEMEX Southeast, LLC representing approximately 2% of its
contributed capital. In addition, we contributed our ready-mix concrete,
aggregates and concrete block assets in the Florida panhandle and southern
Georgia to Ready Mix USA, LLC, representing approximately 9% of its contributed
capital, while Ready Mix USA contributed all its ready-mix concrete and
aggregate operations in Alabama, Georgia, the Florida panhandle and Tennessee,
as well as its concrete block operations in Arkansas, Tennessee, Mississippi,
Florida and Alabama to Ready Mix USA, LLC, representing
16
approximately 91% of its contributed capital. We own a 50.01% interest, and
Ready Mix USA owns a 49.99% interest, in the profits and losses and voting
rights of CEMEX Southeast, LLC, while Ready Mix USA owns a 50.01% interest, and
we own a 49.99% interest, in the profits and losses and voting rights of Ready
Mix USA, LLC. CEMEX Southeast, LLC is managed by us, and Ready Mix USA, LLC is
managed by Ready Mix USA. In a separate transaction, on September 1, 2005, we
sold 27 ready-mix plants and four concrete block facilities located in the
Atlanta, Georgia metropolitan area to Ready Mix USA, LLC for approximately
U.S.$125 million. The proceeds of this sale were used to reduce debt.
On December 22, 2005, we terminated our 50/50 joint ventures with
Lafarge Asland in Spain and Portugal which we acquired in the RMC acquisition.
The Spanish joint venture operated 122 ready-mix concrete plants and 12
aggregates, and the Portuguese joint venture operated 31 ready-mix concrete
plants and five aggregate quarries. In connection with the termination, we
received 29 ready-mix concrete plants and six aggregates quarries in Spain, as
well as approximately (euro)50 million in cash, and Lafarge Asland acquired a
100% interest in both joint ventures.
On March 2, 2006, we sold 4K Beton A/S, our Danish subsidiary, which
operated 18 ready-mix concrete plants in Denmark, to Unicon A/S, a subsidiary
of Cementir Group, an Italian cement producer, for approximately (euro)22
million. As part of the transaction, we purchased from Unicon A/S two companies
engaged in the ready-mix concrete and aggregates business in Poland for
approximately (euro)12 million. These companies operate nine ready-mix concrete
plants and one aggregates quarry in Poland. We received net cash proceeds of
approximately (euro)6 million, after cash and debt adjustments, from this
transaction.
17
Geographic Breakdown of Our 2005 Net Sales
The following chart indicates the geographic breakdown of our net
sales, before eliminations resulting from consolidation, for the year ended
December 31, 2005:
[PIE CHART GRAPHIC OMITTED]
Mexico 19.0%
United States 25.0%
Spain 9.0%
United Kingdom 9.0%
Rest of Europe 16.0%
South America, Central America and the Caribbean 9.0%
Africa and the Middle East 3.0%
Asia 2.0%
Others 8.0%
For a description of a breakdown of total revenues by geographic
markets for each of the years ended December 31, 2003, 2004 and 2005, please
see Item 5 -- "Operating and Financial Review and Prospects."
Geographic Breakdown of Pro Forma 2005 Net Sales
The pro forma net sales data for the year ended December 31, 2005 set
forth below include RMC's net sales data for the two- month period ended
February 28, 2005, which are unaudited and have been obtained from RMC's
accounting records.
The following chart indicates the geographic breakdown of our net
sales on a pro forma basis giving effect to the RMC acquisition as though it
had been completed on January 1, 2005 and before eliminations resulting from
consolidation, for the year ended December 31, 2005:
[PIE CHART GRAPHIC OMITTED]
Mexico 18.0%
United States 25.0%
Spain 9.0%
United Kingdom 10.0%
Rest of Europe 17.0%
South America, Central America and the Caribbean 8.0%
Africa and the Middle East 3.0%
Asia 2.0%
Others 8.0%
18
Our Production Processes
Cement is a binding agent, which, when mixed with sand, stone or other
aggregates and water, produces either ready-mix concrete or mortar. Mortar is
the mixture of cement with finely ground limestone, and ready-mix concrete is
the mixture of cement with sand, gravel or other aggregates and water.
Aggregates are naturally occurring sand and gravel or crushed stone
such as granite, limestone and sandstone. Aggregates are used to produce
ready-mix concrete, roadstone, concrete products, lime, cement and mortar for
the construction industry, and are obtained from land based sources such as
sand and gravel pits and rock quarries or by dredging marine deposits.
Cement Production Process
We manufacture cement through a closely controlled chemical process,
which begins with the mining and crushing of limestone and clay, and, in some
instances, other raw materials. The clay and limestone are then
pre-homogenized, a process which consists of combining different types of clay
and limestone. The mix is typically dried, then fed into a grinder which grinds
the various materials in preparation for the kiln. The raw materials are
calcined, or processed, at a very high temperature in a kiln, to produce
clinker. Clinker is the intermediate product used in the manufacture of cement.
There are two primary processes used to manufacture cement, the dry
process and the wet process. The dry process is more fuel efficient. As of
December 31, 2005, 54 of our 65 operative production plants used the dry
process, nine used the wet process and two used both processes. Our production
plants that use the wet process are located in Venezuela, Colombia, Nicaragua,
the Philippines, the United Kingdom, Germany and Latvia. In the wet process,
the raw materials are mixed with water to form slurry which is fed into a kiln.
Fuel costs are greater in the wet process than in the dry process because the
water that is added to the raw materials to form slurry must be evaporated
during the clinker manufacturing process. In the dry process, the addition of
water and the formation of slurry are eliminated, and clinker is formed by
calcining the dry raw materials. In the most modern application of this dry
process technology, the raw materials are first blended in a homogenizing silo
and processed through a pre-heater tower that utilizes exhaust heat generated
by the kiln to pre-calcine the raw materials before they are calcined to
produce clinker.
Clinker and gypsum are fed in pre-established proportions into a
cement grinding mill where they are ground into an extremely fine powder to
produce finished cement.
Ready-Mix Concrete Production Process
Ready-mix concrete is a combination of cement, fine and coarse
aggregates, and admixtures (which control properties of the concrete including
plasticity, pumpability, freeze-thaw resistance, strength and setting time).
The concrete hardens due to the chemical reaction of hydration when water is
added to the mix, filling voids in the mixture and turning it into a solid
mass.
User Base
Cement is the primary building material in the industrial and
residential construction sectors of most of the markets in which we operate.
The lack of available cement substitutes further enhances the marketability of
our product. The primary end-users of cement in each region in which we operate
vary but usually include, among others, wholesalers, ready-mix concrete
producers, industrial customers and contractors in bulk. The end-users of
ready-mix concrete generally include homebuilders, commercial and industrial
building contractors and road builders. Major end-users of aggregates include
ready-mix concrete producers, mortar producers, general building contractors
and those engaged in roadbuilding activity, asphalt producers and concrete
product producers.
19
Our Business Strategy
We seek to continue to strengthen our global leadership by growing
profitably through our integrated positions along the cement value chain and
maximizing our overall performance by employing the following strategies:
Focus on and vertically integrate our core business of cement, ready-mix
concrete and aggregates
We plan to continue focusing on our core businesses, the production
and sale of cement, ready-mix concrete and aggregates, and the vertical
integration of these businesses. We believe that managing our cement, ready-mix
and aggregates operations as an integrated business can make them more
efficient and more profitable than if they were run separately. We believe that
this strategic focus has enabled us to grow our existing businesses and to
expand our operations internationally.
Geographically diversify our operations and allocate capital effectively by
expanding into selected new markets
Subject to economic conditions that may affect our ability to complete
acquisitions, we intend to continue adding assets to our existing portfolio.
We intend to continue to geographically diversify our cement,
ready-mix and aggregates operations and to vertically integrate in new and
existing markets by investing in, acquiring and developing complementary
operations along the cement value chain.
We believe that it is important to diversify selectively into markets
that have long-term growth potential, particularly in emerging market
countries, where the shortage of roads and other infrastructure and a low per
capita use of cement and other building materials is most likely to result in
significant increases in demand for our products.
By selectively participating in these markets, and by purchasing
operations that benefit from our management and turnaround expertise and assets
that further integrate into our existing portfolio, in most cases, we have been
able to increase our cash flow and return on capital employed.
We evaluate potential acquisitions in light of our three primary
investment principles:
o The potential for increasing the acquired entity's value should
be principally driven by factors that we can influence,
particularly the application of our management and turnaround
expertise;
o The acquisition should not compromise our financial strength; and
o The acquisition should offer a higher long-term return on our
investment than our cost of capital and should offer a minimum
return on capital employed of at least ten percent.
In order to minimize our capital commitments and maximize our return
on capital, we will continue to analyze potential capital raising sources
available in connection with acquisitions, including sources of local financing
and possible joint ventures. We normally consider opportunities for, and
routinely engage in preliminary discussions concerning acquisitions.
Implement platforms to achieve optimal operating standards and quickly integrate
acquisitions
By continuing to produce cement at a low cost, we believe that we will
continue to generate cash flows sufficient to support our present and future
growth. We strive to reduce our overall cement production related costs and
corporate overhead through strict cost management policies and through
improving efficiencies. We have implemented several worldwide standard
platforms as part of this process. These platforms were designed to develop
efficiencies and better practices, and we believe they will further reduce our
costs, streamline our processes and extract synergies from our global
operations. In addition, we have implemented centralized management
20
information systems throughout our operations, including administrative,
accounting, purchasing, customer management, budget preparation and control
systems, which are expected to assist us in lowering costs.
With each international acquisition, we have refined the
implementation of both the technological and managerial processes required to
rapidly integrate acquisitions into our existing corporate structure. The
implementation of the platforms described above has allowed us to integrate our
acquisitions more rapidly and efficiently.
In the case of the RMC acquisition, we expect to achieve significant
cost savings in the acquired operations by optimizing the production and
distribution of ready-mix concrete and aggregates, reducing costs in the cement
manufacturing facilities, partly by implementing CEMEX operating standards at
such facilities, reducing raw materials and energy costs by centralizing
procurement processes and reducing other operational costs by centralizing
technological and managerial processes. We have achieved a portion of these
cost savings in 2005, and we expect to gradually achieve the remainder of these
cost savings between 2006 and 2007.
We plan to continue to eliminate redundancies at all levels,
streamline corporate structures and centralize administrative functions to
increase our efficiency and lower costs. In addition, in the last few years, we
have implemented various procedures to improve the environmental impact of our
activities as well as our overall product quality.
Through a worldwide import and export strategy, we will continue to
optimize capacity utilization and maximize profitability by directing our
products from countries experiencing downturns in their respective economies to
target export markets where demand may be greater. Our global trading system
enables us to coordinate our export activities globally and to take advantage
of demand opportunities and price movements worldwide.
Provide the best value proposition to our customers
We believe that by pursuing our objective of integrating our business
along the cement value chain we can improve and broaden the value proposition
that we provide to our customers. We believe that by offering integrated
solutions we can provide our customers more reliable sourcing as well as higher
quality services and products.
We continue to focus on developing new competitive advantages that
will differentiate us from our competitors. In addition, we are strengthening
our commercial and corporate brands in an effort to further enhance the value
of our products and our services for our customers. Our lower cost combined
with our higher quality service has allowed us to make significant inroads in
these areas.
We believe our Construrama branding and our other marketing strategies
in Mexico have strengthened our distribution network, fostered greater loyalty
among distributors and further fortified our commercial network. With
Construrama, we have enhanced the operating and service standards of our
distributors, providing them with training, a standard image and national
publicity. We have recently begun utilizing our Construrama strategy in our
Venezuelan operations and may introduce this branding strategy in other
markets, depending on the market conditions and brand competition. Another
strategy we have implemented in Mexico, which we call "Multiproductos," helps
our distributors offer a wider array of construction materials and reinforces
the subjective value of our products in their customers.
In Spain, we have implemented several initiatives to increase the
value of our services to our clients such as mobile access to account
information, 24-hour bulk cement dispatch capability, night delivery of
ready-mix cement, and a customer loyalty incentive program.
Strengthen our financial structure
We believe our strategy of cost-cutting initiatives, increased value
proposition and geographic expansion will translate into growing operating cash
flows. Our objective is to strengthen our financial structure by:
o Optimizing our borrowing costs and debt maturities;
21
o Increasing our access to various capital sources; and
o Maintaining the financial flexibility needed to pursue future
growth opportunities.
We intend to continue monitoring our credit risk while maintaining the
flexibility to support our business strategy.
Focus on attracting, retaining and developing a diverse, experienced and
motivated management team
We will continue to focus on recruiting and retaining motivated and
knowledgeable professional managers. Our senior management encourages managers
to continually review our processes and practices, and to identify innovative
management and business approaches to improve our operations. By rotating our
managers from one country to another and from one area of our operations to
another, we increase their diversity of experience.
We provide our management with ongoing training throughout their
careers. In addition, through our stock-based compensation program, our senior
management has a stake in our financial success.
The implementation of our business strategy demands effective dynamics
within our organization. Our corporate infrastructure is based on internal
collaboration and global management platforms. We will continue to strengthen
and develop this infrastructure to effectively support our strategy.
22
Our Corporate Structure
We are a holding company, and operate our business through
subsidiaries that, in turn, hold interests in our cement and ready-mix concrete
operating companies, as well as other businesses. The following chart
summarizes our corporate structure as of December 31, 2005. The chart also
shows, for each company, our approximate direct or indirect percentage equity
or economic ownership interest. The chart has been simplified to show only our
major holding companies in the principal countries in which we operate and does
not include our intermediary holding companies and our operating company
subsidiaries.
[GRAPHIC OMITTED]
23
North America
For the year ended December 31, 2005, our business in North America,
which includes our operations in Mexico and the United States, represented
approximately 44% of our net sales. As of December 31, 2005, our business in
North America represented approximately 41% of our total installed capacity and
approximately 36% of our total assets.
Our Mexican Operations
Overview
Our Mexican operations represented approximately 19% of our net sales
for the year ended December 31, 2005.
As of December 31, 2005, we owned 100% of the outstanding capital
stock of CEMEX Mexico. CEMEX Mexico is a direct subsidiary of CEMEX and is both
a holding company for some of our operating companies in Mexico and an
operating company involved in the manufacturing and marketing of cement,
plaster, gypsum, groundstone and other construction materials and cement
by-products in Mexico. CEMEX Mexico, indirectly, is also the holding company
for our international operations.
As of December 31, 2005, CEMEX Mexico owned 100% of the outstanding
capital stock of Empresas Tolteca de Mexico. Empresas Tolteca de Mexico is a
holding company for some of our operating companies in Mexico. CEMEX Mexico and
Empresas Tolteca de Mexico, together with their subsidiaries, account for
substantially all the revenues and operating income of our Mexican operations.
In March 2006, we announced a plan to construct a new kiln at our
Yaqui cement plant in Sonora, Mexico in order to increase our cement production
capacity to support strong regional demand due to the continued growth of the
housing market in the Northwest region. The current production capacity of the
Yaqui cement plant is approximately 1.4 million tons per year. The construction
of the new kiln, which is designed to increase our total production capacity in
the Yaqui cement plant to approximately 3.2 million tons per year, is expected
to be completed in 2007. We expect our total capital investment in the
construction of this new kiln over the course of two years will be
approximately U.S.$210 million, including U.S.$30 million during 2006. We
expect that this investment will be fully funded with free cash flow generated
during the two-year construction period.
During the second quarter of 2002, the production operations at our
oldest cement plant (Hidalgo) were suspended. However, as a result of an
expected increase in regional demand, we resumed production operations at this
plant during May 2006.
In 2001, we launched the Construrama program, a registered brand name
for construction material stores. Through the Construrama program, we offer to
an exclusive group of our Mexican distributors the opportunity to sell a
variety of products under the Construrama brand name, a concept that includes
the standardization of stores, image, marketing, products and services. As of
December 31, 2005, more than 700 independent concessionaries with close to
2,100 stores were integrated into the Construrama program in more than 750
towns and cities throughout Mexico.
The Mexican Cement Industry
According to Instituto Nacional de Estadistica, Geografia e
Informatica, total construction output in Mexico grew 3.3% in 2005 compared to
2004. The increase in total construction output in 2005 was primarily driven by
the commercial and industrial housing and infrastructure segments, while the
retail (self-construction) market grew marginally.
24
Cement in Mexico is sold principally through distributors, with the
remaining balance sold through ready-mix concrete producers, manufacturers of
pre-cast concrete products and construction contractors. Cement sold through
distributors is mixed with aggregates and water by the end user at the
construction site to form concrete. Ready-mix concrete producers mix the
ingredients in plants and deliver it to local construction sites in mixer
trucks, which pour the concrete. Unlike more developed economies, where
purchases of cement are concentrated in the commercial and industrial sectors,
retail sales of cement through distributors in 2005 accounted for approximately
70% of Mexico's demand. Individuals who purchase bags of cement for
self-construction and other basic construction needs are a significant
component of the retail sector. We estimate that as much as 45% of total demand
in Mexico comes from individuals who address their own construction needs. We
believe that this large retail sales base is a factor that significantly
contributes to the overall performance of the Mexican cement market.
The retail nature of the Mexican cement market also enables us to
foster brand loyalty, which distinguishes us from other worldwide producers
selling primarily in bulk. We own the registered trademarks for our major
brands in Mexico, such as "Monterrey," "Tolteca" and "Anahuac." We believe that
these brand names are important in Mexico since cement is principally sold in
bags to retail customers who may develop brand loyalty based on differences in
quality and service. In addition, we own the registered trademark for the
"Construrama" brand name for construction material stores.
Competition
In the early 1970s, the Mexican cement industry was regionally
fragmented. However, over the last 30 years, cement producers in Mexico have
increased their production capacity and the Mexican cement industry has
consolidated into a national market, thus becoming increasingly competitive.
The major cement producers in Mexico are CEMEX; Holcim Apasco, an affiliate of
Holcim; Sociedad Cooperativa Cruz Azul, a Mexican operator; Cementos Moctezuma,
an associate of Ciments Molins; Grupo Cementos Chihuahua, a Mexican operator in
which we own a 49% interest; and Lafarge.
Potential entrants into the Mexican cement market face various
impediments to entry, including:
o the time-consuming and expensive process of establishing a retail
distribution network and developing the brand identification
necessary to succeed in the retail market, which represents the
bulk of the domestic market;
o the lack of port infrastructure and the high inland transportation
costs resulting from the low value-to-weight ratio of cement;
o the distance from ports to major consumption centers and the
presence of significant natural barriers, such as mountain ranges,
which border Mexico's east and west coasts;
o the extensive capital investment requirements; and
o the length of time required for construction of new plants, which
is approximately two years.
25
Our Mexican Operating Network
[MAP GRAPHIC OMITTED]
_____________________
(1) In 2002, production operations at the Hidalgo cement plant were suspended,
but were resumed during May 2006.
Currently, we operate 15 plants (including Hidalgo, which resumed
operations during May 2006) and 79 distribution centers (including eight marine
terminals) located throughout Mexico. We operate modern plants on Mexico's
Atlantic and Pacific coasts, allowing us to take advantage of low-cost maritime
transportation to the Asian, Caribbean, Central and South American and U.S.
markets.
Products and Distribution Channels
Cement. Our cement operations represented approximately 73% of our
Mexican operations' net sales in 2005. Our domestic cement sales represented
approximately 94% of our total Mexican cement sales in 2005. As a result of the
retail nature of the Mexican market, our Mexican operations are not dependent on
a limited number of large customers. In 2005, our Mexican operations sold
approximately 60% of their cement sales volume through more than 6,000
distributors throughout the country, most of whom work on a regional basis. The
five most important distributors in the aggregate accounted for approximately 4%
of our Mexican operations' total sales by volume for 2005.
Ready-Mix Concrete. Our ready-mix concrete operations represented
approximately 27% of our Mexican operations' net sales in 2005. Our ready-mix
concrete operations in Mexico purchase all of their cement requirements from our
Mexican cement operations. Ready-mix concrete is sold through our own internal
sales force, which is divided into national accounts that cater to large
construction companies and local representatives that support medium- and
small-sized construction companies.
Exports. Our Mexican operations export a portion of their cement
production. Exports of cement and clinker by our Mexican operations represented
approximately 4% of our Mexican operations' net sales in 2005. In 2005,
approximately 73% of our cement and clinker exports from Mexico were to the
United States, 26% to Central America and the Caribbean and 1% to South America.
Our Mexican operations' cement and clinker exports to the U.S. are
marketed through wholly-owned subsidiaries of CEMEX Corp., the holding company
of CEMEX, Inc. All transactions between CEMEX and the subsidiaries of CEMEX
Corp., which act as our U.S. importers, are conducted on an arm's-length basis.
Since 1990, exports of cement and clinker to the U.S. from Mexico
have been subject to U.S. anti-dumping duties. In March 2006, the Mexican and
U.S. governments entered into an agreement to eliminate U.S. anti-dumping
duties on Mexican cement imports following a three-year transition period
beginning in 2006. During the
26
transition period, Mexican cement imports into the U.S. will be subject to
volume limitations of three million tons per year, which amount may be increased
in response to market conditions during the second and third year of the
transition period, subject to a maximum increase per year of 4.5%. Quota
allocations to Mexican companies that import cement into the U.S. will be made
on a regional basis. The transitional anti-dumping duty during the three-year
transition period was lowered to U.S.$3.00 per ton, effective as of April 3,
2006, from the previous amount of approximately U.S.$26.00 per ton. For a more
detailed description of the terms of the agreement between the Mexican and U.S.
governments, please see "Regulatory Matters and Legal Proceedings --
Anti-Dumping."
Production Costs
Our Mexican operations' cement plants primarily utilize petcoke, but
several are designed to switch to fuel oil and natural gas with minimum
downtime. We have entered into two 20-year contracts, one in 2002 and the other
in 2003, with Petroleos Mexicanos, or PEMEX, pursuant to which PEMEX agreed to
supply us with a total of 1,750,000 tons of petcoke per year. Petcoke is
petroleum coke, a solid or fixed carbon substance that remains after the
distillation of hydrocarbons in petroleum and that may be used as fuel in the
production of cement. The PEMEX petcoke contracts have reduced the volatility of
our fuel costs. In addition, since 1992, our Mexican operations have begun to
use alternate fuels, to further reduce the consumption of residual fuel oil and
natural gas. These alternate fuels represented approximately 2.5% of the total
fuel consumption for our Mexican operations in 2005, and we expect to increase
this percentage to approximately 3.5% to 4% during 2006.
In 1999, we reached an agreement with ABB Alstom Power and Sithe
Energies, Inc. for the financing, construction and operation of "Termoelectrica
del Golfo," a 230 megawatt energy plant in Tamuin, San Luis Potosi, Mexico and
to supply electricity to us for a period of 20 years. We entered into this
agreement in order to reduce the volatility of our energy costs. The total cost
of the project was approximately U.S.$360 million. The power plant commenced
commercial operations on May 1, 2004. As of December 31, 2005, after 20 months
of operation, the power plant has supplied electricity to 10 of our cement
plants in Mexico covering approximately 73% of their needs for electricity and
has represented a decrease of approximately 28% in our cost of electricity at
these plants.
We have, from time to time, purchased hedges from third parties to
reduce the effect of volatility in energy prices in Mexico. See Item 5 -
"Operating and Financial Review and Prospects - Liquidity and Capital
Resources."
Description of Properties, Plants and Equipment
As of December 31, 2005, we had 15 wholly-owned cement plants located
throughout Mexico, with a total installed capacity of 27.2 million tons per
year. As described above, production operations at our Hidalgo cement plant have
been suspended since 2002, but were resumed during May 2006. Our Mexican
operations' most significant gray cement plants are the Huichapan, Tepeaca and
Barrientos plants, which serve the central region of Mexico, the Monterrey,
Valles and Torreon plants, which serve the northern region of Mexico, and the
Guadalajara and Yaqui plants, which serve the Pacific region of Mexico. We have
exclusive access to limestone quarries and clay reserves near each of our plant
sites in Mexico. We estimate that these limestone and clay reserves have an
average remaining life of more than 60 years, assuming 2005 production levels.
As of December 31, 2005, all our production plants in Mexico utilized the dry
process.
As of December 31, 2005, we had a network of 71 land distribution
centers in Mexico, which are supplied through a fleet of our own trucks and rail
cars, as well as leased trucks and rail facilities and eight marine terminals.
In addition, we had more than 250 ready-mix concrete plants throughout 79 cities
in Mexico and more than 1,950 ready-mix concrete delivery trucks.
Capital Investments
We made capital expenditures of approximately U.S.$109 million in 2003,
U.S.$90 million in 2004, and U.S.$102 million in 2005 in our Mexican operations.
We currently expect to make capital expenditures of approximately U.S.$222
million in our Mexican operations during 2006, including those related to the
expansion of the Yaqui cement plant described above.
27
Our U.S. Operations
Overview
Our U.S. operations represented approximately 25% of our net sales for
the year ended December 31, 2005.
As of December 31, 2005, we held 100% of CEMEX, Inc., our operating
subsidiary in the United States.
As of December 31, 2005, our U.S. operations included the operations we
acquired from RMC in March 2005. As of December 31, 2005, we had a cement
manufacturing capacity of approximately 13.3 million tons per year in our U.S.
operations, including nearly 0.7 million tons in proportional interests through
minority holdings. As of December 31, 2005, we operated a geographically diverse
base of 12 cement plants located in Alabama, California, Colorado, Florida,
Georgia, Kentucky, Ohio, Pennsylvania, Tennessee and Texas. As of that date, we
also had 49 rail or water served active cement distribution terminals in the
United States. As of December 31, 2005, we had 235 ready-mix plants located in
the Carolinas, Florida, Georgia, Texas, New Mexico, Nevada, Arizona and
California and aggregates facilities in the Carolinas, Arizona, California,
Florida, Georgia, New Mexico, Nevada and Texas, not including the assets we
contributed to Ready Mix USA, LLC, as described below. We believe that by
combining the acquired assets of RMC with our installed cement capacity in the
United States, we are currently the largest cement and ready-mix supplier in the
United States, based on volumes sold in 2005, and an important supplier of
aggregates.
In addition, with the acquisition of Mineral Resource Technologies,
Inc. in August 2003, we believe that we achieved a competitive position in the
growing fly ash market. Fly ash is a mineral residue resulting from the
combustion of powdered coal in electric generating plants. Fly ash has the
properties of cement and may be used in the production of more durable concrete.
Mineral Resource Technologies, Inc. is one of the four largest fly ash companies
in the United States, providing fly ash to customers in 25 states. We also own
regional pipe and precast businesses, along with concrete block and paver plants
in the Carolinas and Florida, which we acquired from RMC.
On March 31, 2005, we sold our Charlevoix, Michigan and Dixon, Illinois
cement plants and several distribution terminals located in the Great Lakes
region to Votorantim Participacoes S.A., or Votorantim, a cement company in
Brazil, for an aggregate purchase price of approximately U.S.$389 million. The
distribution terminals sold to Votorantim are located in Green Bay, Manitowoc
and Milwaukee, Wisconsin; Chicago, Illinois; Ferrysburg, Michigan; Cleveland and
Toledo, Ohio; and Owen Sound, Ontario, Canada. The combined capacity of the two
cement plants sold to Votorantim was approximately two million tons per year.
On June 1, 2005, we sold a cement terminal adjacent to the Detroit
river to the City of Detroit for a purchase price of approximately U.S.$24
million.
On July 1, 2005, we and Ready Mix USA, Inc., or Ready Mix USA, a
privately-owned ready-mix concrete producer with operations in the southeastern
United States, established two jointly-owned limited liability companies, CEMEX
Southeast, LLC, a cement company, and Ready Mix USA, LLC, a ready-mix concrete
company, to serve the construction materials market in the southeast region of
the United States. Under the terms of the limited liability company agreements
and related asset contribution agreements, we contributed two cement plants
(Demopolis, Alabama and Clinchfield, Georgia) and eleven cement terminals to
CEMEX Southeast, LLC, representing approximately 98% of its contributed capital,
while Ready Mix USA contributed cash to CEMEX Southeast, LLC representing
approximately 2% of its contributed capital. In addition, we contributed our
ready-mix concrete, aggregates and concrete block assets in the Florida
panhandle and southern Georgia to Ready Mix USA, LLC, representing approximately
9% of its contributed capital, while Ready Mix USA contributed all its ready-mix
concrete and aggregate operations in Alabama, Georgia, the Florida panhandle and
Tennessee, as well as its concrete block operations in Arkansas, Tennessee,
Mississippi, Florida and Alabama to Ready Mix USA, LLC, representing
approximately 91% of its contributed capital. We own a 50.01% interest, and
Ready Mix USA owns a 49.99% interest, in the profits and losses and voting
rights of CEMEX Southeast, LLC, while Ready Mix USA owns a 50.01% interest, and
we own a 49.99% interest, in the profits and losses and voting rights of Ready
Mix USA, LLC. CEMEX Southeast, LLC is managed by us, and Ready Mix USA, LLC is
managed by Ready Mix USA.
28
After the third anniversary of the formation of these companies, Ready
Mix USA will have the option, but not the obligation, to require us to purchase
Ready Mix USA's interest in the two companies at a purchase price equal to the
greater of the book value of the companies' assets or a formula based on the
companies' earnings. This option will expire on the twenty fifth anniversary of
the formation of these companies.
In a separate transaction, on September 1, 2005, we sold 27 ready-mix
plants and four concrete block facilities located in the Atlanta, Georgia
metropolitan area to Ready Mix USA, LLC for approximately U.S.$125 million.
As a condition to closing the RMC acquisition, we agreed with the U.S.
Federal Trade Commission, or FTC, to divest several ready-mix and related assets
in the Tucson, Arizona area. Following FTC approval, we sold RMC's operations in
the Tucson area to California Portland Cement Company for a purchase price of
approximately U.S.$16 million on August 29, 2005. We do not believe the
divestiture of these assets will have a material effect on our U.S. operations.
In February 2006, we announced a plan to construct a second kiln at our
Balcones cement plant in New Braunfels, Texas in order to increase our cement
production capacity to support strong demand amidst a shortfall in regional
supplies of cement. The current production capacity of the Balcones cement plant
is approximately 1.1 million tons per year. The construction of the new kiln,
which is designed to increase our total production capacity in the Balcones
cement plant to approximately 2.2 million tons per year, is expected to be
completed in 2008. We expect our total capital investment in the construction of
this new kiln over the course of three years will be approximately U.S.$220
million, including U.S.$57 million during 2006. We expect that this investment
will be fully funded with free cash flow generated during the three-year
construction period.
The Cement Industry in the United States
According to the U.S. Census Bureau, total construction spending in the
U.S. grew 8.9% in 2005 compared to 2004. The increase in total construction
spending in 2005 was primarily driven by strong demand from the residential
sector, increased demand from the public sector and a recovery in industrial and
commercial construction.
Demand for cement is derived from the demand for ready-mix concrete and
concrete products which, in turn, is dependent on the demand for construction.
The construction industry is composed of three major sectors, namely, the
residential sector, the industrial and commercial sector and the public sector.
The public sector is the most cement intensive sector, particularly for
infrastructure projects such as streets, highways and bridges.
Since the early 1990s, cement demand has become less vulnerable to
recessionary pressures than in previous cycles, due to the growing importance of
the generally counter-cyclical public sector. In 2005, according to our
estimates, public sector spending accounted for approximately 50% of the total
cement consumption in the U.S. Strong cement demand over the past decade has
driven industry capacity utilization up to maximum levels. According to the
Portland Cement Association, domestic capacity utilization has been close to 90%
in the last three years.
Competition
As a result of the lack of product differentiation and the commodity
nature of cement, the cement industry in the U.S. is highly competitive. We
compete with national and regional cement producers in the U.S. Our principal
competitors in the United States are Holcim, Lafarge, Buzzi-Unicem, Heidelberg
Cement and Ash Grove Cement.
The independent U.S. ready-mix concrete industry is highly fragmented,
and few producers other than vertically integrated producers have annual sales
in excess of U.S.$6 million or have a fleet of more than 20 mixers. Given that
the concrete industry has historically consumed approximately 75% of all cement
produced annually in the U.S., many cement companies choose to be vertically
integrated.
Aggregates are widely used throughout the U.S. for all types of
construction because they are the most basic materials for building activity.
The U.S. aggregates industry is highly fragmented and geographically dispersed.
29
According to the 2005 U.S. Geological Survey, approximately 4,000 companies
operated approximately 6,500 quarries and pits.
Our United States Cement Operating Network
[MAP GRAPHIC OMITTED]
The map above reflects our cement plants and cement
terminals as of December 31, 2005.
Products and Distribution Channels
Cement. Our cement operations represented approximately 43% of our U.S.
operations' net sales in 2005. We deliver a substantial portion of cement by
rail. Occasionally, these rail shipments go directly to customers. Otherwise,
shipments go to distribution terminals where customers pick up the product by
truck or we deliver the product by truck. The majority of our cement sales are
made directly to users of gray Portland and masonry cements, generally within a
radius of approximately 200 miles of each plant.
Ready-Mix Concrete. Our ready-mix concrete operations represented
approximately 46% of our U.S. operations' net sales in 2005. Our ready-mix
concrete operations in the U.S. purchase most of their cement requirements from
our U.S. cement operations and approximately 40% of their aggregates
requirements from our U.S. aggregates operations. In addition, Ready Mix USA,
LLC, an entity in which Ready Mix USA owns a 50.01% interest and we own a 49.99%
interest, purchases most of its cement requirements from our U.S. cement
operations. Our ready-mix products are mainly sold to residential, commercial
and public contractors and to building companies.
Aggregates. Our aggregates operations represented approximately 11% of
our U.S. operations' net sales in 2005. At 2005 production levels, it is
anticipated that over 71% of our construction aggregates reserves in the U.S.
will last for 10 years or more. Our aggregates are consumed mainly by our
internal operations and by our trade customers in the ready-mix, concrete
products and asphalt industries. Ready Mix USA, LLC purchases most of its
aggregates requirements from third parties.
30
Production Costs
The largest cost components of our plants are electricity and fuel,
which accounted for approximately 39% of our U.S. operations' total production
costs in 2005. We are currently implementing an alternative fuels program to
gradually replace coal with more economic fuels such as petcoke and tires, which
has resulted in reduced energy costs. By retrofitting our cement plants to
handle alternative energy fuels, we have gained more flexibility in supplying
our energy needs and have become less vulnerable to potential price spikes. In
2005, the use of alternative fuels offset the effect on our fuel costs of a
significant increase in coal prices. Power costs in 2005 represented
approximately 18% of our U.S. operations' cash manufacturing cost, which
represents production cost before depreciation. We have improved the efficiency
of our U.S. operations' electricity usage, concentrating our manufacturing
activities in off-peak hours and negotiating lower rates with electricity
suppliers.
Description of Properties, Plants and Equipment
As of December 31, 2005, we operated 12 cement manufacturing plants in
the U.S., with a total installed capacity of 13.3 million tons per year,
including nearly 0.7 million tons in proportional interests through minority
holdings. As of that date, we operated a distribution network of 49 cement
terminals, eight of which are deep-water terminals. All our cement production
facilities in 2005 were wholly-owned except for the Balcones, Texas plant, which
was leased as of December 31, 2005, the Louisville, Kentucky plant, which is
owned by Kosmos Cement Company, a joint venture in which we own a 75% interest
and a subsidiary of Dyckerhoff AG owns a 25% interest, and the Demopolis,
Alabama and Clinchfield, Georgia plants, which are owned by CEMEX Southeast,
LLC, an entity in which we own a 50.01% interest and Ready Mix USA owns a 49.99%
interest. On March 20, 2006, we agreed to terminate the lease on the Balcones
cement plant prior to expiration and purchased the Balcones cement plant for
approximately U.S.$61 million.
As of December 31, 2005, we had 235 ready-mix concrete plants and 47
aggregates quarries in the U.S., all of which are wholly-owned. As of December
31, 2005, we also have interests in 173 ready-mix concrete plants and 10
aggregates quarries in the Florida panhandle and southern Georgia, which are
owned by Ready Mix USA, LLC, an entity in which Ready Mix USA owns a 50.01%
interest and we own a 49.99% interest.
As of December 31, 2005, we distributed fly ash through 20 terminals
and 16 third-party-owned utility plants, which operate both as sources of fly
ash and distribution terminals. As of that date, we also owned 63 concrete
block, paver, pipe and precast facilities, and had interests in 7 concrete
block, paver, pipe and precast facilities, which are owned by Ready Mix USA,
LLC.
Capital Investments
We made capital expenditures of approximately U.S.$97 million in 2003,
U.S.$111 million in 2004, and U.S.$160 million in 2005 in our U.S. operations.
We currently expect to make capital expenditures of approximately U.S.$306
million in our U.S. operations during 2006, including those related to the
expansion of the Balcones cement plant described above. We do not expect to be
required to contribute any funds in respect of the assets of the companies
jointly-owned with Ready Mix USA as capital expenditures during 2006.
Europe
For the year ended December 31, 2005, our business in Europe, which
includes our operations in Spain, the United Kingdom and our Rest of Europe
segment, as described below, represented approximately 34% of our net sales. As
of December 31, 2005, our business in Europe represented approximately 27% of
our total installed capacity and approximately 31% of our total assets.
Our Spanish Operations
Overview
Our Spanish operations represented approximately 9% of our net sales
for the year ended December 31, 2005.
31
As of December 31, 2005, we held 99.7% of CEMEX Espana, S.A., or CEMEX
Espana, our operating subsidiary in Spain. Our cement activities in Spain are
conducted by CEMEX Espana itself and Cementos Especiales de las Islas, S.A., or
CEISA, a joint venture 50% owned by CEMEX Espana and 50% owned by a local cement
producer in the Canary Islands. Our ready-mix concrete activities in Spain are
conducted by Hormicemex, S.A., a subsidiary of CEMEX Espana, and our aggregates
activities in Spain are conducted by Aricemex S.A., a subsidiary of CEMEX
Espana. CEMEX Espana is also a holding company for most of our international
operations.
In connection with the RMC acquisition, we acquired RMC's Spanish
operations, which consisted of ready-mix concrete and aggregates operations in
Spain through Readymix Asland S.A., a joint-venture in which RMC owned 50% and
Lafarge-Asland, a Spanish cement producer, owned 50%. This joint venture
operated a network of 122 ready-mix concrete plants and 12 operating aggregates
quarries, which are predominantly located around Madrid, Barcelona, Valencia and
Alicante. On December 22, 2005, we and Lafarge Asland terminated this joint
venture and another 50/50 joint venture with Lafarge-Asland in Portugal, which
we acquired in the RMC acquisition and which operated 31 ready-mix concrete
plants and five aggregate quarries. Under the terms of the termination
agreement, Lafarge Asland received a 100% interest in both joint ventures and we
received approximately (euro)50 million in cash, as well as 29 ready-mix
concrete plants and six aggregates quarries in Spain (some of these assets were
acquired through the acquisition of 100% of Hormigones Ciudad Real, S.A.).
In March 2006, we announced a plan to invest approximately (euro)47
million in the construction of a new cement mill and dry mortar production plant
in the Port of Cartagena, Spain. The new facilities, which are designed to have
a production capacity of nearly one million tons of cement and 200,000 tons of
dry mortar per year, are expected to be completed in 2008. We expect that this
investment will be fully funded with free cash flow generated during the
construction period.
The Spanish Cement Industry
According to the Asociacion de Fabricantes de Cemento de Espana, or
OFICEMEN, the Spanish cement trade organization, in 2005, the construction
sector of the Spanish economy grew 6.0%, primarily as a result of the growth of
construction in the residential sector of the Spanish economy. According to
OFICEMEN, cement consumption in Spain increased 4.8% in 2003, 3.8% in 2004, and
5.1% in 2005.
During the past several years, the level of cement imports into Spain
has been influenced by the strength of domestic demand and fluctuations in the
value of the Euro against other currencies. Cement imports decreased 19.7% in
2003, 14.6% in 2004, and 1.4% in 2005. Clinker imports have been significant,
with increases of 26.4% in 2003, 6.3% in 2004 and 18.3% in 2005. In any case,
imports primarily had an impact on coastal zones, since transportation costs
make it less profitable to sell imported cement in inland markets.
In the past, Spain has traditionally been one of the leading exporters
of cement in the world exporting up to 6 million tons per year. Nevertheless,
exports of producers in Spain have been reduced in recent years to 1.4 million
tons in 2005 to meet strong domestic demand. Our Spanish operations' cement and
clinker export volumes decreased 21% in 2003, 23% in 2004, and 40% in 2005.
Competition
According to OFICEMEN, as of December 31, 2005, approximately 60% of
installed capacity for production of cement in Spain was owned by five
multinational groups, including CEMEX.
Competition in the ready-mix concrete industry is particularly intense
in large urban areas. Our subsidiary Hormicemex has achieved a sizable market
presence in areas such as Baleares, Canarias, Levante and Aragon. In other
areas, such as the central and Cataluna regions, our market share is smaller due
to greater competition in the relatively larger urban areas. The overall high
degree of competition in the Spanish ready-mix concrete industry has in the past
led to weak pricing. The distribution of ready-mix concrete remains a key
component of CEMEX Espana's business strategy.
32
Our Spanish Operating Network
[MAP GRAPHIC OMITTED]
Products and Distribution Channels
Cement. Our cement operations represented approximately 62% of our
Spanish operations' net sales in 2005. CEMEX Espana offers various types of
cement, targeting specific products to specific markets and users. In 2005,
approximately 15% of CEMEX Espana's domestic sales volumes consisted of bagged
cement through distributors, and the remainder of CEMEX Espana's domestic sales
volumes consisted of bulk cement, primarily to ready-mix concrete operators,
which include CEMEX Espana's own subsidiaries, as well as industrial customers
that use cement in their production processes and construction companies.
Ready-Mix Concrete. Our ready-mix concrete operations represented
approximately 32% of our Spanish operations' net sales in 2005. Our ready-mix
concrete operations in Spain in 2005 purchased almost all of their cement
requirements from our Spanish cement operations and approximately 49% of their
aggregates requirements from our Spanish aggregates operations. In addition, in
2005, we were a significant supplier of cement to the joint venture with Lafarge
Asland that we terminated in December 2005. Ready-mix concrete sales for public
works represented 87% of our total ready-mix concrete sales and sales for
residential and non-residential buildings represented 13% of our total ready-mix
concrete sales in 2005.
Aggregates. Our aggregates operations represented approximately 6% of
our Spanish operations' net sales in 2005.
Exports. Our Spanish operations export a portion of their cement
production. Exports of cement by our Spanish operations represented
approximately 1% of our Spanish operations' net sales in 2005. In general,
despite increases in domestic demand in recent years, we have been able to
export excess capacity through collaboration between CEMEX Espana and our
trading network. Export prices, however, are usually lower than domestic market
prices, and costs are usually higher for export sales. Of our total exports from
Spain in 2005, 86% consisted of white cement and 14% consisted of gray cement.
In 2005, 52% of our exports from Spain were to the United States, 29% to Africa
and 19% to Europe.
33
Production Costs
We have improved the profitability of our Spanish operations by
introducing technological improvements that have significantly reduced our
energy costs, including the use of alternative fuels, in accordance with our
cost reduction efforts. Additionally, the increased capacity in 2002 of the San
Vicente plant (approximately 400,000 tons) has allowed us to reduce the clinker
transportation costs between plants and the need for imported clinker. In 2005,
we burned meal flour, organic waste and tires as fuel, achieving in 2005 a 4.1%
substitution rate for petcoke. During 2006, we expect to increase the quantity
of those alternative fuels and initiate the burning of plastics.
Description of Properties, Plants and Equipment
As of December 31, 2005, our Spanish operations operated eight cement
plants located in Spain, with an installed cement capacity of 11.0 million tons,
including 1.4 tons of white cement. As of that date, we also owned three cement
mills, one of which is held through CEISA, 28 distribution centers, including 10
land and 18 marine terminals, and 12 mortar plants, one of which is held through
CEISA.
As of December 31, 2005, we owned 111 ready-mix concrete plants and 21
aggregate quarries, including the 29 ready-mix concrete plants and six
aggregates quarries we received in the termination of the joint venture we
acquired from RMC, as described above.
As of December 31, 2005, we owned nine limestone quarries located in
close proximity to our cement plants, which have useful lives ranging from 10 to
30 years, assuming 2005 production levels. Additionally, we have rights to
expand those reserves to 50 years of limestone reserves, assuming 2005
production levels.
Capital Investments
We made capital expenditures of approximately U.S.$54 million in 2003,
U.S.$55 million in 2004, and U.S.$66 million in 2005 in our Spanish operations.
We currently expect to make capital expenditures of approximately U.S.$149
million in our Spanish operations during 2006, including those related to the
construction of the new cement mill and dry mortar production plant in the Port
of Cartagena described above.
Our U.K. Operations
Overview
Our U.K. operations represented approximately 9% of our net sales for
the year ended December 31, 2005.
As of December 31, 2005, we held 100% of CEMEX Investments Limited
(formerly RMC Group Limited), our operating subsidiary in the United Kingdom. We
are a leading provider of building materials in the United Kingdom with
vertically integrated cement, ready-mix concrete, aggregates and asphalt
operations. We are also an important provider of concrete and pre-cast materials
solutions such as concrete blocks, concrete block paving, roof tiles, flooring
systems and sleepers for rail infrastructure.
The U.K. Cement Industry
According to Euroconstruct, a leading network for construction, finance
and business forecasting in Europe with member institutes in 19 European
countries, total construction output in the United Kingdom declined 1% in 2005.
The decrease was primarily the result of reductions in public spending in the
infrastructure and public housing, sectors. The increase of construction output
in the industrial, commercial and private housing sectors were not sufficient to
offset the reduction in public spending. According to Cembureau, the
representative organization of the cement industry in Europe, cement consumption
in the United Kingdom for 2005 remained flat at 12.2 million tons.
34
Competition
Our primary competitors in the United Kingdom are Lafarge, Heidelberg,
Hanson, Tarmac and Aggregate Industries (a subsidiary of Holcim), each with
varying regional and product strengths. The high-volume southeastern market is
well-served by our raw-material sources and manufacturing plants.
Our U.K. Operating Network
[MAP GRAPHIC OMITTED]
Products and Distribution Channels
Cement. Our cement operations represented approximately 11% of our U.K.
operations' net sales in 2005. About 90% of our sales were bulk cement while the
additional 10% were in bags. We imported 0.3 million tons of cement, a reduction
of 44% compared to 2004 imports. That was due to an increase in local production
in our three cement plants, which performed at historically high efficiency
levels. Our bulk cement is mainly sold to our ready-mix concrete customers, our
concrete block and pre-cast product customers and contractors. Our bagged cement
is primarily sold to national builders merchants and to "do-it-yourself"
superstores.
Ready-Mix Concrete. Our ready-mix concrete operations represented
approximately 39% of our U.K. operations' net sales in 2005. Our ready-mix
concrete operations in the U.K. in 2005 purchased approximately 50% of their
cement requirements from our U.K. cement operations and approximately 60% of
their aggregates requirements from our U.K. aggregates operations. Our ready-mix
concrete products are mainly sold to residential, commercial and public
contractors.
Aggregates. Our aggregates operations represented approximately 12% of
our U.K. operations' net sales in 2005. In 2005, approximately 40% of our U.K.
aggregates were consumed by our own ready-mix concrete operations as well as our
asphalt, concrete block and pre-cast operations. We also sell aggregates to main
contractors to build roads and other infrastructure projects.
Exports. During 2005, our U.K. operations exported approximately 2.6
million tons of aggregates from our marine aggregates operations. These exports
represented approximately 1% of our U.K. operations' net sales in 2005. The main
markets for our aggregates exports are France, Belgium and the Netherlands. Our
marine aggregates operations operate seven dredger vessels which extract
aggregates from our marine reserves along the U.K. coast.
Production Costs
Cement production costs in our U.K. operations during 2005 improved
dramatically as a result of key initiatives implemented during the integration
process of the operations to CEMEX standards. We increased the efficiency of the
kilns in our three cement plants in the U.K., reaching 87% capacity utilization.
Two of the three cement plants operated beyond 90% capacity utilization. In
addition, we reduced maintenance costs by 46% and reduced fuel consumption by
9%. We also increased the usage of alternative fuels and introduced pet-coke in
two of the three cement plants.
35
During 2005, we also increased the productivity of our U.K. ready-mix
concrete and aggregates operations by closing under-performing operations, and
we increased the utilization of our ready-mix concrete trucks, reducing the need
to hire costly third party trucks. In addition, we reduced our maintenance costs
in our ready-mix concrete and aggregates operations by 14% as a result of the
implementation of preventive maintenance practices across our operations.
Description of Properties, Plants and Equipment
As of December 31, 2005, we operated three cement plants in the United
Kingdom, with an installed cement capacity of 2.7 million tons per year. As of
that date, we also owned a grinding mill, one land terminal and six marine
import terminals and operated 288 ready-mix concrete plants and 103 aggregate
quarries in the United Kingdom. In addition, we have operating units dedicated
to the asphalt, concrete blocks, concrete block paving, roof tiles, sleepers,
flooring and other pre-cast businesses in the United Kingdom.
Capital Investments
We made capital expenditures of approximately U.S.$54 million in 2005
in our U.K. operations. We currently expect to make capital expenditures of
approximately U.S.$107 million in our U.K. operations during 2006.
Our Rest of Europe Operations
Our operations in the Rest of Europe, which, as of December 31, 2005,
consisted of our operations in Germany, France, Ireland, Austria, Poland,
Croatia, the Czech Republic, Denmark, Hungary and Latvia, as well as our
minority interest in Lithuania and our other European assets, represented
approximately 16% of our net sales for the year ended December 31, 2005.
Our German Operations
Overview
As of December 31, 2005, we held 100% of CEMEX Deutschland AG, our
operating subsidiary in Germany. We are a leading provider of building materials
in Germany, with vertically integrated cement, ready-mix concrete, aggregates
and concrete products operations (consisting mainly of prefabricated concrete
ceilings and walls). We maintain a nationwide network for ready-mix concrete and
aggregates in Germany.
The German Cement Industry
According to Euroconstruct, total construction in Germany declined 4.8%
in 2005. The decrease was primarily the result of a decrease of 6.4% in the
civil engineering sector, which includes infrastructure as well as commercial
and industrial construction. According to the German Cement Association, total
cement consumption in Germany declined to 26.9 million tons in 2005, a decrease
of 7%.
Competition
Our primary competitors in the German cement market are Heidelberg,
Dyckerhoff (a subsidiary of Buzzi-Unicem), Lafarge, Holcim and Schwenk, a local
German competitor. The ready-mix concrete and aggregates markets in Germany are
more fragmented, with more participation of local competitors.
36
Our German Operating Network
[MAP GRAPHIC OMITTED]
Description of Properties, Plants and Equipment
As of December 31, 2005, we operated three cement plants in Germany,
with an installed cement capacity of 6.0 million tons per year. As of that date,
we also operated three cement grinding mills, 177 ready-mix concrete plants, 39
aggregate quarries and one land terminal in Germany.
Capital Investments
We made capital expenditures of approximately U.S.$20 million in 2005
in our German operations, and we currently expect to make capital expenditures
of approximately U.S.$44 million in our German operations during 2006.
Our French Operations
Overview
As of December 31, 2005, we held 100% of RMC France SAS, our operating
subsidiary in France. We are a leading ready-mix concrete producer and a leading
aggregates producer in France. We transport a significant quantity of materials
by waterway.
The French Cement Industry
According to Euroconstruct, total construction output in France grew by
3.2% in 2005. The increase was primarily driven by an increase of 9.5% in the
residential construction sector. According to Cembureau, total cement
consumption in France reached 22.5 million tons in 2005, an increase of 2.6%.
Competition
Our main competitors in the ready-mix concrete market in France include
Lafarge, Holcim, Italcementi and Vicat. Our main competitors in the aggregates
market in France include Lafarge, Italcementi, Colas and Eurovia. Many of our
major competitors benefit from manufacturing their own supply of cement within
France, while we must rely on third party cement producers.
Description of Properties, Plants and Equipment
As of December 31, 2005, we operated 233 ready-mix concrete plants in
France, one maritime cement terminal located in LeHavre, on the northern coast
of France, and 41 aggregates quarries. As of that date, we also operated 15
aggregates quarries through joint ventures.
37
Capital Investments
We made capital expenditures of approximately U.S.$20 million in 2005
in our French operations, and we currently expect to make capital expenditures
of approximately U.S.$40 million in our French operations during 2006.
Our Irish Operations
As of December 31, 2005, we held 61.7% of Readymix Plc, our operating
subsidiary in the Republic of Ireland. Our operations in Ireland produce and
supply sand, stone and gravel as well as ready-mix concrete, aggregates, mortar
and concrete products. We are also involved in the production and distribution
of pre-cast, pre-stressed and architectural pre-cast products for distribution
throughout Ireland. As of December 31, 2005, we operated 42 ready-mix concrete
plants and 23 aggregate quarries in Ireland. As of that date, we also operated
three maritime terminals for cement importation for the Republic of Ireland,
Northern Ireland and the Isle of Man. We have a joint venture with Lafarge for
the importation and distribution of cement in the Isle of Man.
According to Euroconstruct, total construction output in Ireland grew
by 3.2% in 2005. The increase was primarily driven by an increase of 11% in the
non-residential construction sector. According to our estimates, total cement
consumption in the Republic of Ireland and Northern Ireland reached 5.1 million
tons in 2005, an increase of 1%.
Our main competitors in the ready-mix concrete and aggregates markets
in Ireland are CRH and Kilsaran.
We made capital expenditures of approximately U.S.$9 million in 2005 in
our Irish operations, and we currently expect to make capital expenditures of
approximately U.S.$20 million in our Irish operations during 2006.
Our Austrian Operations
As of December 31, 2005, we held 100% of CEMEX Austria plc, our
operating subsidiary in Austria. We are a leading participant in the concrete,
aggregates and pre-cast concrete markets in Austria and also produce ready-mix
concrete and admixtures. As of December 31, 2005, we operated 39 ready-mix
concrete plants and 26 aggregate quarries in Austria.
According to Euroconstruct, total construction output in Austria grew
by 1.5% in 2005. The increase was primarily driven by an increase of 2.4% in
non-residential construction in 2005, after a decline of 0.8% in 2004 .
According to Euroconstruct , total cement consumption in Austria reached 4.6
million tons in 2005, an increase of 1.5%.
Our main competitors in the ready-mix concrete and aggregates markets
in Austria are Asamer, Wopfinger and Lafarge.
We made capital expenditures of approximately U.S.$15 million in 2005
in our Austrian operations, and we currently expect to make capital expenditures
of approximately U.S.$7 million in our Austrian operations during 2006.
Our Polish Operations
As of December 31, 2005, we held 100% of CEMEX Polska sp. z.o.o., our
operating subsidiary in Poland. We are a leading provider of building materials
in Poland serving the cement, ready-mix concrete and aggregates markets. As of
December 31, 2005, we operated two cement plants in Poland, with a total
installed cement capacity of 3.1 million tons per year. As of that date, we also
operated two grinding mills, 28 ready-mix concrete plants and three aggregates
quarries in Poland, two wholly owned and one in which we have a 30% interest. As
of that date, we also operated three cement terminals in Poland.
According to Central Statistical Office in Poland, total construction
output in Poland grew by 5.0% in 2005. The increase was primarily driven by an
increase of 7.4% in the civil engineering sector according to the Polish
38
Cement Association. In addition, according to the Polish Cement Association,
total cement consumption in Poland reached 12.2 million tons in 2005, an
increase of 5.9%.
Our primary competitors in the Polish cement, ready-mix concrete and
aggregates markets are Heidelberg, Lafarge, CRH and Dyckerhoff.
On March 2, 2006, we acquired two companies engaged in the ready-mix
concrete and aggregates business in Poland from Unicon A/S, a subsidiary of
Cementir Group, an Italian cement producer, for approximately (euro)12 million.
These companies operate nine ready-mix concrete plants and one aggregates quarry
in Poland. As part of the transaction, we sold 4K Beton A/S, our Danish
subsidiary, which operated 18 ready-mix concrete plants in Denmark, to Unicon
A/S for approximately (euro)22 million. We received net cash proceeds of
approximately (euro)6 million, after cash and debt adjustments, from this
transaction.
We made capital expenditures of approximately U.S.$5 million in 2005 in
our Polish operations, and we currently expect to make capital expenditures of
approximately U.S.$12 million in our Polish operations during 2006.
Our Croatian Operations
As of December 31, 2005, we held 99.24% of Dalmacijacement d.d., our
operating subsidiary in Croatia. We are the largest cement producer in Croatia
based on installed capacity as of December 31, 2005, according to our estimates.
As of December 31, 2005, we operated three cement plants in Croatia, with an
installed capacity of 2.6 million tons per year. As of that date, we also
operated seven cement terminals, two ready-mix facilities and one aggregates
quarry in Croatia.
According to the Croatian Cement Association, total cement consumption
in Croatia reached 2.58 million tons in 2005, an increase of 3.4%.
Our primary competitors in the Croatian cement market are Nexe and
Holcim.
We made capital expenditures of approximately U.S.$5 million in 2005 in
our Croatian operations, and we currently expect to make capital expenditures of
approximately U.S.$8 million in our Croatian operations during 2006.
Our Czech Republic Operations
As of December 31, 2005, we held 100% of CEMEX Czech Republic, s.r.o.,
our operating subsidiary in the Czech Republic. We are a leading producer of
ready-mix concrete and aggregates in the Czech Republic. We also distribute
cement in the Czech Republic. As of December 31, 2005, we operated 46 ready-mix
concrete plants and seven aggregates quarries in the Czech Republic. As of that
date, we also operated one cement grinding mill and one cement terminal in the
Czech Republic.
According to Euroconstruct, total construction output in the Czech
Republic grew by 5.5% in 2005. The increase was primarily driven by growth in
the residential construction sector of around 7.9% in 2005. According to
Euroconstruct , total cement consumption in the Czech Republic reached 4.0
million tons in 2005, an increase of 4.2%.
Our main competitors in the cement, ready-mix concrete and aggregates
markets in the Czech Republic are Heidelberg, Dyckerhoff, Holcim and Lafarge.
We made capital expenditures of approximately U.S.$2 million in 2005 in
our Czech Republic operations, and we currently expect to make capital
expenditures of approximately U.S.$5 million in our Czech Republic operations
during 2006.
39
Our Danish Operations
As of December 31, 2005, we held 100% of 4K Beton A/S, our operating
subsidiary in Denmark. As of December 31, 2005, we operated 18 ready-mix
concrete plants in Denmark.
On March 2, 2006, we sold 4K Beton A/S to Unicon A/S, a subsidiary of
Cementir Group, an Italian cement producer, for approximately (euro)22 million.
As part of the transaction, we purchased from Unicon A/S two companies engaged
in the ready-mix concrete and aggregates business in Poland for approximately
(euro)12 million. These companies operate nine ready-mix concrete plants and one
aggregates quarry in Poland. We received net cash proceeds of approximately
(euro)6 million, after cash and debt adjustments, from this transaction.
We made capital expenditures of approximately U.S.$0.2 million in 2005
in our Danish operations.
Our Hungarian Operations
As of December 31, 2005, we held 100% of Danubiousbeton Betonkeszito
Kft, our operating subsidiary in Hungary. As of December 31, 2005, we operated
27 ready-mix concrete plants and six aggregate quarries in Hungary.
According to Hungarian Statistical Office, total construction output in
Hungary grew by 16.6% in 2005. The increase was primarily driven by the increase
in highway constructions. Total cement consumption in Hungary reached 4.1
million tons in 2005, an increase of 2.5%.
Our main competitors in the ready-mix concrete and aggregates markets
in Hungary are Heidelberg, Strabag and Lasselsberger.
We made capital expenditures of approximately U.S.$10 million in 2005
in our Hungarian operations, and we currently expect to make capital
expenditures of approximately U.S.$8 million in our Hungarian operations during
2006.
Our Latvian Operations
As of December 31, 2005, we held 100% of SIA CEMEX, our operating
subsidiary in Latvia. We are the only cement producer and a leading ready-mix
producer and supplier in Latvia. As of December 31, 2005, we operated one cement
plant in Latvia with an installed cement capacity of 0.4 million tons per year.
As of that date, we also operated three ready-mix concrete plants in Latvia.
In April 2006, we implemented a plan to expand our cement plant in
Latvia in order to increase our cement production capacity by one million tons
per year to support strong demand in the country. The construction is expected
to be completed in 2008. We expect our total capital investment in the capacity
expansion over the course of three years will be approximately U.S.$160 million,
including U.S.$19 million during 2006. We expect that this investment will be
fully funded with consolidated free cash flow generated by CEMEX's worldwide
operations during the three-year construction period.
We made capital expenditures of approximately U.S.$3 million in 2005 in
our Latvian operations, and we currently expect to make capital expenditures of
approximately U.S.$26 million in our Latvian operations during 2006.
Our Lithuanian Equity Investment
As of December 31, 2005, we owned a 34% interest in Akmenes Cementas
AB, a Lithuanian cement producer, which operates one cement plant in Lithuania
with an installed cement capacity of 2.7 million tons per year.
40
Our Italian Operations
As of December 31, 2005, we held 100% of Cementilce S.R.L., our
operating subsidiary in Italy. We are building three grinding mills in Italy,
one with an installed capacity of approximately 450 thousand tons and two others
with installed capacities of 750 thousand tons per year. The smaller mill
started operations at the end of the third quarter of 2005, one of the larger
mills is expected to start operations in the second quarter of 2006, and the
other one in the third quarter of 2007. Our operations in Italy enhance our
trading operations in the Mediterranean region.
We made capital investments of approximately U.S.$13 million during
2003, approximately U.S.$33 million during 2004, and approximately U.S.$33
million in 2005 in our Italian operations, and we currently expect to make
capital investments of approximately U.S.$29 million in our Italian operations
during 2006.
Our Other European Operations
As of December 31, 2005, we operated 11 marine cement terminals in
Finland, Norway and Sweden through Embra AS, a leading bulk-cement importer in
the Nordic region.
South America, Central America and the Caribbean
For the year ended December 31, 2005, our business in South America,
Central America and the Caribbean, which includes our operations in Venezuela,
Colombia, Argentina, Costa Rica, the Dominican Republic, Panama, Nicaragua,
Puerto Rico and Jamaica, as well as other assets in the Caribbean, represented
approximately 9% of our net sales. As of December 31, 2005, our business in
South America, Central America and the Caribbean represented approximately 16%
of our total installed capacity and approximately 7% of our total assets.
Our Venezuelan Operations
Overview
As of December 31, 2005, we held a 75.7% interest in CEMEX Venezuela,
S.A.C.A., or CEMEX Venezuela, our operating subsidiary in Venezuela, which is
listed on the Caracas Stock Exchange. CEMEX Venezuela also serves as the holding
company for our interests in the Dominican Republic, Panama and Trinidad. As of
December 31, 2005, CEMEX Venezuela was the largest cement producer in Venezuela,
based on an installed capacity of 4.6 million tons.
In March 2004, we launched the Construrama program in Venezuela. As
described above, Construrama is a registered brand name for construction
material stores which we have utilized as a marketing strategy in our Mexican
operations since 2001. Through the Construrama program, we offer to a group of
our Venezuelan distributors the opportunity to sell a variety of products under
the Construrama brand name, a concept that includes the standardization of
stores, image, marketing, products and services. As of December 31, 2005, 113
independent concessionaries with 79 stores were integrated into the Construrama
program in Venezuela. By the end of 2006, we expect to have approximately 156
stores under the Construrama program in Venezuela.
The Venezuelan Cement Industry
According to the Venezuelan Cement Producer Association, cement
consumption in Venezuela grew approximately 22.2% in 2005, as the Venezuelan
economy continued to recover from Venezuela's political and economic turmoil
during 2003. In February 2003, Venezuelan authorities imposed foreign exchange
controls and implemented price controls on many products, including cement. In
2005, average inflation in Venezuela was reduced to 14.4%, the Venezuelan
Bolivar depreciated 12% against the Dollar and gross domestic product increased
9.3%. In 2005, a major government housing plan began and is expected to continue
throughout 2006.
41
Competition
As of December 31, 2005, the Venezuelan cement industry included five
cement producers, with a total installed capacity of approximately 10.1 million
tons, according to our estimates. Our global competitors, Holcim and Lafarge,
own controlling interests in Venezuela's second and third largest cement
producers, respectively.
In 2005, the ready-mix concrete market accounted for only about 11% of
cement consumption in Venezuela, according to our estimates. We believe that
Venezuela's construction companies, which typically prefer to install their own
ready-mix concrete plants on-site, are the most significant barrier to
penetration of the ready-mix concrete sector, with the result that on-site
ready-mix concrete mixing represents a high percentage of total ready-mix
concrete production.
Other than CEMEX Venezuela, the ready-mix concrete market in Venezuela
is concentrated in two companies, Premezclado Caribe, which is owned by Holcim,
and Premex, which is owned by Lafarge. The rest of the ready-mix concrete sector
in Venezuela is highly fragmented.
As of December 31, 2005, CEMEX Venezuela was the leading Venezuelan
domestic supplier of cement, based on our estimates of sales of gray and white
cement in Venezuela. In addition, CEMEX Venezuela was the leading domestic
supplier of ready-mix concrete in 2005 with 33 ready-mix production plants
throughout Venezuela.
Our Venezuelan Operating Network
As shown below, CEMEX Venezuela's three cement plants and one grinding
facility are located near the major population centers and the coast of
Venezuela.
[MAP GRAPHIC OMITTED]
Distribution Channels
Transport by land is handled partially by CEMEX Venezuela. During 2005,
approximately 33% of CEMEX Venezuela's total domestic sales were transported
through its own fleet of trucks. CEMEX Venezuela also serves a significant
number of its retail customers directly through its wholly-owned distribution
centers. CEMEX Venezuela's cement is transported either in bulk or in bags.
42
Exports
During 2005, exports from Venezuela represented approximately 21% of
CEMEX Venezuela's net sales. CEMEX Venezuela's main export markets historically
have been the Caribbean and the east coast of the United States. In 2005, 76% of
our exports from Venezuela were to the United States, and 24% were to the
Caribbean.
Description of Properties, Plants and Equipment
As of December 31, 2005, CEMEX Venezuela operated three wholly-owned
cement plants, Lara, Mara and Pertigalete, with a combined installed cement
capacity of approximately 4.6 million tons. As of that date, CEMEX Venezuela
also operated the Guayana grinding facility with a cement capacity of 375,000
tons. As of December 31, 2005, CEMEX Venezuela owned 33 ready-mix concrete
production facilities, one mortar plant and 12 distribution centers. As of that
date, CEMEX Venezuela also owned six limestone quarries with reserves sufficient
for over 100 years at 2005 production levels. During 2005, CEMEX Venezuela
acquired a new limestone quarry in order to supply the Pertigalete plant for the
long term.
The Lara and Mara plants and one production line at the Pertigalete
plant use the wet process; the other production line at the Pertigalete plant
uses the dry process. All the plants use primarily natural gas as fuel, but a
small percentage of diesel fuel is also used at Lara Plant. CEMEX Venezuela has
its own electricity generating facilities, which are powered by natural gas and
diesel fuel.
As of December 31, 2005, CEMEX Venezuela owned and operated four port
facilities, three marine terminals and one river terminal. One port facility is
located at the Pertigalete plant, one at the Mara plant, one at the Catia La Mar
terminal on the Caribbean Sea near Caracas, and one at the Guayana Plant on the
Orinoco River in the Guayana Region.
Capital Investments
We made capital expenditures of approximately U.S.$11 million in 2003,
U.S.$14 million in 2004, and U.S.$23 million in 2005 in our Venezuelan
operations. We currently expect to make capital expenditures of approximately
U.S.$30 million in our Venezuelan operations during 2006.
Our Colombian Operations
Overview
As of December 31, 2005, we owned approximately 99.7% of CEMEX
Colombia, S.A., or CEMEX Colombia, our operating subsidiary in Colombia. As of
December 31, 2005, CEMEX Colombia was the second-largest cement producer in
Colombia, based on installed capacity of 4.8 million tons, according to the
Colombian Institute of Cement Producers.
CEMEX Colombia has a significant market share in the cement and
ready-mix concrete market in the "Urban Triangle" of Colombia comprising the
cities of Bogota, Medellin and Cali. During 2005, these three metropolitan areas
accounted for approximately 50% of Colombia's cement consumption. CEMEX
Colombia's Ibague plant, which uses the dry process and is strategically located
between Bogota, Cali and Medellin, is Colombia's largest and had an installed
capacity of 2.5 million tons as of December 31, 2005. CEMEX Colombia, through
its Bucaramanga and Cucuta plants, is also an active participant in Colombia's
northeastern market. CEMEX Colombia's strong position in the Bogota ready-mix
concrete market is largely due to its access to a ready supply of aggregate
deposits in the Bogota area.
The Colombian Cement Industry
According to the Colombian Institute of Cement Producers, the installed
capacity in Colombia for 2005 was 15.5 million tons. According to such
organization, total cement consumption in Colombia reached 7.8 millions tons
during 2005, an increase of 36.6%, while cement exports from Colombia remained
at 2.1 million tons. We estimate that close to 50% of cement in Colombia is
consumed by the self-construction sector, while the housing
43
sector accounts for 25% of total cement consumption and has been growing since
the 1999 crisis. The other construction segments in Colombia, including the
public works and commercial sectors, account for the balance of cement
consumption in Colombia.
Competition
The Sindicato Antioqueno, or Argos, owns or has interests in eight of
Colombia's eighteen cement plants. Argos has established a leading position in
the Colombian coastal markets through Cementos Caribe in Barranquilla, Compania
Colclinker in Cartagena and Tolcemento in Sincelejo. The other principal cement
producer is Cementos Boyaca, an affiliate of Holcim.
Our Colombian Operating Network
[MAP GRAPHIC OMITTED]
Description of Properties, Plants and Equipment
As of December 31, 2005, CEMEX Colombia owned five cement plants,
one clinker facility and one grinding mill, having a total installed capacity
of 4.8 million tons per year. Two of these plants and the clinker facility
utilize the wet process and three plants utilize the dry process. CEMEX
Colombia also has an internal electricity generating capacity of 24.7
megawatts through a leased facility. As of December 31, 2005, CEMEX Colombia
owned six land distribution centers, one mortar plant, 26 ready-mix concrete
plants, one concrete products plant, and six aggregates operations. As of
that date, CEMEX Colombia also owned eight limestone quarries with minimum
reserves sufficient for over 60 years at 2005 production levels.
Capital Investments
We made capital expenditures of approximately U.S.$6 million in
2003, U.S.$9 million in 2004 and U.S.$7 million in 2005 in our Colombian
operations. We currently expect to make capital investments of approximately
U.S.$15 million in our Colombian operations during 2006.
Our Costa Rican Operations
As of December 31, 2005, we owned a 99.1% interest in CEMEX (Costa
Rica), S.A., or CEMEX (Costa Rica), our operating subsidiary in Costa Rica
and a leading cement producer in the country. As of December 31, 2005, CEMEX
(Costa Rica) operated one cement plant in Costa Rica, with an installed
capacity of 0.9 million tons. As of that date, CEMEX (Costa Rica) also
operated one grinding mill in northwest Costa Rica, with a grinding capacity
of 670,000 tons, and a second grinding mill in the capital San Jose, with a
grinding capacity of 168,000
44
tons. As of December 31, 2005, CEMEX Costa Rica operated six ready-mix plants,
one aggregates quarry, and one land distribution center.
During 2005, exports of cement by our Costa Rican operations
represented approximately 21% of our total cement production in Costa Rica.
In 2005, 15% of our exports from Costa Rica were to Nicaragua, 45% to El
Salvador and 23% to Guatemala, and 17% to other countries in South America
and the Caribbean.
Approximately 1.2 million tons of cement were sold in Costa Rica
during 2005, according to Camara de la Construccion de Costa Rica, the Costa
Rican construction industry association. The Costa Rican cement market is a
predominantly retail market, and we estimate that over three quarters of
cement sold is bagged cement.
The Costa Rican cement industry includes two producers, CEMEX (Costa
Rica) and Holcim Costa Rica.
We made capital expenditures of approximately U.S.$7 million in
2003, U.S.$3 million in 2004 and U.S.$5 million in 2005 in our Costa Rican
operations. We currently expect to make capital expenditures of approximately
U.S.$6 million in our Costa Rican operations during 2006.
Our Dominican Republic Operations
As of December 31, 2005, we held, through CEMEX Venezuela, 99.9% of
CEMEX Dominicana, S.A. (formerly Cementos Nacionales, S.A.), or CEMEX
Dominicana, our operating subsidiary in the Dominican Republic and a leading
cement producer in the country. CEMEX Dominicana's sales network covers the
country's main consumption areas, which are Santo Domingo, Santiago de los
Caballeros, La Vega, San Pedro de Macoris, Azua and Bavaro. CEMEX Dominicana
also has a 25 year lease arrangement with the Dominican Republic government
related to the mining of gypsum, which enables CEMEX Dominicana to supply all
local and regional gypsum requirements.
In June 2003, CEMEX Dominicana announced a U.S.$130 million investment
plan to install a new kiln for producing clinker with an annual capacity of 1.6
million tons of clinker. This new kiln, which increased our total clinker
production capacity in the Dominican Republic to 2.2 million tons per year,
began operations at the end of 2005.
In 2005, Dominican Republic cement consumption reached 3.1 million
tons. Our principal competitors in the Dominican Republic are Domicen, an
Italian cement producer that started cement production in 2005, Cementos Cibao,
a local competitor, Cemento Colon, an affiliate of Holcim and Cementos Andinos,
a Colombian cement producer.
As of December 31, 2005, CEMEX Dominicana operated one cement plant in
the Dominican Republic, with an installed capacity of 2.6 million tons per year
of, and three grinding mills. As of that date, CEMEX Dominicana also operated
seven ready-mix concrete plants, seven distribution centers located throughout
the country and two marine terminals.
We made capital expenditures of approximately U.S.$13 million in 2003,
U.S.$56 million in 2004, and U.S.$87 million in 2005 in our Dominican Republic
operations. We currently expect to make capital investments of approximately
U.S.$22 million in our Dominican Republic operations during 2006.
Our Panamanian Operations
As of December 31, 2005, we held, through CEMEX Venezuela, a 99.3%
interest in Cemento Bayano, S.A., or Cemento Bayano, our operating subsidiary
in Panama and a leading cement producer in the country. As of December 31,
2005, Cemento Bayano operated one cement plant in Panama, with an installed
capacity of 0.5 million tons per year. As of that date, Cemento Bayano also
owned and operated 11 ready-mix concrete plants.
Approximately one million cubic meters of ready-mix concrete were
sold in Panama during 2005, according to the General Comptroller of the
Republic of Panama (Contraloria General de la Republica de Panama). Panamanian
cement consumption decreased 1.3% in 2005, according to our estimates. The
Panamanian cement
45
industry includes two cement producers, Cemento Bayano and Cemento Panama, an
affiliate of Holcim and Cementos del Caribe.
We made capital expenditures of approximately U.S.$8 million in 2003,
U.S.$6 million in 2004, and U.S.$5 million in 2005 in our Panamanian operations.
We currently expect to make capital expenditures of approximately U.S.$6 million
in our Panamanian operations during 2006.
Our Nicaraguan Operations
As of December 31, 2005, we owned 100% of CEMEX Nicaragua, S.A., or
CEMEX Nicaragua, our operating subsidiary in Nicaragua. As of that date, CEMEX
Nicaragua leased and operated one cement plant with an installed capacity of 0.5
million tons. Since March 2003, CEMEX Nicaragua has also leased a 100,000 ton
milling plant in Managua, which has been used exclusively for petcoke milling.
According to our estimates, approximately 600,000 tons of cement were
sold in Nicaragua during 2005. Two market participants compete in the Nicaraguan
cement industry: CEMEX Nicaragua and Holcim.
We made capital expenditures of approximately U.S.$5 million in 2003,
U.S.$3 million in 2004 and U.S.$7 million in 2005 in our Nicaraguan operations.
We currently expect to make capital expenditures of approximately U.S.$5 million
in our Nicaraguan operations during 2006.
Our Puerto Rican Operations
As of December 31, 2005, we owned 100% of CEMEX de Puerto Rico, Inc.
(formerly Puerto Rican Cement Company, Inc.), or CEMEX Puerto Rico, our
operating subsidiary in Puerto Rico. As of December 31, 2005, CEMEX Puerto Rico
operated one cement plant, with an installed cement capacity of approximately
1.1 million tons per year. As of that date, CEMEX Puerto Rico also owned and
operated 26 ready-mix concrete plants, including the 15 ready-mix concrete
plants CEMEX Puerto Rico acquired with its acquisition of Concretera Mayaguezana
in July 2005 for approximately U.S.$26 million.
In 2005, Puerto Rican cement consumption reached 1.8 million tons. The
Puerto Rican cement industry in 2005 was comprised of two cement producers,
CEMEX Puerto Rico, and San Juan Cement Co., an affiliate of Italcementi.
We made capital expenditures of approximately U.S.$26 million in 2003,
U.S.$8 million in 2004, and U.S.$10 million in 2005 in our Puerto Rican
operations. We currently expect to make capital investments of approximately
U.S.$24 million in our Puerto Rican operations during 2006.
Our Argentine Operations
As of December 31, 2005, we held 100% of Readymix Argentina S.A., our
operating subsidiary in Argentina. As of December 31, 2005, we operated four
ready-mix concrete plants in Argentina.
Our Other Operations in the Region
We believe that the Caribbean region holds considerable strategic
importance because of its geographic location. As of December 31, 2005, we
operated a network of eight marine terminals in the Caribbean region, which
facilitated exports from our operations in several countries, including Mexico,
Venezuela, Costa Rica, Puerto Rico, Spain, Colombia and Panama. Three of our
marine terminals are located in the main cities of Haiti, two are in the
Bahamas, one is in Bermuda, one is in Manaus, Brazil and one is in the Cayman
Islands. As of December 31, 2005, we had minority positions in Trinidad Cement
Limited, with cement operations in Trinidad and Tobago, Barbados and Jamaica, as
well as a minority position in Caribbean Cement Company Limited in Jamaica.
In addition, in January 2006, we acquired a grinding mill with a
grinding capacity of 400,000 tons per year in Guatemala for approximately
U.S.$17.4 million.
46
Africa and the Middle East
For the year ended December 31, 2005, our business in Africa and the
Middle East, which includes our operations in Egypt, the United Arab Emirates
and Israel, represented approximately 3% of our net sales. As of December 31,
2005, our business in Africa and the Middle East represented approximately 5% of
our total installed capacity and approximately 2% of our total assets.
Our Egyptian Operations
As of December 31, 2005, we had a 95.8% interest in Assiut Cement
Company, or Assiut, our operating subsidiary in Egypt. As of December 31, 2005,
we operated one cement plant in Egypt, with an installed capacity of
approximately 4.9 million tons. This plant is located approximately 200 miles
south of Cairo and serves the upper Nile region of Egypt, as well as Cairo and
the delta region, Egypt's main cement market. In addition, as of that date we
operated three ready-mix concrete plants in Egypt.
According to our estimates, the Egyptian market consumed approximately
28.1 million tons of cement during 2005. Cement consumption increased by 19.6%
in 2005, due to an economic recovery in Egypt and the positive effect of
Government reforms.
As of December 31, 2005, the Egyptian cement industry had a total of
nine cement producers, with an aggregate annual installed cement capacity of
approximately 40 million tons. According to the Egyptian Cement Council, during
2005, Holcim (minority shareholder in Egyptian Cement Company), Lafarge
(Alexandria Portland Cement and Beni Suef Cement), CEMEX (Assiut) and
Italcementi (Suez Cement, Tourah Cement and Helwan Portland Cement), the four
largest cement producers in the world, represented approximately 72% of the
total installed capacity in Egypt. Other significant competitors in the Egyptian
market are Ameriyah (Cimpor), National, Sinai, Misr Beni Suef and Misr Quena
Cement Companies.
We made capital expenditures of approximately U.S.$14 million in 2003,
U.S.$9 million in 2004, and U.S.$9 million in 2005 in our Egyptian operations.
We currently expect to make capital expenditures of approximately U.S.$15
million in our Egyptian operations during 2006.
Our United Arab Emirates (UAE) Operations
As of December 31, 2005, we held a 49% equity interest in four UAE
companies: RMC Topmix LLC and RMC Supermix LLC, two ready-mix holding companies,
Gulf Quarries Company, an aggregates company, and Falcon Cement LLC, which
specializes in trading. We are not allowed to have a majority interest in these
companies since UAE law requires 51% ownership by UAE nationals. However,
through agreements with other shareholders in these companies, we have purchased
the remaining 51% of the economic benefits in each of the companies. As a
result, we own a 100% economic interest in all four companies. As of December
31, 2005, we operated 13 ready-mix concrete plants in the UAE, serving the
markets of Dubai, Abu Dhabi, Ras Al Khaimah and Sharjah. As of that date, we
also operated an aggregates quarry in the UAE.
In March 2006, we announced a plan to invest approximately U.S.$50
million in the construction of a new grinding facility for cement and slag in
Dubai. The new facility, which is designed to increase our total cement
production capacity in the region to approximately 1.6 million tons per year, is
expected to be completed in 2007. We expect that this investment will be fully
funded with free cash flow generated by CEMEX's worldwide operations during the
construction period.
We made capital expenditures of approximately U.S.$4 million in 2005 in
our UAE operations, and we currently expect to make capital expenditures of
approximately U.S.$44 million in our UAE operations during 2006, including those
related to the construction of the new grinding facility in Dubai described
above.
Our Israeli Operations
As of December 31, 2005, we held 100% of CEMEX Holdings (Israel) Ltd.,
our operating subsidiary in Israel. We are a leading producer and supplier of
raw materials for the construction industry in Israel. In addition to ready-mix
47
concrete products, we produce a diverse range of building materials and
infrastructure products in Israel. As of December 31, 2005, we operated 59
ready-mix concrete plants, one concrete products plant, and one admixtures
plant in Israel.
As of December 31, 2005, we also held 50% of Lime&Stone (L&S) Ltd., a
leading aggregates producer in Israel and an important supplier of lime, asphalt
and marble. As of December 31, 2005, this joint venture operated 11 aggregate
quarries, two asphalt plants, one lime factory and one marble facility.
We made capital expenditures of approximately U.S.$3 million in 2005 in
our Israeli operations, and we currently expect to make capital expenditures of
approximately U.S.$4 million in our Israeli operations during 2006.
Asia
For the year ended December 31, 2005, our business in Asia, which
includes our operations in the Philippines, Thailand and Malaysia, as well as
our minority interest in Indonesia and other assets in Asia, represented
approximately 2% of our net sales. As of December 31, 2005, our business in Asia
represented approximately 11% of our total installed capacity and approximately
3% of our total assets.
Our Philippine Operations
As of December 31, 2005, we held through CAH, 100% of the economic
benefits of our two operating subsidiaries in the Philippines, Solid, and APO
Cement Corporation, or APO.
According to Cement Manufacturers' Association of the Philippines
(CEMAP), cement consumption in the Philippine market, which is primarily retail,
totaled 11.8 million tons during 2005. Although the Philippines has largely
recovered from the 1997 Asian economic recession, Philippine demand for cement
decreased by approximately 5% in 2005.
As of December 31, 2005, the Philippine cement industry had a total of
20 cement plants and three cement grinding mills. Annual installed capacity is
26.8 million tons, according to CEMAP. Major global cement producers own
approximately 88% of this capacity. Our major competitors in the Philippine
cement market are Holcim, which has interests in five local cement plants, and
Lafarge, which has interests in eight local cement plants.
Our Philippine operations include three plants with a total capacity of
5.6 million tons per year and three marine distribution terminals. Our cement
plants include five wet process production lines and three dry process
production lines with an installed cement capacity of 4.1 million tons.
We made capital expenditures of approximately U.S.$2 million in 2003,
U.S.$2 million in 2004, and U.S.$4 million in 2005 in our Philippine operations.
We currently expect to make capital expenditures of approximately U.S.$14
million in our Philippine operations during 2006.
Our Indonesian Equity Investment
As of December 31, 2005, our proportionate economic interest through
CAH in Gresik, Indonesia's largest cement producer, was approximately 25.5%. The
Republic of Indonesia has a 51% interest in Gresik. Currently, we hold two seats
on both the board of directors and the board of commissioners of Gresik, as well
as the right to approve Gresik's business plan jointly with the Indonesian
government.
In October 2001, certain individuals purporting to represent the people
of the Indonesian province of West Sumatra, in which the Padang plant of Gresik
is located, issued a declaration which stated that PT Semen Padang, or Semen
Padang, the 99.99%-owned subsidiary of Gresik that owns and operates the Padang
plant, was placed under the temporary control of the people of West Sumatra. The
declaration ordered the management of Semen Padang to report to the local
government of the West Sumatra Province, under the supervision of the People's
Representative Assembly of West Sumatra, pending a "spin-off" of the Semen
Padang subsidiary. In November 2001, the People's Representative Assembly of
West Sumatra issued a decision approving this declaration on the grounds that
48
the original sale of Semen Padang by the Indonesian government to Gresik in 1995
was invalid, since several necessary approvals were not obtained. We believe the
provincial administration lacks legal authority to direct or interfere with the
affairs of Semen Padang. The former management of Semen Padang refused to
relinquish control until September 2003 when the newly-appointed management was
finally permitted to enter the Padang Facility and assume control of Semen
Padang. However, we believe that the newly-appointed management was admitted on
condition that it encourage a spin-off of Semen Padang, and in October 2003, it
explicitly agreed to do so.
Gresik has experienced other ongoing difficulties at Semen Padang,
including the effective loss of operational and financial control of Semen
Padang, and, until recently, the inability to prepare consolidated financial
statements that include Semen Padang's operations and the inability of its
independent auditors to provide an unqualified audit opinion on such financial
statements. In April 2006, after making several adjustments suggested by its
independent auditors, unqualified audited financial statements for 2004 and 2005
were finally presented by Semen Gresik. As a result of these difficulties, as of
the date of this annual report, we have not been able to independently verify
certain information with respect to Semen Padang's facilities and operations and
thus, the overall description of Gresik's facilities and operations below
assumes the validity and accuracy of the information provided by Semen Padang's
management.
On May 3, 2006, we agreed to sell 24.9% of Gresik to Indonesia-based
Rajawali Group for approximately U.S.$337 million. The purchaser's obligations
under our sales contract are subject to obtaining the approval of the Indonesian
government and the fulfillment of other conditions. In the event this sale is
consummated, our remaining interest in Gresik will be 0.6%.
On May 17, 2006, we received a letter from the Indonesian government
purporting to exercise its right to repurchase, under the 1998 purchase
agreement, pursuant to which we acquired our interest in Gresik, the Gresik
shares we have agreed to sell to the Rajawali Group. However, we believe that
the Indonesian government's purported exercise of this right did not comply with
the requirements set forth in the 1998 purchase agreement, and we are in
correspondence and in discussions with the Indonesian government concerning this
issue. No assurance can be given either that the sale to the Rajawali Group will
be consummated, or that the Indonesian government will purchase the Gresik
shares, on the terms outlined above, or that a sale transaction on similar or
different terms may be consummated with any other purchaser.
For a description of legal proceedings relating to Gresik, please see
"Regulatory Matters and Legal Proceedings -- Other Legal Proceedings."
According to our estimates, Indonesian domestic cement demand increased
approximately 1.0% in 2003, 9.8% in 2004, and 4.2% in 2005. As of December 31,
2005, the Indonesian cement industry had 13 cement plants, including the four
plants owned by Gresik, with a combined installed capacity of approximately 47.5
million tons. Gresik, with an installed capacity of 17.3 million tons, is
Indonesia's largest cement producer.
As of December 31, 2005, Gresik had four cement plants, 25 land
distribution centers and 10 marine terminals. Gresik's cement plants include the
Padang plant, with one production line that utilizes the wet process and four
production lines that utilize the dry process and an installed capacity of 5.6
million tons; the Gresik plant, which has two production lines that utilize the
dry process and an installed capacity of 1.3 million tons; the Tuban plant,
which has three production lines that utilize the dry process and an installed
capacity of 6.9 million tons; and the Tonasa plant, which has three production
lines that utilize the dry process and an installed capacity of 3.5 million
tons. As of December 31, 2005, Gresik was operating at approximately 95%
capacity utilization, including export sales. During 2005, Gresik exported
approximately 13% of its total sales volume, mainly through its own efforts and,
to a lesser extent, through CEMEX's trading operations. Gresik exports mainly to
Sri Lanka and Bangladesh.
Our Thai Operations
As of December 31, 2005, we had a 100% interest in CEMEX (Thailand) Co.
Ltd., or CEMEX (Thailand), our operating subsidiary in Thailand. As of December
31, 2005, we owned one cement plant in Thailand, with an installed capacity of
approximately 0.7 million tons.
49
According to our estimates, at December 31, 2005, the cement industry
in Thailand had a total of 14 cement plants, with an aggregate annual installed
capacity of approximately 55.6 million tons. We estimate that there are five
major cement producers in Thailand, four of which represent 96% of installed
capacity and 97% of the market. Our major competitors in the Thai market, which
have a significantly larger presence than CEMEX (Thailand), are Siam Cement,
Holcim, TPI Polene and Italcementi.
We made capital expenditures of approximately U.S.$2 million in 2003,
U.S.$3 million in 2004, and U.S.$4 million in 2005 in our Thai operations. We
currently expect to make capital expenditures of approximately U.S.$5 million in
our Thai operations during 2006.
Our Malaysian Operations
As of December 31, 2005, we held 100% of RMC Industries (Malaysia) Sdn
Bkd, our operating subsidiary in Malaysia. We are a leading ready-mix concrete
producer in Malaysia, with a significant share in the country's major urban
centers. As of December 31, 2005, we operated 22 ready-mix concrete plants, five
asphalt plants and three aggregate quarries in Malaysia.
Our main competitors in the ready-mix concrete and aggregates markets
in Malaysia are YTL, Lafarge and Hanson.
We made capital expenditures of approximately U.S.$1 million in 2005 in
our Malaysian operations, and we currently expect to make capital expenditures
of approximately U.S.$2 million in our Malaysian operations during 2006.
Other Asian Investments
Since April 2001, we have been operating a grinding mill with cement
milling production capacity of 520,000 tons per year near Dhaka, Bangladesh. A
majority of the supply of clinker for the mill is produced by our operations in
the region. In addition, since June 2001, we have also operated a cement
terminal in the port of Taichung located on the west coast of Taiwan.
Our Trading Operations
We traded approximately 16 million tons of cement and clinker in 2005.
Approximately 51% of the volume we traded in 2005 consisted of exports from our
operations in Costa Rica, Croatia, Egypt, Germany, Mexico, Philippines, Poland,
Puerto Rico, Spain and Venezuela. Approximately 49% was purchased from third
parties in countries such as Belgium, China, Egypt, France, Indonesia, Israel,
Japan, Lithuania, South Korea, Taiwan, Thailand and Turkey. In 2005, we expanded
our trading activities to 97 countries from 76 countries in 2004. This broadened
geographic coverage allows us to serve new markets in Northern Europe, the
Middle East and Australia through an enhanced trading network. In 2005, we also
gained an important presence in slag cement trading markets, particularly in
Europe and the Middle East, having traded approximately 1.5 million tons of slag
cement in 2005. Slag cement (also called ground granulated blast furnace slag)
is a hydraulic cement produced during the reduction of iron ore to iron in a
blast furnace.
Our trading network enables us to maximize the capacity utilization of
our facilities worldwide while reducing our exposure to the inherent cyclicality
of the cement industry. We are able to distribute excess capacity to regions
around the world where there is demand. In addition, our worldwide network of
strategically located marine terminals allows us to coordinate maritime
logistics on a global basis and minimize transportation expenses. Our trading
operations also enable us to explore new markets without significant initial
capital investment.
Regulatory Matters and Legal Proceedings
A description of material regulatory and legal matters affecting us is
provided below.
50
Tariffs
The following is a discussion of tariffs on imported cement in our
major markets.
Mexico
Mexican tariffs on imported goods vary by product and have been as
high as 100%. In recent years, import tariffs have been substantially reduced
and currently range from none at all for raw materials to over 20% for finished
products, with an average weighted tariff of approximately 3.7%. As a result of
the North American Free Trade Agreement, or NAFTA, as of January 1, 1998, the
tariff on cement imported into Mexico from the United States or Canada was
eliminated. However, a tariff in the range of 13% ad valorem will continue to
be imposed on cement produced in all other countries unless tariff reduction
treaties are implemented or the Mexican government unilaterally reduces that
tariff. While the reduction in tariffs could lead to increased competition from
imports in our Mexican markets, we anticipate that the cost of transportation
from most producers outside Mexico to central Mexico, the region of highest
demand, will remain an effective barrier to entry.
United States
There are no tariffs on cement imported into the United States from
any country, except Cuba and North Korea.
Europe
Member countries of the European Union are subject to the uniform
European Union commercial policy. There is no tariff on cement imported into a
country that is a member of the European Union from another member country or
on cement exported from a European Union country to another member country. For
cement imported into a member country from a non-member country, the tariff is
currently 1.7% of the customs value. Any country with preferential treatment
with the European Union is subject to the same tariffs as members of the
European Union. Most Eastern European producers who export cement into European
Union countries currently pay no tariff.
Environmental Matters
We are subject to a broad range of environmental laws and regulations
in each of the jurisdictions in which we operate. These laws and regulations
impose increasingly stringent environmental protection standards regarding,
among other things, air emissions, wastewater discharges, the use and handling
of hazardous waste or materials, waste disposal practices and the remediation
of environmental damage or contamination. These standards expose us to the risk
of substantial environmental costs and liabilities, including liabilities
associated with divested assets and past activities, even where conducted by
prior owners or operators and, in some jurisdictions, without regard to fault
or the lawfulness of the original activity.
To prevent, control and remediate environmental problems and maintain
compliance with regulatory requirements, we maintain an environmental policy
designed to monitor and control environmental matters. Our environmental policy
requires each subsidiary to respect local laws and meet our own internal
standards to minimize the use of non-renewable resources and the generation of
hazardous and other wastes. We use processes that are designed to reduce the
impact of our operations on the environment throughout all the production
stages in all our operations worldwide. We believe that we are in substantial
compliance with all material environmental laws applicable to us.
We regularly incur capital expenditures that have an environmental
component or that are impacted by environmental regulations. However, we do not
keep separate accounts for such mixed capital and environmental expenditures.
Environmental expenditures that extend the life, increase the capacity, improve
the safety or efficiency of assets or are incurred to mitigate or prevent
future environmental contamination may be capitalized. Other environmental
costs are expensed when incurred. For the years ended December 31, 2003, 2004
and 2005, environmental capital expenditures and remediation expenses were not
material. However, our environmental expenditures may increase in the future.
51
The following is a discussion of the environmental regulation and
matters in our major markets.
Mexico
We were one of the first industrial groups in Mexico to sign an
agreement with the Secretaria del Medio Ambiente y Recursos Naturales, or
SEMARNAT, the Mexican government's environmental ministry, to carry out
voluntary environmental audits in our 15 Mexican cement plants under a
government-run program. In 2001, the Mexican environmental protection agency in
charge of the voluntary environmental auditing program, the Procuraduria Federal
de Proteccion al Ambiente, or PROFEPA, which is part of SEMARNAT, completed
auditing our 15 cement plants and awarded all our plants, including our Hidalgo
plant, a Certificado de Industria Limpia, Clean Industry Certificate, certifying
that our plants are in full compliance with environmental laws. The Clean
Industry Certificates are strictly renewed every two years. As of the date of
this annual report, 14 of the cement plants have a Clean Industry Certificate.
The Certificates for Atotonilco, Huichapan, Merida, Yaqui, Hermosillo, Tamuin,
Valles, Zapotiltic and Torreon are expected to be renewed at the end of 2006;
the Certificates for Barrientos, Tepeaca and Guadalajara are valid until 2007;
and the Certificates for Monterrey and Ensenada are valid until 2008. The
Certificate for the Hildalgo plant has expired since operations were halted in
2002, but operations resumed during May 2006. Now that operations at the Hidalgo
plant have resumed, we will request that PROFEPA audit the plant and grant it a
Clean Industry Certificate.
For over a decade, the technology for recycling used tires into an
energy source has been employed in our Ensenada and Huichapan plants. Our
Monterrey and Hermosillo plants started using tires as an energy source in
September 2002 and November 2003, respectively. In 2004, our Yaqui, Tamuin,
Guadalajara and Barrientos plants also started using tires as an energy source,
and as of the end of 2005, all our cement plants in Mexico use tires as an
alternative fuel. Municipal collection centers in Tijuana, Mexicali, Ensenada,
Mexico City, Reynosa, Nuevo Laredo and Guadalajara currently enable us to
recycle an estimated 10,000 tons of tires per year. Overall, approximately 2.39%
of the total fuel used in our 14 operating cement plants in Mexico during 2005
was comprised of alternative substituted fuels.
Between 1999 and 2005, our Mexican operations have invested
approximately US $35.3 million in the acquisition of environmental protection
equipment and the implementation of the ISO 14001 environmental management
standards of the International Organization for Standardization, or ISO.
Currently, our 14 operating cement plants in Mexico and an aggregates plant in
Monterrey have the ISO 14001 certification for environmental management systems.
The audit to obtain the renewal of the ISO 14001 certification took place during
first week of April 2006, and we believe the renewal will be obtained soon
during the second half of 2006.
United States
CEMEX, Inc. is subject to a wide range of U.S. Federal, state and local
laws, regulations and ordinances dealing with the protection of human health and
the environment. These laws are strictly enforced and can lead to significant
monetary penalties for noncompliance. These laws regulate water discharges,
noise, and air emissions, including dust, as well as the handling, use and
disposal of hazardous and non-hazardous waste materials. These laws also create
a shared liability by responsible parties for the cost of cleaning up or
correcting releases to the environment of designated hazardous substances. We
therefore may have to remove or mitigate the environmental effects of the
disposal or release of these substances at CEMEX, Inc.'s various operating
facilities or elsewhere. We believe that our current procedures and practices
for handling and managing materials are generally consistent with the industry
standards and legal and regulatory requirements and that we take appropriate
precautions to protect employees and others from harmful exposure to hazardous
materials.
Several of CEMEX, Inc.'s previously owned and currently owned
facilities have become the subject of various local, state or Federal
environmental proceedings and inquiries in the past. While some of these matters
have been settled, others are in their preliminary stages and may not be
resolved for years. The information developed to date on these matters is not
complete. CEMEX, Inc. does not believe it will be required to spend
significantly more on these matters than the amounts already recorded in our
consolidated financial statements included elsewhere in this annual report.
However, it is impossible for CEMEX, Inc. to determine the ultimate cost that it
might incur in connection with such environmental matters until all
environmental studies and investigations, remediation work, negotiations with
other parties that may be responsible, and litigation against other potential
52
sources of recovery have been completed. With respect to known environmental
contingencies, CEMEX, Inc. has recorded provisions for estimated probable
liabilities and does not believe that the ultimate resolution of such matters
will have a material adverse effect on our financial results.
Europe
In 2003, the European Union adopted a directive implementing the Kyoto
Protocol on climate change and establishing a greenhouse gas emissions allowance
trading scheme within the European Union. The directive requires Member States
to impose binding caps on carbon dioxide emissions from installations involved
in energy activities, the production and processing of ferrous metals, the
mineral industry (including cement production) and the pulp, paper or board
production business. Under this scheme, companies with operations in these
sectors receive from the relevant Member States allowances that set limitations
on the levels of greenhouse gas emissions from their installations. These
allowances are tradable so as to enable companies that manage to reduce their
emissions to sell their excess allowances to companies that are not reaching
their emissions objectives. Companies can also use credits issued from the use
of the flexibility mechanisms under the Kyoto protocol to fulfill their European
obligations. These flexibility mechanisms provide that credits (equivalent to
allowances) can be obtained by companies for projects that reduce greenhouse gas
emissions in emerging markets. These projects are referred to as Clean
Development Mechanism (CDM) or joint implementation projects depending on the
countries where they take place. Failure to meet the emissions caps is subject
to heavy penalties.
As required by the directive, each of the Member States established a
national allocation plan setting out the allowance allocations for each
industrial facility for the initial period of three years, from 2005 to 2007. As
of March 31, 2006, the European Commission has approved the national allocation
plan of most Member States, including all the European countries in which we
have operations, except Poland.
We have received the carbon dioxide allowance allocation from the
environmental agencies of the different Member States where we have operations
for the 2005 to 2007 period. Based on our production forecasts, on a
consolidated basis after trading allowances between our operations in countries
with a deficit of allowances and our operations in countries with an excess of
allowances, we expect to have a surplus of allowances averaging approximately
600 thousand tons of carbon dioxide per year for that period. For the next
allocation period comprising 2008 through 2012, however, we expect a reduction
in the allowances granted by the environmental agencies in substantially all the
Member States, which may result in a consolidated deficit in our carbon dioxide
allowances during that period. We believe we may be able to reduce the impact of
any deficit by either reducing carbon dioxide emissions in our facilities or by
implementing CDM projects in emerging markets authorized by the United Nations.
If we are not successful in implementing emission reductions in our facilities
or obtaining credits from CDM projects, we may have to purchase a significant
amount of allowances in the market, the cost of which may have an impact on our
operating results. As of March 31, 2006, the market value of carbon dioxide
allowances was approximately (euro)30 per ton.
Anti-Dumping
U.S. Anti-Dumping Rulings--Mexico
Our exports of Mexican gray cement from Mexico to the United States
are subject to an anti-dumping order that was imposed by the Commerce
Department on August 30, 1990. Pursuant to this order, firms that import gray
Portland cement from our Mexican operations in the United States must make cash
deposits with the U.S. Customs Service to guarantee the eventual payment of
anti-dumping duties. As a result, since that year and until April 3, 2006, we
have paid anti-dumping duties for cement and clinker exports to the United
States at rates that have fluctuated between 37.49% and 80.75% over the
transaction amount. Beginning in August 2003, we paid anti-dumping duties at a
fixed rate of approximately U.S.$52.41 per ton, which decreased to U.S.$32.85
per ton starting December 2004 and to U.S.$26.28 per ton in January 2006. Over
the past decade, we have used all available legal resources to petition the
Commerce Department to revoke the anti-dumping order, including the petitions
for "changed circumstances" reviews from the International Trade Commission, or
ITC, and the appeals to NAFTA described below. As described below, during the
first quarter of 2006, the U.S. and Mexican governments entered into an
agreement pursuant to which restrictions imposed by the United States on
Mexican cement imports will be eased during a three-year transition period and
completely eliminated following the transition period.
53
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the Commerce
Department and the ITC are required to conduct "sunset reviews" of outstanding
anti-dumping orders, countervailing duty orders and suspension agreements every
five years. At the conclusion of these reviews, the Commerce Department is
required to terminate the order or suspension agreement unless the agencies have
found that termination is likely to lead to continuation or recurrence of
dumping, or a subsidy in the case of countervailing duty orders, and material
injury.
In July 2000, following a "sunset review," the Commerce Department
determined not to revoke the anti-dumping order on imports from Mexico. On
October 5, 2000, the ITC found likelihood of injury to the U.S. industry and
determined not to revoke this anti-dumping order. On September 19, 2001, CEMEX
filed a petition for a "changed circumstances" review. The ITC decided in
December 2001 not to initiate such a review. CEMEX appealed the ITC's decision
in the "sunset review" and the "changed circumstances" review to NAFTA. On
April 7, 2005, a NAFTA panel heard oral arguments and on June 24, 2005,
remanded the matter to the ITC with instructions to reconsider its likelihood
of injury determination. On September 22, 2005, the ITC reported back to the
NAFTA panel, recommending by a three-to-two vote not to revoke the anti-dumping
order on imports from Mexico. We believe the ITC's determination on remand did
not comply with the guidelines set by the NAFTA panel for such determination,
and we presented our arguments before the NAFTA panel on November 9, 2005.
However, as a result of the settlement between the U.S. and Mexican governments
described below, this matter was settled in March 2006.
U.S./Mexico Anti-Dumping Settlement Agreement
On January 19, 2006, officials from the Mexican and the United States
governments announced that they had reached an agreement in principle that will
bring to an end the long-standing dispute over anti-dumping duties on Mexican
cement exports to the United States. According to the agreement, restrictions
imposed by the United States will first be eased during a three-year transition
period and completely eliminated in early 2009 if Mexican cement producers abide
by its terms during the transition period, allowing cement from Mexico to enter
the U.S. without duties or other limits on volumes. During the transition
period, Mexican cement imports into the U.S. will be subject to volume
limitations of three million tons per year, which amount may be increased in
response to market conditions during the second and third year of the transition
period, subject to a maximum increase per year of 4.5%. Quota allocations to
companies that import Mexican cement into the United States will be made on a
regional basis. The anti-dumping duty during the three-year transition period
was lowered to U.S.$3.00 per ton, effective as of April 3, 2006, from the
previous amount of U.S.$26.28 per ton.
On March 6, 2006, the Office of the United States Trade Representative
and the Commerce Department entered into an agreement with the Secretaria de
Economia of Mexico providing for the settlement of all administrative reviews
and all litigation pending before NAFTA and World Trade Organization panels
challenging various anti-dumping determinations involving Mexican cement. As
part of the settlement the Commerce Department agreed to compromise its claims
for duties with respect to imports of Mexican cement. The Commerce Department
and the Secretaria de Economia will monitor the regional export limits through
export and import licensing systems. The agreement provides that upon the
effective date of the agreement, on April 3, 2006, the Commerce Department will
order the U.S. Customs Service to liquidate all entries covered by all the
completed administrative reviews for the periods from August 1, 1995 through
July 31, 2005, plus the unreviewed entries made between August 1, 2005 and April
2, 2006, and refund the cash deposits in excess of 10 cents per metric ton. As a
result of this agreement, refunds from the U.S. government associated with the
historic anti-dumping duties will be shared among the various Mexican and
American cement industry participants. We expect to receive approximately
U.S.$100 million in refunds under the agreement during 2006.
As of December 31, 2005, CEMEX Corp., the parent company of our U.S.
subsidiaries that import Mexican cement into the United States, had accrued
liabilities of approximately U.S.$68 million, including accrued interest, for
the difference between the amount of anti-dumping duties paid on imports and the
latest findings by the Commerce Department in its administrative reviews. As a
result of the settlement between the U.S. and Mexican governments described
above, substantially all the liabilities accrued for past anti-dumping duties
were eliminated in March 2006.
54
Anti-Dumping in Taiwan
Five Taiwanese cement producers -- Asia Cement Corporation, Taiwan
Cement Corporation, Lucky Cement Corporation, Hsing Ta Cement Corporation and
China Rebar -- filed before the Tariff Commission under the Ministry of Finance
(MOF) of Taiwan an anti-dumping case involving imported gray Portland cement and
clinker from the Philippines and Korea.
In July 2001, the MOF informed the petitioners and the respondent
producers in exporting countries that a formal investigation had been initiated.
Among the respondents in the petition are APO, Rizal and Solid, indirect
subsidiaries of CEMEX.
In June 2002, the International Trade Commission under the Ministry of
Economic Affairs (ITC-MOEA) notified respondent producers that its final injury
investigation concluded that the imports from South Korea and the Philippines
caused material injury to the domestic industry in Taiwan.
In July 2002, the MOF notified the respondent producers that a dumping
duty would be imposed on Portland cement and clinker imports from the
Philippines and South Korea commencing from July 19, 2002. The duty rate imposed
on imports from APO, Rizal and Solid was fixed at 42%.
In September 2002, APO, Rizal and Solid filed before the Taipei High
Administrative Court an appeal in opposition to the anti-dumping duty imposed
by the MOF. In August 2004, we received a copy of the decision of the Taipei
Administrative High Court, which was adverse to our appeal. The decision has
since become final. This anti-dumping duty is subject to review by the
government after five years following its imposition. If following that review
the government determines that the circumstances giving rise to the
anti-dumping order have changed and that the elimination of the duty would not
harm the domestic industry, the government may decide to revoke the
anti-dumping duty.
Tax Matters
As of December 31, 2005, we and some of our Mexican subsidiaries have
been notified of several tax assessments determined by the Mexican tax office
with respect to the tax years from 1992 through 1996 in a total amount of
approximately Ps742 million (U.S.$70 million). The tax assessments are based
primarily on: (i) recalculations of the inflationary tax deduction, since the
tax authorities claim that "Advance Payments to Suppliers" and "Guaranty
Deposits" are not by their nature credits, (ii) disallowed restatement of tax
loss carryforwards in the same period in which they occurred, (iii) disallowed
determination of tax loss carryforwards, and (iv) disallowed amounts of business
asset tax, commonly referred to as BAT, creditable against the controlling
entity's income tax liability on the grounds that the creditable amount should
be in proportion to the equity interest that the controlling entity has in its
relevant controlled entities. We have filed an appeal for each of these tax
claims before the Mexican federal tax court, and the appeals are pending
resolution.
In addition, during May 2006, we and some of our Mexican subsidiaries
were notified by the Mexican tax office of several tax assessments with respect
to tax years 1992 and 2002 in a total amount of approximately Ps3,793 million
(U.S.$335 million). The tax assessments are based primarily on: (i) disallowed
restatement of consolidated tax loss carryforwards in the same period in which
they occurred and (ii) investments made in entities incorporated in foreign
countries with preferential tax regimes (Regimenes Fiscales Preferentes). We
plan to contest these tax claims, and we are in the process of filing an appeal
for each of these tax claims before the Mexican federal tax court. If we fail to
obtain favorable rulings on appeal, these tax claims may have a material impact
on us.
Pursuant to amendments to the Mexican income tax law (ley del
impuesto sobre la renta), which became effective on January 1, 2005, Mexican
companies with direct or indirect investments in entities incorporated in
foreign countries whose income tax liability in those countries is less than
75% of the income tax that would be payable in Mexico will be required to pay
taxes in Mexico on passive income such as dividends, royalties, interests,
capital gains and rental fees obtained by such foreign entities, provided that
the income is not derived from entrepreneurial activities in such countries
(income derived from entrepreneurial activities is not subject to tax under
these amendments). The tax payable by Mexican companies in respect of the 2005
tax year pursuant to these amendments was due upon filing their annual tax
returns in March 2006. We believe these amendments are contrary
55
to Mexican constitutional principles, and on August 8, 2005, we filed a motion
in the Mexican federal courts challenging the constitutionality of the
amendments. On December 23, 2005, we obtained a favorable ruling from the
Mexican federal court that the amendments were unconstitutional; however, the
Mexican tax authority has appealed this ruling. If the final ruling is not
favorable to us, these amendments may have a material impact on us.
As of December 31, 2005, the Philippine Bureau of Internal Revenue, or
BIR, assessed APO and Solid, our operating subsidiaries in Philippines, for
deficiencies in the amount of income tax paid in prior tax years amounting to a
total of approximately PhP3,119 million (approximately U.S.$59 million as of
December 31, 2005, based on an exchange rate of PhP53.09 to U.S.$1.00, which
was the Philippine Peso/Dollar exchange rate on December 31, 2005 as published
by the Bangko Sentral ng Pilipinas, the central bank of the Republic of the
Philippines). The tax assessments result primarily from: (i) the disallowance
of APO's income tax holiday related income from 1998 to 2001; and (ii)
deficiencies in national taxes paid by APO for the 1999 tax year and by Solid
for the 2000 tax year. In the first case, we have contested the BIR's
assessment with the Court of Tax Appeal, or CTA. In the second case, both APO
and Solid continue to submit relevant evidence to the BIR to contest these
assessments and intend to contest these assessments with the CTA in case the
BIR issues a final collection letter. In addition, Solid's 1998 and 2002
through to 2004 tax years, and APO's 2000 through 2004 tax years are under
preliminary review by the BIR for deficiency in the payment of taxes. As of the
date of this annual report, the finalization of these assessments was held in
abeyance by the BIR as APO and Solid continue to present evidence to dispute
its findings. We believe that these assessments will not have a material
adverse effect on us. However, an adverse resolution of these assessments could
have a material adverse effect on our results of operations in the Philippines.
Other Legal Proceedings
In May 1999, several companies filed a civil liability suit in the
civil court of the circuit of Ibague, Colombia, against two of our Colombian
subsidiaries, alleging that these subsidiaries were responsible for
deterioration of the rice production capacity of the land of the plaintiffs
caused by pollution from our cement plants located in Ibague, Colombia. On
January 13, 2004, CEMEX Colombia was notified of the judgment the court entered
against CEMEX Colombia which awarded damages to the plaintiffs in the amount of
CoP21,114 million (approximately U.S.$8 million as of December 31, 2005, based
on an exchange rate of CoP2,284.22 to U.S.$1.00, which was the Colombian
Peso/Dollar exchange rate on December 31, 2005 as published by the Banco de la
Republica de Colombia, the central bank of Colombia). On January 15, 2004,
CEMEX Colombia appealed the judgment. The appeal was admitted and the case was
sent to the Tribunal Superior de Ibague, where CEMEX Colombia filed, on March
23, 2004, a statement of the arguments supporting its appeal. The case is
currently under review by the appellate court. We expect this proceeding to
continue for several years before final resolution.
In March 2001, 42 transporters filed a civil liability suit in the
civil court of Ibague, Colombia, against three of our Colombian subsidiaries.
The plaintiffs content that these subsidiaries are responsible for alleged
damages caused by breach of raw material transportation contracts. The
plaintiffs asked for relief in the amount of CoP130,201 million (approximately
U.S.$57 million as of December 31, 2005). On February 23, 2006, CEMEX was
notified of the judgment of the court dismissing the claims of the plaintiffs.
The case is currently under review by the appellate court.
On August 5, 2005, a lawsuit was filed against a subsidiary of CEMEX
Colombia, claiming that it was liable along with the other members of the
Asociacion Colombiana de Productores de Concreto, or ASOCRETO, a union formed
by all the ready-mix producers in Colombia, for the premature distress of the
roads built for the mass public transportation system of Bogota using ready-mix
concrete supplied by CEMEX Colombia and other ASOCRETO members. The plaintiffs
allege that the base material supplied for the road construction failed to meet
the quality standards offered by CEMEX Colombia and the other ASOCRETO members
and/or that they provided insufficient or inaccurate information in connection
with the product. The plaintiffs seek the repair of the roads in a manner which
guarantees their service during the 20-year period for which they were
originally designed and estimate that the cost of such repair will be
approximately U.S.$45 million. The court completed the evidentiary stage, and
its decision is pending. We are not able to assess the likelihood of an adverse
result in this lawsuit or the potential damages which could be borne by CEMEX
Colombia.
In March 2003, a lawsuit was filed in the Indonesian province of West
Sumatra in the Padang District Court against (i) Gresik, an Indonesian cement
producer in which we own a 25.5% interest through CAH and the
56
Republic of Indonesia owns a 51% interest, (ii) Semen Padang, a 99.9%-owned
subsidiary of Gresik that owns and operates Gresik's Padang cement plant, and
(iii) several Indonesian government agencies. The lawsuit, which was filed by
a foundation purporting to act in the interest of the people of West Sumatra,
challenged the validity of the sale of Semen Padang by the Indonesian
government to Gresik in 1995 on the grounds that the Indonesian government did
not obtain the necessary approvals for such sale. On May 9, 2003, the Padang
District Court issued an interim decision suspending Gresik's rights as a
shareholder in Semen Padang on the grounds that ownership of Semen Padang was
an issue in dispute. The District Court further announced its final decision
in favor of the foundation on March 31, 2004. Gresik appealed the decision to
the High Court of West Sumatra which subsequently ruled in favor of Gresik and
annulled the March 31, 2004 decision of the District Court. According to the
High Court, the foundation did not have legal standing to file the claim based
on the Indonesian laws on environment, consumer protection and forestry. The
case is currently at the annulment stage pending final decision by the Supreme
Court.
In addition to the case outlined in the preceding paragraph, there are
two other formal legal proceedings relating to the change of management at
Semen Padang as resolved during its Extraordinary General Meeting of
Shareholders (EGMS) on May 12, 2003. In one case, filed by the Employees'
Cooperative of Semen Padang, the District Court of Padang on January 29, 2004
ruled that the replacement of management at Semen Padang based on the EGMS was
legally valid. An appeal of that decision by the former presidents of the board
of directors and board of commissioners of Semen Padang was then filed with the
High Court of West Sumatra, which appeal was rejected on June 2, 2005 on the
grounds that the former presidents lacked standing to act for and on behalf of
the boards. The case is now pending final decision at the annulment stage by
the Supreme Court. In the other proceeding, certain members of the former
management of PT Semen Padang have filed a request for consideration with the
Supreme Court with regard to its decision in March 2003 to permit the holding
of the EGMS of PT Semen Padang which led to the replacement of the former
management. This request is still pending with the Supreme Court.
After the failure of several attempts to reach a negotiated or
mediated solution to these problems involving Gresik, on December 10, 2003,
CEMEX Asia Holdings, Ltd., or CAH, our subsidiary through which we hold our
interest in Gresik, filed a request for arbitration against the Republic of
Indonesia and the Indonesian government before the International Centre for
Settlement of Investment Disputes, or ICSID, based in Washington D.C. CAH is
seeking, among other things, rescission of the purchase agreement entered into
with the Republic of Indonesia in 1998, plus repayment of all costs and
expenses, and compensatory damages. The ICSID accepted and registered CAH's
request for arbitration and issued a formal notice of registration on January
27, 2004. On May 10, 2004, an Arbitral Tribunal was established to hear the
dispute. The Indonesian government objected to the Arbitral Tribunal's
jurisdiction over the claims asserted in CAH's request for arbitration, and on
July 28-29, 2005, the Arbitral Tribunal conducted an oral hearing to resolve
these jurisdictional objections. As of the date of this annual report, the
Arbitral Tribunal had not yet rendered its jurisdictional decision. We cannot
predict what effect, if any, this action will have on our investment in Gresik,
how the Arbitral Tribunal will rule on the Indonesian government's
jurisdictional objections or the merits of the dispute, or the time-frame in
which the Arbitral Tribunal will rule. For a more detailed description of our
investment in Gresik and the ongoing difficulties with Semen Padang, please see
"Asia -- Our Indonesian Equity Investment" above.
On August 5, 2005, Cartel Damages Claims, SA, or CDC, filed a lawsuit
in the District Court in Dusseldorf Germany against CEMEX Deutschland AG and
other German cement companies. CDC is seeking (euro)102 million in respect of
damage claims by 28 entities relating to alleged price and quota fixing by
German cement companies between 1993 and 2002, which entities had assigned
their claims to CDC. CDC is a Belgian company established by two lawyers in the
aftermath of the German cement cartel investigation that took place from July
2002 to April 2003 by Germany's Federal Cartel Office with the express purpose
of purchasing potential damages claims from cement consumers and pursuing those
claims against the cartel participants. In January 2006, another entity
assigned alleged claims to CDC and the amount of damages being sought by CDC
increased to (euro)113.5 million plus interest. The District Court in
Dusseldorf has scheduled a preliminary hearing for December 6, 2006. As of
December 31, 2005, we had accrued liabilities relating this matter for a total
amount of approximately (euro)34 million (U.S.$40 million ).
As of the date of this annual report, we are involved in various
legal proceedings involving product warranty claims, environmental claims,
indemnification claims relating to acquisitions and similar types of claims
that have arisen in the ordinary course of business. We believe we have made
adequate provisions to cover both
57
current and contemplated general and specific litigation risks, and we believe
these matters will be resolved without any significant effect on our
operations, financial position or results of operations.
As of December 31, 2005, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
approximately U.S.$50 million. The environmental matters relate to (i) the
disposal of various materials in accordance with past industry practice, which
might be categorized as hazardous substances or wastes, and (ii) the cleanup of
sites used or operated by CEMEX, Inc., including discontinued operations, in
regard to the disposal of hazardous substances or wastes, either individually
or jointly with other parties. Most of the proceedings are in the preliminary
stage, and a final resolution might take several years. For purposes of
recording the provision, CEMEX, Inc. considers that it is probable that a
liability has been incurred and the amount of the liability is reasonably
estimable, whether or not claims have been asserted, and without giving effect
to any possible future recoveries. Based on information developed to date,
CEMEX, Inc. does not believe it will be required to spend significant sums on
these matters in excess of the amounts previously recorded. Until all
environmental studies, investigations, remediation work, and negotiations with
or litigation against potential sources of recovery have been completed, the
ultimate cost that might be incurred to resolve these environmental issues
cannot be assured.
Recent Developments
Acquisition of Guatemalan Operations
In January 2006, we acquired a grinding mill with a grinding capacity
of 400,000 tons per year in Guatemala for approximately U.S.$17.4 million. We
entered into an agreement to purchase these operations in September 2005 and
completed the acquisition on January 1, 2006.
Divestiture of Danish Operations; Acquisition of Additional Polish Operations
On March 2, 2006, we sold 4K Beton A/S, our Danish subsidiary, which
operated 18 ready-mix concrete plants in Denmark, to Unicon A/S, a subsidiary
of Cementir Group, an Italian cement producer, for approximately (euro)22
million. As part of the transaction, we purchased from Unicon A/S two companies
engaged in the ready-mix concrete and aggregates business in Poland for
approximately (euro)12 million. These companies operate nine ready-mix concrete
plants and one aggregates quarry in Poland. We received net cash proceeds of
approximately (euro)6 million, after cash and debt adjustments, from this
transaction.
Termination of Lease Agreement and Purchase of Balcones Plant.
On March 20, 2006, we agreed to terminate our lease on the Balcones
cement plant located in New Braunfels, Texas prior to expiration, and purchased
the Balcones cement plant for approximately U.S.$61 million.
Agreement to Sale Stake in PT Semen Gresik
On May 3, 2006, we agreed to sell 24.9% of Gresik to Indonesia-based
Rajawali Group for approximately U.S.$337 million. The purchaser's obligations
under our sales contract are subject to obtaining the approval of the
Indonesian government and the fulfillment of other conditions. In the event
this sale is consummated, our remaining interest in Gresik will be 0.6%.
On May 17, 2006, we received a letter from the Indonesian government
purporting to exercise its right to repurchase, under the 1998 purchase
agreement, pursuant to which we acquired our interest in Gresik, the Gresik
shares we have agreed to sell to the Rajawali Group. However, we believe that
the Indonesian government's purported exercise of this right did not comply
with the requirements set forth in the 1998 purchase agreement, and we are in
correspondence and in discussions with the Indonesian government concerning
this issue. No assurance can be given either that the sale to the Rajawali
Group will be consummated, or that the Indonesian government will purchase the
Gresik shares, on the terms outlined above, or that a sale transaction on
similar or different terms may be consummated with any other purchaser.
58
2006 Capital Expansion Program
In February 2006, we announced a U.S.$500 million worldwide capital
expansion program for 2006 to invest in the expansion of our operations in
select countries where we believe such expansion is necessary to meet growing
demand. We expect that this program will fund the initial phases of the
expansion of our Balcones cement plant in New Braunfels, Texas, the expansion
of our Yaqui cement plant in Sonora, Mexico, the construction of a new cement
mill and dry mortar production plant in the Port of Cartagena, Spain, the
expansion of our cement plant in Latvia and the construction of a new grinding
facility for cement and slag in Dubai, United Arab Emirates, as described
above, as well as investments in our operations in other countries, including
the United Kingdom and France. We expect that this program will be fully funded
with free cash flow generated during the year.
Recent Mexican Tax Assessments
During May 2006, we and some of our Mexican subsidiaries were notified
by the Mexican tax office of several tax assessments with respect to tax years
1992 and 2002 in a total amount of approximately Ps3,793 million (U.S.$335
million). The tax assessments are based primarily on: (i) disallowed
restatement of consolidated tax loss carryforwards in the same period in which
they occurred and (ii) investments made in entities incorporated in foreign
countries with preferential tax regimes (Regimenes Fiscales Preferentes). We
plan to contest these tax claims, and we are in the process of filing an appeal
for each of these tax claims before the Mexican federal tax court. If we fail
to obtain favorable rulings on appeal, these tax claims may have a material
impact on us.
Other Recent Developments
For a description of recent developments relating to our indebtedness,
please see Item 5 -- "Operating and Financial Review and Prospects -- Liquidity
and Capital Resources -- Recent Developments."
Item 4A - Unresolved Staff Comments
-------------------------
Not applicable.
59
Item 5 - Operating and Financial Review and Prospects
--------------------------------------------
Cautionary Statement Regarding Forward Looking Statements
This annual report contains forward-looking statements that reflect
our current expectations and projections about future events based on our
knowledge of present facts and circumstances and assumptions about future
events. In this annual report, the words "expects," "believes," "anticipates,"
"estimates," "intends," "plans," "probable" and variations of such words and
similar expressions are intended to identify forward-looking statements. Such
statements necessarily involve risks and uncertainties that could cause actual
results to differ materially from those anticipated. Some of the risks,
uncertainties and other important factors that could cause results to differ,
or that otherwise could impact us or our subsidiaries, include:
o the cyclical activity of the construction sector;
o competition;
o general political, economic and business conditions;
o weather and climatic conditions;
o national disasters and other unforeseen events; and
o the other risks and uncertainties described under Item 3 "-- Key
Information -- Risk Factors" and elsewhere in this annual report.
Readers are urged to read this entire annual report and carefully
consider the risks, uncertainties and other factors that affect our business.
The information contained in this annual report is subject to change without
notice, and we are not obligated to publicly update or revise forward-looking
statements. Readers should review future reports filed by us with the U.S.
Securities and Exchange Commission.
This annual report also includes statistical data regarding the
production, distribution, marketing and sale of cement, ready-mix concrete,
clinker and aggregates. We generated some of these data internally, and some
were obtained from independent industry publications and reports that we believe
to be reliable sources. We have not independently verified these data nor sought
the consent of any organizations to refer to their reports in this annual
report.
Overview
The following discussion should be read in conjunction with our
consolidated financial statements included elsewhere in this annual report. Our
financial statements have been prepared in accordance with Mexican GAAP, which
differ in significant respects from U.S. GAAP. See note 25 to our consolidated
financial statements, included elsewhere in this annual report, for a
description of the principal differences between Mexican GAAP and U.S. GAAP as
they relate to us.
Mexico experienced annual inflation rates of 3.9% in 2003, 5.4% in
2004, and 3.0% in 2005. Mexican GAAP requires that our consolidated financial
statements recognize the effects of inflation. Consequently, financial data for
all periods in our consolidated financial statements and throughout this annual
report, except as otherwise noted, have been restated in constant Mexican Pesos
as of December 31, 2005. They have been restated using the CEMEX weighted
average inflation factors, as explained in note 3B to our consolidated financial
statements included elsewhere in this annual report.
The percentage changes in cement sales volumes described in this annual
report for our operations in a particular country or region include the number
of tons of cement and/or the number of cubic meters of ready-mix concrete sold
to our operations in other countries and regions. Likewise, unless otherwise
indicated, the net sales financial information presented in this annual report
for our operations in each country or region includes the
60
Mexican Peso amount of sales derived from sales of cement and ready-mix concrete
to our operations in other countries and regions, which have been eliminated in
the preparation of our consolidated financial statements included elsewhere in
this annual report.
The following table sets forth selected financial information as of and
for each of the three years ended December 31, 2003, 2004 and 2005 by principal
geographic segment expressed as an approximate percentage of our total
consolidated group before eliminations resulting from consolidation. Through the
RMC acquisition, we acquired new operations in the United States, Spain, Africa
and the Middle East and Asia, which had a significant impact on our operations
in those segments, and we acquired operations in the United Kingdom and the Rest
of Europe, in which segments we did not have operations prior to the RMC
acquisition. The financial information as of and for the year ended December 31,
2005 in the table below includes the consolidation of RMC's operations for the
ten-month period ended December 31, 2005. We operate in countries and regions
with economies in different stages of development and structural reform, with
different levels of fluctuation in exchange rates, inflation and interest rates.
These economic factors may affect our results of operations and financial
condition depending upon the depreciation or appreciation of the exchange rate
of each country and region in which we operate compared to the Mexican Peso and
the rate of inflation of each of these countries and regions. The variations in
(1) the exchange rates used in the translation of the local currency to Mexican
Pesos, and (2) the rates of inflation used for the restatement of our financial
information to constant Mexican Pesos, as of the latest balance sheet presented,
may affect the comparability of our results of operations and consolidated
financial position from period to period.
%
South
America, %
Central Africa
% % % America and the
% United % United Rest of and the Middle % % Elimina- Consoli-
Mexico States Spain Kingdom Europe Caribbean East Asia Others Combined tions dated
(in millions of constant Mexican Pesos as of December 31, 2005, except percentages)
Net Sales For the
Period Ended:
December 31, 2003 34% 22% 16% N/A N/A 15% 2% 2% 9% Ps 89,504 Ps(7,459) Ps 82,045
December 31, 2004 33% 22% 16% N/A N/A 15% 2% 2% 10% 94,985 (7,923) 87,062
December 31, 2005 19% 25% 9% 9% 16% 9% 3% 2% 8% 175,655 (12,946) 162,709
Operating Income
For the Period
Ended:
December 31, 2003 70% 14% 18% N/A N/A 20% 2% -- (24)% 16,665 -- 16,665
December 31, 2004 60% 16% 18% N/A N/A 21% 3% 1% (19)% 19,783 -- 19,783
December 31, 2005 41% 27% 14% 2% 7% 9% 4% 2% (6)% 26,409 -- 26,409
Total Assets at:
December 31, 2003 22% 18% 14% N/A N/A 11% 2% 3% 30% 261,274 (77,865) 183,409
December 31, 2004 23% 16% 12% N/A N/A 11% 2% 3% 33% 263,703 (78,019) 185,684
December 31, 2005 18% 18% 7% 12% 12% 7% 2% 3% 21% 411,812 (127,584) 284,228
Critical Accounting Policies
We have identified below the accounting policies we have applied under
Mexican GAAP that are critical to understanding our overall financial
reporting.
Income Taxes
Our operations are subject to taxation in many different jurisdictions
throughout the world. Under Mexican GAAP, we recognize deferred tax assets
and liabilities using a balance sheet methodology, which requires a
determination of the permanent and temporary differences between the
financial statements carrying amounts and the tax basis of assets and
liabilities. Our worldwide tax position is highly complex and subject to
numerous laws that require interpretation and application and that are not
consistent among the countries in which we operate. Significant judgment is
required to appropriately assess the amounts of tax assets and liabilities.
We record tax assets when we believe that the recoverability of the asset is
determined to be more likely than not in accordance
61
with established accounting principles. If this determination cannot be made, a
valuation allowance is established to reduce the carrying value of the asset.
Our overall strategy is to structure our worldwide operations to
minimize or defer the payment of income taxes on a consolidated basis. Many of
the activities we undertake in pursuing this tax reduction strategy are highly
complex and involve interpretations of tax laws and regulations in multiple
jurisdictions and are subject to review by the relevant taxing authorities. It
is possible that the taxing authorities could challenge our application of
these regulations to our operations and transactions. The taxing authorities
have in the past challenged interpretations that we have made and have assessed
additional taxes. Although we have from time to time paid some of these
additional assessments, in general we believe that these assessments have not
been material and that we have been successful in sustaining our positions. No
assurance can be given, however, that we will continue to be as successful as
we have been in the past or that pending appeals of current tax assessments
will be judged in our favor.
Recognition of the effects of inflation
Under Mexican GAAP, the financial statements of each subsidiary are
restated to reflect the loss of purchasing power (inflation) of its functional
currency. The inflation effects arising from holding monetary assets and
liabilities are reflected in the income statements as monetary position result.
Inventories, fixed assets and deferred charges, with the exception of fixed
assets of foreign origin and the equity accounts, are restated to account for
inflation using the consumer price index applicable in each country. Fixed
assets of foreign origin are restated using the inflation index of the assets'
origin country and the variation in the foreign exchange rate between the
country of origin currency and the functional currency. The result is reflected
as an increase or decrease in the carrying value of each item, and is presented
in consolidated stockholders' equity in the line item Effects from Holding
Non-Monetary Assets. Income statement accounts are also restated for inflation
into constant Mexican Pesos as of the reporting date.
In the event of a sudden increase in the rate of inflation in Mexico,
the adjustment that the market makes in the exchange rate of the Mexican Peso
against other currencies resulting from such inflation is not immediate and may
take several months, if it occurs at all. In this situation, the value
expressed in the consolidated financial statements for fixed assets of foreign
origin will be understated in terms of Mexican inflation, given that the
restatement factor arising from the inflation of the assets' origin country and
the variation in the foreign exchange rate between the country of origin
currency and the Mexican Peso will not offset the Mexican inflation.
A sudden increase in inflation could also occur in other countries in
which we operate.
Foreign currency translation
As mentioned above, the financial statements of consolidated foreign
subsidiaries are restated for inflation in their functional currency based on
the subsidiary country's inflation rate. Subsequently, the restated financial
statements are translated into Mexican Pesos using the foreign exchange rate at
the end of the corresponding reporting period for balance sheet and income
statement accounts.
In the event of an abrupt and deep depreciation of the Mexican Peso
against the U.S. Dollar, which would not be aligned with a corresponding
inflation of the same magnitude, the carrying amounts of the Mexican assets,
when presented in convenience translation into U.S. Dollars, will show a
decrease in value, in terms of Dollars, by the difference between the rate of
depreciation against the U.S. Dollar and the Mexican inflation rate.
Derivative financial instruments
As mentioned in note 3L to our consolidated financial statements
included elsewhere in this annual report, in compliance with the guidelines
established by our risk management committee, we use derivative financial
instruments such as interest rate and currency swaps, currency and stock
forward contracts, options and futures, in order to change the risk profile
associated with changes in interest rates and foreign exchange rates of debt
agreements, as a vehicle to reduce financing costs, as an alternative source
of financing, and as hedges of: (i) forecasted transactions, (ii) net assets
in foreign subsidiaries and (iii) future exercises of options under our
executive stock option programs. These instruments have been negotiated with
institutions with significant financial capacity;
62
therefore, we consider the risk of non-compliance with the obligations agreed
to by such counterparties to be minimal.
Derivative financial instruments are recognized as assets or
liabilities in the balance sheet at their estimated fair value and the changes
in such values in the income statement for the period in which they occur,
unless such instruments have been designated as accounting hedges of debt or
equity instruments. Until December 31, 2004,no specific rules existed in Mexico
for hedging transactions. Beginning January 1, 2005, Bulletin C-10, "Derivative
Financial Instruments and Hedging Activities", establishes accounting standards
for hedging instruments. Some of our instruments have been designated as
accounting hedges of debt or equity instruments (see note 3L to our
consolidated financial statements included elsewhere in this annual report).
Interest accruals generated by interest rate swaps and cross currency
swaps are recognized as financial expense, adjusting the effective interest
rate of the related debt. Interest accruals from other hedging derivative
instruments are recorded within the same item when the effects of the primary
instrument subject to the hedging relation are recognized. Transaction costs
are deferred and amortized in earnings over the life of the instrument or
immediately upon settlement. See notes 12 and 17 to our consolidated financial
statements included elsewhere in this annual report.
Pursuant to the accounting principles established by Mexican GAAP, our
balance sheets and income statements are subject to volatility arising from
variations in interest rates, exchange rates, share prices and other conditions
established in our derivative instruments. The estimated fair value represents
the amount at which a financial asset could be bought or sold, or a financial
liability could be extinguished at the reporting date, between willing parties
in an arm's length transaction. Occasionally, there is a reference market that
provides the estimated fair value; in the absence of a market, such value is
determined by the net present value of projected cash flows or through
mathematical valuation models. The estimated fair values of derivative
instruments determined by us and used by us for recognition and disclosure
purposes in the financial statements and their notes, are supported by the
confirmations of these values received from the counterparties to these
financial instruments; nonetheless, significant judgment is required to account
appropriately for the effects of derivative financial instruments in the
financial statements.
The estimated fair values of derivative financial instruments may
fluctuate over time, and are based on estimated settlement costs or quoted
market prices. These values should be viewed in relation to the fair values of
the underlying instruments or transactions, and as part of our overall exposure
to fluctuations in foreign exchange rates, interest rates and prices of shares.
The notional amounts of derivative instruments do not necessarily represent
amounts exchanged by the parties and, therefore, are not a direct measure of
our exposure through our use of derivatives. The amounts exchanged are
determined on the basis of the notional amounts and other items included in the
derivative instruments.
Impairment of long-lived assets
Our balance sheet reflects significant amounts of long-lived assets
(mainly fixed assets and goodwill) associated with our operations throughout
the world. Many of these amounts have resulted from past acquisitions, which
have required us to reflect these assets at their fair market values at the
dates of acquisition. According to their characteristics and the specific
accounting rules related to them, we assess the recoverability of our
long-lived assets periodically or whenever events or circumstances arise that
we believe trigger a requirement to review such carrying values. This
determination requires substantial judgment and is highly complex when
considering the myriad of countries in which we operate, each of which has
its own economic circumstances that have to be monitored. Additionally, we
monitor the lives assigned to these long-lived assets for purposes of
depreciation and amortization, when applicable. This determination is
subjective and is integral to the determination of whether an impairment has
occurred.
Valuation reserves on accounts receivable and inventories
On a periodic basis, we analyze the recoverability of our accounts
receivable and our inventories (supplies, raw materials, work-in-process and
finished goods), in order to determine if due to credit risk or other factors
in the case of our receivables and due to weather or other conditions in the
case of our inventories, some receivables may
63
not be recovered or certain materials in our inventories may not be utilizable
in the production process or for sale purposes. If we determine such a
situation exists, book values related to the non-recoverable assets are
adjusted and charged to the income statement through an increase in the
doubtful accounts reserve or the inventory obsolescence reserve, as
appropriate. These determinations require substantial management judgment and
are highly complex when considering the various countries in which we have
operations, each having its own economic circumstances that require continuous
monitoring, and our numerous plants, deposits, warehouses and quarries. As a
result, final losses from doubtful accounts or inventory obsolescence could
differ from our estimated reserves.
Asset retirement obligations
Beginning in 2003, we recognize unavoidable obligations, legal or
assumed, to restore the site or the environment when removing operating assets
at the end of their useful lives. These obligations represent the net present
value of expected cash flows to be incurred in the restoration process, and are
initially recognized against the related assets' book value. The additional
asset is depreciated during its remaining useful life. The increase of the
liability, by the passage of time, is charged to results of the period.
Adjustments to the obligation for changes in the estimated cash flows or the
estimated disbursement period are made against fixed assets, and depreciation
is modified prospectively.
In our case, asset retirement obligations are related mainly to future
costs of demolition, cleaning and reforestation, derived from commitments, both
legal or assumed, so that at the end of the operation, the sites where raw
material is extracted, the maritime terminals and other production sites, are
left in acceptable conditions. We record provisions for situations that have
been identified and quantified, which requires significant judgment in
assessing the estimated cash outflows that will be disbursed upon retirement of
the related assets. See notes 3M and 13 to our consolidated financial
statements included elsewhere in this annual report.
Transactions in our own stock
From time to time we have entered into various transactions involving
our own stock. These transactions have been designed to achieve various
financial goals but were primarily executed to give us a means of satisfying
future transactions that may require us to deliver significant numbers of shares
of our own stock. These transactions are described in detail in the notes to our
consolidated financial statements included elsewhere in this annual report. We
have viewed these transactions as hedges against future exposure even though
they do not meet the definition of hedges under accounting principles. There is
significant judgment necessary to properly account for these transactions, as
the obligations underlying the related transactions are required to be reflected
at market value, with the changes in such value reflected in our income
statement. These transactions raise the possibility that we could be required to
reflect losses on the transactions in our own shares without having a converse
reflection of gains on the transactions under which we would deliver such shares
to others. In October 2005, in connection with our non-dilutive equity offering,
we settled substantially all our obligations related to transactions in our own
stock. See notes 2, 16E and 17A to our consolidated financial statements
included elsewhere in this annual report.
Results of Operations
Consolidation of Our Results of Operations
Our consolidated financial statements, included elsewhere in this
annual report, include those subsidiaries in which we hold a majority interest
or which we otherwise control. All significant intercompany balances and
transactions have been eliminated in consolidation.
For the periods ended December 31, 2003, 2004, and 2005 our
consolidated results reflect the following transactions:
o On December 22, 2005, we terminated our 50/50 joint ventures with
Lafarge Asland in Spain and Portugal, which we acquired in the RMC
acquisition. Under the terms of the termination agreement, Lafarge
Asland received a 100% interest in both joint ventures and we
received (euro)50 million in cash, as well as 29 ready-mix
concrete plants and six aggregates quarries in Spain. Our
consolidated financial statements for the year ended December 31,
2005 include our 50% interest in the results of operations
64
relating to these joint venture assets through the proportionate
consolidation method for the period from March 1, 2005 through
December 22, 2005 only.
o On August 29, 2005, we sold RMC's operations in the Tucson,
Arizona area, consisting of several ready-mix and related assets,
to California Portland Cement Company for a purchase price of
approximately U.S.$16 million. Our consolidated financial
statements for the year ended December 31, 2005 include the
results of operations relating to these assets for the period from
March 1, 2005 through August 29, 2005 only.
o On July 1, 2005, we and Ready Mix USA established two
jointly-owned limited liability companies, CEMEX Southeast, LLC, a
cement company, and Ready Mix USA, LLC, a ready-mix concrete
company, to serve the construction materials market in the
southeast region of the United States. Under the terms of the
limited liability company agreements and related asset
contribution agreements, we contributed two cement plants
(Demopolis, Alabama and Clinchfield, Georgia) and eleven cement
terminals to CEMEX Southeast, LLC, representing approximately 98%
of its contributed capital, while Ready Mix USA contributed cash
to CEMEX Southeast, LLC representing approximately 2% of its
contributed capital. In addition, we contributed our ready-mix
concrete, aggregates and concrete block assets in the Florida
panhandle and southern Georgia to Ready Mix USA, LLC, representing
approximately 9% of its contributed capital, while Ready Mix USA
contributed all its ready-mix concrete and aggregate operations in
Alabama, Georgia, the Florida panhandle and Tennessee, as well as
its concrete block operations in Arkansas, Tennessee, Mississippi,
Florida and Alabama to Ready Mix USA, LLC, representing
approximately 91% of its contributed capital. We own a 50.01%
interest, and Ready Mix USA owns a 49.99% interest, in the profits
and losses and voting rights of CEMEX Southeast, LLC, while Ready
Mix USA owns a 50.01% interest, and we own a 49.99% interest, in
the profits and losses and voting rights of Ready Mix USA, LLC. In
a separate transaction, on September 1, 2005, we sold 27 ready-mix
plants and four concrete block facilities located in the Atlanta,
Georgia metropolitan area to Ready Mix USA, LLC for approximately
U.S.$125 million. As of December 31, 2005, we had control of, and
consolidated, CEMEX Southeast, LLC, while our interest in Ready
Mix USA, LLC was accounted for by the equity method since it was
controlled by Ready Mix USA as of that date. The value of our
assets relating to these companies was calculated based on the
relative values of the assets contributed by us to each company.
Our consolidated financial statements for the year ended December
31, 2005 include the results of operations relating to the assets
we contributed to Ready Mix USA, LLC for the period from January
1, 2005 through July 1, 2005 only and the results of operations
relating to the assets we sold to Ready Mix USA, LLC for the
period from March 1, 2005 through September 1, 2005 only since we
acquired those assets in the RMC acquisition.
o On June 1, 2005, we sold a cement terminal adjacent to the Detroit
river to the City of Detroit for a purchase price of approximately
U.S.$24 million. Our consolidated financial statements for the
year ended December 31, 2005 include the results of operations
relating to this cement terminal for the five-month period ended
May 31, 2005 only.
o On March 31, 2005, we sold our Charlevoix, Michigan and Dixon,
Illinois cement plants and several distribution terminals located
in the Great Lakes region to Votorantim Participacoes S.A., a
cement company in Brazil, for an aggregate purchase price of
approximately U.S.$389 million. The combined capacity of the two
cement plants sold was approximately two million tons per year,
and the operations of these plants represented approximately 9% of
our U.S. operations' operating cash flow for the year ended
December 31, 2004. Our consolidated financial statements for the
year ended December 31, 2005 include the results of operations
relating to these assets for the three-month period ended March
31, 2005 only.
o On March 1, 2005, we completed our acquisition of RMC for a total
purchase price of approximately U.S.$6.5 billion, which included
approximately U.S.$2.2 billion of assumed debt. We accounted for
the acquisition as a purchase under Mexican GAAP, which means that
our consolidated financial statements only include RMC from the
date of the acquisition. Our consolidated financial statements for
the year ended December 31, 2005 include RMC's results of
operations for the ten-month period ended December 31, 2005. Our
consolidated financial statements for each of the years ended
65
December 31, 2003 and 2004 do not include RMC's results of
operations. As a result, the financial information for the year
ended December 31, 2005 is not comparable to the prior periods.
o In August and September 2003, we acquired 100% of the outstanding
shares of Mineral Resource Technologies Inc., and the cement
assets of Dixon-Marquette Cement for a combined purchase price of
approximately U.S.$100 million. The single cement plant, which had
an annual production capacity of 560,000 tons, was sold on March
31, 2005 as part of the U.S. asset sale described elsewhere in
this annual report.
o In July 2002, we entered into agreements with other CAH investors
to purchase their CAH shares in exchange for CPOs through
quarterly share exchanges in 2003 and 2004. In 2003, 84,763 CAH
shares were exchanged for 1,683,822 CPOs, with an approximate
value of U.S.$7.8 million. In 2004, 1,398,602 CAH shares were
exchanged for 27,850,713 CPOs with an approximate value of
U.S.$172 million. For accounting purposes, these exchanges were
considered effective as of July 2002. With these exchanges, we
increased our equity interest in CAH to 92.3%. In August 2004, we
acquired an additional 6.8% equity interest in CAH (695,065 CAH
shares) for approximately U.S.$70 million, and in December 2005,
we acquired the remaining 0.9% interest in CAH (93,241 CAH shares)
for approximately U.S.$8 million, thereby increasing our total
equity interest in CAH to 100%.
Selected Consolidated Income Statement Data
The following table sets forth selected consolidated income statement
data for CEMEX for each of the three years ended December 31, 2003, 2004, and
2005 expressed as a percentage of net sales.
Year Ended December 31,
-----------------------------------------
2003 2004 2005
------------- -------------- -----------
Net sales............................................................ 100.0 100.0 100.0
Cost of sales........................................................ (57.6) (56.3) (60.5)
------------- -------------- -----------
Gross profit.................................................... 42.4 43.7 39.5
Operating expenses:..................................................
Administrative.................................................... (11.1) (10.2) (9.4)
Selling........................................................... (11.0) (10.8) (13.9)
------------- -------------- -----------
Total operating expenses....................................... (22.1) (21.0) (23.3)
------------- -------------- -----------
Operating income................................................. 20.3 22.7 16.2
Net comprehensive financing income (cost):
Financial expense................................................. (5.3) (4.6) (3.4)
Financial income.................................................. 0.2 0.3 0.3
Foreign exchange gain (loss), net................................. (2.4) (0.3) (0.5)
Gain (loss) on valuation of marketable securities and other
investments.................................................... (0.8) 1.5 2.5
Monetary position gain............................................ 4.6 4.7 2.8
------------- -------------- -----------
Net comprehensive financing income (cost)......................... (3.7) 1.6 1.7
------------- -------------- -----------
Other expenses, net.................................................. (6.4) (5.9) (2.1)
Income before income tax, business assets tax, employees'
statutory profit sharing and equity in income of affiliates..... 10.2 18.4 15.8
------------- -------------- -----------
Income tax and business assets tax, net.............................. (1.3) (2.3) (2.2)
Employees' statutory profit sharing.................................. (0.2) (0.4) --
------------- -------------- -----------
Total income taxes, business assets tax and employees' statutory
profit sharing.................................................. (1.5) (2.7) (2.2)
Income before equity in income of affiliates...................... 8.7 15.7 13.6
Equity in income of affiliates....................................... 0.5 0.6 0.6
------------- -------------- -----------
Consolidated net income.............................................. 9.2 16.3 14.2
------------- -------------- -----------
Minority interest net income......................................... 0.4 0.3 0.4
------------- -------------- -----------
Majority interest net income......................................... 8.8 16.0 13.8
------------- -------------- -----------
66
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Overview
Summarized in the table below are the percentage (%) increases (+) and
decreases (-) for the year ended December 31, 2005 compared to the year ended
December 31, 2004 in our sales volumes and average prices for each of our
geographic segments.
--------------------------------- ----------------------------- --------------- ------------------------------
Export Sales Average Domestic Prices in
Domestic Sales Volumes Volumes Local Currency (1)
Geographic Segment Cement Ready-Mix Cement Cement Ready-Mix
--------------------------------- -------------- -------------- --------------- -------------- ---------------
North America
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Mexico +1% +15% +54% -2% -3%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
United States (2) +6% +177% N/A +18% +25%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Europe
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Spain (3) +4% +57% -40% +6% +5%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
UK (4) N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Rest of Europe (5) N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- ---------------
South/Central America and the
Caribbean (6)
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Venezuela +38% +27% -21% +9% +23%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Colombia +33% +17% N/A -42% -14%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Rest of South/Central America
and the Caribbean (7) +5% +49% +34% -3% +4%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Africa and the Middle East (8)
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Egypt +23% +41% -53% +13% +18%
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Rest of Africa and the Middle
East (9) N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Asia (10)
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Philippines -1% N/A +116% +13% N/A
--------------------------------- -------------- -------------- --------------- -------------- ---------------
Rest of Asia (11) +9% N/A N/A -1% N/A
--------------------------------- -------------- -------------- --------------- -------------- ---------------
N/A = Not Applicable
(1) Represents the average change in domestic cement and ready-mix prices in
local currency terms. For purposes of a geographic segment consisting of a
region, the average prices in local currency terms for each individual
country within the region are first translated into Dollar terms at the
exchange rates in effect as of the end of the reporting period. Variations
for a region represent the weighted average change of prices in Dollar
terms based on total sales volumes in the region.
(2) Our cement and ready-mix concrete sales volumes and average prices in the
United States for the year ended December 31, 2005 include the sales
volumes and average prices of the cement and ready-mix concrete operations
in the United States we acquired as a result of the RMC acquisition for
the ten-month period ended December 31, 2005, except that the sales
volumes and average prices relating to the assets we contributed on July
1, 2005, and the assets we sold on September 1, 2005, to Ready Mix USA,
LLC, an entity in which Ready Mix USA owns a 50.01% interest and we own a
49.99% interest, are included only for the periods from March 1, 2005
through July 1, 2005 and from March 1, 2005 through September 1, 2005,
respectively.
(3) Our ready-mix concrete sales volumes and average prices in Spain for the
year ended December 31, 2005 include the sales volumes and average prices
of the joint venture ready-mix concrete operations in Spain we acquired as
a result of the RMC acquisition, which operations we divested on December
22, 2005 in connection with the termination of the joint venture with
Lafarge Asland through which such operations were conducted, for the
period from March 1, 2005 through December 22, 2005.
(4) Our United Kingdom segment includes the operations in the United Kingdom
we acquired as a result of the RMC acquisition for the ten-month period
ended December 31, 2005.
(5) Our Rest of Europe segment includes the operations in Germany, France,
Republic of Ireland, Czech Republic, Austria, Poland, Croatia, Hungary,
Latvia and Denmark we acquired as a result of the RMC acquisition for the
ten-month period ended December 31, 2005.
(6) Our South America, Central America and the Caribbean segment includes our
operations in Venezuela, Colombia and the operations listed in note 7
below; however, in above table, our operations in Venezuela and Colombia
are presented separately from our other operations in the segment for
purposes of comparison with our 2004 presentation of our operations in the
region.
(7) Rest of South/Central America and the Caribbean includes our operations in
Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico and our
trading activities in the Caribbean, as well as the operations in Jamaica
and Argentina we acquired as a result of the RMC acquisition for the
ten-month period ended December 31, 2005.
(8) Our Africa and the Middle East segment includes our operations in Egypt
and the operations listed in note 9 below; however, in the above table,
our operations in Egypt are presented separately from our other operations
in the segment for purposes of comparison with our 2004 presentation of
our operations in the region.
(9) Rest of Africa and the Middle East includes the operations in the United
Arab Emirates and Israel we acquired as a result of the RMC acquisition
for the ten-month period ended December 31, 2005.
67
(10) Our Asia segment includes our operations in the Philippines and the
operations listed in note 11 below; however, for in the above table, our
operations in the Philippines are presented separately from our other
operations in the segment for purposes of comparison with our 2004
presentation of our operations in the region.
(11) Rest of Asia includes our operations in Thailand, Bangladesh and other
assets in the Asian region, as well as the operations in Malaysia we
acquired as a result of the RMC acquisition for the ten-month period ended
December 31, 2005.
On a consolidated basis, our cement sales volumes increased
approximately 23%, from 65.8 million tons in 2004 to 80.6 million tons in 2005,
and our ready-mix concrete sales volumes increased approximately 191%, from
23.9 million cubic meters in 2004 to 69.5 million cubic meters in 2005. Our net
sales increased approximately 87% from Ps87,062 million in 2004 to Ps162,709
million in 2005, and our operating income increased approximately 33% from
Ps19,783 million in 2004 to Ps26,409 million in 2005.
Excluding the effect of the consolidation of RMC's operations, from
2004 to 2005, our consolidated cement sales volumes increased approximately 4%,
our consolidated ready-mix concrete sales volumes increased approximately 16%,
our consolidated net sales increased approximately 13%, and our consolidated
operating income increased approximately 14%.
The following tables present selected condensed financial information
of net sales and operating income for each of our geographic segments for the
years ended December 31, 2004 and 2005. Variations in net sales determined on
the basis of constant Mexican Pesos include the appreciation or depreciation
which occurred during the period between the local currencies of the countries
in the regions vis-a-vis the Mexican Peso, as well as the effects of inflation
as applied to the Mexican Peso amounts using our weighted average inflation
factor; therefore, such variations differ substantially from those based solely
on the countries' local currencies:
- -----------------------------------------------------------------------------------------------------------
Net Sales
- -----------------------------------------------------------------------------------------------------------
Approximate For the Year
Currency Ended December 31,
Fluctuations, ---------------------------
Net of Variations
Variations in Inflation in Constant
Geographic Segment Local Currency(1) Effects Mexican Pesos 2004 2005
- -----------------------------------------------------------------------------------------------------------
(In millions of constant
Mexican Pesos as of
December 31, 2005)
---------------------------
North America
Mexico............................. +0.7% +7.4% +8.1% 31,196 33,732
United States (2).................. +105.4% +0.5% +105.9% 21,097 43,441
Europe
Spain (3).......................... +10.3% -1.1% +9.2% 14,741 16,098
United Kingdom (4)................. N/A N/A N/A N/A 16,299
Rest of Europe (5)................. N/A N/A N/A N/A 28,837
South/Central America and the
Caribbean
Venezuela.......................... +15.8% +1.8% +17.6% 3,742 4,399
Colombia........................... -16.7% +18.4% +1.7% 2,620 2,664
Rest of South / Central America
and the Caribbean (6)........... +11.7% -13.9% -2.2% 7,357 7,195
Africa and Middle East
Egypt.............................. +27.1% +11.3% +38.4% 2,028 2,806
Rest of Africa and the Middle East
(7)............................. N/A N/A N/A N/A 2,981
Asia
Philippines........................ +18.3% +7.8% +26.1% 1,617 2,039
Rest of Asia (8)................... N/A N/A N/A N/A 1,019
Others (9)......................... +33.1% +0.5% +33.6% 10,587 14,145
---------------------------
+84.9% 94,985 175,655
Eliminations from consolidation.... (7,923) (12,946)
---------------------------
Consolidated net sales............. +86.9% 87,062 162,709
===========================
68
- -----------------------------------------------------------------------------------------------------------
Operating Income
- -----------------------------------------------------------------------------------------------------------
Approximate For the Year
Currency Ended December 31,
Fluctuations, ---------------------------
Net of Variations
Variations in Inflation in Constant
Geographic Segment Local Currency(1) Effects Mexican Pesos 2004 2005
- -----------------------------------------------------------------------------------------------------------
(In millions of constant
Mexican Pesos as of
December 31, 2005)
---------------------------
North America
Mexico............................. -14.6% +6.3% -8.3% 11,707 10,734
United States (2).................. +156.7% +0.7% +157.4% 2,776 7,145
Europe
Spain (3).......................... +16.8% -10.2% +6.6% 3,582 3,819
United Kingdom (4)................. N/A N/A N/A N/A 567
Rest of Europe (5)................. N/A N/A N/A N/A 1,795
South/Central America and the
Caribbean (6)
Venezuela.......................... +20.7% +1.8% +22.5% 1,169 1,432
Colombia........................... -73.5% +3.8% -69.7% 1,194 362
Rest of South/Central America and
the Caribbean (7)............... -53.7% -5.6% -59.3% 1,685 685
Africa and Middle East (8)
Egypt.............................. +56.6% +13.9% +70.5% 613 1,045
Rest of Africa and the Middle East
(9)............................. N/A N/A N/A N/A 100
Asia (10)
Philippines........................ +41.7% +9.5% +51.2% 289 437
Rest of Asia (11).................. N/A N/A N/A N/A (18)
Others (12)........................ +48.6% -1.0% +47.6% (3,232) (1,694)
---------------------------
Consolidated operating income...... +33.5% s 19,783 26,409
===========================
__________________________
N/A = Not Applicable
(1) For purposes of a geographic segment consisting of a region, the net sales
and operating income data in local currency terms for each individual
country within the region are first translated into Dollar terms at the
exchange rates in effect as of the end of the reporting period. Variations
for a region represent the weighted average change in Dollar terms based
on net sales and operating income for the region.
(2) Our net sales and operating income in the United States for the year ended
December 31, 2005 include the results of the cement and ready-mix concrete
operations in the United States we acquired as a result of the RMC
acquisition for the ten-month period ended December 31, 2005, except that
the results of the assets we contributed on July 1, 2005, and the assets
we sold on September 1, 2005, to Ready Mix USA, LLC, an entity in which
Ready Mix USA owns a 50.01% interest and we own a 49.99% interest, are
included only for the periods from March 1, 2005 through July 1, 2005 and
from March 1, 2005 through September 1, 2005, respectively.
(3) Our net sales and operating income in Spain for the year ended December
31, 2005 include the proportionally consolidated results of the joint
venture ready-mix concrete operations in Spain we acquired as a result of
the RMC acquisition, which operations we divested on December 22, 2005 in
connection with the termination of the joint venture with Lafarge Asland
through which such operations were conducted, for the period from March 1,
2005 through December 22, 2005.
(4) Our United Kingdom segment includes the operations in the United Kingdom
we acquired as a result of the RMC acquisition for the ten-month period
ended December 31, 2005.
(5) Our Rest of Europe segment includes the operations in Germany, France,
Republic of Ireland, Czech Republic, Austria, Poland, Croatia, Hungary,
Latvia and Denmark we acquired as a result of the RMC acquisition for the
ten-month period ended December 31, 2005.
(6) Our South America, Central America and the Caribbean segment includes our
operations in Venezuela, Colombia and the operations listed in note 7
below; however, in the above table, our operations in Venezuela and
Colombia are presented separately from our other operations in the segment
for purposes of comparison with our 2004 presentation of our operations in
the region.
(7) Rest of South/Central America and the Caribbean includes our operations in
Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico and our
trading activities in the Caribbean, as well as the operations in Jamaica
and Argentina we acquired as a result of the RMC acquisition for the
ten-month period ended December 31, 2005.
(8) Our Africa and the Middle East segment includes our operations in Egypt
and the operations listed in note 9 below; however, in the above table,
our operations in Egypt are presented separately from our other operations
in the segment for purposes of comparison with our 2004 presentation of
our operations in the region.
(9) Rest of Africa and the Middle East includes the operations in the United
Arab Emirates and Israel we acquired as a result of the RMC acquisition
for the ten-month period ended December 31, 2005.
69
(10) Our Asia segment includes our operations in the Philippines and the
operations listed in note 11 below; however, for in the above table, our
operations in the Philippines are presented separately from our other
operations in the segment for purposes of comparison with our 2004
presentation of our operations in the region.
(11) Rest of Asia includes our operations in Thailand, Bangladesh and other
assets in the Asian region, as well as the operations in Malaysia we
acquired as a result of the RMC acquisition for the ten-month period ended
December 31, 2005.
(12) Our Others segment includes our worldwide trade maritime operations, our
information solutions company and other minor subsidiaries.
Net Sales
Our net sales increased approximately 87% from Ps87,062 million in 2004
to Ps162,709 million in 2005 in constant Peso terms. The increase in net sales
was primarily attributable to the consolidation of RMC's operations for ten
months in 2005 and higher sales volumes and prices in our operations in most of
our markets, which were partially offset by lower domestic cement prices in
South America, Central America and the Caribbean and by our divestiture in March
2005 of two cement plants and other assets in the United States, and our
contribution in July 2005 and sale in September 2005 of ready-mix concrete,
aggregates and concrete block assets in the United States to an entity in which
we own a 49.99% interest. Excluding the effect of the consolidation of RMC's
operations, our net sales increased approximately 6% during 2005 compared to
2004. Of our consolidated net sales in 2004 and 2005, approximately 71% and 70%,
respectively, were derived from sales of cement, approximately 24% and 26%,
respectively, from sales of ready-mix concrete and approximately 5% and 4%,
respectively, from sales of other construction materials, including aggregates,
and services.
Through the RMC acquisition, we acquired additional operations in the
United States, Spain, Africa and the Middle East and Asia, which had a
significant impact on our operations in those segments, and we acquired
operations in the United Kingdom and the Rest of Europe, in which segments we
did not have operations prior to the RMC acquisition. The operating data set
forth below in the discussion of our United Kingdom, France and Germany
operations for 2004 and for January and February of 2005 represent operating
data for those operations prior to our acquisition of RMC.
Set forth below is a quantitative and qualitative analysis of the
effects of the various factors affecting our net sales on a geographic segment
basis.
Mexico
Our Mexican operations' domestic cement sales volumes increased
approximately 1% in 2005 compared to 2004, and ready-mix concrete sales volumes
increased approximately 15% during the same period. The increases in sales
volumes were primarily due to increased government spending on infrastructure
projects and increased demand in the residential construction sector, which were
partially offset by a weak self-construction sector. Our Mexican operations'
cement export volumes, which represented approximately 10% of our Mexican cement
sales volumes in 2005, increased approximately 54% in 2005 compared to 2004,
primarily as a result of increased cement demand in the United States. Of our
Mexican operations' total cement export volumes during 2005, 73% was shipped to
the United States, 26% to Central America and the Caribbean and 1% to South
America. Our Mexican operations' average domestic sales price of cement
decreased approximately 2% in constant Peso terms in 2005 compared to 2004
(increased approximately 3% in nominal Peso terms). Our Mexican operations'
average sales price of ready-mix concrete decreased approximately 3% in constant
Peso terms (increased approximately 1% in nominal Peso terms) over the same
period. For the year ended December 31, 2005, sales of ready-mix concrete in
Mexico represented approximately 28% of our Mexican operations' net sales.
As a result of the increases in domestic cement and ready-mix concrete
sales volumes and cement export volumes, net sales in Mexico, in constant Peso
terms, increased approximately 8% in 2005 compared to 2004, despite the
decreases in the average domestic sales prices of cement and ready-mix concrete.
United States
Our U.S. operations' cement sales volumes, which include cement
purchased from our other operations, increased approximately 6% in 2005
compared to 2004, and ready-mix concrete sales volumes increased
approximately 177% during the same period. The increases in sales volumes
resulted primarily from the consolidation of RMC's U.S. operations for ten
months in 2005 (representing approximately 7% of our U.S. cement
70
sales volumes and approximately 60% of our U.S. ready-mix concrete sales
volumes), as well as increased demand in the public sector, particularly in
streets and highway construction, increased demand in the residential sector and
the industrial and commercial sector, which were partially offset by our
divestiture in March 2005 of two cement plants and other assets in the Great
Lakes region, and our contributions in July 2005 and sale in September 2005 of
ready-mix concrete, aggregates and concrete block assets in the Florida
panhandle and southern Georgia to Ready Mix USA, LLC, an entity in which we own
a 49.99% interest. Our U.S. operations' average sales price of cement increased
approximately 18% in Dollar terms in 2005 compared to 2004, and the average
sales price of ready-mix concrete increased approximately 25% in Dollar terms
over the same period. The increases in average prices were primarily due to
continued strength in demand for, and limited supply of, cement and ready-mix
concrete. For the year ended December 31, 2005, sales of ready-mix concrete in
the United States represented approximately 46% of our U.S. operations' net
sales.
As a result of the increases in cement and ready-mix concrete sales
volumes and the increases in the average sales prices of cement and ready-mix
concrete, net sales in the United States, in Dollar terms, increased
approximately 105% in 2005 compared to 2004.
Spain
Our Spanish operations' domestic cement sales volumes increased
approximately 4% in 2005 compared to 2004, and ready-mix concrete sales volumes
increased approximately 57% during the same period. The increases in sales
volumes resulted primarily from the proportional consolidation of RMC's Spanish
joint venture operations for nearly ten months in 2005 (representing
approximately 29% of our Spanish ready-mix concrete sales volumes), as well as
strong residential construction activity and increased spending in the
public-works sector, particularly on infrastructure projects. Our Spanish
operations' cement export volumes, which represented approximately 1% of our
Spanish cement sales volumes in 2005, decreased approximately 40% in 2005
compared to 2004 primarily due to increased domestic demand. Of our Spanish
operations' total cement export volumes in 2005, 19% was shipped to Europe and
the Middle East, 29% to Africa, and 52% to the United States. Our Spanish
operations' average domestic sales price of cement increased approximately 18%
in Euro terms in 2005 compared to 2004, and the average price of ready-mix
cement increased approximately 25% in Euro terms over the same period. The
increases in average prices were primarily due to increased demand for cement
and ready-mix concrete. For the year ended December 31, 2005, sales of ready-mix
concrete in Spain represented approximately 32% of our Spanish operations' net
sales.
As a result of the increases in domestic cement and ready-mix concrete
sales volumes and the increases in the average domestic sales prices of cement
and ready-mix concrete, net sales in Spain, in Euro terms, increased
approximately 10% in 2005 compared to 2004, despite the decline in cement export
volumes.
United Kingdom
Our United Kingdom operations consist of the United Kingdom operations
we acquired from RMC, which are consolidated in our results of operations for
ten months in 2005. Cement sales volumes in these United Kingdom operations
decreased approximately 2% in 2005 compared to 2004, and ready-mix concrete
sales volumes decreased approximately 1% during the same period. The decreases
in sales volumes were primarily due to slower than expected growth in the U.K.
economy resulting in decreased construction activity in the repair, maintenance
and improvement sector and the public-works sector, which were partially offset
by moderate increases in demand in the residential sector and the industrial
sector. Our United Kingdom operations' net sales for the ten-month period ended
December 31, 2005 represented approximately 9% our net sales in constant Peso
terms, before eliminations resulting from consolidation, for 2005.
Rest of Europe
Our operations in our Rest of Europe segment in 2005 consisted of the
operations we acquired from RMC in Germany, France, Croatia, Poland, Latvia, the
Czech Republic, Ireland, Austria, Hungary, Portugal, Denmark, Finland, Norway
and Sweden, which are consolidated in our results of operations for ten months
in 2005. Our Rest of Europe operations' net sales for the ten-month period ended
December 31, 2005 represented approximately 16% our net sales in constant Peso
terms, before eliminations resulting from consolidation, for 2005, and our Rest
71
of Europe operations' operating income for the ten-month period ended December
31, 2005 represented approximately 7% of our consolidated operating income, in
constant Peso terms, for 2005. Set forth below is a discussion of sales volumes
in Germany and France, the most significant countries in our Rest of Europe
segment, based on net sales.
In Germany, cement sales volumes in the operations we acquired from RMC
decreased approximately 8% in 2005 compared to 2004, and ready-mix concrete
sales volumes in those operations decreased approximately 12% during the same
period. These decreases are primarily due to a weak German economy, a high
unemployment rate, the slow growth of disposable income and political
uncertainty, resulting in decreased construction activity.
In France, ready-mix concrete sales volumes in the operations we
acquired from RMC increased approximately 6% in 2005 compared to 2004, primarily
as a result of strong demand from the housing sector due to tax incentives to
promote housing construction and the launch of a new social housing program.
South America, Central America and the Caribbean
Our operations in South America, Central America and the Caribbean in
2005 consisted of our operations in Venezuela and Colombia, the operations we
acquired from RMC in Argentina, which are consolidated in our results of
operations for ten months in 2005, and our Central American and Caribbean
operations, which included our operations in Costa Rica, the Dominican Republic,
Panama, Nicaragua, Puerto Rico and the operations we acquired from RMC in
Jamaica, which are consolidated in our results of operations for ten months in
2005, as well as several cement terminals and other assets in other Caribbean
countries and our trading operations in the Caribbean region. Most of these
trading operations consist of the resale in the Caribbean region of cement
produced by our operations in Venezuela and Mexico.
Our South America, Central America and the Caribbean operations'
domestic cement sales volumes increased 19% in 2005 compared to 2004, and
ready-mix concrete sales volumes increased 31% over the same period. The
increases in sales volumes are primarily attributable to the increased sales
volumes in our Venezuelan and Colombian operations described below, as well as
increased demand in the Dominican Republic due to new tourist development, new
infrastructure projects in Panama and the commencement of ready-mix operations
in Nicaragua and Costa Rica. Our South America, Central American and Caribbean
operations' average domestic sales price of cement decreased approximately 11%
in Dollar terms in 2005 compared to 2004 due to competitive pressures in the
Colombian market, while the average sales price of ready-mix concrete increased
approximately 4% in Dollar terms over the same period. For the year ended
December 31, 2005, sales of ready-mix concrete in South America, Central America
and the Caribbean represented approximately 27% of our South America, Central
America and the Caribbean operations' net sales. Set forth below is a discussion
of sales volumes in Venezuela and Colombia, the most significant countries in
our South America, Central American and Caribbean segment, based on net sales.
Our Venezuelan operations' domestic cement sales volumes increased
approximately 38% in 2005 compared to 2004, and ready-mix concrete sales volumes
increased approximately 27% during the same period. The increases in volumes
resulted primarily from increased government spending in the public sector due
to higher oil revenues and increased demand in the self-construction sector. Our
Venezuelan operations' cement export volumes, which represented approximately
42% of our Venezuelan cement sales volumes in 2005, decreased approximately 21%
in 2005 compared to 2004 primarily due to increased domestic demand. Of our
Venezuelan operations' total cement export volumes during 2005, 76% was shipped
to North America and 24% to South America and the Caribbean.
Our Colombian operations' cement volumes increased approximately 33% in
2005 compared to 2004, and ready-mix concrete sales volumes increased
approximately 17% during the same period. The increases in sales volumes
resulted primarily from increased demand in the self-construction sector due to
lower unemployment and higher wages and increased spending in the public works
sectors.
As a result of the increases in domestic cement sales volumes,
ready-mix concrete sales volumes and the average sales prices of ready-mix
concrete, net sales in our South America, Central America and the Caribbean
operations, in constant Peso terms, increased approximately 4% in 2005 compared
to 2004, despite the decrease in the average domestic sales prices of cement in
Colombia and the decline in Venezuelan cement export volumes.
72
Africa and the Middle East
Our operations in Africa and the Middle East consist of our operations
in Egypt and the operations we acquired from RMC in the United Arab Emirates
(UAE) and Israel, which are consolidated in our results of operations for ten
months in 2005.
Our Africa and the Middle East operations' domestic cement sales
volumes increased approximately 23% in 2005 compared to 2004, primarily as a
result of increased demand in the housing sector and increased government
spending on infrastructure in Egypt due to higher oil revenues. Our Africa and
the Middle East operations' average domestic sales price of cement increased
approximately 13% in Egyptian pound terms and approximately 21% in Dollar terms
in 2005 compared to 2004, primarily due to better overall market conditions in
Egypt. Our Africa and the Middle East operations' cement export volumes, which
represented approximately 14% of our Africa and the Middle East operations'
cement sales volumes in 2005, decreased approximately 53% in 2005 compared to
2004 primarily due to increased domestic demand in Egypt. Of our Africa and the
Middle East operations' total cement export volumes during 2005, 95% was shipped
to Europe and 5% was shipped to Africa. Our Africa and the Middle East
operations' ready-mix concrete sales volumes increased significantly in 2005
compared to 2004 primarily as a result of the consolidation of RMC's UAE and
Israeli operations for ten months in 2005 (representing approximately 92% of our
ready-mix concrete sales volumes in the region). For the year ended December 31,
2005, sales of ready-mix concrete in Africa and the Middle East represented
approximately 51% of our Africa and the Middle East operations' net sales.
As a result of the consolidation of RMC's UAE and Israeli operations
and the increases in domestic cement sales volumes and the average domestic
sales prices of cement in our Egyptian operations, net sales in our Africa and
the Middle East operations, in constant Peso terms, increased approximately 185%
in 2005 compared to 2004, despite the decline in cement export volumes.
Asia
Our operations in Asia consist of our operations in the Philippines,
Thailand, Bangladesh, Taiwan and the operations we acquired from RMC in
Malaysia, which are consolidated in our results of operations for ten months in
2005. Our Asian operations' domestic cement sales volumes increased
approximately 2% in 2005 compared to 2004, primarily due to strong cement demand
in the housing sector in Thailand and greater market coverage in Bangladesh,
which were partially offset by decreased demand in the Philippines as a result
of political uncertainty, while the average sales price of cement in the region
increased approximately 10%, in Dollar terms, during the same period. Our Asian
operations' cement export volumes, which represented approximately 18% of our
Asian operations' cement sales volumes in 2005, increased approximately 116% in
2005 compared to 2004 primarily due to expansion into other markets in the
Middle East and Southeast Asia. Of our Asian operations' total cement export
volumes during 2005, 58% was shipped to the Middle East and 42% to the Southeast
Asia region. Our Asian operations' ready-mix concrete sales volumes increased
significantly in 2005 compared to 2004, primarily due to the consolidation of
RMC's Malaysian operations for ten months in 2005 (representing nearly all of
our ready-mix concrete sales volumes in the region). For the year ended December
31, 2005, sales of ready-mix concrete in Asia represented approximately 15% of
our Asian operations' net sales.
Primarily as a result of the increases in domestic cement sales
volumes, cement export volumes and the average sales price of cement, but also
as a result of the consolidation of RMC's Malaysian ready-mix concrete
operations, net sales in our Asian operations, in constant Peso terms, increased
approximately 89% in 2005 compared to 2004.
Others
Our Others segment includes our worldwide cement, clinker and slag
trading operations, our information solutions company and other minor
subsidiaries. Net sales in our Others segment increased approximately 34% in
2005 compared to 2004 in constant Peso terms, primarily as a result of a 74%
increase in our trading operations' net sales in 2005 compared to 2004 due to
increased trading activity resulting from the consolidation of RMC's trading
operations for ten months in 2005. For the year ended December 31, 2005, our
trading operations' net sales represented approximately 69% of our Others
segment's net sales.
73
Cost of Sales
Our cost of sales, including depreciation, increased approximately 101%
from Ps48,997 million in 2004 to Ps98,460 million in 2005 in constant Peso
terms, primarily due to the consolidation of RMC's operations for ten months
during 2005. Excluding the effect of the consolidation of RMC's operations, our
cost of sales, including depreciation, increased approximately 7% during the
same period, primarily as a result of higher energy costs. As a percentage of
net sales, cost of sales increased from 56% in 2004 to 61% in 2005 (57%,
excluding the effect of the consolidation of RMC).
Gross Profit
Our gross profit increased approximately 69% from Ps38,065 million in
2004 to Ps64,249 million in 2005 in constant Peso terms. Excluding the effect of
the consolidation of RMC's operations, our gross profit increased approximately
4% during the same period. Our gross margin decreased from 44% in 2004 to 40% in
2005, primarily due to higher energy costs and the consolidation of RMC's
operations for ten months during 2005, which resulted in a change in our product
mix as we had a higher percentage of sales of ready-mix concrete, aggregates and
other products having a higher cost of sales and a lower profit margin as
compared to cement. Excluding the effect of the consolidation of RMC's
operations, our gross margin decreased to 43% due to higher energy costs
partially offset by higher sales volumes and average sales prices in most of our
markets. The increase in our gross profit is primarily attributable to the 87%
increase in our net sales in 2005 compared to 2004 (6%, excluding the effect of
the consolidation of RMC), partially offset by the 101% increase in our cost of
sales in 2005 compared to 2004 (7%, excluding the effect of the consolidation of
RMC).
Operating Expenses
Our operating expenses increased approximately 107% from Ps18,282
million in 2004 to Ps37,840 million in 2005 in constant Peso terms, primarily
due to the consolidation of RMC's operations for ten months during 2005.
Excluding the effect of the consolidation of RMC's operations, our operating
expenses increased approximately 1% during the same period, primarily as a
result of increased transportation costs due to higher worldwide energy costs,
which were partially offset by our continuing cost-reduction efforts, including
reductions in corporate overhead and travel expenses. As a percentage of net
sales, our operating expenses increased from 21% in 2004 to 23% in 2005
(remained flat, excluding the effect of the consolidation of RMC).
Operating Income
For the reasons mentioned above, our operating income increased
approximately 34% from Ps19,783 million in 2004 to Ps26,409 million in 2005 in
constant Peso terms. Excluding the effect of the consolidation of RMC's
operations, our operating income increased approximately 6% as compared to 2004.
Additionally, set forth below is a quantitative and qualitative analysis of the
effects of the various factors affecting our operating income on a geographic
segment basis.
Mexico
Our Mexican operations' operating income decreased approximately 8%
from Ps11,707 million in 2004 to Ps10,734 million in 2005 in constant Peso
terms. The decrease in operating income was primarily due to decreases in the
average prices of domestic cement and ready-mix concrete and higher energy
costs. The price decreases and higher costs were partially offset by increases
in domestic cement and ready-mix concrete sales volumes and cement export
volumes.
United States
Our U.S. operations' operating income increased approximately 157%
from Ps2,776 million in 2004 to Ps7,145 million in 2005 in constant Peso
terms. The increase in operating income resulted primarily from the
consolidation of RMC's U.S. operations for ten months in 2005 (representing
approximately 28% of our U.S. operations' operating income) and increases in
domestic cement and ready-mix concrete sales volumes and average
74
prices. These increases were partially offset by higher energy and material
costs, the divestiture of assets in March 2005 and the contribution in July 2005
and sale in September 2005 of assets to Ready Mix USA, LLC, as described above
under "Net Sales -- United States," and the depreciation of the Dollar against
the Peso.
Spain
Our Spanish operations' operating income increased approximately 7%
from Ps3,582 million in 2004 to Ps3,819 million in 2005 in constant Peso terms.
The increase in operating income resulted primarily from the proportional
consolidation of RMC's Spanish joint venture operations for nearly ten months in
2005 (representing approximately 4% of our Spanish operations' operating income)
and increases in domestic cement and ready-mix concrete sales volumes and
average prices. These increases were partially offset by a decline in cement
export volumes, higher energy costs and the depreciation of the Euro against the
Peso and the Dollar.
United Kingdom
Our United Kingdom operations consist of the United Kingdom operations
we acquired from RMC, which were consolidated in our results of operations for
ten months in 2005. Our United Kingdom operations' operating income for the
ten-month period ended December 31, 2005 represented approximately 2% of our
consolidated operating income, in constant Peso terms, for 2005.
Rest of Europe
Our operations in our Rest of Europe segment in 2005 consisted of the
operations we acquired from RMC in Germany, France, Croatia, Poland, Latvia, the
Czech Republic, Ireland, Austria, Hungary, Portugal, Denmark, Finland, Norway
and Sweden, which are consolidated in our results of operations for ten months
in 2005. Our Rest of Europe operations' operating income for the ten-month
period ended December 31, 2005 represented approximately 7% of our consolidated
operating income, in constant Peso terms, for 2005.
South America, Central America and the Caribbean
Our South America, Central America and the Caribbean operations'
operating income decreased approximately 39% from Ps4,048 million in 2004 to
Ps2,479 million in 2005 in constant Peso terms. The decrease in operating income
was primarily attributable to the decrease in the average domestic sales prices
of cement in Colombia, the decline in Venezuelan cement export volumes and
higher energy costs. The cement price and export volume decreases and higher
costs were partially offset by increases in domestic cement and ready-mix
concrete sales volumes and the average price of ready-mix concrete.
Africa and the Middle East
Our Africa and the Middle East operations' operating income increased
approximately 87% from Ps613 million in 2004 to Ps1,145 million in 2005 in
constant Peso terms. The increase in operating income resulted primarily from
the consolidation of RMC's UAE and Israeli operations for ten months in 2005
(representing approximately 9% of our operating income in the region) and
increases in cement sales volumes and the average domestic sales price of cement
in Egypt. These increases were partially offset by a decline in cement export
volumes and higher energy costs.
Asia
Our Asian operations' operating income increased approximately 45% from
Ps289 million in 2004 to Ps419 million in 2005 in constant Peso terms. The
increase in operating income resulted primarily from increases in cement export
volumes and the average domestic sales price of cement in the region. These
increases were partially offset by higher energy costs.
75
Others
Operating income (loss) in our Others segment improved approximately
48% from a loss of Ps3,232 million in 2004 to a loss of Ps1,694 million in 2005
in constant Peso terms. The improvement in operating loss was primarily
attributable to a 37.6% increase in our trading operations' operating income in
2005 compared to 2004 due to increased trading activity resulting from the
consolidation of RMC's trading operations for ten months in 2005, and a 16.3%
improvement in our information solutions company's operating loss in 2005
compared to 2004.
Comprehensive Financing Income (Expense)
Pursuant to Mexican GAAP, the comprehensive financing result should
measure the real cost (gain) of an entity's financing, net of the foreign
currency fluctuations and the inflationary effects on monetary assets and
liabilities. In periods of high inflation or currency depreciation, significant
volatility may arise and is reflected under this caption. For presentation
purposes, comprehensive financing income (expense) includes:
o financial or interest expense on borrowed funds;
o financial income on cash and temporary investments;
o appreciation or depreciation resulting from the valuation of
financial instruments, including derivative instruments and
marketable securities, as well as the realized gain or loss from
the sale or liquidation of such instruments or securities;
o foreign exchange gains or losses associated with monetary assets
and liabilities denominated in foreign currencies; and
o gains and losses resulting from having monetary liabilities or
assets exposed to inflation (monetary position result).
Year Ended December 31,
-------------------------------
2004 2005
-------------- -------------
(in millions of constant Pesos)
Net comprehensive financing income (expense):
Financial expense ............................... Ps (3,977) Ps (5,588)
Financial income ................................ 250 417
Results from valuation and liquidation
of financial instruments ..................... 1,280 4,101
Foreign exchange loss, net ...................... (252) (837)
Monetary position gain .......................... 4,123 4,507
-------------- -------------
Net comprehensive financing income (expense).. Ps 1,424 Ps 2,600
============== =============
Our net comprehensive financing income increased approximately 82% from
Ps1,424 million in 2004 to Ps2,600 million in 2005 (Ps3,146 million, excluding
the effect of the consolidation of RMC). The components of the change are shown
above. Our financial expense was Ps5,588 million for 2005, an increase of
approximately 41% from Ps3,977 million in 2004. The increase was primarily
attributable to higher average levels of debt outstanding during 2005 compared
to 2004 as a result of borrowings related to the RMC acquisition. Our financial
income increased approximately 67% from Ps250 million in 2004 to Ps417 million
in 2005 as a result of increases in interest rates. Our results from valuation
and liquidation of financial instruments improved significantly from a gain of
Ps1,280 million in 2004 to a gain of Ps4,101 million in 2005, primarily
attributable to significant valuation improvements from our derivative financial
instruments portfolio (discussed below) during 2005. Our net foreign exchange
results declined from a loss of Ps252 million in 2004 to a loss of Ps837 million
in 2005, mainly due to the depreciation of the Euro against the Dollar. Our
monetary position gain (generated by the recognition of inflation effects over
monetary assets and liabilities) increased from Ps4,123 million during 2004 to
Ps4,507 million during 2005, as a result of an increase in the weighted average
inflation index used in the determination of the monetary position result in
2005 compared to 2004.
76
Derivative Financial Instruments
For the years ended December 31, 2004 and 2005, our derivative
financial instruments that have a potential impact on our comprehensive
financing result consisted of equity forward contracts entered into to hedge our
obligations under our executive stock option programs, foreign exchange
derivative instruments (excluding our foreign exchange forward contracts
designated as hedges of our net investment in foreign subsidiaries), interest
rate swaps, cross currency swaps and interest rate derivatives related to energy
projects. We recognized a gain of Ps4,101 million in 2005 in the item "Results
from valuation and liquidation of financial instruments," of which a net
valuation gain of approximately Ps482 million is attributable to changes in the
fair value of our equity forward contracts that hedge our stock option programs,
net of the costs generated by such programs, a valuation gain of approximately
Ps2,831 million is attributable to changes in the fair value of our foreign
currency derivatives, a valuation gain of approximately Ps33 million is
attributable to changes in the fair value of our marketable securities and a
valuation gain of approximately Ps755 million is attributable to changes in the
fair value of our interest rate derivatives. The estimated fair value gain of
our equity forward contracts and the costs associated with the stock options
both are attributable to the increase, during 2005, in the market price of our
listed securities (ADSs and CPOs) as compared to 2004. The estimated fair value
gain of our foreign currency derivatives is primarily attributable to changes in
the estimated fair value of the contracts we entered into in September 2004 that
were designated as accounting hedges of the foreign exchange risk associated
with our commitment to purchase the remaining outstanding shares of RMC
following the necessary corporate and regulatory approvals at a fixed price in
Pounds (representing a gain of approximately Ps1,411 million), and changes in
the estimated fair value of our cross currency swap contracts relating to our
debt portfolio (representing a gain of approximately Ps1,422 million). The
estimated fair value gain of our interest rate derivatives is primarily
attributable to an increase in five-year interest rates.
Other Expenses, Net
Our other expenses, net decreased approximately 35% from Ps5,169
million in 2004 to Ps3,372 million in 2005 in constant Peso terms, primarily as
a result of new accounting pronouncements under Mexican GAAP, effective as of
January 1, 2005, pursuant to which the amortization of goodwill was eliminated,
although goodwill remains subject to periodic impairment evaluations, which was
partially offset by a one-time charge of Ps976 million related to the change in
pension fund plans from defined benefit to defined contribution. The decrease
was also due to the sale of our 11.9% interest in Cementos Bio Bio, S.A. in
April 2005, which resulted in a net profit of approximately U.S.$19.5 million
(Ps207 million), partially offset by the sale of our Charlevoix, Michigan and
Dixon, Illinois cement plants and several distribution terminals located in the
Great Lakes region in March 2005, which resulted in a net loss of approximately
U.S.$10.5 million (Ps112 million). Excluding the effect of the consolidation of
RMC's operations, our other expenses, net decreased approximately 50% during the
same period.
Income Taxes, Business Assets Tax and Employees' Statutory Profit Sharing
Our effective tax rate was 13.9% in 2005 compared to 12.2% in 2004. Our
tax expense, which primarily consists of income taxes and business assets tax,
increased from Ps1,960 million in 2004 to Ps3,564 million in 2005. The increase
was attributable to higher taxable income in 2005 as compared to 2004. Our
average statutory income tax rate was approximately 30% in 2005 and
approximately 33% in 2004.
Employees' statutory profit sharing improved from an expense of Ps317
million during 2004 to an income of Ps9 million during 2005 due to lower taxable
income for profit sharing purposes in Mexico and Venezuela.
Majority Interest Net Income
Majority interest net income represents the difference between our
consolidated net income and minority interest net income, which is the portion
of our consolidated net income attributable to those of our subsidiaries in
which non-affiliated third parties hold interests. Changes in minority interest
net income in any period reflect changes in the percentage of the stock of our
subsidiaries held by non-affiliated third parties as of the end of each month
during the relevant period and consolidated net income attributable to those
subsidiaries.
77
For the reasons described above, our consolidated net income (before
deducting the portion allocable to minority interest) for 2005 increased
approximately 62% from Ps14,189 million in 2004 to Ps23,010 million in 2005 in
constant Peso terms. Excluding the effect of the consolidation of RMC's
operations, our consolidated net income (before deducting the portion allocable
to minority interest) increased approximately 37% during the same period. The
percentage of our consolidated net income allocable to minority interests
increased from 1.6% in 2004 to 2.5% in 2005 (2.0%, excluding the effect of the
consolidation of RMC), as a result of our contributions in July 2005 and sale in
September 2005 of ready-mix concrete, aggregates and concrete block assets in
the Florida panhandle and southern Georgia to Ready Mix USA, LLC, an entity in
which we own a 49.99% interest. Majority interest net income increased by
approximately 61% from Ps13,965 million in 2004 to Ps22,425 million in 2005 in
constant Peso terms, mainly as a result of our increase in net sales, our
valuation gains on derivative financial instruments, and the decrease in other
expenses, net, partially offset by higher financial expenses and income taxes.
Excluding the effect of the consolidation of RMC's operations, our majority
interest net income increased by approximately 37% during the same period. As a
percentage of net sales, majority interest net income decreased from 16% in 2004
to 14% in 2005. Excluding the effect of the consolidation of RMC's operations,
as a percentage of net sales, majority interest net income increased from 16% in
2004 to 21% in 2005.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Overview
Summarized in the table below are the percentage (%) increases (+) and
decreases (-) for the year ended December 31, 2004 compared to the year ended
December 31, 2003 in our sales volumes and average prices for each of our
geographic segments.
--------------------------------- ----------------------------- --------------- -----------------------------
Export Sales Average Domestic Prices in
Domestic Sales Volumes Volumes Local Currency (1)
Cement Ready-Mix Cement Cement Ready-Mix
--------------------------------- -------------- -------------- --------------- -------------- --------------
North America
--------------------------------- -------------- -------------- --------------- -------------- --------------
Mexico +2% +16% +37% -3% -1%
--------------------------------- -------------- -------------- --------------- -------------- --------------
United States +9% +8% N/A +5% +11%
--------------------------------- -------------- -------------- --------------- -------------- --------------
Europe
--------------------------------- -------------- -------------- --------------- -------------- --------------
Spain +3% +2% -23% +3% +5%
--------------------------------- -------------- -------------- --------------- -------------- --------------
UK N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- --------------
Rest of Europe N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- --------------
South/Central America and the
Caribbean
--------------------------------- -------------- -------------- --------------- -------------- --------------
Venezuela +20% +13% +26% -12% -2%
--------------------------------- -------------- -------------- --------------- -------------- --------------
Colombia +8% +13% N/A -8% +8%
--------------------------------- -------------- -------------- --------------- -------------- --------------
Rest of South/Central America Flat -1% N/A +7% +5%
and the Caribbean (2)
--------------------------------- -------------- -------------- --------------- -------------- --------------
Africa and Middle East
--------------------------------- -------------- -------------- --------------- -------------- --------------
Egypt -6% +86% +173% +32% +13%
--------------------------------- -------------- -------------- --------------- -------------- --------------
Rest of Africa and Middle East N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- --------------
Asia
--------------------------------- -------------- -------------- --------------- -------------- --------------
Philippines -2% -95% -49% +35% -14%
--------------------------------- -------------- -------------- --------------- -------------- --------------
Rest of Asia (3) N/A N/A N/A N/A N/A
--------------------------------- -------------- -------------- --------------- -------------- --------------
N/A = Not Applicable
(1) Represents the average change in domestic cement and ready-mix prices in
local currency terms. For purposes of a geographic segment consisting of a
region, the average prices in local currency terms for each individual
country within the region are first translated into Dollar terms at the
exchange rates in effect as of the end of the reporting period. Variations
for a region represent the weighted average change of prices in Dollar
terms based on total sales volumes in the region.
(2) Rest of South/Central America and the Caribbean includes our operations in
Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico and our
trading activities in the Caribbean.
(3) Rest of Asia includes our operations in Thailand, Bangladesh and other
assets in the Asian region.
On a consolidated basis, our cement sales volumes increased
approximately 2%, from 64.7 million tons in 2003 to 65.8 million tons in
2004, and our ready-mix concrete sales volumes increased approximately 10%,
from 21.7 million cubic meters in 2003 to 23.9 million cubic meters in 2004.
Our net sales increased approximately 6%
78
from Ps82,045 million in 2003 to Ps87,062 million in 2004, and our operating
income increased approximately 19% from Ps16,665 million in 2003 to Ps19,783
million in 2004.
The following tables present selected condensed financial information
of net sales and operating income for each of our geographic segments for the
years ended December 31, 2003 and 2004. Variations in net sales determined on
the basis of constant Mexican Pesos include the appreciation or depreciation
which occurred during the period between the local currencies of the countries
in the regions vis-a-vis the Mexican Peso, as well as the effects of inflation
as applied to the Mexican Peso amounts using our weighted average inflation
factor; therefore, such variations differ substantially from those based
solely on the countries' local currencies:
- -----------------------------------------------------------------------------------------------------------
Net Sales
- -----------------------------------------------------------------------------------------------------------
Approximate For the Year
Currency Ended December 31,
Fluctuations, ---------------------------
Net of Variations
Variations in Inflation in Constant
Geographic Segment Local Currency(1) Effects Mexican Pesos 2003 2004
- -----------------------------------------------------------------------------------------------------------
(In millions of constant
Mexican Pesos as of
December 31, 2005)
---------------------------
North America
Mexico............................. +4.5% -0.9% +3.6% 30,102 31,196
United States ..................... +14.0% -7.6% +6.4% 19,836 21,097
Europe
Spain ............................. +5.6% +0.4% +6.0% 13,910 14,741
United Kingdom..................... N/A N/A N/A N/A N/A
Rest of Europe .................... N/A N/A N/A N/A N/A
South/Central America and the
Caribbean
Venezuela.......................... +10.6% -8.1% +2.5% 3,652 3,742
Colombia........................... +11.7% -8.1% +3.6% 2,530 2,620
Rest of South/Central America and
the Caribbean (2)............... +4.7% +3.6% +8.3% 6,794 7,357
Africa and Middle East
Egypt.............................. +42.3% -10.8% +31.5% 1,542 2,028
Rest of Africa and Middle East .... N/A N/A N/A N/A N/A
Asia
Philippines........................ +19.8% -14.5% +5.3% 1,536 1,617
Rest of Asia (3)................... N/A N/A N/A N/A N/A
Others (4)......................... +18.8% -8.5% +10.3% 9,602 10,587
-------------------------------
+6.1% 89,504 94,985
Eliminations from consolidation.... (7,459) (7,923)
-------------------------------
Consolidated net sales............. 82,045 87,062
===============================
79
- -----------------------------------------------------------------------------------------------------------
Operating Income
- -----------------------------------------------------------------------------------------------------------
Approximate For the Year
Currency Ended December 31,
Fluctuations, ---------------------------
Net of Variations
Variations in Inflation in Constant
Geographic Segment Local Currency(1) Effects Mexican Pesos 2003 2004
- -----------------------------------------------------------------------------------------------------------
(In millions of constant
Mexican Pesos as of
December 31, 2005)
---------------------------
North America
Mexico............................. +7.3% -6.3% +1.0% 11,593 11,707
United States ..................... +27.0% -8.6% +18.4% 2,344 2,776
Europe
Spain ............................. +17.5% +0.4% +17.9% 3,037 3,582
United Kingdom .................... N/A N/A N/A N/A N/A
Rest of Europe..................... N/A N/A N/A N/A N/A
South/Central America and the
Caribbean
Venezuela.......................... +23.4% -27.4% -4.0% 1,218 1,169
Colombia........................... +14.2% -0.7% +13.5% 1,052 1,194
Rest of South/Central America and
the Caribbean (2)............... +32.8% +7.4% +40.2% 1,202 1,685
Africa and Middle East
Egypt.............................. +93.7% -13.9% +79.8% 341 613
Rest of Africa and Middle East .... N/A N/A N/A N/A N/A
Asia
Philippines........................ +318.7% -19.4% +299.3% (145) 289
Rest of Asia (3).................. N/A N/A N/A N/A N/A
Others (4)......................... +12.6% +6.1% +18.7% (3,977) (3,232)
---------------------------
Consolidated operating income...... 16,665 19,783
===========================
- ----------------------------
N/A = Not Applicable
(1) For purposes of a geographic segment consisting of a region, the net sales
and operating income data in local currency terms for each individual
country within the region are first translated into Dollar terms at the
exchange rates in effect as of the end of the reporting period. Variations
for a region represent the weighted average change in Dollar terms based
on net sales and operating income for the region.
(2) Rest of South/Central America and the Caribbean includes our operations in
Costa Rica, Panama, the Dominican Republic, Nicaragua, Puerto Rico and our
trading activities in the Caribbean.
(3) Rest of Asia includes our operations in Thailand, Bangladesh and other
assets in the Asian region.
(4) Our Others segment includes our worldwide trade maritime operations, our
information solutions company and other minor subsidiaries.
Net Sales
Our net sales increase of 6% during 2004 was primarily attributable to
higher sales volumes in most of our markets, which were partially offset by a
decrease in domestic cement sales volumes in Africa and the Middle East and
Asia and lower domestic cement prices in Mexico and South America, Central
America and the Caribbean. Of our consolidated net sales in 2003 and 2004,
approximately 73% and 71%, respectively, were derived from sales of cement,
approximately 22% and 24%, respectively, from sales of ready-mix concrete and
approximately 5% and 5%, respectively, from sales of other construction
materials and services.
Set forth below is a quantitative and qualitative analysis of the
effects of the various factors affecting our net sales on a geographic segment
basis.
80
Mexico
Our Mexican operations' domestic gray cement sales volumes increased
approximately 2% in 2004 compared to 2003, and ready-mix concrete sales volumes
increased approximately 16% during the same period. The increases in sales
volumes resulted primarily from increased demand in the public sector,
particularly from infrastructure projects and low- and middle-income housing,
as compared to flat self-construction sector volumes during the year. Our
Mexican operations' cement export volumes, which represented 7% of our Mexican
cement sales volumes in 2004, increased approximately 37% in 2004 compared to
2003, due mainly to an increase in public sector spending abroad. Of our
Mexican operations' cement export volumes during 2004, 79% was shipped to the
United States, 20% to Central America and the Caribbean and 1% to South
America. The average cement price in Mexico decreased approximately 3% in
constant Peso terms in 2004 compared to 2003, and the average ready-mix
concrete price decreased approximately 1% in constant Peso terms over the same
period (these prices increased 2% and 4%, respectively, in nominal Peso terms).
For the year ended December 31, 2004, sales of ready-mix concrete in Mexico
represented approximately 25% of our Mexican operations' net sales.
As a result of the increases in cement and ready-mix concrete sales
volumes and the increase in cement export volumes, partially offset by
decreases in average cement and ready-mix prices, net sales in Mexico, in
constant Peso terms, increased approximately 4% in 2004 compared to 2003.
United States
Our United States operations' cement sales volumes, which include
cement purchased from our other operations, increased approximately 9% in 2004
compared to 2003, and ready-mix concrete sales volumes increased approximately
8% over the same period. The increases in sales volumes are primarily
attributable to strong demand from the residential sector due to a low interest
rate environment and from the cement-intensive public works sector, as well as
favorable weather conditions during December 2004. The industrial and
commercial sectors, which declined in 2003, made a strong recovery and grew in
2004. The average sales price of cement increased approximately 5% in Dollar
terms during 2004 compared to 2003, and the average price of ready-mix concrete
increased approximately 11% during the same period. For the year ended December
31, 2004, sales of ready-mix concrete in the U.S. represented approximately 27%
of our U.S. operations' net sales.
As a result of the increases in cement and ready-mix concrete sales
volumes and the increases in average cement and ready-mix prices, net sales in
the United States, in U.S. Dollar terms, increased approximately 14% in 2004
compared to 2003.
Spain
Our Spanish operations' domestic cement sales volumes increased
approximately 3% in 2004 compared to 2003, and ready-mix concrete sales volumes
increased approximately 2% during the same period. The increases in sales
volumes were primarily driven by strong residential construction activity due
to a favorable mortgage environment and by increased spending in public works
due to Spain's infrastructure program, as well as favorable weather conditions
during November and December. Our Spanish operations' cement export volumes,
which represented 2% of our Spanish cement sales volumes in 2004, decreased
approximately 23% in 2004 compared to 2003 primarily due to increased domestic
demand. Of our Spanish operations' total cement export volumes during 2004, 71%
was shipped to the United States, 15% to Europe and 14% to Africa. The average
sales price of cement increased approximately 3% in Euro terms during 2004
compared to 2003, and the average price of ready-mix concrete increased
approximately 5% in Euro terms over the same period. For the year ended
December 31, 2004, sales of ready-mix concrete in Spain represented
approximately 25% of our Spanish operations' net sales.
As a result of the increases in cement and ready-mix concrete sales
volumes and the increases in average cement and ready-mix prices, net sales in
Spain, in Euro terms, increased approximately 6% in 2004 compared to 2003,
despite the decline in cement export volumes.
81
South America, Central America and the Caribbean
As of December 31, 2004, our operations in South America, Central
America and the Caribbean consisted of our operations in Venezuela and Colombia
and our Central American and Caribbean operations, which include our operations
in Costa Rica, the Dominican Republic, Panama, Nicaragua, Puerto Rico, as well
as several cement terminals and other assets in other Caribbean countries and
our trading operations in the Caribbean region. Most of these trading
operations consist of the resale in the Caribbean region of cement produced by
our operations in Venezuela and Mexico.
Our South America, Central America and the Caribbean operations'
domestic cement sales volumes increased approximately 8% in 2004 compared to
2003, and ready-mix concrete sales volumes increased approximately 7% over the
same period. The increases in sales volumes were primarily attributable to the
increased sales volumes in our Venezuelan and Colombian operations described
below. Our South America, Central American and Caribbean operations' average
domestic sales price of cement increased approximately 6% in Dollar terms in
2004 compared to 2003 due to increased demand in the region, which was
partially offset by competitive pressures in the Colombian market and
government price controls over bagged cement in Venezuela, while the average
sales price of ready-mix concrete increased approximately 13% in Dollar terms
over the same period. For the year ended December 31, 2004, sales of ready-mix
concrete in South America, Central America and the Caribbean represented
approximately 17% of our South America, Central America and the Caribbean
operations' net sales. Set forth below is a discussion of sales volumes in
Venezuela and Colombia, the most significant countries in our South America,
Central American and Caribbean segment, based on net sales.
Our Venezuelan operations' domestic cement sales volumes increased
approximately 20% in 2004 compared to 2003, while ready-mix concrete sales
volumes also increased approximately 13% during the same period. The increases
in sales volumes and ready-mix concrete sales volumes were mainly driven by the
self-construction and commercial sectors, while government spending remained
stable. Construction in the private sector increased due to increased
confidence in the economy. Our Venezuelan operations' cement export volumes,
which represented 56% of our Venezuelan cement sales volumes in 2004, increased
approximately 26% in 2004 compared to 2003. The increase in cement export
volumes was due to increases in sales to the United States, Guadalupe, Haiti,
Martinique and Panama. Of our Venezuelan operations' total cement export
volumes during 2004, 75% was shipped to the United States and 25% to the
Caribbean and South America.
Our Colombian operations' domestic cement sales volumes increased
approximately 8% in 2004 compared to 2003, and ready-mix concrete sales volumes
increased approximately 13% during the same period. The increases in sales
volumes were primarily a result of increased demand from the commercial sector
and, to a lesser extent, from the residential sector.
Africa and the Middle East
As of December 31, 2004, our operations in Africa and the Middle East
consisted of our operations in Egypt. Our Africa and the Middle East
operations' domestic cement sales volumes decreased approximately 6% in 2004
compared to 2003, primarily as a result of the decrease in cement volume
resulting from a slowdown in infrastructure spending by the Egyptian
government. However, the lower domestic volumes were partially offset by a more
than 173% increase in cement export volumes compared to 2003. Our Africa and
the Middle East operations' average domestic sales price of cement increased
approximately 32% in Egyptian pound terms and approximately 28% in U.S. dollar
terms in 2004 compared to 2003, primarily due to better overall market
conditions in Egypt. Our Africa and the Middle East operations' cement export
volumes represented approximately 30% of our Africa and the Middle East
operations' total cement sales volumes in 2004. During 2004, 23% of our Africa
and the Middle East operations' cement export volumes were shipped to Africa
while 77% were shipped to Europe. Our Africa and the Middle East operations'
ready-mix concrete sales volumes increased 86% in 2004 compared to 2003,
primarily due to increases in market share achieved by our ready-mix operations
in the local Egyptian market. For the year ended December 31, 2004, sales of
ready-mix concrete in Africa and the Middle East represented approximately 5%
of our Africa and the Middle East operations' net sales.
82
As a result of the increases in the average domestic sales prices of
cement, ready-mix concrete sales volumes and cement export volumes, net sales
in our Africa and the Middle East operations, in constant Peso terms, increased
approximately 32% in 2004 compared to 2003, despite the decrease in domestic
cement sales volumes.
Asia
As of December 31, 2004, our operations in Asia consisted of our
operations in the Philippines, Thailand and Bangladesh. Our Asian operations'
cement sales volumes decreased approximately 9% in 2004 compared to 2003,
primarily as a result of decreased demand in the Philippines public works
sector due to reductions in government spending on infrastructure, while the
average sales price of cement in the region increased approximately 21%, in
Dollar terms, during the same period. Our Asian operations' ready-mix concrete
sales volumes decreased approximately 95% in 2004 compared to 2003 primarily
due to a decrease in public sector spending in the Philippines. For the year
ended December 31, 2004, sales of ready-mix concrete in Asia represented less
than 1% of our Asian operations' net sales.
As a result of the increase in the average cement sales prices, net
sales in our Asian operations, in constant Peso terms, increased approximately
5% in 2004 compared to 2003, despite the decreases in domestic cement and
ready-mix concrete sales volumes.
Others
Our Others segment includes our worldwide cement and clinker trading
operations, our information solutions company and other minor subsidiaries. Net
sales in our Others segment increased approximately 19% in 2004 compared to
2003 in constant Peso terms, primarily as a result of a 35% increase in our
trading operations' net sales in 2004 compared to 2003 due to increased trading
activity. For the year ended December 31, 2004, our trading operations' net
sales represented approximately 67% of our Others segment's net sales.
Cost of Sales
Our cost of sales, including depreciation, increased 4% from Ps47,296
million in 2003 to Ps48,997 million in 2004 in constant Peso terms, primarily
as a result of the increase in our net sales, primarily attributable to higher
average prices in most of our markets, which more than offset higher worldwide
energy costs. As a percentage of sales, cost of sales decreased 1.3% from 57.6%
in 2003 to 56.3% in 2004.
Gross Profit
Our gross profit increased by 10% from Ps34,748 million in 2003 to
Ps38,065 million in 2004 in constant Peso terms. Our gross margin increased
from 42% in 2003 to 44% in 2004, as a result of higher average prices in most
of our markets. The increase in our gross profit was primarily attributable to
the 6% increase in our net sales in 2004 compared to 2003 and the increase of
only 4% in our cost of sales in 2004 compared to 2003.
Operating Expenses
Our operating expenses increased 1% from Ps18,083 million in 2003 to
Ps18,282 million in 2004 in constant Peso terms, primarily as a result of
increased transportation costs due to higher worldwide energy costs, partially
offset by our continuing cost-reduction efforts, including reductions in
corporate overhead and travel expenses. As a percentage of sales, our operating
expenses decreased from 22% in 2003 to 21% in 2004.
Operating Income
For the reasons mentioned above, our operating income increased 19%
from Ps16,665 million in 2003 to Ps19,783 million in 2004. Additionally, set
forth below is a quantitative and qualitative analysis of the effects of the
various factors affecting our operating income on a geographic segment basis.
83
Mexico
Our Mexican operations' operating income increased approximately 1%
from Ps11,593 million in 2003 to Ps11,707 million in 2004 in constant Peso
terms. The increase in operating income was primarily due to increases in
domestic cement and ready-mix concrete sales volumes and cement export volumes.
These increases were partially offset by decreases in the average prices of
domestic cement and ready-mix concrete and higher energy costs.
United States
Our U.S. operations' operating income increased approximately 18% from
Ps2,344 million in 2003 to Ps2,776 million in 2004 in constant Peso terms. The
increase in operating income resulted primarily from increases in domestic
cement and ready-mix concrete sales volumes and average prices. These increases
were partially offset by higher energy and material costs and the depreciation
of the Dollar against the Peso.
Spain
Our Spanish operations' operating income increased approximately 18%
from Ps3,037 million in 2003 to Ps3,582 million in 2004 in constant Peso terms.
The increase in operating income resulted primarily from increases in domestic
cement and ready-mix concrete sales volumes and average prices and the
appreciation of the Euro against the Peso and the Dollar. These increases and
the currency appreciation were partially offset by a decline in cement export
volumes and higher energy costs.
South America, Central America and the Caribbean
Our South America, Central America and the Caribbean operations'
operating income increased approximately 17% from Ps3,472 million in 2003 to
Ps4,048 million in 2004 in constant Peso terms. The increase in operating
income was primarily attributable to increases in domestic cement and ready-mix
concrete sales volumes in Venezuela and Colombia. These increases were
partially offset by the decreases in the average domestic sales prices of
cement in Venezuela and Colombia, the decline in Venezuelan cement export
volumes and higher energy costs.
Africa and the Middle East
Our Africa and the Middle East operations' operating income increased
approximately 80% from Ps341 million in 2003 to Ps613 million in 2004 in
constant Peso terms. The increase in operating income resulted primarily from
increases in the average domestic sales price of cement, cement export volumes
and ready-mix concrete sales volumes in Egypt. These increases were partially
offset by a decline in domestic cement sales volumes in Egypt and higher energy
costs.
Asia
Our Asian operations' operating income (loss) improved approximately
299% from a loss of Ps145 million in 2003 to income of Ps289 million in 2004 in
constant Peso terms. The improvement in operating income (loss) was primarily
attributable to increases in the average domestic sales price of cement in the
Philippines. These increases were partially offset by a decline in domestic
cement sales volumes in the Philippines and higher energy costs.
Others
Operating income (loss) in our Others segment improved approximately
19% from a loss of Ps3,977 million in 2003 to a loss of Ps3,232 million in 2004
in constant Peso terms. The improvement in operating loss was primarily
attributable to an 11.3% increase in our trading operations' operating income
in 2004 compared to 2003 due to increased trading activity, and a 39%
improvement in our information solutions company's operating loss in 2004
compared to 2003.
84
Comprehensive Financing Income (Expense)
Pursuant to Mexican GAAP, the comprehensive financing result should
measure the real cost (gain) of an entity's financing, net of the foreign
currency fluctuations and the inflationary effects on monetary assets and
liabilities. In periods of high inflation or currency depreciation, significant
volatility may arise and is reflected under this caption. For presentation
purposes, comprehensive financing income (expense) includes:
o financial or interest expense on borrowed funds;
o financial income on cash and temporary investments;
o appreciation or depreciation resulting from the valuation of
financial instruments, including derivative instruments and
marketable securities, as well as the realized gain or loss from
the sale or liquidation of such instruments or securities;
o foreign exchange gains or losses associated with monetary assets
and liabilities denominated in foreign currencies; and
o gains and losses resulting from having monetary liabilities or
assets exposed to inflation (monetary position result).
Year Ended December 31,
--------------------------
2003 2004
----------- ----------
(in millions of constant Pesos)
Net comprehensive financing income (expense):
Financial expense................................. Ps (4,359) Ps (3,977)
Financial income.................................. 191 250
Results from valuation and liquidation
of financial instruments ....................... (682) 1,280
Foreign exchange loss, net ....................... (1,965) (252)
Monetary position gain............................ 3,752 4,123
----------- ----------
Net comprehensive financing income (expense)... Ps (3,063) Ps 1,424
=========== ==========
Our net comprehensive financing result improved from an expense of
Ps3,063 million in 2003 to an income of Ps1,424 million in 2004. The components
of the change are shown above. Our financial expense was Ps4,359 million for
2003 compared to Ps3,977 million for 2004, a decrease of 9%. The decrease was
primarily attributable to lower average levels of debt outstanding during 2004,
since the majority of the borrowings related to the RMC acquisition were
incurred in the first quarter of 2005. Our financial income increased 31% from
Ps191 million in 2003 to Ps250 million in 2004 primarily as a result of an
increase in interest rates. Our results from valuation and liquidation of
financial instruments improved from a loss of Ps682 million in 2003 to a gain
of Ps1,280 million in 2004, primarily attributable to valuation improvements
from our derivative financial instruments portfolio (discussed below) during
2004. Our net foreign exchange results improved from a loss of Ps1,965 million
in 2003 to a loss of Ps252 million in 2004. The foreign exchange loss in 2004
was primarily attributable to the appreciation of the Japanese Yen against the
Dollar, which was partially offset by the appreciation of the Peso against the
Dollar, as compared to the foreign exchange loss in 2003, which was primarily
attributable to the depreciation of the Peso against the Dollar and the
appreciation of the Japanese Yen against the Dollar. See notes 12 and 17 to our
consolidated financial statements included elsewhere in this annual report. Our
monetary position gain (generated by the recognition of inflation effects over
monetary assets and liabilities) increased from a gain of Ps3,752 million
during 2003 to a gain of Ps4,123 million during 2004, mainly as a result of an
increase in the weighted average inflation index used in the determination of
the monetary position result in 2004 compared to 2003.
Derivative Financial Instruments
For the years ended December 31, 2003 and 2004, our derivative financial
instruments that have a potential impact on our comprehensive financing result
consisted of equity forward contracts entered into to hedge potential
85
exercises under our executive stock option programs (see notes 16 and 17 to our
consolidated financial statements included elsewhere in this annual report),
foreign exchange derivative instruments, excluding our foreign exchange forward
contracts designated as hedges of our net investment in foreign subsidiaries,
interest rate swaps, cross currency swaps, interest rate swap options
(swaptions), and interest rate derivatives related to energy projects. Of the
gain of Ps1,280 million in 2004 recognized in the item results from valuation
and liquidation of financial instruments, a net valuation loss of approximately
Ps561 million was attributable to changes in the fair value of our equity
forward contracts that hedge our stock option programs, net of the costs
generated by such programs, and an approximate valuation gain of Ps124 million
was attributable to changes in the fair value of our marketable securities.
These losses were offset by an approximate gain of Ps645 million resulting from
changes in the fair value of our interest rate derivatives, and an approximate
gain of Ps1,072 million resulting from changes in the fair value of our foreign
currency derivatives. These valuation effects accounted for substantially all
the gain recorded in 2004 under the line item results from valuation and
liquidation of financial instruments presented above. We experienced valuation
improvements in most of these financial derivatives in 2004 compared to 2003.
See "-- Qualitative and Quantitative Market Disclosure -- Our Derivative
Financial Instruments" and "-- Qualitative and Quantitative Market Disclosure --
Interest Rate Risk, Foreign Currency Risk and Equity Risk." See also notes 12
and 17 to our consolidated financial statements included elsewhere in this
annual report. The estimated net gain mentioned above, determined by the excess
between the fair value gain of our equity forward contracts that hedge the
potential exercise of our executive stock option programs over the costs
associated with the intrinsic value of our executives' options, was primarily
attributable to slight differences in the strike price established in the
forward contracts as compared to those of the options. The fair value gain of
our equity forward contracts and the costs associated with the stock options
both were attributable to the increase, during 2004, in the market price of our
listed securities (ADSs and CPOs) as compared to 2003. The estimated fair value
gain of our foreign currency derivatives was primarily attributable to the
contracts that were designated as accounting hedges of the foreign exchange risk
associated with the firm commitment agreed to on November 17, 2004. On this
date, RMC's shareholders committed to sell their RMC shares at a fixed price.
Changes in the estimated fair value of these contracts from the designation
date, which represented a gain of approximately U.S.$132 million (Ps1,411
million), were recognized in stockholders' equity. See note 17B to our
consolidated financial statements included elsewhere in this annual report.
Other Expenses, Net
Our other expenses, net for 2004 were Ps5,169 million compared to
Ps5,230 million in 2003, a decrease of 1%. The decrease was primarily
attributable to the recognition of gains on the sale of fixed assets during
2004 of approximately Ps617 million compared with Ps147 million in 2003. See
notes 7, 10 and 11 to our consolidated financial statements included elsewhere
in this annual report.
Income Taxes, Business Assets Tax and Employees' Statutory Profit Sharing
Our effective tax rate was 12.2% in 2004 compared to 12.3% in 2003.
Our tax expense, which primarily consists of income taxes and business assets
tax, increased 91% from Ps1,026 million in 2003 to Ps1,960 million in 2004. The
increase was attributable to higher taxable income in 2004 as compared to 2003.
Our average statutory income tax rate was approximately 33% in 2004 and
approximately 34% in 2003.
Employees' statutory profit sharing increased from Ps195 million
during 2003 to Ps317 million during 2004 due to higher taxable income for
profit sharing purposes in Mexico. See note 18B to our consolidated financial
statements included elsewhere in this annual report.
Majority Interest Net Income
Majority interest net income represents the difference between our
consolidated net income and minority interest net income, which is the portion
of our consolidated net income attributable to those of our subsidiaries in
which non-affiliated third parties hold interests. Changes in minority interest
net income in any period reflect changes in the percentage of the stock of our
subsidiaries held by non-affiliated third parties as of the end of each month
during the relevant period and consolidated net income attributable to those
subsidiaries.
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For the reasons described above, our consolidated net income (before
deducting the portion allocable to minority interest) for 2004 increased 88%,
from Ps7,549 million in 2003 to Ps14,189 million in 2004. The percentage of our
consolidated net income allocable to minority interests decreased from 4.6% in
2003 to 1.6% in 2004, as a result of the 6.83% (695,065 shares) of CAH equity
we acquired for approximately U.S.$70 million. Majority interest net income
increased by 94%, from Ps7,201 million in 2003 to Ps13,965 million in 2004,
mainly as a result of our increase in net sales, our valuation gains on
derivative financial instruments, the decrease in our foreign exchange loss and
a lower portion of consolidated net income allocable to minority interests,
partially offset by higher income taxes. As a percentage of net sales, majority
interest net income increased from 8.8% in 2003 to 16.0% in 2004.
Liquidity and Capital Resources
Operating Activities
We have satisfied our operating liquidity needs primarily through
operations of our subsidiaries and expect to continue to do so for both the
short-term and long-term. Although cash flow from our operations has
historically overall met our liquidity needs for operations, servicing debt and
funding acquisitions, our subsidiaries are exposed to risks from changes in
foreign currency exchange rates, price and currency controls, interest rates,
inflation, governmental spending, social instability and other political,
economic or social developments in the countries in which they operate, any one
of which may materially reduce our net income and cash from operations.
Consequently, we also rely on cost-cutting and continual operating improvements
to optimize capacity utilization and maximize profitability as well as to
offset the risks associated with having worldwide operations. Our consolidated
net resources provided by operating activities were Ps17.9 billion in 2003,
Ps23.8 billion in 2004, and Ps36.3 billion in 2005. See our Statement of
Changes in the Financial Position included elsewhere in this annual report.
Our Indebtedness
As of December 31, 2005, we had approximately U.S.$9.5 billion (Ps101
billion) of total debt, of which approximately 13% was short-term and 87% was
long-term. Approximately 6% of our long-term debt at December 31, 2005, or
U.S.$0.6 billion (Ps6 billion), is to be paid in 2006, unless extended. As of
December 31, 2005, after giving effect to our cross currency swap arrangements
discussed elsewhere in this annual report, 72% of our consolidated debt was
Dollar-denominated, 21% was Euro-denominated, 5% was Yen-denominated, 2% was
Pound-denominated, and immaterial amounts were denominated in other currencies.
The weighted average interest rates paid by us in 2005 in our main currencies
were 5.2% on our Dollar-denominated debt, 2.9% on our Euro-denominated debt,
1.1% on our Yen-denominated debt and 5.5% on our Pound-denominated debt.
From time to time, as part of our financing activities, we and our
subsidiaries have entered into various financing agreements, including bank
loans, credit facilities, sale-leaseback transactions, forward contracts,
forward lending facilities and equity swap transactions. Additionally, we and
our subsidiaries have issued notes, commercial paper, bonds, preferred equity
and putable capital securities.
Most of our outstanding indebtedness has been incurred to finance our
acquisitions and to finance our capital investment programs. CEMEX Mexico and
Empresas Tolteca de Mexico, two of our principal Mexican subsidiaries, have
provided guarantees of our indebtedness in the amount of approximately U.S.$3.8
billion (Ps40 billion), as of December 31, 2005. See Item 3 -- "Key Information
- -- Risk Factors -- Our ability to pay dividends and repay debt depends on our
subsidiaries' ability to transfer income and dividends to us," and Item 3 --
"Key Information -- Risk Factors. -- We have incurred and will continue to
incur debt, which could have an adverse effect on the price of our CPOs and
ADSs, result in us incurring increased interest costs and limit our ability to
distribute dividends, finance acquisitions and expansions and maintain
flexibility in managing our business activities," and note 25(x) to our
consolidated financial statements included elsewhere in this annual report.
Some of the debt instruments in respect of our and our subsidiaries'
indebtedness contain various covenants, which, among other things, require us
and them to maintain specific financial ratios, restrict asset sales and
dictate the use of proceeds from the sale of assets. These restrictions may
adversely affect our ability to finance our future operations or capital needs
or to engage in other business activities, such as acquisitions, which may be in
87
our interest. From time to time, we have sought and obtained waivers and
amendments to some of our and our subsidiaries' debt agreements, principally in
connection with acquisitions. Our failure to obtain any required waivers may
result in the acceleration of the affected indebtedness and could trigger our
obligations to make payments of principal, interest and other amounts under our
other indebtedness, which could have a material adverse effect on our financial
condition. We believe that we have good relations with our lenders and the
lenders to our subsidiaries, and nothing has come to our attention that would
lead us to believe that any future waivers, if required, would not be
forthcoming. However, we cannot assure you that future waivers would be
forthcoming, if requested. As of December 31, 2005, we were in compliance with
all the financial covenants in our own and our subsidiaries' debt instruments.
Under Rule 5-04(c) of Regulation S-X under the Exchange Act, companies
with restricted net assets exceeding 25% of their consolidated net assets are
required to include Schedule 1 (parent company-only financial statements).
Under Rule 4-08(e)(3) of Regulation S-X, loan provisions prohibiting dividend
payments, loans or advances to the parent by a subsidiary, are considered
restrictions for purposes of computing restricted net assets.
As of December 31, 2005, the financing agreements entered by us and
our subsidiaries do not include covenants or agreements that by their specific
terms restrict the transfer of funds from our subsidiaries to us in the form of
dividends, loans or advances. However, the financing agreements include some
restrictive covenants that would be considered transfer restrictions under Rule
4-08(e)(3) of Regulation S-X. These restrictive covenants are as follows:
o A restriction on asset dispositions that limits the use of
proceeds of funds obtained from assets sales. The restriction
requires us to reinvest such proceeds in cement-related assets or
repay senior debt. As of December 31, 2005, we had senior debt in
subsidiaries of approximately U.S.$6,040 million (equivalent to
approximately 61.5% of our consolidated net assets); and
o A financial covenant limiting the amount of total debt maintained
in New Sunward Holdings (a Dutch holding company subsidiary)
relative to the stockholder's equity of CEMEX Espana (our
operating company in Spain and the direct parent of New Sunward
Holdings) to be not higher than 0.35 times. As of December 31,
2005, New Sunward Holdings had outstanding debt of approximately
(euro) 574 million (U.S.$680 million) (equivalent to approximately
6.9% of our consolidated net assets).
In light of these restrictions, as of December 31, 2005, we had more
than 25% of our consolidated net assets subject to restrictions under Rule
4-08(e)(3) of Regulation S-X, and as a result we have included the required
Schedule 1 (parent company-only financial statements) elsewhere in this annual
report.
As of December 31, 2005, after the completion of our acquisition of
RMC and the refinancing of the acquisition credit facilities, we had
approximately U.S.$9.5 billion of outstanding indebtedness, including
indebtedness assumed from RMC. The following is a description of the material
indebtedness assumed from RMC and which was repaid following the acquisition.
o On October 18, 2002, RMC entered into a (pound)1 billion Term and
Revolving Credit Agreement relating to a multi-currency five-year
(pound)600 million revolving credit facility and a multi-currency
five-year (pound)400 million term loan facility. On March 16,
2005, CEMEX Espana and RMC entered into an amended and restated
agreement relating to these facilities. Simultaneous with the
execution of the amended and restated agreement, the total amount
of the facilities was reduced to (pound)604,354,196; the revolving
credit facility was reduced to (pound)425,558,038 and the term
loan facility was reduced to (pound)178,796,154. This facility was
fully prepaid and cancelled on November 7, 2005.
o On November 30, 2000, RMC and several institutional purchasers
entered in a Note Purchase Agreement in connection with a private
placement by RMC. Pursuant to this agreement, RMC issued U.S.$120
million aggregate principal amount of 8.40% Senior Notes due 2010,
U.S.$90 million aggregate principal amount of 8.50% Senior Notes
due 2012 and U.S.$45 million aggregate principal amount of 8.72%
Senior Notes due 2020. As described below under "--Recent
Developments," in May 2006, these notes were fully prepaid.
88
On April 5, 2005, we entered into a U.S.$1 billion 180-day term credit
agreement guaranteed by CEMEX Mexico and Empresas Tolteca de Mexico. The
proceeds of this credit facility were used to fund the repayment of amounts
outstanding under a U.S.$1.25 billion multi-currency term loan facility of New
Sunward Holding B.V., dated September 24, 2004, entered into to finance the RMC
acquisition. This credit facility was fully prepaid on June 7, 2005.
On May 17, 2005, we completed a cash tender offer, pursuant to which we
purchased a portion of the outstanding notes originally issued by RMC in private
placements. The total amount paid in the cash tender offer was approximately
U.S.$315 million, which was repaid through a private placement by a wholly-owned
subsidiary of CEMEX Espana during June 2005 of new five- and ten-year notes in
an aggregate principal amount of U.S.$325 million.
On May 31, 2005, we entered into a five-year U.S.$1.2 billion
revolving credit facility guaranteed by CEMEX Mexico and Empresas Tolteca de
Mexico. The proceeds of this credit facility were used to repay amounts
outstanding under the U.S.$1 billion multi-currency 180-day term credit
agreement we entered into on April 5, 2005, to repay other existing
indebtedness and for general corporate purposes.
On June 6, 2005, we amended our U.S.$800 million revolving credit
facility dated June 23, 2004. The amended facility is a U.S.$700 million
revolving credit facility guaranteed by CEMEX Mexico and Empresas Tolteca de
Mexico and matures in 2009.
On June 27, 2005, New Sunward Holding B.V. entered into a two-year
U.S.$350 million term loan facility and a four-year U.S.$350 million
multi-currency revolving credit facility, guaranteed by CEMEX, CEMEX Mexico and
Empresas Tolteca de Mexico. The proceeds of these facilities were used to repay
existing indebtedness not related to the RMC acquisition.
On July 7, 2005, CEMEX Espana amended the second and third tranches of
a U.S.$3.8 billion multi-currency term loan facility, dated September 24, 2004,
totaling U.S.$2.3 billion. The amended facility consists of a two-year U.S.$575
million term loan, a five-year U.S.$575 million term loan and a U.S.$1.15
billion amortizing loan with an average maturity of 3.5 years.
With this transaction we completed the refinancing process of the debt
incurred in connection with the RMC acquisition.
Our Prior Preferred Equity Arrangements
In November 2000, we formed a Dutch subsidiary which issued preferred
equity for an amount of U.S.$1.5 billion (Ps16.0 billion) to provide funds for
our acquisition of CEMEX, Inc., formerly Southdown, Inc. This preferred equity
has since been redeemed. The preferred equity granted its holders 10% of the
subsidiary's voting rights, as well as the right to receive a preferred
dividend. Under the terms of the preferred equity financing arrangements,
Sunward Acquisitions N.V., or Sunward Acquisitions, our indirect Dutch
subsidiary, contributed its 85.2% interest in CEMEX Espana to New Sunward
Holding B.V., or New Sunward Holding, in exchange for all its ordinary shares.
A special purpose entity, which was neither owned nor controlled by us,
borrowed U.S.$1.5 billion from a syndicate of banks and New Sunward Holding
issued preferred equity to the special purpose entity in exchange for the
U.S.$1.5 billion, which was used to subscribe for further shares in CEMEX
Espana. During 2001, we redeemed a portion of the then-outstanding preferred
equity in the amount of U.S.$600 million, and at year-end 2001, the balance
outstanding was U.S.$900 million. In February 2002, we refinanced this
preferred equity transaction, pursuant to which we redeemed U.S.$250 million of
the outstanding preferred equity and extended the termination dates on the
remaining U.S.$650 million. In October 2003, we redeemed before maturity all
the U.S.$650 million (Ps7,444 million) of preferred equity outstanding.
For accounting purposes under Mexican GAAP, the preferred equity was
recorded as a minority interest on our balance sheet until its liquidation.
Dividends paid on the preferred equity were recorded as a minority interest on
our income statement. For the year ended December 31, 2003 preferred equity
dividends amounted to approximately U.S.$12.5 million.
89
In October 2004, we liquidated the remaining 9.66% Putable Capital
Securities for approximately U.S.$66 million (Ps705 million). These capital
securities were issued in 1998 by one of our Spanish subsidiaries in an
aggregate liquidation amount of U.S.$250 million, with an annual dividend rate
of 9.66%. In April 2002, through a tender offer, U.S.$184 million of the
capital securities were redeemed. The amount paid to holders in excess of the
nominal amount of the capital securities pursuant to the early redemption of
approximately U.S$20 million (Ps229 million) was recognized against
stockholders' equity. The balance outstanding as of December 31, 2003 was
U.S.$66 million (Ps756 million). Until January 1, 2004, for accounting purposes
under Mexican GAAP, this transaction was recorded as minority interest in our
balance sheet and dividends paid on the capital securities were recorded as
minority interest net income in our income statement. For the year ended
December 31, 2003, capital securities dividends amounted to approximately
U.S.$6.4 million. As of January 1, 2004, as a result of new accounting
pronouncements under Mexican GAAP, this transaction was recorded as debt in our
balance sheet and dividends paid on the capital securities during 2004, which
amounted to approximately U.S.$6 million (Ps75 million), were recorded as part
of financial expenses in our income statement.
Our Prior Equity Arrangements
In December 1995, we entered into a financing transaction pursuant to
which one of our Mexican subsidiaries transferred shares of stock of one of its
cement companies to a trust, and a third party purchased a beneficial interest
in the trust for approximately U.S.$124 million in exchange for notes issued by
the trust. We had the right to reacquire these assets on various dates until
2007. During the course of the transaction, we were committed to make annual
repurchases of the shares underlying the trust, as well as annual fee payments,
which represented the cost of retaining the repurchase option. In December
2003, we acquired the remaining assets for approximately U.S.$76 million.
From inception of the transaction until repurchase of the assets, the
assets related to this transaction were considered as owned by third parties;
therefore, for accounting purposes under Mexican GAAP, this transaction was
included as minority interest in our balance sheet. For the year ended December
31, 2003, the expense generated by retaining the option to re-acquire the
assets amounted to approximately U.S.$15 million and was included as financial
expense in our income statement.
In December 1999, by means of a public offer on the Mexican Stock
Exchange, or MSE, and the New York Stock Exchange, or NYSE, we issued to our
shareholders, members of our board of directors and other executives 105
million appreciation warrants ("warrants") maturing on December 13, 2002, at a
subscription price in pesos of Ps3.2808 per appreciation warrant. A portion of
the appreciation warrants was subscribed as American Depositary Warrants, or
ADWs, each ADW representing five warrants.
In November 2001, we launched a voluntary public exchange offer of new
warrants and new ADWs maturing on December 21, 2004, for our existing warrants
and our existing ADWs on a one-for-one basis. Of the total 105 million warrants
originally issued, 103,790,945, or 98.9%, were tendered in exchange for the new
warrants. Both the old warrants and the new warrants were designed to allow the
holder to benefit from future increases in the market price of our CPOs, with
any appreciation value to be received in the form of our CPOs or ADSs, as
applicable. The old warrants expired on December 13, 2002 in accordance with
their terms without any payments to the holders. Until September 2003, the CPOs
and ADSs required to cover potential exercises of warrants were held through
equity forward contracts with financial institutions. These forward contracts
were settled in October 2003 through simultaneous secondary equity offerings on
the MSE and the NYSE made by us and the banks holding the shares. See note 17A
to our consolidated financial statements included elsewhere in this annual
report and "-- Our Equity Derivative Forward Arrangements."
In November and December 2003, we announced a simultaneous public offer
in the MSE and the NYSE that was concluded during January 2004 by means of which
we repurchased for cash 90,018,042 warrants, or 86.7%, of the then outstanding
warrants and warrants represented by ADWs, which included approximately 34.9
million warrants owned by or controlled by us and our subsidiaries. The price at
which the warrants were purchased was Ps8.10 per warrant (Ps40.50 per ADW). In
addition, in December 2004, the remaining outstanding 13,772,903 warrants were
automatically exercised upon expiration of the warrants in accordance with their
terms. Considering the results of the purchase of warrants in January 2004, the
exercise in December 2004 and the direct expenses related to these transactions,
approximately Ps1,010 million was paid. This amount was recognized against
90
stockholders' equity within additional paid-in-capital. See note 15F to our
consolidated financial statements included elsewhere in this annual report and
"-- Our Equity Derivative Forward Arrangements."
Our Prior Equity Derivative Forward Arrangements
As of December 31, 2004, we had forward contracts covering a total of
30,644,267 ADSs with different maturities until October 2006 and an aggregate
notional amount of U.S.$1,112 million. These forward contracts were entered into
to hedge the future exercise of the options granted under our executive stock
option programs. Changes in the estimated fair value of these contracts were
recognized in the income statement as a component of the costs generated by the
option programs. As of December 31, 2004, the estimated fair value of these
contracts was a gain of approximately U.S.$45 million (Ps479 million). In
October 2005, in connection with a non-dilutive equity offering of all the
shares underlying those forward contracts, we agreed with the forward banks to
settle those forward contracts for cash. From the offering proceeds of
approximately U.S.$1.5 billion, after expenses, approximately U.S.$1.3 billion
was used to settle our obligations under those forward contracts.
In addition, as of December 31, 2004, we had forward contracts covering
a total of 1,364,061 ADSs with different maturities until January 2006 and an
aggregate notional amount of U.S.$45 million. Until December 31, 2004, these
contracts were treated as equity instruments; therefore, changes in their fair
value were recognized in stockholders' equity when settled. Starting in 2005,
changes in the fair value of these contracts were recognized in earnings. As of
December 31, 2004, the estimated fair value of these contracts was a gain of
U.S.$6.0 million (Ps64 million). During 2004, contracts representing 2,509,524
CPOs that were held to meet our obligations to deliver shares under the warrants
program were settled, resulting in a gain of U.S.$3 million (Ps28 million) which
was recognized in stockholders' equity. See note 16E to our consolidated
financial statements included elsewhere in this annual report. These forward
contracts were settled for cash in October 2005 together with the forward
contracts described in the preceding paragraph in connection with a non-dilutive
equity offering of all the shares underlying the forward contracts. See note 17A
to our consolidated financial statements included elsewhere in this annual
report
Our Receivables Financing Arrangements
We have established sales of trade accounts receivable programs with
financial institutions, referred to as securitization programs. These programs
were negotiated by our subsidiaries in Mexico during 2002, our subsidiary in the
United States during 2001 and our subsidiary in Spain during 2000. Through the
securitization programs, our subsidiaries effectively surrender control, risks
and the benefits associated to the accounts receivable sold; therefore, the
amount of receivables sold is recorded as a sale of financial assets and the
balances are removed from the balance sheet at the moment of sale, except for
the amounts that the counterparties have not paid, which are reclassified to
other accounts receivable. See notes 5 and 6 to our consolidated financial
statements included elsewhere in this annual report. The balances of receivables
sold pursuant these securitization programs as of December 31, 2004 and 2005
were Ps6,822 million (U.S.$642 million) and Ps7,334 million (U.S.$691 million),
respectively. The accounts receivable qualifying for sale do not include amounts
over specified days past due or concentrations over specified limits to any one
customer, according to the terms of the programs. Expenses incurred under these
programs, originated by the discount granted to the acquirers of the accounts
receivable, are recognized in the income statements and were approximately Ps109
million (U.S.$10 million) in 2003, Ps121 million (U.S.$11 million) in 2004 and
Ps210 million (U.S.$20 million) in 2005. The proceeds obtained through these
programs have been used primarily to reduce net debt.
Stock Repurchase Program
Under Mexican law, our shareholders may authorize a stock repurchase
program at our annual shareholders' meeting. Unless otherwise instructed by our
shareholders, we are not required to purchase any minimum number of shares
pursuant to such program.
In connection with our 2004 annual shareholders' meeting held on April
28, 2005, our shareholders approved a stock repurchase program in an amount of
up to Ps6 billion (approximately U.S.$565 million) to be implemented between
April 2005 and April 2006. See note 15A to our consolidated financial statements
included elsewhere in this annual report. This program expired in April 2006 and
no CPOs were repurchased under this program.
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In connection with our 2005 annual shareholders' meeting held on April
27, 2006, our shareholders approved a stock repurchase program in an amount of
up to Ps6 billion (approximately U.S.$540 million) to be implemented between
April 2006 and April 2007.
Recent Developments
On March 31, 2006, we issued a prepayment notice to the holders of the
8.40% Series A Senior Notes due 2010, 8.50% Series B Senior Notes due 2012, and
8.72% Series C Senior Notes due 2020 issued by RMC on November 30, 2000 for a
then aggregate principal amount of U.S.$255 million, as described above. At the
same time, we issued a prepayment notice to the holders of other outstanding
notes originally issued by RMC in private placements for an aggregate principal
amount of U.S.$122 million. These prepayments, which amounted to a total of
approximately U.S.$377 million, were made on May 5, 2006.
Research and Development, Patents and Licenses, etc.
Our research and development, or R&D, efforts help us in achieving our
goal of increasing market share in the markets in which we operate. The
department of the Vice President of Technology is responsible for developing new
products for our cement and ready-mix businesses that respond to our clients'
needs. The department of the Vice President of Energy has the responsibility for
developing new processes, equipment and methods to optimize operational
efficiencies and reduce our costs. For example, we have developed processes and
products that allow us to reduce heat consumption in our kilns, which in turn
reduces energy costs. Other products have also been developed to provide our
customers a better and broader offering of products in a sustainable manner. We
believe this has helped us to keep or increase our market share in many of the
markets in which we operate.
We have ten laboratories dedicated to our R&D efforts. Nine of these
laboratories are strategically located in close proximity to our plants to
assist our operating subsidiaries with troubleshooting, optimization techniques
and quality assurance methods. One of our laboratories is located in Switzerland
where we are continually improving and consolidating our research and
development efforts in the areas of cement, concrete, aggregates, admixtures,
mortar and asphalt technology, as well as in information technology and energy
management. We have several patent registrations and pending applications in
many of the countries in which we operate. These patent registrations and
applications relate primarily to different materials used in the construction
industry and the production processes related to them, as well as processes to
improve our use of alternative fuels and raw materials.
Our Information Technology divisions have developed information
management systems and software relating to cement and ready-mix operational
practices, automation and maintenance. These systems have helped us to better
serve our clients with respect to purchasing, delivery and payment.
R&D activities comprise part of the daily routine of the departments
and divisions mentioned above; therefore, the costs associated with such
activities are expensed as incurred. However, the costs incurred in the
development of software for internal use are capitalized and amortized in
operating results over the estimated useful life of the software, which is
approximately 4 years.
In 2004 and 2005, the combined total expense of the departments of the
Vice President of Energy and the Vice President of Technology, which includes
R&D activities, amounted to approximately U.S.$35 million and U.S.$38 million,
respectively. In addition, in 2004 and 2005, we capitalized approximately
U.S.$10 million and U.S.$17 million, respectively, related to internal use
software development. See note 11 to our consolidated financial statements
included elsewhere in this annual report.
Trend Information
The following discussion contains forward-looking statements that
reflect our current expectations and projections about future events based on
our knowledge of present facts and circumstances and assumptions about future
events. In this annual report, the words "expects," "believes,"
"anticipates," "estimates," "intends," "plans," "probable" and variations of
such words and similar expressions are intended to identify forward-looking
statements. Such statements necessarily involve risks and uncertainties that
could cause actual results to differ
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materially from those anticipated. The information set forth below is subject
to change without notice, and we are not obligated to publicly update or revise
forward-looking statements.
Overview
During 2005 we achieved two very important milestones. First, we posted
our strongest financial results ever. This achievement comes primarily from the
consolidation of the RMC operations for the ten-month period ending December 31,
2005 and the related synergies, as well as from higher domestic volumes and
prices in most of the markets in our portfolio.
Our second major milestone of the year was the undertaking and
completion of the acquisition of the RMC group on March 1, 2005. This has been
not only the largest but also our most complex acquisition to date, involving
personnel from all of our operations in a multi-country and multi-disciplinary
effort. The integration of this acquisition and the continuous improvement
efforts is an ongoing process. As of December 31, 2005, we had identified
approximately U.S.$360 million of annual savings that we expect to achieve by
2007 through cost-saving synergies, including approximately U.S.$240 million
during 2006. As of December 31, 2005, more than 80% of the post-merger
integration initiatives required to achieve the expected synergies have been
put in place.
Outlook for Our Major Markets
The following is a discussion of our outlook for our four major
markets, the United States, Mexico, Spain and the United Kingdom, which together
generated approximately 62% of our net sales in 2005.
United States
In the United States, all segments of demand experienced strong growth
throughout 2005. Spending in the public sector spending grew significantly
during 2005, especially spending on streets and highways. We expect that streets
and highways spending will continue to be a primary driver of demand in this
sector in 2006 with the recently approved, U.S.$287 billion six-year
surface-transportation program known as SAFETEA-LU, coupled with the generally
improving economic environment and fiscal condition of the states. Consequently,
we expect volumes in the public-works and street-and-highway sectors to increase
in 2006.
The residential sector growth during 2005 was driven mainly by
attractive financial terms, better employment, positive household formation,
tight inventories, and continued migration flows stemming from northern baby
boomers. However, due to higher home prices and higher mortgage rates we are
cautiously expecting a moderate decline in this sector for 2006.
We expect that the industrial-and-commercial sector will continue its
growth trend during 2006 due to continued economic expansion.
Overall, we expect cement volumes in the U.S. to grow in line with, or
slightly in excess of, U.S. gross domestic product (GDP) growth and we expect
ready-mix concrete volumes to grow at a pace slightly below U.S. GDP growth
during 2006. We believe the probability of realizing most of our announced price
increases in the United States is being enhanced by the continuing favorable
supply demand dynamics.
Mexico
In Mexico we expect GDP growth, driven in part by increased government
spending, increases in mortgages and to a lesser extent, a strong self
construction sector as a result of relatively stable real wages and employment.
For 2006, foreign direct investment and remittances from workers abroad should
remain at the same levels as 2005 and contribute to strong economic activity.
We expect that demand in the public sector in 2006 will be driven by
government spending on streets and highways, public buildings, hurricane
reconstruction efforts and other infrastructure projects. We also expect demand
in this sector to be supported by strong government finances as a result of
continued fiscal discipline, and supported by higher prices for Mexican oil
exports. In addition, in February 2006, the government began making
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distributions from the oil surplus fund from 2005, which was approximately
U.S.$1 billion. As a result, we expect volumes in the public sector to increase
in 2006.
In the residential sector, we expect that cement demand in 2006 will
be driven by low- and middle-income housing growth as mortgage awards sponsored
by Infonavit and other institutions continue to increase at an accelerated pace
and mortgages granted by commercial banks are expected to double in 2006. We
expect a slight increase in volumes in this sector in 2006.
We expect volumes in the self-construction sector to increase
moderately in 2006, as a result of relatively stable real wages and employment.
We believe this sector is growing at a slower pace than GDP because the higher
availability of mortgage financing has enabled the residential construction
sector to satisfy some of the housing demand.
Overall, we expect that cement consumption from government and other
ready-mix-intensive projects will translate into an increase in our ready-mix
concrete volumes in 2006.
Although we are optimistic about the trend in cement consumption,
given the potential uncertainties resulting from our electoral cycle, we are
cautiously estimating moderate growth in cement volumes for 2006.
Spain
In Spain, all segments of demand remained strong during 2005, driven
by a robust construction sector. For 2006, we expect moderate GDP growth in
Spain.
In 2005, the residential sector had its strongest year ever, with
housing starts exceeding the 700 thousand mark. For 2006, we expect volumes in
the residential sector to decline slightly, although housing starts are
expected to remain at high levels with robust cement consumption.
We expect volumes in the public-works sector to remain flat in 2006.
At the national level, we expect this sector to improve after a transitional
period in which some projects were put on hold as the new government settled
in. On the other hand, we expect local municipalities to moderate their
public-works activity throughout the year. Construction activity is also
expected to be positively impacted by the electoral cycle, as several local
elections will take place in 2007. We also expect demand in the public-works
sector will be supported by the Spanish government's new infrastructure plan,
which is expected to run through 2020 and which represents an annual increase
of U.S.$4 billion, or more than 25% per annum, over the previous one.
We expect the industrial-and-commercial sector will remain stable
throughout 2006.
Overall, we expect moderate volume growth in Spain for 2006.
United Kingdom
In the United Kingdom, cement volumes fell by approximately 2% in
2005. The decrease in cement consumption was due mainly to a continued
deceleration of the economy, as GDP growth for 2005 is expected to have been
less than 2%, lower than the original forecast of between 3% and 3.5%. This
resulted in a contraction of the construction output of approximately 1%, the
first annual decline in the United Kingdom since 1994.
We expect GDP in the United Kingdom to grow slightly in 2006, with
moderate growth in construction spending.
We expect a continuation of the same trend we saw in the latter half of
2005, with activity levels slowly improving. We believe the anticipated return
to growth in the public sector and the industrial-and-commercial sector will
partially offset the subdued activity in the repair, maintenance, and
improvement sector and the residential sector. We expect the weak trend to turn
around during the second half of 2006.
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We expect that the residential sector will not be very active in 2006
due to higher interest rates and housing prices. Improvement in the public-works
sector will depend upon the government returning to its previously announced
investments in infrastructure, highway, and other public building projects.
Overall, we expect volumes in the United Kingdom in 2006 to remain
roughly flat compared with those of last year.
Summary of Material Contractual Obligations and Commercial Commitments
As of December 31, 2005, our subsidiaries had future commitments for
the purchase of raw materials for an approximate amount of U.S.$169 million.
In March 1998, we entered into a 20-year contract with PEMEX providing
that PEMEX's refinery in Cadereyta would supply us with 900,000 tons of petcoke
per year, commencing in 2003. In July 1999, we entered into a second 20-year
contract with PEMEX providing that PEMEX's refinery in Madero would supply us
with 850,000 tons of petcoke per year, commencing in 2002. We expect the PEMEX
petcoke contracts to reduce the volatility of our fuel costs and provide us
with a consistent source of petcoke throughout their 20-year terms.
In 1999, we reached an agreement with ABB Alstom Power and Sithe
Energies, Inc. requiring Alstom and Sithe to finance, build and operate
"Termoelectrica del Golfo," a 230 megawatt energy plant in Tamuin, San Luis
Potosi, Mexico and to supply electricity to us for a period of 20 years.
Pursuant to the agreement, we are obligated to purchase the full electric
capacity generated by the power plant during the 20-year period. We are also
obligated to supply Alstom and Sithe with 1,200,000 tons of petcoke per year for
the 20-year period for the consumption of this power plant and another power
plant built and operated by Alstom and Sithe for Penoles, a Mexican mining
company. We expect to meet our petcoke delivery requirements to Alstom and Sithe
through several petcoke supply agreements, including our petcoke supply contract
with PEMEX. Pursuant to the agreement, we may be obligated to purchase the
Termoelectrica del Golfo plant upon the occurrence of specified material
defaults or events, such as failure to pay when due, bankruptcy or insolvency,
and revocation of permits necessary to operate the facility, and upon
termination of the 20-year period, we will have the right to purchase the assets
of the power plant. We expect this arrangement to reduce the volatility of our
energy costs and to provide approximately 80% of CEMEX Mexico's electricity
needs. The power plant commenced commercial operations on May 1, 2004. As of
December 31, 2005, after twenty months of operations, the power plant has
supplied electricity to 10 of our cement plants in Mexico covering approximately
73% of their needs for electricity and has represented a decrease of
approximately 28% in the cost of electricity at these plants.
For purposes of presenting the approximate cash flows that will be
required to meet our other material contractual obligations, the following
table presents a summary of those obligations, as of December 31, 2005:
Payments Due by Period
----------------------------------------------------------------
(In millions of U.S. Dollars)
Less than 1-3 3-5 More than
Contractual Obligations Total 1 Year Years Years 5 Years
- -------------------------------------------------- ------------ ----------- --------- ---------- --------------
Long-term bank loans and notes payable............ 8,745 534 2,794 4,501 916
Capital lease obligations......................... 106 30 41 31 4
Total debt (1).............................. 8,851 564 2,835 4,532 920
Operating leases (2).............................. 634 178 251 113 92
Interest payments on our indebtedness (3)......... 1,968 564 817 409 178
Estimated cash flows under interest rate
derivatives (4)............................... 330 106 114 79 31
Planned funding of pension plans and other
post-retirement benefits (5).................. 1,466 136 272 285 773
(1) Total long-term debt including current maturities is presented in note 12
to our consolidated financial statements included elsewhere in this annual
report. In addition, as of December 31, 2005, we had lines of credit
totaling approximately U.S.$9.9 billion, of which the available portion
amounted to approximately U.S.$2.9 billion. The scheduling of debt
payments does not consider the effect of any refinancing that
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may occur on our debt during the following years. However, we have been
successful in the past in replacing our long-term obligations with others
of similar nature, and we intend to do so in the future.
(2) Operating leases have not been calculated on the basis of net present
value; instead they are presented in the basis of nominal future cash
flows. See note 22D to our consolidated financial statements included
elsewhere in this annual report. Our operating leases as of December 31,
2005 included the lease of the Balcones cement plant in New Braunfels,
Texas which was scheduled to expire on September 9, 2009. On March 20,
2006, we agreed to terminate this lease prior to expiration and purchased
the Balcones cement plant for approximately U.S.$61 million.
(3) In the determination of our future estimated interest payments on our
floating rate denominated debt, we used the interest rates in effect as of
December 31, 2005.
(4) Our estimated cash flows under interest rate derivatives, which include
the interest rate cash flows under our interest rate swaps and our cross
currency swap contracts, represent the net amount between the rate we pay
and the rate we receive under such contracts. In the determination of our
future estimated cash flows, we used the interest rates applicable under
such contracts as of December 31, 2005.
(5) Amounts relating to our planned funding to pensions and other
postretirement benefits presented in the table above represent our
estimated annual payments under these benefits for the next 10 years,
determined in local currency and translated into U.S. dollars at the
exchange rates as of December 31, 2005, and includes our estimate of the
number of new retirees during such future years.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably
likely to have a material effect on our financial condition, operating results,
liquidity or capital resources.
Qualitative and Quantitative Market Disclosure
Our Derivative Financial Instruments
In compliance with the procedures and controls established by our risk
management committee, we have entered into various derivative financial
instrument transactions in order to manage our exposure to market risks
resulting from changes in interest rates, foreign exchange rates and the price
of our common stock. We actively evaluate the creditworthiness of the financial
institutions and corporations that are counterparties to our derivative
financial instruments, and we believe that they have the financial capacity to
meet their obligations in relation to these instruments.
The fair value of derivative financial instruments is based on
estimated settlement costs or quoted market prices and supported by
confirmations of these values received from the counterparties to these
financial instruments. The notional amounts of derivative financial instrument
agreements are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss.
(U.S.$ millions)
------------------------------------------------------------------
At December 31, 2004 At December 31, 2005
------------------------ -----------------------
Notional Estimated Notional Estimated
Derivative Instruments amount fair value amount fair value Maturity Date
- ------------------------------ ----------- ------------- ----------- ----------- ---------------
Equity forward contracts...... 1,157 66 - - -
Foreign exchange forward
contracts..................... 4,898 63 3,200 173 Jan 06- Jul 07
Interest rates swaps.......... 1,950 (174) 2,725 52 Jun 09- Apr 10
Cross currency swaps.......... 1,118 209 2,290 212 Jun 06- Jun 11
Derivatives related to energy. 168 (6) 159 (4) May 2017
Our Equity Derivative Forward Contracts
A substantial portion of our equity derivative forward contracts held
as of December 31, 2004, with an aggregate notional amount of U.S.$1,112
million, were entered into to hedge the potential exercises of options under
our U.S. dollar denominated executive programs (see notes 16 and 17 to our
consolidated financial statements included elsewhere in this annual report).
Changes in the estimated fair value of these forwards were recognized in the
income statement as a component of the costs generated by the stock option
programs. The estimated fair value of these forward contracts represented a
gain of approximately U.S.$45 million as of December 31, 2004. In October 2005,
in connection with a non-dilutive equity offering of all the ADSs underlying
those forward contracts, we agreed with the forward banks to settle those
forward contracts for cash. From the offering proceeds of
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approximately U.S.$1.5 billion, after expenses, approximately U.S.$1.3 billion
was used to settle our obligations under those forward contracts.
In addition, as of December 31, 2004, we held equity forward contracts
with an aggregate notional amount of U.S.$45 million. Until December 31, 2004,
these contracts were treated as equity instruments; therefore, changes in their
fair value were recognized in stockholders' equity upon settlement. As of
December 31, 2004, the estimated fair value of these contracts was a gain of
approximately U.S.$6.0 million (Ps64 million). As of January 1, 2005, changes in
the fair value of these forward contracts were recognized in the income
statement in the same manner as our other forward contracts described in the
preceding paragraph. These forward contracts were settled for cash in October
2005 together with the forward contracts described in the preceding paragraph in
connection with a non-dilutive equity offering of all the shares underlying the
forward contracts.
Our Foreign Exchange Forward Contracts
A portion of our foreign exchange forward contracts held as of December
31, 2004 and 2005, with notional amounts of U.S.$957 million and U.S.$3,137
million, respectively, are accounted for at their estimated market value as
hedge instruments for our net investments in foreign subsidiaries. Gains or
losses on these forward contracts are recognized as an adjustment to
stockholders' equity within the related foreign currency translation adjustment.
As of December 31, 2004, we held structured foreign exchange forward
contracts, collars and digital options for a notional amount of U.S.$3,453
million in connection with our commitment to purchase RMC. The derivatives were
entered into to hedge the variability in cash flows associated with exchange
fluctuations between the Dollar, the currency in which we obtained the funds to
purchase, and Pounds, the currency in which our firm commitment was denominated.
These contracts were designated as accounting hedges of the foreign exchange
risk associated with the firm commitment agreed to on November 17, 2004, the
date on which RMC's shareholders committed to sell their shares at a fixed
price. Changes in the estimated fair value of these contracts from the
designation date, which represented a gain of approximately U.S.$132 million
(Ps1,411 million), was recognized in stockholders' equity in 2004, and was
reclassified to earnings on March 2005, the month in which the final purchase
occurred. The change in the estimated fair value of these contracts from their
origination until their designation as hedges in 2004 was a gain of
approximately U.S.$102 million (Ps1,094 million) and was recognized in earnings
in 2004. See note 17 to our consolidated financial statements included elsewhere
in this annual report.
Our Interest Rate Swaps
As of December 31, 2004 and 2005, we held interest rate swaps for
notional amounts of U.S.$1,950 million and U.S.$2,725 million, respectively,
entered into in order to hedge contractual cash flows (interest payments) of
underlying debt negotiated at floating rates. Although these interest rate swap
contracts, are part of, and complement, our financial strategy, they generally
do not meet the accounting hedge criteria. Consequently, changes in the
estimated fair value of these instruments were recognized in earnings. However,
as of December 31, 2005, several of our interest rate swap contracts, with an
aggregate notional amount of U.S.$1,500 million, met the accounting hedge
criteria and were designated as accounting hedges of contractual cash flows
(interest payments) of a portion of our floating rate debt. Accordingly, changes
in the estimated fair value of these instruments that meet the accounting hedge
criteria are recognized as stockholders' equity, and will be reclassified to
earnings as the financial expense of the related debt is accrued. In addition,
periodic payments under these instruments that meet the accounting hedge
criteria are recognized in earnings as an adjustment of the effective interest
rate of the related debt. See note 12A to our consolidated financial statements
included elsewhere in this annual report.
Our Cross Currency Swaps
As of December 31, 2004 and 2005, we held cross currency swap
contracts related to our short-term and long-term financial debt portfolio.
Through these contracts, we carried out the exchange of the originally
contracted currencies and interest rates, over a determined amount of
underlying debt. During the life of these contracts, the cash flows originated
by the exchange of interest rates under the cross currency swap contracts
match the interest payment dates and conditions of the underlying debt.
Likewise, at maturity of the contracts and the underlying debt, we will
exchange with the counterparty notional amounts provided by the contracts so
that we will receive an amount of cash flow equal to cover our primary
obligation under the underlying debt. In exchange, we will pay the
97
notional amount in the exchanged currency. As a result, we have effectively
exchanged the risks related to interest rates and foreign exchange variations of
the underlying debt to the rates and currencies negotiated in the cross currency
swap contracts. See note 12B to our consolidated financial statements included
elsewhere in this annual report.
The periodic cash flows on the cross currency swap instruments arising
from the exchange of interest rates are recorded in the comprehensive financing
result as part of the effective interest rate of the related debt. We recognize
the estimated fair value of the cross currency swap contracts as assets or
liabilities in the balance sheet, with changes in the estimated fair value being
recognized through the income statement. All financial assets and liabilities
with the same maturity, for which our intention is to simultaneously realize or
settle, have been offset for presentation purposes, in order to reflect the cash
flows that we expect to receive or pay upon settlement of the financial
instruments.
In respect of the estimated fair value recognition of the cross
currency swap contracts, as of December 31, 2004 and 2005, we recognized net
assets of U.S.$209 million (Ps2,227 million) and U.S.$212 million (Ps2,250
million), respectively, related to the estimated fair value of the short-term
and long-term cross currency swap contracts, of which,
o A gain of approximately U.S.$301 million (Ps3,212 million) as of
December 31, 2004 relates to prepayments made of Yen- and
Dollar-denominated obligations under our cross currency swaps,
thereby decreasing the carrying amounts of the related debt (we
did not make any prepayments of Yen and Dollar-denominated
obligations during 2005), and
o A loss of approximately U.S.$92 million (Ps985 million) as of
December 31, 2004 and a gain of approximately U.S.$212 million
(Ps2,251 million) as of December 31, 2005 represented the
contracts' estimated fair value, before prepayment effects (with
respect to 2004 only), and includes:
o Losses of approximately U.S.$132 million (Ps1,408
million) as of December 31, 2004 and gains of
approximately U.S.$135 million (Ps1,434 million) as of
December 31, 2005, which are directly related to
variations in exchange rates between the inception of the
contracts and the balance sheet date, and which were
offset for presentation purposes during 2004 only as part
of the related debt carrying amount,
o Gains of approximately U.S.$11 million (Ps116 million) as
of December 31, 2004 and approximately U.S.$15 million
(Ps159 million) as of December 31, 2005, identified with
the periodic cash flows for the interest rate swaps, and
which were recognized as an adjustment of the related
financing interest payable, and
o Remaining net assets of approximately U.S.$29 million
(Ps307 million) as of December 31, 2004 and approximately
U.S.$69 million (Ps733 million) as of December 31, 2005,
which were recognized within other short-term and
long-term assets and liabilities, as applicable. See note
12B to our consolidated financial statements included
elsewhere in this annual report.
As of December 31, 2004, the effect on our balance sheet, arising from
the accounting assets and liabilities offset, was that the book value of the
financial liabilities directly related to the cross currency swap contracts was
presented as if such financial liabilities had been effectively negotiated in
the exchange currency instead of in the originally contracted currency. As of
December 31, 2005, as a result of new accounting pronouncements under Mexican
GAAP, which became effective as of January 1, 2005, the book value of the
financial liabilities directly related to the cross currency swap contracts are
presented in the originally contracted currency. For the years ended December
31, 2004 and 2005, the changes in the estimated fair value of our cross
currency swap contracts, excluding prepayment effects in 2004, resulted in a
loss of approximately U.S.$192 million (Ps2,246 million) and a gain of
approximately U.S.$304 million (Ps3,228 million), respectively, which were
recognized within the comprehensive financing result.
98
Our Derivatives Related to Energy Projects
As of December 31, 2004 and 2005, we had an interest rate swap
maturing in May 2017, for a notional amount of U.S.$159 million and U.S.$150
million, respectively, negotiated to exchange floating for fixed interest
rates, in connection with agreements we entered into for the acquisition of
electric energy for a 20-year period commencing in 2003. During the life of the
derivative contract and over its notional amount, we will pay LIBOR rates and
receive a 7.53% fixed rate until maturity in May 2017. In addition, during 2001
we sold a floor option for a notional amount of U.S.$168 million and U.S.$159
million as of December 31, 2004 and 2005, respectively, related to the interest
rate swap contract, pursuant to which, commencing in 2003 and until 2017, we
pay the difference between the 7.53% fixed rate and LIBOR rates. Through the
sale of this option, we received a premium of approximately U.S.$22 million
(Ps251.9 million) in 2001. As of December 31, 2004 and 2005, the combined
estimated fair value of the swap and floor contracts, amounting to approximate
losses of U.S.$6 million (Ps67 million) and U.S.$4 million (Ps44 million),
respectively, were recorded in the comprehensive financing result for each
period. As of December 31, 2004 and 2005, the notional amount of both contracts
is not aggregated, considering that there is only one notional amount with
exposure to changes in interest rates and the effects of one instrument are
proportionally inverse to the changes in the other one. See note 17C to our
consolidated financial statements included elsewhere in this annual report.
Interest Rate Risk, Foreign Currency Risk and Equity Risk
Interest Rate Risk
The table below presents tabular information of our fixed and
floating rate long-term foreign currency-denominated debt as of December 31,
2005. It includes the effects generated by the interest rate swaps and the
cross currency swap contracts that we have entered into, covering a portion of
our financial debt originally negotiated in Pesos and Dollars. See note 12 to
our consolidated financial statements included elsewhere in this annual report.
Average floating interest rates are calculated based on forward rates in the
yield curve as of December 31, 2005. Future cash flows represent contractual
principal payments. The fair value of our floating rate long-term debt is
determined by discounting future cash flows using borrowing rates available to
us as of December 31, 2005 and is summarized as follows:
Expected maturity dates as of December 31, 2005
-------------------------------------------------------------------------------------
After Fair
Debt 2006 2007 2008 2009 2010 2011 Total Value
- ------------------------------ --------- --------- -------- --------- -------- --------- -------- -----------
(Millions of Dollars equivalents of debt denominated in foreign currencies)
Variable rate................. 510 1,148 599 1,051 1,618 47 4,973 4,830
Average interest rate......... 5.24% 5.20% 5.15% 5.25% 5.25% 5.13%
Fixed rate.................... 54 194 895 1,387 476 872 3,878 3,918
Average interest rate......... 5.09% 4.99% 4.97% 5.06% 5.71% 5.34%
As of December 31, 2005, we were subject to the volatility of the
floating interest rates, which, if such rates were to increase, may adversely
affect our financing cost and our net income. As of December 31, 2005, 56% of
our foreign currency-denominated long-term debt bears floating rates at a
weighted average interest rate of LIBOR plus 43 basis points, after giving
effect to our interest rate swaps and cross currency swaps. As of December 31,
2005, we also held interest rate swaps for a notional amount of U.S.$2,725
million and with a fair value gain of approximately U.S.$52 million during 2005.
Pursuant to these interest rate swaps, we receive variable rates and deliver
fixed rates over the notional amount. These derivatives, even when they do not
meet the criteria to be considered hedging items for accounting purposes,
complement our financial strategy and mitigate our overall exposure to floating
rates. See "-- Our Derivative Financial Instruments -- Our Interest Rate Swaps."
The potential change in the fair value as of December 31, 2005 of these
contracts that would result from a hypothetical, instantaneous decrease of 50
basis points in the interest rates would be a loss of approximately U.S.$28
million (Ps300 million).
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Foreign Currency Risk
Due to our geographic diversification, our revenues are generated in
various countries and settled in different currencies. However, some of our
production costs, including fuel and energy, and some of our cement prices, are
periodically adjusted to take into account fluctuations in the Dollar/Peso
exchange rate. For the year ended December 31, 2005, approximately 19% of our
net sales, before eliminations resulting from consolidation, were generated in
Mexico, 25% in the United States, 9% in Spain, 9% in the United Kingdom, 16% in
our Rest of Europe segment, 9% in South America, Central America and the
Caribbean, 3% in Africa and the Middle East, 2% in Asia and 8% from other
regions and our cement and clinker trading activities. As of December 31, 2005,
our debt amounted to Ps101 billion, of which approximately 51% was
Dollar-denominated, 21% was Euro-denominated, 21% was Peso-denominated, 5% was
Yen-denominated and 2% was Pound-denominated; therefore, we had a foreign
currency exposure arising from the Dollar-denominated debt, the Euro-denominated
debt, the Yen-denominated debt and the Pound-denominated debt, versus the
currencies in which our revenues are settled in most countries in which we
operate. See "-- Liquidity and Capital Resources -- Our Indebtedness," Item 10
- -- "Additional Information -- Material Contracts" and "Risk Factors -- We have
to service our Dollar denominated debt with revenues generated in Pesos or other
currencies, as we do not generate sufficient revenue in Dollars from our
operations to service all our Dollar denominated debt. This could adversely
affect our ability to service our debt in the event of a devaluation or
depreciation in the value of the Peso, or any of the other currencies of the
countries in which we operate." Although we also have a small portion of our
debt in other currencies, we have generated enough cash flow in those currencies
to service that debt. Therefore, we believe there is no material foreign
currency risk exposure with respect to that debt.
As previously mentioned, we have entered into cross currency swap
contracts, designed to change the original profile of interest rates and
currencies over a portion of our financial debt. See "-- Our Derivative
Financial Instruments." As of December 31, 2005, the estimated fair value of
these instruments was a gain of approximately U.S.$212 million (Ps2,251
million). The potential change in the fair value of these contracts as of
December 31, 2005 that would result from a hypothetical, instantaneous
depreciation of 10% in the exchange rate of the Peso against the Dollar, would
be a loss of approximately U.S.$189 million (Ps2,007 million).
Additionally, as previously mentioned, we have entered into foreign
exchange forward contracts designed to hedge our net investment in foreign
subsidiaries, our firm commitments, as well as other currency derivative
instruments. See "-- Our Derivative Financial Instruments." The combined
estimated fair value of our foreign exchange forwards that hedge our net
investment in foreign subsidiaries and our other currency derivatives as of
December 31, 2005 was a gain of approximately U.S.$173 million (Ps1,837
million). The potential change in the fair value of these derivatives as of
December 31, 2005 that would result from a hypothetical, instantaneous
depreciation of 10% in the exchange rate of the Peso combined with a
appreciation of 10% of the Euro against the Dollar would be a loss of
approximately U.S.$422 million (Ps4,482 million), which would be partially
offset by a corresponding foreign translation gain as a result of our net
investment in foreign subsidiaries.
Equity Risk
As described above, we have entered into equity forward contracts on
our own stock. Upon liquidation and at our option, the equity forward contracts
provide for physical settlement or net cash settlement of the estimated fair
value and the effects are recognized in the income statement. At maturity, if
these forward contracts are not settled or replaced, or if we default on these
agreements, our counterparties may sell the shares underlying the contracts.
Such sales may have an adverse effect on our stock market price.
Investments, Acquisitions and Divestitures
The transactions described below represent our principal investments,
acquisitions and divestitures completed during 2003, 2004, and 2005.
Investments and Acquisitions
On September 27, 2004, in connection with a public offer to purchase
RMC's outstanding shares, CEMEX UK Limited, our indirect wholly-owned
subsidiary, acquired 50 million shares of RMC for approximately (pound)432
100
million (U.S.$786 million, based on a Pound/Dollar exchange rate of
(pound)0.5496 to U.S.$1.00 on September 27, 2004), which represented
approximately 18.8% of RMC's outstanding shares. On March 1, 2005, following
board and shareholder approval and clearance from applicable regulators, CEMEX
UK Limited purchased the remaining 81.2% of RMC's outstanding shares and
completed our acquisition of RMC. The transaction value of this acquisition,
including our assumption of approximately U.S.$2.2 billion of RMC's debt, was
approximately U.S.$6.5 billion.
In August and September 2003, we acquired 100% of the outstanding
shares of Mineral Resource Technologies Inc., and the cement assets of
Dixon-Marquette Cement for a combined purchase price of approximately U.S.$100
million. Located in Dixon, Illinois, the single cement facility has an annual
production capacity of 560,000 tons. This cement plant was sold on March 31,
2005 in connection with our sale of U.S. assets in the Great Lakes region, as
described below.
In June 2003, CEMEX Dominicana, S.A. (formely known as Cementos
Nacionales, S.A.) announced a U.S.$130 million investment plan to install a new
kiln for producing clinker with an annual capacity of 1.6 million tons of
clinker. This new kiln, which increased our total clinker production capacity in
the Dominican Republic to 2.2 million tons per year, began operations at the end
of 2005.
In July 2002, we entered into agreements with other CAH investors to
purchase their CAH shares in exchange for CPOs through quarterly share exchanges
in 2003 and 2004. In 2003, 84,763 CAH shares were exchanged for 1,683,822 CPOs,
with an approximate value of U.S.$7.8 million. In 2004, 1,398,602 CAH shares
were exchanged for 27,850,713 CPOs with an approximate value of U.S.$172
million. For accounting purposes, these exchanges were considered effective as
of July 2002. With these exchanges, we increased our equity interest in CAH to
92.3%. In August 2004, we acquired an additional 6.8% equity interest in CAH
(695,065 CAH shares) for approximately U.S.$70 million, and in December 2005, we
acquired the remaining 0.9% interest in CAH (93,241 CAH shares) for
approximately U.S.$8 million, thereby increasing our total equity interest in
CAH to 100%.
In addition to the above-mentioned acquisitions, our net investment in
property, machinery and equipment, as reflected in our consolidated statements
of changes in financial position included elsewhere in this annual report,
excluding acquisitions of equity interests in subsidiaries and affiliates, was
approximately Ps4,510 million (U.S.$425 million) in 2003, Ps4,637 million
(U.S.$437 million) in 2004, and Ps8,341 million (U.S.$785 million) in 2005. This
net investment in property, machinery and equipment has been applied to the
construction and upgrade of plants and equipment, to the maintenance of plants
and equipment, including environmental controls and technology updates.
Divestitures
On March 31, 2005, we sold our Charlevoix, Michigan and Dixon, Illinois
cement plants and several distribution terminals located in the Great Lakes
region to Votorantim Participacoes S.A., a cement company in Brazil, for an
aggregate purchase price of approximately U.S.$389 million. The combined
capacity of the two cement plants sold was approximately two million tons per
year.
On April 26, 2005, we divested our 11.9% interest in Cementos Bio Bio,
S.A., a cement company in Chile, for approximately U.S.$65 million.
On June 1, 2005, we sold a cement terminal adjacent to the Detroit
river to the City of Detroit for a purchase price of approximately U.S.$24
million.
As a condition to closing the RMC acquisition, we agreed with the U.S.
Federal Trade Commission, or FTC, to divest several ready-mix and related assets
in the Tucson, Arizona area. Following FTC approval, we sold RMC's operations in
the Tucson area to California Portland Cement Company for a purchase price of
approximately U.S.$16 million on August 29, 2005.
On July 1, 2005, we and Ready Mix USA, Inc. established two
jointly-owned limited liability companies, CEMEX Southeast, LLC, a cement
company, and Ready Mix USA, LLC, a ready-mix concrete company, to serve the
construction materials market in the southeast region of the United States.
Under the terms of the limited liability
101
company agreements and related asset contribution agreements, we contributed two
cement plants (Demopolis, Alabama and Clinchfield, Georgia) and eleven cement
terminals to CEMEX Southeast, LLC, representing approximately 98% of its
contributed capital, while Ready Mix USA contributed cash to CEMEX Southeast,
LLC representing approximately 2% of its contributed capital. In addition, we
contributed our ready-mix concrete, aggregates and concrete block assets in the
Florida panhandle and southern Georgia to Ready Mix USA, LLC, representing
approximately 9% of its contributed capital, while Ready Mix USA contributed all
its ready-mix concrete and aggregate operations in Alabama, Georgia, the Florida
panhandle and Tennessee, as well as its concrete block operations in Arkansas,
Tennessee, Mississippi, Florida and Alabama to Ready Mix USA, LLC, representing
approximately 91% of its contributed capital. We own a 50.01% interest, and
Ready Mix USA owns a 49.99% interest, in the profits and losses and voting
rights of CEMEX Southeast, LLC, while Ready Mix USA owns a 50.01% interest, and
we own a 49.99% interest, in the profits and losses and voting rights of Ready
Mix USA, LLC. In a separate transaction, on September 1, 2005, we sold 27
ready-mix plants and four concrete block facilities located in the Atlanta,
Georgia metropolitan area to Ready Mix USA, LLC for approximately U.S.$125
million.
On December 22, 2005, we terminated our 50/50 joint ventures with
Lafarge Asland in Spain and Portugal which we acquired in the RMC acquisition.
The Spanish joint venture operated 122 ready-mix concrete plants and 12
aggregates, and the Portuguese joint venture operated 31 ready-mix concrete
plants and five aggregate quarries. In connection with the termination, we
received 29 ready-mix concrete plants and six aggregates quarries in Spain, as
well as (euro)50 million in cash, and Lafarge Asland acquired a 100% interest in
both joint ventures.
See note 9A to our consolidated financial statements included elsewhere
in this annual report.
U.S. GAAP Reconciliation
Our consolidated financial statements included elsewhere in this annual
report have been prepared in accordance with Mexican GAAP, which differ in some
significant respects from U.S. GAAP. The Mexican GAAP consolidated financial
statements include the effects of inflation as provided for under Bulletin B-10
and Bulletin B-15 and are presented in constant Pesos representing the same
purchasing power for each period presented, whereas financial statements
prepared under U.S. GAAP are presented on a historical cost basis. The
reconciliation to U.S. GAAP included as note 25 to our consolidated financial
statements presented elsewhere in this annual report includes (i) a reconciling
item for the reversal of the effect of applying the CEMEX weighted average
inflation factor instead of the Mexican inflation-only factor for the
restatement to constant pesos for the years ended December 31, 2002 and 2003,
and (ii) a reconciling item to reflect the difference in the carrying value of
machinery and equipment of foreign origin and related depreciation, between (a)
the methodology set forth by Mexican GAAP in which fixed assets are restated
using the inflation index of the assets' origin country and the variation in the
foreign exchange rate between the country of origin currency and the functional
currency, and (b) the amounts that would be determined by using the historical
cost/constant currency method in which fixed assets are restated using the
inflation index of the country that holds the asset. As described below, these
provisions of inflation accounting under Mexican GAAP do not meet the
requirements of Rule 3-20 of Regulation S-X of the Securities and Exchange
Commission. Our reconciliation does not include the reversal of other Mexican
GAAP inflation accounting adjustments as these adjustments represent a
comprehensive measure of the effects of price level changes in the inflationary
Mexican economy and, as such, is considered a more meaningful presentation than
historical cost-based financial reporting for both Mexican and U.S. accounting
purposes.
Majority net income under U.S. GAAP for the years ended December 31,
2003, 2004, and 2005 amounted to Ps8,984 million, Ps18,505 million and Ps22,115
million, respectively, compared to majority net income under Mexican GAAP for
the years ended December 31, 2003, 2004, and 2005 of approximately Ps7,201
million, Ps13,965 million and Ps22,425 million, respectively. See note 25 to our
consolidated financial statements included elsewhere in this annual report for a
description of the principal differences between Mexican GAAP and U.S. GAAP as
they relate to us and the effects that newly issued accounting pronouncements
have had in our financial position.
Newly Issued Accounting Pronouncements Under U.S. GAAP
In December 2004, the Financial Accounting Standards Board (FASB)
issued SFAS 123R, Share-Based Payment, a revision of Statement 123, "Accounting
for Stock Issued to Employees", which establishes standards for
102
the accounting of all share-based payment transactions, with a primary focus on
schemes in which an entity obtains employee services in share-based payment
transactions, also clarifies and expands guidance in several areas, including
measuring fair value, classifying an award as equity or as a liability, and
attributing compensation cost to reporting periods. SFAS 123R requires enitities
to measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award and
eliminates the alternative to use APB Opinion 25's intrinsic value method of
accounting, permitted by Statement 123 as originally issued (see note 25(r) to
our financial statements included elsewhere in this annual report), under which,
upon compliance with certain rules, issuing stock options to employees resulted
in recognition of no compensation cost. The cost under SFAS 123R should be
recognized over the period during which an employee is required to provide
service in exchange for the award (usually the vesting period). The grant-date
fair value of employee share awards will be estimated using option-pricing
models, unless observable market prices for the same or similar instruments are
available.
The cost under SFAS 123R for equity awards should be recognized over
the period during which an employee is required to provide service in exchange
for the award (usually the vesting period). In addition, for liability awards,
the cost should be determined by the changes in the estimated fair value of the
awards at each reporting date. The grant-date fair value, and the fair value at
the reporting date, for employee equity and liability awards, respectively,
will be estimated using option-pricing models, unless observable market prices
for the same or similar instruments are available.
SFAS 123R is effective for CEMEX as of January 1, 2006 and applies to
all awards classified as equity awards granted after the effective date and to
awards modified, repurchased, or cancelled after that date, as well as to all
outstanding liability awards. The cumulative effect of initially applying this
statement, if any, will be recognized as of the effective date. As of the
effective date, entities that used the fair-value-based method for either
recognition or disclosure under Statement 123 (see note 25(r) to our financial
statements included elsewhere in this annual report) will apply SFAS 123R using
a modified version of prospective application. Under this transition method of
adoption, compensation cost is recognized for the portion of outstanding awards
for which the requisite service has not yet been rendered, based on the
grant-date fair value of those awards calculated under Statement 123 for either
recognition or pro forma disclosures. For periods before the effective date,
entities may elect to apply a modified version of retrospective application
under which financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those periods by
Statement 123.
In connection with the adoption of SFAS 123R in 2006, considering all
outstanding liability awards, SFAS 123R may have a material impact on our net
income under U.S. GAAP (see pro forma historical information in footnote 25(r)
to our financial statements included elsewhere in this annual report). As of
the effective date of SFAS 123R, we did not have any unvested equity awards;
therefore, we do not to expect to recognize any cost in respect of these
awards.
In December 2004, the FASB issued SFAS 151, Inventory Costs, which
clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Under this statement,
such items will be recognized as current-period charges. In addition, this
statement requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities.
This statement is effective for us for inventory costs incurred on or after
January 1, 2006. We do not expect any material impact on our financial
statements from the adoption of this statement.
In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary
Assets, which eliminates an exception in APB 29 for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. The
exception provides that those exchanges should be measured based on the
recorded amount of the nonmonetary assets relinquished, rather than on the fair
values of the exchanged assets. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as
a result of the exchange. This statement is effective for us for nonmonetary
asset exchanges occurring on or after January 1, 2006. We do not expect any
material impact on our financial statements from the adoption of this
statement.
In May 2005, the FASB issued SFAS 154, Accounting Changes and Error
Corrections, which establishes, unless impracticable, retrospective application
as the required method for reporting a change in accounting principle
103
in the absence of explicit transition requirements specific to a newly adopted
accounting principle. This statement is effective for us for all accounting
changes and any error corrections occurring after January 1, 2006. Except for
the effect from accounting changes related to the adoption of SFAS 123R
described above, we do not expect any material impact on our financial
statements from the adoption of this statement.
In September 2005, the FASB's Emerging Issues Task Force (EITF) issued
EITF Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the
Same Counterparty, which provides guidance as to when purchases and sales of
inventory with the same counterparty should be accounted for as a single
exchange transaction. EITF 04-13 also provides guidance as to when a
nonmonetary exchange of inventory should be accounted for at fair value. EITF
04-13 will be applied to new arrangements entered into, and modifications or
renewals of existing arrangements occurring after January 1, 2007. We do not
expect the application of EITF 04-13 to have a material impact on our financial
statements.
104
Item 6 - Directors, Senior Management and Employees
------------------------------------------
Senior Management and Directors
Senior Management
Set forth below is the name and position of each of our executive
officers as of December 31, 2005. The terms of office of the executive officers
are indefinite.
Lorenzo H. Zambrano, Joined CEMEX in 1968. During his career with
Chief Executive Officer CEMEX, Mr. Zambrano has been involved in all
operational aspects of our business. He held
several positions in CEMEX prior to his
appointment as director of operations in
1981. In 1985, Mr. Zambrano was appointed
chief executive officer, and in 1995 he was
elected chairman of the board of directors.
Mr. Zambrano is a graduate of Instituto
Tecnologico y de Estudios Superiores de
Monterrey, A.C., or ITESM, with a degree in
mechanical engineering and administration
and holds an M.B.A. from Stanford
University.
Mr. Zambrano has been a member of our board
of directors since 1979 and chairman of our
board of directors since 1995. He is a
member of the board of directors of IBM and
the International Advisory Board of
Citigroup. He is also a member of the board
of directors of Fomento Economico Mexicano,
S.A. de C.V., Empresas ICA, S.A. de C.V.,
Alfa, S.A. de C.V., Grupo Financiero
Banamex, S.A. de C.V., Vitro, S.A. and Grupo
Televisa, S.A. Mr. Zambrano is chairman of
the board of directors of Consejo de
Ensenanza e Investigacion Superior, A.C.,
which manages ITESM. Until July 2005, Mr.
Zambrano participated in the Chairman's
Council of Daimler Chrysler AG and until
January 2006, Mr. Zambrano was a member of
the Stanford University's Graduate School of
Business Advisory Council.
In addition, he is member of the board of
directors of Museo de Arte Contemporaneo de
Monterrey A.C. (MARCO), Conservacion
Internacional, and the Americas Society,
Inc. Lorenzo H. Zambrano is a first cousin
of Lorenzo Milmo Zambrano and Rogelio
Zambrano Lozano, both members of our board
of directors, as well as of Rodrigo Trevino,
our chief financial officer. He is also a
second cousin of Roberto Zambrano Villarreal
and Mauricio Zambrano Villarreal, both
members of our board of directors.
Hector Medina, Joined CEMEX in 1988. He has held several
Executive Vice President of positions in CEMEX, including director of
Planning and Finance strategic planning from 1991 to 1994,
president of CEMEX Mexico from 1994 to 1996,
and has served as executive vice president
of planning and finance since 1996. He is a
graduate of ITESM with a degree in chemical
engineering and administration. He also
received a Masters of Science degree in
management studies from the management
Center of the University of Bradford in
England and a Masters of Science diploma in
Operations Research from the Escuela de
Organizacion Industrial in Spain in 1975.
Among the positions he previously held are
those of Project Director at Grupo Protexa,
S.A. de C.V., Administrative Director at
Grupo Xesa, S.A. de C.V., Commercial
Director at Direcplan, S.A. and Industrial
Relations Sub-Director at Hylsa, S.A. de
C.V. In March 2006, Mr. Medina was appointed
chairman of the board of Universidad
Regimontana, a private university located in
Monterrey, Mexico. Mr. Medina is a
105
member of the board of directors of Cementos
Chihuahua, Compania Minera Autlan,
Mexifrutas, S.A. de C.V. and Chocota
Productos del Mar, S.A. de C.V. and member
of the "consejo de vigilancia" of Ensenanza
e Investigacion Superior A.C. and ITESM. Mr.
Medina is also a member of the Advisory
Board of Nacional Monte de Piedad.
Armando J. Garcia Segovia, Initially joined CEMEX in 1975 and rejoined
Executive Vice President of CEMEX in 1985. He has served as director of
Development operational and strategic planning from 1985
to 1988, director of operations from 1988 to
1991, director of corporate services and
affiliate companies from 1991 to 1994,
director of development from 1994 to 1996,
general director of development from 1996 to
2000, and executive vice president of
development since 2000. He is a graduate of
ITESM with a degree in mechanical
engineering and administration and holds an
M.B.A. from the University of Texas. He was
employed at Cydsa, S.A. from 1979 to 1981
and at Conek, S.A. de C.V. from 1981 to
1985. He is a brother of Jorge Garcia
Segovia, an alternate member of our board of
directors, and a first cousin of Rodolfo
Garcia Muriel, a member of our board of
directors.
Mr. Garcia has been a member of our board of
directors since 1983. He also serves as a
member of the board of directors of
Materiales Industriales de Chihuahua, S.A.
de C.V., Calhidra y Mortero de Chihuahua,
S.A. de C.V., Grupo Cementos de Chihuahua,
S.A. de C.V., Construcentro de Chihuahua,
S.A. de C.V., Control Administrativo
Mexicano, S.A. de C.V., Compania Industrial
de Parras, S.A. de C.V., Fabrica La
Estrella, S.A. de C.V., Prendas Textiles,
S.A. de C.V., Telas de Parras, S.A. de C.V.,
Canacem, Confederacion Patronal de la
Republica Mexicana, Centro Patronal de Nuevo
Leon, and Instituto Mexicano del Cemento y
del Concreto. He is a member of the board
and former chairman of Centro de Estudios
del Sector Privado para el Desarrollo
Sostenible, and member of the board of the
World Environmental Center.
He is also founder and chairman of the board
of Comenzar de Nuevo, A.C.
Victor Romo, Joined CEMEX in 1985 and has served as
Executive Vice President of director of administration of CEMEX Espana
Administration from 1992 to 1994, general director of
administration and finance of CEMEX Espana
from 1994 to 1996, president of CEMEX
Venezuela from 1996 to 1998, president of
the South American and Caribbean region from
1998 to May 2003, and executive vice
president of administration since May 2003.
He is a graduate in public accounting and
holds a master's degree in administration
and finance from ITESM. Previously, he
worked for Grupo Industrial Alfa, S.A. de
C.V. from 1979 to 1985.
Francisco Garza, Joined CEMEX in 1988 and has served as
President of CEMEX director of trading from 1988 to 1992,
North America Region and president of CEMEX USA from 1992 to 1994,
Trading president of CEMEX Venezuela and Cemento
Bayano from 1994 to 1996, and president of
CEMEX Mexico and CEMEX USA from 1996 to
1998. In 1998, he was appointed president of
the North American region and trading. He is
a graduate in business administration from
ITESM and holds an M.B.A. from the Johnson
School of Management at Cornell University.
106
Fernando Gonzalez, Joined CEMEX in 1989 and has served as vice-
President of the president-human resources from 1992 to 1994,
European Region vice-president-strategic planning from 1994
to 1998, president of CEMEX Venezuela from
1998 to 2000, president of CEMEX Asia from
2000 to May 2003, and president of the South
American and Caribbean region from May 2003
to February 2005. In March 2005, he was
appointed president of the expanded European
Region, including the United Kingdom,
France, Germany, the Rest of Europe (other
than Spain and Italy), and Israel. He is a
graduate in business administration and
holds a master's degree in administration
from ITESM. Previously, he worked for Grupo
Industrial Alfa, S.A. de C.V. from 1976 to
1989.
Jose Luis Saenz de Miera, Joined CEMEX Espana in 1993 as general
President of the Iberia, manager of administration and finance, and
Middle East, Africa and Asia in 1994 he was appointed president of CEMEX
Region Espana. Mr. Saenz de Miera has served as
president of the Europe, Africa and Asia
region from October 1998 to February 2005.
Since March 1, 2005, Mr. Saenz de Miera has
been responsible for the Iberian Peninsula,
Italy, Africa, and Asia, including the
United Arab Emirates and Malaysia. He
studied economic sciences in Universidad
Complutense de Madrid and is a certified
public accountant from Instituto de Censores
Jurados de Cuentas in Spain. Previously, he
was employed from 1973 to 1993 at KPMG Peat
Marwick, since 1982 as partner and between
1988 and 1993 as deputy senior partner. Mr.
Saenz de Miera is a citizen of Spain.
Juan Romero, Joined CEMEX in 1992 and has occupied
President of CEMEX South several senior management positions,
America and the Caribbean including commercial director for CEMEX
Espana, president of CEMEX, Colombia,
commercial director for CEMEX Mexico, and
president of CEMEX Mexico. In March 2005,
Mr. Romero became president of the South
America and Caribbean Regions and Mexico.
Mr. Romero graduated from Universidad de
Comillas in Spain, where he studied Law and
Economics and Enterprise Sciences.
Previously, Mr. Romero worked for Cementos
Sanson and Cementos Portland Morata de
Jalon. Mr. Romero is a citizen of Spain.
Rodrigo Trevino, Joined CEMEX in 1997 and has served as chief
Chief Financial Officer financial officer since then. He holds both
bachelor and master of science degrees in
industrial engineering from Stanford
University. Prior to joining CEMEX, he
served as the country corporate officer for
Citicorp/Citibank Chile from 1995 to 1996,
and prior to that, he worked at Citibank,
N.A. from 1979 to 1994. Rodrigo Trevino is a
first cousin of Lorenzo H. Zambrano, our
chief executive officer and chairman of our
board of directors.
Ramiro G. Villarreal, Joined CEMEX in 1987 and has served as
General Counsel general counsel since then, and also has
served as secretary of our board of
directors since 1995. He is a graduate of
the Universidad Autonoma de Nuevo Leon with
a degree in law. He also received a masters
of science degree in finance from the
University of Wisconsin. Prior to joining
CEMEX, he served as assistant general
director of Grupo Financiero Banpais from
1985 to 1987.
107
Board of Directors
Set forth below are the names of the members of our board of
directors. The members of our board of directors serve for one-year terms. At
our 2005 annual shareholders' meeting held on April 27, 2006, our shareholders
re-elected all the members of our board of directors to serve until the next
annual shareholders' meeting.
Lorenzo H. Zambrano, See "-- Senior Management."
Chairman
Lorenzo Milmo Zambrano Has been a member of our board of directors
since 1977. He is also general director of
Inmobiliaria Ermiza, S.A. de C.V. He is a
first cousin of Lorenzo H. Zambrano,
chairman of our board of directors and our
chief executive officer, a first cousin of
Rogelio Zambrano Lozano, a member of our
board of directors, and an uncle of Tomas
Milmo Santos, an alternate member of our
board of directors.
Armando J. Garcia Segovia See "-- Senior Management."
Rodolfo Garcia Muriel Has been a member of our board of directors
since 1985. He is also the chief executive
officer of Compania Industrial de Parras,
S.A. de C.V. and Parras Cone de Mexico, S.A.
de C.V. He is member of the board of
directors of Parras Williamson, S.A. de
C.V., Telas de Parras, S.A. de C.V., Synkro,
S.A. de C.V., IUSA-GE, S. de R.L.,
Industrias Unidas, S.A., Apolo Operadora de
Sociedades de Inversion, S.A. de C.V., and
Cambridge Lee Industries, Inc. Mr. Garcia
Muriel is also vice president of Camara
Nacional de la Industria Textil. He is a
first cousin of Armando J. Garcia Segovia,
executive vice president of development of
CEMEX and a member of our board of
directors, and Jorge Garcia Segovia, an
alternate member of our board of directors.
Rogelio Zambrano Lozano Has been a member of our board of directors
since 1987. He is also a member of the
advisory board of Grupo Financiero Banamex,
S.A. de C.V. Zona Norte, director of Carza,
S.A. de C.V. and Parque Plaza Sesamo, S.A.
de C.V., and a member of the board of
directors of Hospital San Jose is a first
cousin of Lorenzo H. Zambrano, chairman of
our board of directors and our chief
executive officer, a first cousin of Lorenzo
Milmo Zambrano, a member of our board of
directors, and an uncle of Tomas Milmo
Santos, an alternate member of our board of
directors.
Roberto Zambrano Villarreal Has been a member of our board of directors
since 1987 and president of our audit
committee since 2002. He is also a member of
the board of directors of Cemex Mexico, S.A.
de C.V. He is chairman of the board of
directors of Desarrollo Integrado, S.A. de
C.V., Administracion Ficap, S.A. de C.V.,
Aero Zano, S.A. de C.V., Ciudad Villamonte,
S.A. de C.V., Focos, S.A. de C.V., C & I
Capital, S.A. de C.V., Industrias Diza, S.A.
de C.V., Inmobiliaria Sanni, S.A. de C.V.,
Inmuebles Trevisa, S.A. de C.V., Servicios
Tecnicos Hidraulicos, S.A. de C.V.,
Mantenimiento Integrado, S.A. de C.V., ,
Pilatus PC-12 Center de Mexico, S.A. de
C.V., and Pronatura, A.C. He is a member of
the board of directors of S.L.I. de Mexico,
S.A. de C.V., Compania de Vidrio Industrial,
S.A. de C.V., Comision de Cooperacion
Ecologica Fronteriza (COCEF) and Banco de
Desarrollo America del Norte (BDAN) He is a
brother of Mauricio Zambrano Villarreal, a
member of our board of directors.
108
Bernardo Quintana Isaac Has been a member of our board of directors
since 1990. He is chief executive officer
and chairman of the board of directors of
Empresas ICA Sociedad Controladora, S.A. de
C.V., and a member of the board of directors
of Telefonos de Mexico, S.A. de C.V., Grupo
Financiero Banamex, S.A. de C.V., Grupo
Carso, S.A. de C.V., and Grupo Maseca, S.A.
de C.V. He is also a member of Consejo
Mexicano de Hombres de Negocios, Fundacion
UNAM and, Fundacion ICA. He is a founding
associate of Fundacion Letras Mexicanas and
is currently president of Patronato UNAM.
Dionisio Garza Medina Has been a member of our board of directors
since 1995. He is also chairman of the board
and chief executive officer of Alfa, S.A. de
C.V. He is a member of the board of
directors of Vitro, S.A., Cydsa, S.A., and
ING Mexico. He is also chairman of the
executive board of the Universidad de
Monterrey and a member of Consejo Mexicano
de Hombres de Negocios, the advisory
committee of the David Rockefeller Center
for Latin American Studies of Harvard
University, the board of Harvard Business
School, and the advisory committee of the
New York Stock Exchange.
Alfonso Romo Garza Has been a member of our board of directors
since 1995. He is chairman of the board and
chief executive officer of Savia, S.A. de
C.V. and member of the board of Nacional de
Drogas, S.A. de C.V., Grupo Maseca, S.A. de
C.V., and Grupo Comercial Chedraui, S.A. de
C.V. He is an external advisor of the World
Bank Board for Latin America and the
Caribbean, and a member of the board of The
Donald Danforth Plant Science Center and
Synthetic Genomics.
Mauricio Zambrano Villarreal Has been a member of our board of directors
since 2001. Mr. Zambrano Villarreal served
as an alternate member of our board of
directors from 1995 to 2001. He is also
general vice-president of Desarrollo
Integrado, S.A. de C.V., chairman of the
board of directors of Empresas Falcon, S.A.
de C.V. and Trek Associates, Inc., secretary
of the board of directors of Administracion
Ficap, S.A. de C.V., Aero Zano, S.A. de
C.V., Ciudad Villamonte, S.A. de C.V.,
Focos, S.A. de C.V., Compania de Vidrio
Industrial, S.A. de C.V., C & I Capital,
S.A. de C.V., Industrias Diza, S.A. de C.V.,
Inmuebles Trevisa, S.A. de C.V., and
Servicios Tecnicos Hidraulicos, S.A. de
C.V., and a member of the board of directors
of Invercap, S.A. de C.V. He is a brother of
Roberto Zambrano Villarreal, a member of our
board of directors.
Tomas Brittingham Longoria Has been a member of our board of directors
since 2002. Previously served as an
alternate member of our board of directors
from 1987 until 2002. He is chief executive
officer of Laredo Autos, S.A. de C.V. He is
a son of Eduardo Brittingham Sumner, an
alternate member of our board of directors.
Jose Manuel Rincon Gallardo Has been a member of our board of directors
since 2003. He is also the board's
"financial expert" and a member of our Audit
Committee. He is president of the board of
directors of Sonoco de Mexico, S.A. de C.V.,
member of the board of directors and audit
committee of Grupo Financiero Banamex, S.A.
de C.V., and Grupo Herdez, S.A. de C.V., and
member of the board of directors of Grupo
Transportacion Ferroviaria Mexicana, S.A. de
C.V., Grupo Aeroportuario del Pacifico, S.A.
de C.V., Grupo Cuervo, S.A. de C.V.,
Laboratorio Sanfer-
109
Hormona, and Alexander Forbes Mexico. Mr.
Rincon Gallardo is a member of Pro-Dignidad,
A.C., Instituto Mexicano de Contadores
Publicos, A.C., and Instituto Mexicano de
Ejecutivos de Finanzas, A.C. Mr. Rincon
Gallardo was managing partner of KPMG
Mexico, and was a member of the board of
directors of KPMG United States and KPMG
International.
Alternate Directors
Set forth below are the names of the alternate members of our board of
directors. The alternate members of our board serve for one-year terms.
Eduardo Brittingham Sumner Has been an alternate member of our board of
directors since 2002. Previously served as a
regular member of our board of directors
from 1967 until 2002. He is also general
director of Laredo Autos, S.A. de C.V.,
Consorcio Industrial de Exportacion, S.A. de
C.V., and an alternate member of the board
of directors of Vitro, S.A. He is the father
of Tomas Brittingham Longoria, a member of
our board of directors.
Tomas Milmo Santos Has been an alternate member of our board of
directors since 2001. He is Chief Executive
Officer and president of the board of
directors of Axtel, S.A. de C.V., a
telecommunications company that operates in
the local, long distance and data transfer
market. He is also a member of the board of
directors of Coparmex, Cemex Mexico, HSBC
Mexico, and ITESM. Mr. Milmo Santos holds a
degree in economics from Stanford
University. Mr. Milmo Santos is a nephew of
Lorenzo H. Zambrano, our chief executive
officer and chairman of our board of
directors, and a nephew of Lorenzo Milmo
Zambrano and Rogelio Zambrano Lozano, both
members of our board of directors.
Jorge Garcia Segovia Has been an alternate member of our board of
directors since 1985. He is also a member of
the board of directors of Compania
Industrial de Parras, S.A. de C.V. He is a
brother of Armando J. Garcia Segovia and a
first cousin of Rodolfo Garcia Muriel, both
members of our board of directors.
Board Practices
In compliance with amendments to Mexican securities laws enacted in
2001, our shareholders approved, at a general extraordinary meeting of
shareholders held on April 25, 2002, a proposal to amend various articles of
CEMEX's by-laws, or estatutos sociales, in order to improve our standards of
corporate governance and transparency, among other matters. The amendments
require that at least 25% of our directors qualify as independent directors;
that our board of directors, at its first meeting after the adoption of the
amendments, establish an audit committee; and that shareholders representing at
least 10% of our shares have the right to designate an examiner and an
alternate examiner.
We have not entered into any service contracts with our directors that
provide for benefits upon termination of employment.
The Audit Committee
The audit committee is responsible for reviewing related party
transactions and is required to submit an annual report of its activities to our
board of directors. The audit committee is also responsible for the appointment,
compensation and oversight of our external auditors. The audit committee has
also adopted procedures for handling complaints regarding accounting and
auditing matters, including anonymous and confidential methods for
110
addressing concerns raised by employees. Under our by-laws, the majority of
the members of the audit committee, including its president, are required to be
independent directors. Effective July 3, 2006, under our by-laws and the
Mexican securities laws, all the members of the audit committee, including its
president, will be required to be independent directors.
Set forth below are the names of the members of our current audit
committee. The terms of the members of our audit committee are indefinite, and
they may only be removed by a resolution of the board of directors. Jose Manuel
Rincon Gallardo qualifies as an "audit committee financial expert." See "Item
16A--Audit Committee Financial Expert."
Roberto Zambrano Villarreal See "--Board of Directors."
President
Jose Manuel Rincon Gallardo See "--Board of Directors."
Lorenzo Milmo Zambrano See "--Board of Directors."
Alfonso Romo Garza See "--Board of Directors."
Tomas Brittingham Longoria See "--Board of Directors."
Effective July 3, 2006 the members of our audit committee will be as
set forth below.
Roberto Zambrano Villarreal See "--Board of Directors."
President
Jose Manuel Rincon Gallardo See "--Board of Directors."
Tomas Brittingham Longoria See "--Board of Directors."
Alfonso Romo Garza See "--Board of Directors."
Mauricio Zambrano Villarreal See "--Board of Directors."
The reason for the change in the composition of our Audit Committee is
to be in compliance with the new Mexican Securities Law that was enacted on
December 28, 2005 and will become effective on June 28, 2006. Also effective as
of July 3, 2006, we will have a Corporate Practices Committee that will be
comprised of the same board members as the Audit Committee.
Compensation of Our Directors and Members of Our Senior Management
For the year ended December 31, 2005, the aggregate amount of
compensation we paid, or our subsidiaries paid, to all members of our board of
directors, alternate members of our board of directors and senior managers, as
a group, was approximately Ps209.0 million. Approximately Ps38.7 million of
this amount was paid pursuant to the Restricted Stock Incentive Plan, or RSIP,
described below under "-- Restricted Stock Incentive Plan (RSIP)." During 2005,
as part of their compensation, the members of our board of directors, alternate
members of our board of directors and senior managers, as a group, were
allocated a total of approximately 2.6 million CPOs; under the terms of the
RSIP, 25% of those shares vested in 2005, and will remain restricted for one
year.
Certain key executives participate in a bonus plan that distributes to
such executives a bonus pool based on our operating performance. This bonus is
calculated and paid annually, 50% in cash and 50% in restricted CPOs under an
RSIP.
In addition, approximately Ps11.4 million was set aside or accrued to
provide pension, retirement or similar benefits.
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Employee Stock Option Plan (ESOP)
In 1995, we adopted an employee stock option plan, or ESOP, under
which we were authorized to grant members of our board of directors, members of
our senior management and other eligible employees options to acquire our CPOs.
Our obligations under the plan are covered by shares held in a trust created
for such purpose (initially 216,300,000 shares). As of December 31, 2005, after
giving effect to the exchange program implemented in November 2001 described
below, and the exercise of options that has occurred through that date, options
to acquire 2,711,174 CPOs remain outstanding under this program, with a
weighted average exercise price of approximately Ps15 per CPO. As of December
31, 2005, the outstanding options under this program had a weighted average
remaining tenure of approximately 3 years.
In November 2001, starting with the 2001 voluntary exchange program
described below, we incorporated new features to our ESOP, including an
escalating strike price in dollars, increasing at an annual rate of 7%,
adjusted downward by dividends paid. Options under this amended ESOP were
hedged by non-dilutive equity forward contracts.
In February 2004, starting with the 2004 voluntary exchange program
described below, we further amended our ESOP. The amendments provide, among
other things, that the options will be automatically exercised at a
predetermined price of U.S.$7.50 per CPO if, at any time during the life of the
options, the CPO closing market price reaches or exceeds that predetermined
price. Any gains realized through exercise of the options, whether automatic or
voluntary, will be invested in restricted CPOs. The restricted CPOs received
upon exercise of the options will be held in a trust on behalf of each employee.
The restrictions will gradually lapse, at which time the CPOs will become freely
transferable and the employee may withdraw them from the trust. On January 17,
2005, the closing CPO market price reached U.S.$7.50, and, as a result, all
existing options were automatically exercised.
CEMEX, Inc. ESOP
As a result of the acquisition of CEMEX, Inc. (formerly Southdown,
Inc.) in November 2000, we established a stock option program for CEMEX, Inc.'s
executives for the purchase of our ADSs. The options granted under the program
have a fixed exercise price in U.S. Dollars equivalent to the average market
price of one ADS during a six month period before the grant date and have a
10-year term. Twenty-five percent of the options vest annually during the first
four years after their grant date. The options are covered using shares
currently owned by our subsidiaries, thus potentially increasing stockholders'
equity and the number of shares outstanding. As of December 31, 2005,
considering the options granted since 2001, and the exercise of options that has
occurred through that date, options to acquire 1,663,806 ADSs remain outstanding
under this program. These options have a weighted average exercise price of
approximately U.S.$ 2.40 per CPO or U.S.$ 23.98 per ADS as each ADS currently
represents 10 CPOs.
Stock options activity during 2004 and 2005, the balance of options
outstanding as of December 31, 2004 and 2005 and other general information
regarding our stock option programs, is presented in note 16 to our consolidated
financial statements included elsewhere in this annual report.
As of December 31, 2005, the following ESOP options to purchase our
securities were outstanding:
Number of CPOs Range of
or CPO exercise prices
Title of security equivalents per CPOs or
underlying options underlying options Expiration Date CPO equivalents
- ----------------------- ------------------- --------------- -----------------
CPOs (Pesos) 2,711,174 2006 - 2011 Ps10.39 - Ps18.27
CPOs (Dollars) (may be 5,779,005 2011 - 2013 U.S.$ 2.18 -
instantly cash-settled) U.S.$3.00
CPOs (Dollars)
(Unlimited upside;
receive restricted CPOs) 34,820,329 2012 U.S.$ 3.79
CEMEX, Inc. ESOP 16,638,060 2011 - 2015 U.S.$ 1.94 -
U.S.$ 3.82
112
As of December 31, 2005, our senior management and directors held the
following ESOP options to acquire our securities:
Number of CPOs Range of
or CPO exercise prices
Title of security equivalents per CPOs or
underlying options underlying options Expiration Date CPO equivalents
- ----------------------- ------------------- --------------- -----------------
CPOs (Dollars)
(Unlimited upside;
receive restricted CPOs) 12,807,371 2012 U.S.$3.79
As of December 31, 2005, our employees and former employees, other
than senior management and directors, held the following ESOP options to
acquire our securities:
Number of CPOs Range of
or CPO exercise prices
Title of security equivalents per CPOs or
underlying options underlying options Expiration Date CPO equivalents
- ---------------------- ------------------- --------------- -----------------
CPOs (Pesos) 2,711,174 2006-2011 Ps10.39 - 18.27
CPOs (Dollars) (may be
instantly cash-settled) 5,779,005 2011-2013 U.S.$2.18 - 3.00
CPOs (Dollars)
(Unlimited upside;
receive restricted
CPOs) 22,012,958 2012 U.S.$3.79
CEMEX, Inc. ESOP 16,638,060 2011-2015 U.S.$1.94 - 3.82
The November 2001 Voluntary Exchange Program
In November 2001, we implemented a voluntary exchange program to offer
participants in our ESOP new options in exchange for their existing options. The
new options have an escalating strike price in U.S. Dollars and are hedged by
our equity forward contracts, while the old options had a fixed strike price in
Pesos. The executives who participated in this program exchanged their options
to purchase CPOs at a weighted average strike price of Ps34.11 per CPO, for cash
equivalent to the intrinsic value on the exchange date and new options to
purchase CPOs with an escalating dollar strike price set at U.S.$4.93 per CPO as
of December 31, 2001, growing by 7% per annum less dividends paid on the CPOs.
Of the old options, 57,448,219 (approximately 90.1%) were exchanged for new
options in the voluntary exchange program and 8,695,396 were not exchanged. In
the context of the program, 81,630,766 new options were issued, in addition to
7,307,039 of the new options that were purchased by participants under a
voluntary purchase option that was also part of the exchange. As of December 31,
2005, considering the options granted under the program, the exercise of options
through that date, the result of the February 2004 exchange program described
below and the 2004 voluntary early exercise program, 1,554,150 options to
acquire 3,695,458 CPOs remained outstanding under this program, with an exercise
price of approximately U.S.$5.22 per CPO. As of December 31, 2005, the
outstanding options under this program had a remaining tenure of approximately
5.8 years.
The February 2004 Voluntary Exchange Program
In February 2004, we implemented a voluntary exchange program to
offer ESOP and voluntary employee stock option plan, or VESOP, pursuant to
which participants received new options in exchange for their existing
options. Under the terms of the exchange offer, participating employees
surrendered their options in exchange for new options with an initial strike
price of U.S.$5.05 per CPO and a life of 8.4 years, representing respectively
the weighted average strike price and maturity of existing options. The strike
price of the new options increased annually at a 7% rate, less dividends paid
on the CPOs. The new options were exercisable at any time at the
113
discretion of their holders, and would be automatically exercised if, at
any time during the life of the options, the closing CPO market price reaches
U.S.$7.50.
Any gain realized through the exercise of these options was required
to be invested in restricted CPOs at a 20% discount to market. Holders of these
options were entitled to receive an annual payment of US$0.10 net of taxes per
option outstanding as of the payment date until exercise or maturity of the
options, which was scheduled to grow annually at a 10% rate.
As a result of the voluntary exchange offer, 122,708,146 new options
were issued in exchange for 114,121,358 existing options, which were
subsequently cancelled. All options not exchanged in the offer maintained their
existing terms and conditions.
On January 17, 2005, the closing CPO market price reached U.S.$7.50
and, as a result, all existing options under this program were automatically
exercised. Holders of these options received the corresponding gain in
restricted CPOs, as described above.
The 2004 Voluntary Early Exercise Program
In December 2004, we offered ESOP and VESOP participants new options,
conditioned on the participants exercising and receiving the intrinsic value of
their existing options. As a result of this program, 120,827,370 options from
the February 2004 voluntary exchange program, 16,580,004 options from other
ESOPs, and 399,848 options from VESOP programs were exercised, and we granted a
total of 139,151,236 new options. The new options had an initial strike price
of US$7.4661, which was US$0.50 above the closing CPO market price on the date
on which the old options were exercised, and which increased at a rate of 5.5%
per annum. All gains from the exercise of these new options will be paid in
restricted CPOs. The restrictions will be removed gradually within a period of
between two and four years, depending on the exercise date.
The new options may be exercised at any time at the discretion of
their holders. Of the 139,151,236 new options, 120,827,370 would be
automatically exercised if the closing CPO market price reached U.S.$8.50,
while the remaining 18,323,866 options do not have an automatic exercise
threshold. Holders of these options were entitled to receive an annual payment
of US$0.10 net of taxes per option outstanding as of the payment date until
exercise or maturity of the options or until the closing CPO market price
reached U.S.$8.50, which payment was scheduled to grow annually at a 10% rate.
On June 17, 2005, the closing CPO market price reached U.S.$8.50, and,
as a result, all outstanding options subject to automatic exercise were
automatically exercised and the annual payment to which holders of the
remaining options were entitled was terminated.
For accounting purposes under Mexican and U.S. GAAP, as of December
31, 2005, we accounted for the options granted under the February 2004
voluntary exchange program by means of the fair value method through earnings.
See notes 3W and 16 to our consolidated financial statements included elsewhere
in this annual report.
Voluntary Employee Stock Option Plan (VESOP)
During 1998, 1999, 2002 and 2003, we established voluntary employee
stock option plans, or VESOPs, pursuant to which managers and senior executives
elected to purchase options to CPOs. As of December 31, 2005 there were 5,000
options to acquire 11,889 CPOs, with an exercise price of U.S.$3.05 and a
remaining life of approximately 2 years, outstanding from options sold to
executives under a VESOP in April 2002.
As of December 31, 2005, no member of our senior management or board
of directors held any VESOP options to acquire our securities.
Restricted Stock Incentive Plan (RSIP)
Since January 2005, we have been changing our long-term variable
compensation programs from stock option grants to restricted stock awards
under a Restricted Stock Incentive Plan, or RSIP. Under the terms of the
114
RSIP, eligible employees are allocated a specific number of restricted CPOs as
variable compensation to be vested over a four-year period. An amount in cash
sufficient to purchase twenty five percent (25%) of the allocated number of CPOs
will be distributed annually to a trust to purchase CPOs in the market on behalf
of each employee. The CPOs purchased by the trust will be held in a restricted
account by the trust on behalf of each employee for one year. At the end of the
one-year period the restrictions will lapse, at which time the CPOs will become
freely transferable and the employee may withdraw them from the trust.
During 2005, approximately 2.5 million CPOs were purchased by the
trust on behalf of eligible employees pursuant to the Restricted Stock
Incentive Plan, of which approximately 650 thousand were purchased for members
of our senior management and board of directors.
Employees
As of December 31, 2005, we had approximately 52,674 employees
worldwide, which represented an increase of 97% from year-end 2004. This
increase was mainly attributable to the RMC acquisition during 2005.
The following table sets forth the number of our full-time employees
and a breakdown of their geographic location at the end of each of the last
three fiscal years:
2003 2004 2005
North America
Mexico....................................... 11,155 11,689 13,044
United States................................ 4,709 5,010 9,657
Europe
Spain........................................ 2,963 2,851 2,838
United Kingdom............................... 6,237
Rest of Europe............................... 117 135 10,714
South America, Central America and the Caribbean... 5,099 5,108 6,309
Africa and the Middle East......................... 873 929 2,364
Asia............................................... 1,049 957 1,511
Employees in Mexico have collective bargaining agreements on a
plant-by-plant basis, which are renewable on an annual basis with respect to
salaries and on a biannual basis with respect to benefits. During 2005, more
than 270 contracts with different labor unions were renewed.
Approximately one-fifth of our employees in the United States are
represented by unions, with the largest number being members of the
International Brotherhood of Boilermakers and the International Brotherhood of
Teamsters. Collective bargaining agreements are in effect at all our U.S.
plants and have various expiration dates from 2006 through 2012.
Our Spanish union employees have contracts that are renewable every
two to three years on a company-by-company basis. Employees in the ready-mix
concrete, mortar, aggregates and transport sectors have collective bargaining
agreements by sector.
In the United Kingdom, our cement and logistics operations have
collective bargaining agreements with the Transport & General Workers Union
(TGWU) and Amicus. The rest of our operations in the United Kingdom are not
part of a collective bargaining agreement; however, there are local recognition
agreements for consultation and employee representation with the TGWU and the
GMB union, Britain's general labor union.
In Germany, all our operations have collective bargaining agreements
with the Industriegewerkschaft - BAUEN AGRAR UMWELT - IG B.A.U. union. In
addition to the collective bargaining agreements, there are internal company
agreements, negotiated between the workers council and the company itself.
115
In France, approximately 5% of our employees are members of one of the
five main unions. Each union is represented in the company mainly in Paris and
in Southern France. All agreements are negotiated with unions and non-union
representatives elected in the local workers council (Comite d'Entreprise).
In Venezuela, each of our subsidiary companies operating our cement
plants has its own union, and each company has separately negotiated three-year
labor contracts with the union employees of the relevant plants.
In Colombia, a single union represents the union employees of the
Bucaramanga and Cucuta cement plants. There are also collective agreements with
non-union workers at the Caracolito/Ibague cement plant, Santa Rosa cement
plant and all ready-mix concrete plants in Colombia.
Overall, we consider our relationships with labor unions representing
our employees to be satisfactory.
Share Ownership
As of March 31, 2006, our senior management and directors and their
immediate families owned, collectively, approximately 3.9% of our outstanding
shares, including shares underlying stock options and restricted CPOs under our
ESOPs. This percentage does not include shares held by the extended families of
members of our senior management and directors, since to the best of our
knowledge, no voting arrangements or other agreements exist with respect to
those shares. No individual director or member of our senior management
beneficially owned one percent or more of any class of our outstanding capital
stock.
Item 7 - Major Shareholders and Related Party Transactions
-------------------------------------------------
Major Shareholders
Based upon information contained in a statement on Schedule 13G filed
with the Securities and Exchange Commission on February 13, 2006, as of
December 31, 2005, Southeastern Asset Management, Inc., an investment adviser
registered under the U.S. Investment Advisers Act of 1940, as amended,
beneficially owned 36,279,092 ADSs and 26,061,948 CPOs, representing a total
388,852,868 CPOs or approximately 10.1% of our outstanding capital stock.
Southeastern Asset Management, Inc. does not have voting rights different from
our other shareholders.
Other than Southeastern Asset Management, Inc., the CPO trust and the
shares and CPOs owned by our subsidiaries, we are not aware of any person that
is the beneficial owner of five percent or more of any class of our voting
securities.
As of March 31, 2006, our outstanding capital stock consisted of
7,676,623,102 Series A shares and 3,838,311,551 Series B shares, in each case
including shares held by our subsidiaries.
As of March 31, 2006, a total of 7,429,174,874 Series A shares and
3,714,587,437 Series B shares were held by the CPO trust. Each CPO represents
two Series A shares and one Series B share. A portion of the CPOs is represented
by ADSs. Under the terms of the CPO trust agreement, non-Mexican holders of CPOs
and ADSs have no voting rights with respect to the A shares underlying those
CPOs and ADSs. All ADSs are deemed to be held by non-Mexican nationals. At every
shareholders' meeting, the A shares held in the CPO trust are voted in
accordance with the vote cast by holders of the majority of A shares held by
Mexican nationals and B shares voted at that meeting of shareholders.
As of March 31, 2006, through our subsidiaries, we owned approximately
313.5 million CPOs, representing approximately 8.4% of our outstanding CPOs and
8.2% of our outstanding voting stock. These CPOs are voted at the direction of
our management. From time to time, our subsidiaries are active participants in
the trading market for our capital stock; as a result, the levels of our CPO and
share ownership by those subsidiaries are likely to fluctuate. Our voting rights
over those CPOs are the same as those of any other CPO holder. As of the same
date, an additional 23.8 million CPOs, representing approximately 0.6% of our
outstanding CPOs and 0.6% of our outstanding voting stock, were held in a
derivative instrument hedging expected cash flows of stock options exercises in
the short and medium term.
116
Our by-laws, or estatutos sociales, provide that our board of directors
must authorize in advance any transfer of voting shares of our capital stock
that would result in any person, or group acting in concert, becoming a holder
of 2% or more of our voting shares.
Mexican securities regulations provide that our majority-owned
subsidiaries may neither directly or indirectly invest in our CPOs nor other
securities representing our capital stock. The Mexican securities authority
could require any disposition of the CPOs or of other securities representing
our capital stock so owned and/or impose fines on us if it were to determine
that the ownership of our CPOs or of other securities representing our capital
stock by our subsidiaries, in most cases, negatively affects the interests of
our shareholders. Notwithstanding the foregoing, the exercise of all rights
pertaining to our CPOs or to other securities representing our capital stock in
accordance with the instructions of our subsidiaries does not violate any
provisions of our bylaws or the bylaws of our subsidiaries. The holders of these
CPOs or of other securities representing our capital stock are entitled to
exercise the same rights relating to their CPOs or their other securities
representing our capital stock, including all voting rights, as any other holder
of the same series.
As of March 31, 2006, we had 429 ADS holders of record in the United
States, holding approximately 62% of our outstanding CPOs.
On April 27, 2006, our shareholders approved a new stock split, which
we expect to occur in July 2006. In connection with the stock split, each of our
existing series A shares will be surrendered in exchange for two new series A
shares, and each of our existing series B shares will be surrendered in exchange
for two new series B shares. Concurrent with this stock split, we authorized the
amendment of the CPO trust agreement pursuant to which our CPOs are issued to
provide for the substitution of two new CPOs for each of our existing CPOs, with
each new CPO representing two new series A shares and one new series B share. In
connection with the stock split and at our request, Citibank, N.A., as
depositary for the ADSs, will distribute one additional ADS for each ADS
outstanding as of the record date for the stock split. The ratio of CPOs to ADSs
will not change as a result of the stock split; each ADS will represent ten (10)
new CPOs following the stock split and the CPO trust amendment. The proportional
equity interest participation of existing shareholders will not change as a
result of the stock split. The financial data set forth in this annual report
have not been adjusted to give retroactive effect to the stock split.
Related Party Transactions
Mr. Bernardo Quintana Isaac, a member of our board of directors, is
chief executive officer and chairman of the board of directors of Grupo ICA,
S.A. de C.V., or Grupo ICA, a large Mexican construction company. In the
ordinary course of business, we extend financing to Grupo ICA for varying
amounts at market rates, as we do for our other customers.
In the past, we have extended loans of varying amounts and interest
rates to our directors and executives. During 2005, the largest aggregate amount
of loans we had outstanding to our directors and members of senior management
was Ps11,549,703. As of March 31, 2006, these loans had been fully repaid.
Item 8 - Financial Information
---------------------
Consolidated Financial Statements and Other Financial Information
See Item 18 -- "Financial Statements" and "Index to Consolidated
Financial Statements."
Legal Proceedings
See Item 4 -- "Information on the Company -- Regulatory Matters and
Legal Proceedings."
Dividends
A declaration of any dividend by us is made by our shareholders at a
general ordinary meeting. Any dividend declaration is usually based upon the
recommendation of our board of directors. However, the shareholders are not
obligated to approve the board's recommendation. We may only pay dividends
from retained
117
earnings included in financial statements that have been approved by
our shareholders and after all losses have been paid for, a legal reserve equal
to 5% of our paid-in capital has been created and our shareholders have approved
the relevant dividend payment. According to 1999 Mexican tax reforms, all
shareholders, excluding Mexican corporations, that receive a dividend in cash or
in any other form are subject to a withholding tax. See Item 10 -- "Additional
Information -- Taxation -- Mexican Tax Considerations." Since we conduct our
operations through our subsidiaries, we have no significant assets of our own
except for our investments in those subsidiaries. Consequently, our ability to
pay dividends to our shareholders is dependent upon our ability to receive funds
from our subsidiaries in the form of dividends, management fees, or otherwise.
Some of our credit agreements and debt instruments and some of those of our
subsidiaries contain provisions restricting our ability, and that of our
subsidiaries, as the case may be, to pay dividends if financial covenants are
not maintained. As of December 31, 2005, we and our subsidiaries were in
compliance with, or had obtained waivers in connection with, those covenants.
See Item 3 -- "Key Information -- Risk Factors -- We have incurred and will
continue to incur debt, which could have an adverse effect on the price of our
CPOs and ADSs, result in us incurring increased interest costs and limit our
ability to distribute dividends, finance acquisitions and expansions and
maintain flexibility in managing our business activities."
Although our board of directors currently intends to continue to
recommend an annual dividend on the common stock, the recommendation whether to
pay and the amount of those dividends will continue to be based upon, among
other things, earnings, cash flow, capital requirements and our financial
condition and other relevant factors.
Owners of ADSs on the applicable record date will be entitled to
receive any dividends payable in respect of the A shares and the B shares
underlying the CPOs represented by those ADSs; however, as permitted by the
deposit agreement pursuant to which our ADSs are issued, we may instruct the ADS
depositary not to extend the option to elect to receive cash in lieu of the
stock dividend to the holders of ADSs, as we did in connection with the dividend
for the 2005 fiscal year, as described below. The ADS depositary will fix a
record date for the holders of ADSs in respect of each dividend distribution.
Unless otherwise stated, the ADS depositary has agreed to convert cash dividends
received by it in respect of the A shares and the B shares underlying the CPOs
represented by ADSs from Pesos into Dollars and, after deduction or after
payment of expenses of the ADS depositary, to pay those dividends to holders of
ADSs in Dollars. We cannot assure holders of our ADSs that the ADS depositary
will be able to convert dividends received in Pesos into Dollars.
The following table sets forth the amounts of annual cash dividends
paid in Pesos, on a per share basis, and a convenience translation of those
amounts into Dollars based on the CEMEX accounting rate as of December 31, 2005:
Dividends Per Share
-------------------------------------
Constant Pesos Dollars
-------------------- ---------------
2001..................................... 0.37 0.03
2002..................................... 0.39 0.04
2003..................................... 0.41 0.04
2004..................................... 0.39 0.04
2005..................................... 0.83 0.08
Dividends declared at each year's annual shareholders' meeting are in
respect of dividends for the preceding year. In recent years, our board of
directors has proposed, and our shareholders have approved, dividend proposals,
whereby our shareholders have had a choice between stock dividends or cash
dividends declared in respect of the prior year's results, with the stock
issuable to shareholders who elect the stock dividend over the cash dividend
being issued at a 20% discount from then current market prices. The dividends
declared per share or per CPO in recent years, expressed in constant Pesos as
of December 31, 2005, were as follows: 2001, Ps1.11 per CPO (or Ps0.37 per
share); 2002, Ps1.17 per CPO (or Ps0.39 per share); 2003, Ps1.23 per CPO (or
Ps0.41 per share); 2004, Ps1.17 per CPO (or Ps0.39 per share); and 2005, Ps2.49
per CPO (or Ps0.83 per share). As a result of dividend elections made by
shareholders, in 2002, Ps262 million in cash was paid and 128 million
additional CPOs were issued in respect of dividends declared for the 2001
fiscal year; in 2003, Ps68 million in cash was paid and 198 million additional
CPOs were issued in respect of dividends declared for the 2002 fiscal year; in
2004, Ps161 million in cash was paid and 150 million additional CPOs were
issued in respect of dividends declared for the 2003 fiscal
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year; and in 2005, Ps380 million in cash was paid and 133 million additional
CPOs were issued in respect of dividends declared for the 2004 fiscal year.
At our 2005 annual shareholders' meeting, which was held on April 27,
2006, our shareholders approved a dividend for the 2005 fiscal year of the Peso
equivalent of U.S.$0.133 per CPO (U.S.$0.0443 per share) or Ps1.49 (Ps0.50 per
share), based on the Peso/Dollar exchange rate in effect for May 25, 2006 of
Ps11.1935 to U.S.$1.00, as published by the Mexican Central Bank. Holders of our
series A shares, series B shares and CPOs will be entitled to receive the
dividend in either stock or cash consistent with our past practices; however,
under the terms of the deposit agreement pursuant to which our ADSs are issued,
we have instructed the ADS depositary not to extend the option to elect to
receive cash in lieu of the stock dividend to the holders of ADSs, unlike our
practice in connection with previous dividends when ADS holders were extended
this option. In order to have sufficient shares to issue to those shareholders
who receive the dividend in stock, our shareholders approved an increase in the
variable part of our capital stock through the capitalization of retained
earnings in an amount up to Ps6,718 milion, through the issuance of up to 480
million series A shares and 240 million series B shares, to be represented by
new CPOs. Our shareholders delegated to our board of directors the determination
of the final amount of the capital increase. As a result of dividend elections
made by shareholders, in June 2006, approximately Ps144 million in cash will be
paid and approximately 106 million additional CPOs will be issued in respect of
dividends declared for the 2005 fiscal year. The final amount of the increase in
the variable part of our capital stock, as determined by our board of directors,
was approximately Ps1,764 million.
Significant Changes
Except as described herein, no significant change has occurred since
the date of our consolidated financial statements included in this annual
report.
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Item 9 - Offer and Listing
-----------------
Market Price Information
Our CPOs are listed on the Mexican Stock Exchange and trade under the
symbol "CEMEX.CPO." Our ADSs, each of which currently represents ten CPOs, are
listed on the New York Stock Exchange and trade under the symbol "CX." The
following table sets forth, for the periods indicated, the reported highest and
lowest market quotations in nominal Pesos for CPOs on the Mexican Stock
Exchange and the high and low sales prices in Dollars for ADSs on the NYSE. The
information below does not give effect to the two-for-one stock split in our
CPOs and ADSs approved by our shareholders on April 27, 2006, which we expect
will be effected in July 2006.
Calendar Period CPOs(1) ADSs
- -------------------------- ----------------------- -------------------------
Yearly High Low High Low
---------- ---------- ----------- ------------
2001...................... Ps 25.83 Ps 17.25 U.S.$28.30 U.S.$17.63
2002...................... 30.91 19.55 33.00 19.25
2003...................... 29.75 17.83 26.64 16.31
2004...................... 41.00 29.15 36.56 25.97
2005...................... 66.50 37.75 61.98 34.13
Quarterly
2004
First quarter.......... 33.25 29.15 29.96 26.20
Second quarter......... 35.25 30.20 31.35 25.97
Third quarter.......... 35.63 31.11 31.31 26.95
Fourth quarter......... 41.00 31.20 36.56 27.14
2005
First quarter ......... 46.75 39.00 42.52 34.55
Second quarter......... 47.01 37.75 43.72 34.13
Third quarter.......... 57.30 44.90 53.80 41.87
Fourth quarter......... 66.50 51.20 61.98 46.78
2006
First quarter ......... 72.04 59.30 67.09 56.01
Monthly
2005-2006
November............... 61.39 55.80 57.75 51.68
December............... 66.50 59.84 61.98 56.81
January................ 70.23 63.10 67.09 59.90
February............... 69.40 59.30 66.38 56.01
March.................. 72.04 62.50 66.46 58.24
April.................. 76.55 71.00 68.95 65.03
May.................... 78.70 63.86 72.07 56.25
________________
Source: Based on data of the Mexican Stock Exchange and the NYSE.
(1) As of December 31, 2005, approximately 96.8% of our outstanding share
capital was represented by CPOs.
On May 31, 2006, the last reported closing price for CPOs on the
Mexican Stock Exchange was Ps64.53 per CPO, and the last reported closing price
for ADSs on the NYSE was U.S.$56.97 per ADS.
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Item 10 - Additional Information
----------------------
Articles of Association and By-laws
General
Pursuant to the requirements of Mexican corporation law, our articles
of association and by-laws, or estatutos sociales, have been registered with the
Mercantile Section of the Public Register of Property and Commerce in Monterrey,
Mexico, under the entry number 21 since June 11, 1920. We are a holding company
engaged, through our operating subsidiaries, primarily in the production,
distribution, marketing and sale of cement, ready-mix concrete and clinker. Our
objectives and purposes can be found in article 2 of our by-laws. We are a
global cement manufacturer, with operations in North, Central and South America,
Europe, the Caribbean, Asia and Africa. We plan to continue focusing on the
production and sale of cement and ready-mix concrete, as we believe that this
strategic focus has enabled us to grow our existing businesses and to expand our
operations internationally.
We have two series of common stock, the series A common stock, with no
par value, or A shares, which can only be owned by Mexican nationals, and the
series B common stock, with no par value, or the B shares, which can be owned by
both Mexican and non-Mexican nationals. Our by-laws state that the A shares may
not be held by non-Mexican persons, groups, units or associations that are
foreign or have participation by foreign governments or their agencies. Our
by-laws also state that the A shares shall at all times account for a minimum of
64% of our total outstanding voting stock. Other than as described herein,
holders of the A shares and the B shares have the same rights and obligations.
In 1994, we changed from a fixed capital corporation to a variable
capital corporation in accordance with Mexican corporation law and effected a
three-for-one split of all our outstanding capital stock. As a result, we
changed our corporate name from CEMEX, S.A. to CEMEX, S.A. de C.V., established
a fixed capital account and a variable capital account and issued one share of
variable capital stock of the same series for each eight shares of fixed capital
stock held by any shareholder, after giving effect to the stock split.
Each of our fixed and variable capital accounts is comprised of A
shares and B shares. Under Mexican law and our by-laws, any holder of shares
representing variable capital is entitled to have those shares redeemed at that
holder's option for a price equal to the lower of:
o 95% of the market value of those shares based on the weighted
average trading price of our CPOs on the Mexican Stock Exchange
during the latest period of 30 trading days preceding the date on
which the exercise of the redemption option is effective, for a
period not to exceed six months; and
o the book value of those shares at the end of the fiscal year
immediately prior to the effective date of the redemption option
exercise by that shareholder as set forth in our annual financial
statements approved at the ordinary meeting of shareholders.
If the period used in calculating the quoted share price as described
above consists of less than 30 trading days, the number of days when shares were
actually traded will be used. If shares have not been traded during this period,
the redemption price will be the book value of those shares as described above.
If a shareholder exercises its redemption option during the first three quarters
of a fiscal year, that exercise is effective at the end of that fiscal year, but
if a shareholder exercises its redemption option during the fourth quarter, that
exercise is effective at the end of the next succeeding fiscal year. The
redemption price is payable as of the day following the annual ordinary meeting
of shareholders at which the relevant annual financial statements were approved.
Shareholder authorization is required to increase or decrease either
the fixed capital account or the variable capital account. Shareholder
authorization to increase or decrease the fixed capital account must be obtained
at an extraordinary meeting of shareholders. Shareholder authorization to
increase or decrease the variable capital account must be obtained at an
ordinary general meeting of shareholders.
On September 15, 1999, we effected a further stock split. For every one
of our shares of any series we issued two series A shares and one series B
share. Concurrently with this stock split, we also consummated an
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exchange offer to exchange new CPOs and new ADSs representing the new CPOs for
our then existing A shares, B shares and ADSs and converted our then existing
CPOs into the new CPOs. As of December 31, 2005, approximately 96.8% of our
outstanding share capital was represented by CPOs, a portion of which is
represented by ADSs.
At a general extraordinary meeting of shareholders held on April 28,
2005, our shareholders approved a two-for-one stock split, which became
effective on July 1, 2005. In connection with this stock split, each of our
existing series A shares was surrendered in exchange for two new series A
shares, and each of our existing series B shares was surrendered in exchange for
two new series B shares. Concurrent with this stock split, we authorized the
amendment of the CPO trust agreement pursuant to which our CPOs are issued to
provide for the substitution of two new CPOs for each of our existing CPOs, with
each new CPO representing two new series A shares and one new series B share.
The number of our existing ADSs did not change as a result of the stock split;
instead the ratio of CPOs to ADSs was modified so that each existing ADS
represents ten new CPOs following the stock split and the CPO trust amendment.
As of December 31, 2005, our capital stock consisted of 12,154,784,604
issued shares. As of December 31, 2005, series A shares represented 64% of our
capital stock, or 8,103,189,736 shares, of which 7,676,571,754 shares were
subscribed and paid, 213,087,000 shares were treasury shares and 213,530,982
shares were issued pursuant to our employee stock option plans and subscribed to
by Banamex as trustee thereunder, but had not yet been paid. These shares have
been and will continue to be gradually paid upon exercise of the corresponding
stock options. As of December 31, 2005, series B shares represented 36% of our
capital stock, or 4,051,594,868 shares, of which 3,838,285,877 shares were
subscribed and paid, 106,543,500 shares were treasury shares and 106,765,491
shares were issued pursuant to our employee stock option plans and subscribed to
by Banamex as trustee thereunder, but had not yet been paid. These shares have
been and will continue to be gradually paid upon exercise of the corresponding
stock options. Of the total of our A shares and B shares outstanding as of
December 31, 2005, 6,534,000,000 shares corresponded to the fixed portion of our
capital stock and 5,620,784,604 shares corresponded to the variable portion of
our capital stock.
At the 2005 annual shareholders' meeting held on April 27, 2006, in
connection with their approval of a dividend for the 2005 fiscal year, our
shareholders approved an increase in the variable part of our capital stock
through the capitalization of retained earnings in an amount up to Ps6,718
million, through the issuance of up to 480 million series A shares and 240
million series B shares, to be represented by new CPOs. The final amount of the
increase in the variable part of our capital stock, as determined by our board
of directors, was approximately Ps1,764 million. See Item 8 -- "Financial
Information -- Dividends" above. In addition, at the 2005 annual shareholders'
meeting, our shareholders approved the cancellation of 213,087,000 series A
treasury shares and 106,543,500 series B treasury shares.
At the 2005 annual shareholders' meeting, our shareholders also
approved a new stock split, which we expect to occur in July 2006. In connection
with this new two-for-one stock split, each of our existing series A shares will
be surrendered in exchange for two new series A shares, and each of our existing
series B shares will be surrendered in exchange for two new series B shares.
Concurrent with this stock split, we authorized the amendment of the CPO trust
agreement pursuant to which our CPOs are issued to provide for the substitution
of two new CPOs for each of our existing CPOs, with each new CPO representing
two new series A shares and one new series B share. In connection with the stock
split and at our request, Citibank, N.A., as depositary for the ADSs, will
distribute one additional ADS for each ADS outstanding as of the record date for
the stock split. The ratio of CPOs to ADSs will not change as a result of the
stock split; each ADS will represent ten (10) new CPOs following the stock split
and the CPO trust amendment. The proportional equity interest participation of
existing shareholders will not change as a result of the stock split. The
financial data set forth in this annual report have not been adjusted to give
retroactive effect to this new stock split.
On June 1, 2001, the Mexican securities law (Ley de Mercado de Valores)
was amended to increase the protection granted to minority shareholders of
Mexican listed companies and to commence bringing corporate governance
procedures of Mexican listed companies in line with international standards.
On February 6, 2002, the Mexican securities authority (Comision
Nacional Bancaria y de Valores) issued an official communication authorizing the
amendment of our by-laws to incorporate additional provisions to comply
122
with the new provisions of the Mexican securities law. Following approval from
our shareholders at our 2002 annual shareholders' meeting, we amended and
restated our by-laws to incorporate these additional provisions, which consist
of, among other things, protective measures to prevent share acquisitions,
hostile takeovers, and direct or indirect changes of control. As a result of the
amendment and restatement of our by-laws, the expiration of our corporate term
of existence was extended from 2019 to 2100.
On March 19, 2003, the Mexican securities authority issued new
regulations designed to (i) further implement minority rights granted to
shareholders by the Mexican securities law and (ii) simplify and comprise in a
single document provisions relating to securities offerings and periodic reports
by Mexican listed companies.
On April 24, 2003, our shareholders approved changes to our by-laws,
incorporating additional provisions and removing some restrictions. The changes
were as follows:
o The restriction that prohibits our subsidiaries from acquiring
shares in companies that own our shares was amended to remove a
condition that our subsidiaries have knowledge of such ownership.
o The limitation on our variable capital was removed. Formerly, our
variable capital was limited to ten times our minimum fixed
capital, which is currently set at Ps39.5 million.
o Increases and decreases in our variable capital now require the
notarization of the minutes of the ordinary general shareholders'
meeting that authorize such increase or decrease, as well as the
filing of these minutes with the Mexican National Securities
Registry (Registro Nacional de Valores), except when such increase
or decrease results from (i) shareholders exercising their
redemption rights or (ii) stock repurchases.
o Amendments were made to the calculation of the redemption price
for our variable capital shares, which is described above.
o Approval by the board of directors is now required for
transactions by us or any of our subsidiaries involving: (i)
transactions not in the ordinary course of business with third
parties related to us or to any of our subsidiaries, (ii)
purchases or sales of assets having a value equal to or exceeding
10% or more of our total consolidated assets, (iii) the granting
of security interests in an amount exceeding 30% of our total
consolidated assets, and (iv) any other transaction that exceeds
1% of our total consolidated assets.
o The cancellation of registration of our shares in the Securities
Section of the Mexican National Securities Registry now involves
an amended procedure, which is described below under "Repurchase
Obligation." In addition, any amendments to the article containing
these provisions no longer require the consent of the Mexican
securities authority and 95% approval by shareholders entitled to
vote.
On December 30, 2005, a new Mexican securities law was published in an
attempt to continue bringing corporate governance procedures of Mexican listed
companies in line with international standards. This new law includes
provisions increasing disclosure information requirements, minority shareholder
rights and corporate governance.
Under the new Mexican securities law, we are required to adopt specific
amendments to our by-laws within 180 days of the effective date of the new law.
Following approval from our shareholders at our 2005 annual shareholders'
meeting held on April 27, 2006, we amended and restated our by-laws to
incorporate these amendments. The amendments to our by-laws will become
effective on July 3, 2006. The most significant of these amendments are as
follows:
o The change of our corporate name from CEMEX, S.A. de C.V. to
CEMEX, S.A.B. de C.V., which means that we will now be called a
Publicly Held Company (Sociedad Anonima Bursatil or S.A.B.).
123
o The creation of a corporate practices committee, which is a new
committee of our board of directors and which is comprised
exclusively of independent directors.
o The elimination of the figure of statutory examiner (Comisario)
and the assumption of its responsibilities by the board of
directors through the audit committee and the new corporate
practices committee, as well as by our external auditor.
o The imposition of new duties (such as the duty of loyalty and the
duty of care) and liabilities on the members of the board of
directors as well as on the relevant officers.
o The implementation of a mechanism for claims of a breach of a
director's or officer's duties to be brought by us or by holders
of 5% or more of our shares.
o An increase of the responsibilities of the audit committee.
o The chief executive officer is now the person in charge of
managing the company. before, this was the duty of the board of
directors. The board of directors will now supervise the chief
executive officer.
o Shareholders are given the right to enter into certain agreements
with other shareholders.
These amendments to our by-laws are subject to the new law becoming
effective on June 28, 2006. Therefore, the following summary does not give
effect to these amendments.
Changes in Capital Stock and Preemptive Rights
Our by-laws allow for a decrease or increase in our capital stock if it
is approved by our shareholders at a shareholders' meeting. Additional shares of
our capital stock, having no voting rights or limited voting rights, are
authorized by our by-laws and may be issued upon the approval of our
shareholders at a shareholders' meeting, with the prior approval of the Mexican
securities authority.
Our by-laws provide that shareholders have preemptive rights in
proportion to the number of shares of our capital stock they hold, before any
increase in the number of outstanding A shares, B shares, or any other existing
series of shares, as the case may be, except in the case of shares previously
acquired by us or if the shareholders waive their preemptive rights, in the
context of a public offer, as set forth in the Mexican securities law.
Preemptive rights give shareholders the right, upon any issuance of shares by
us, to purchase a sufficient number of shares to maintain their existing
ownership percentages. Preemptive rights must be exercised within the period and
under the conditions established for that purpose by the shareholders, and our
by-laws and applicable law provide that this period must be 15 days following
the publication of the notice of the capital increase in the Periodico Oficial
del Estado de Nuevo Leon. With the prior approval of the Mexican securities
authority, an extraordinary shareholders' meeting may approve the issuance of
our stock in connection with a public offering, without the application of the
preemptive rights described above. At that meeting, holders of our stock must
waive preemptive rights by the affirmative vote of 50% of the capital stock, and
the resolution duly adopted in this manner will be effective for all
shareholders. If holders of at least 25% of our capital stock vote against the
resolution, the issuance without the application of preemptive rights may not be
effected. The Mexican securities authority may only approve the issuance if we
maintain policies that protect the rights of minority shareholders. Any
shareholder voting against the relevant resolution will have the right to have
its shares placed in the public offering together with our shares and at the
same market price.
Pursuant to our by-laws, significant acquisitions of shares of our
capital stock and changes of control of CEMEX require prior approval from our
board of directors. Our board of directors must authorize in advance any
transfer of voting shares of our capital stock that would result in any person
or group becoming a holder of 2% of more of our shares. If our board of
directors denies that authorization, it must designate an alternative buyer
for those shares, at a price equal to the price quoted on the Mexican Stock
Exchange. Any acquisition of shares of our capital stock representing 20% or
more of our capital stock by a person or group of persons requires prior
approval from our board of directors and, in the event approval is granted,
the acquiror has an obligation to make a public
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offer to purchase all of the outstanding shares of that class of capital stock
being purchased. In the event the requirements described above for significant
acquisitions of shares of our capital stock are not met, the persons acquiring
such shares will not be entitled to any corporate rights with respect to such
shares, such shares will not be taken into account for purposes of determining a
quorum for shareholders' meetings and we will not record such persons as holders
of such shares in our shareholder ledger.
Our by-laws require the stock certificates representing shares of our
capital stock to make reference to the provisions in our by-laws relating to the
prior approval of the board of directors for significant share transfers and the
requirements for recording share transfers in our shareholder ledger. In
addition, shareholders are responsible for informing us whenever their
shareholdings exceed 5%, 10%, 15% and 20% of the outstanding shares of a
particular class of our capital stock. We are required to maintain a shareholder
ledger that records the names, nationality and domicile of all significant
shareholders, and any shareholder that meets or exceeds these thresholds must be
recorded in this ledger if such shareholder is to be recognized or represented
at any shareholders' meeting. If a shareholder fails to inform us of its
shareholdings reaching a threshold as described above, we will not record the
transactions that cause such threshold to be met or exceeded in our shareholder
ledger, and such transaction will have no legal effect and will not be binding
on us.
Repurchase Obligation
In accordance with Mexican securities regulations, our majority
shareholders are obligated to make a public offer for the purchase of stock to
the minority shareholders if the listing of our stock with the Mexican Stock
Exchange is canceled, either by resolution of our shareholders or by an order of
the Mexican securities authority. The price at which the stock must be purchased
by the majority shareholders is the higher of:
o the weighted average price per share based on the weighted average
trading price of our CPOs on the Mexican Stock Exchange during the
latest period of 30 trading days preceding the date of the offer,
for a period not to exceed six months; or
o the book value per share, as reflected in the last quarterly
report filed with the Mexican securities authority and the Mexican
Stock Exchange.
Five business days prior to the commencement of the offering, our board
of directors must make a determination with respect to the fairness of the
offer, taking into account the interests of the minority shareholders and
disclose its opinion, which must refer to the justifications of the offer price;
if the board of directors is precluded from making such determination as a
result of a conflict of interest, the resolution of the board of directors must
be based upon a fairness opinion issued by an expert selected by the audit
committee in which emphasis must be placed on minority rights.
Following the expiration of this offer, if the majority shareholders do
not acquire 100% of the paid-in share capital, such shareholders must place in a
trust set up for that purpose for a six-month period an amount equal to that
required to repurchase the remaining shares held by investors who did not
participate in the offer. The majority shareholders are not obligated to make
the offer to purchase if shareholders representing 95% of our share capital
waive that right, and the amount offered for the shares is less than 300,000
UDIs (Unidades de Inversion), which are investment units in Mexico that reflect
inflation variations. If these conditions are met, we must create a trust as
described above and provide electronic notice to the Mexican Stock Exchange. For
purposes of these provisions, majority shareholders are shareholders that own a
majority of our shares, have voting power sufficient to control decisions at
general shareholders' meetings, or that may elect a majority of our board of
directors.
Shareholders' Meetings and Voting Rights
Shareholders' meetings may be called by:
o our board of directors or statutory auditors;
o shareholders representing at least 10% of the then outstanding
shares of our capital stock by requesting our board of directors
or the statutory auditors to call a meeting;
125
o any shareholder if no meeting has been held for two consecutive
years or when the matters referred to in Article 181 of the
General Law of Commercial Companies (Ley General de Sociedades
Mercantiles) have not been dealt with; or
o a Mexican court in the event our board of directors or the
statutory auditors do not comply with the valid request of the
shareholders indicated above.
Notice of shareholders' meetings must be published in the official
gazette for the State of Nuevo Leon, Mexico or any major newspaper published and
distributed in the City of Monterrey, Nuevo Leon, Mexico. The notice must be
published at least 15 days prior to the date of any shareholders' meeting.
Consistent with Mexican law, our by-laws further require that all information
and documents relating to the shareholders' meeting be available to shareholders
from the date the notice of the meeting is published.
General shareholders' meetings can be ordinary or extraordinary. At
every general shareholders' meeting, each holder of A shares and B shares is
entitled to one vote per share. Shareholders may vote by proxy duly appointed in
writing. Under the CPO trust agreement, holders of CPOs who are not Mexican
nationals cannot exercise voting rights corresponding to the A shares
represented by their CPOs.
An annual general ordinary shareholders' meeting must be held during
the first four months after the end of each of our fiscal years to consider the
approval of a report of our board of directors regarding our performance and our
financial statements for the preceding fiscal year and to determine the
allocation of the profits for the preceding year. At the annual general
shareholders' meeting, any shareholder or group of shareholders representing 10%
or more of our outstanding voting stock has the right to appoint one regular and
one alternate director in addition to the directors elected by the majority and
the right to appoint a statutory auditor. The alternate director appointed by
the minority holders may only substitute for the director appointed by that
minority.
A general extraordinary shareholders' meeting may be called at any time
to deal with any of the matters specified by Article 182 of the General Law of
Commercial Companies, which include, among other things:
o extending our corporate existence;
o our early dissolution;
o increasing or reducing our fixed capital stock;
o changing our corporate purpose;
o changing our country of incorporation;
o changing our form of organization;
o a proposed merger;
o issuing preferred shares;
o redeeming our own shares;
o any amendment to our by-laws; and
o any other matter for which a special quorum is required by law or
by our by-laws.
The above-mentioned matters may only be dealt with at extraordinary
shareholders' meetings.
In order to vote at a meeting of shareholders, shareholders must appear
on the list that Indeval, the Mexican securities depositary, and the Indeval
participants holding shares on behalf of the shareholders, prepare prior to the
126
meeting or must deposit prior to that meeting the certificates representing
their shares at our offices or in a Mexican credit institution or brokerage
house, or foreign bank approved by our board of directors to serve this
function. The certificate of deposit with respect to the share certificates must
be presented to our company secretary at least 48 hours before a meeting of
shareholders. Our company secretary verifies that the person in whose favor any
certificate of deposit was issued is named in our share registry and issues an
admission pass authorizing that person's attendance at the meeting of
shareholders.
Our by-laws provide that a shareholder may only be represented by proxy
in a shareholders' meeting with a duly completed form provided by us authorizing
the proxy's presence. In addition, our by-laws require that the secretary acting
at the shareholders' meeting publicly affirm the compliance by all proxies with
this requirement.
A shareholders' resolution is required to take action on any matter
presented at a shareholders' meeting. At an ordinary meeting of shareholders,
the affirmative vote of the holders of a majority of the shares present at the
meeting is required to adopt a shareholders' resolution. At an extraordinary
meeting of shareholders, the affirmative vote of at least 50% of the capital
stock is required to adopt a shareholders' resolution, except that when amending
Article 22 of our by-laws (which specifies the list of persons who are not
eligible to be appointed as a director or a statutory auditor) the affirmative
vote of at least 75% of the voting stock is needed. Our by-laws also require the
approval of 75% of the voting shares of our capital stock to amend provisions in
our by-laws relating to the prior approval of the board of directors for share
transfers and the requirements for recording share transfers in our corporate
ledger.
The quorum for a first ordinary meeting of shareholders is 50% of our
outstanding and fully paid shares, and for the second ordinary meeting of
shareholders is any number of our outstanding and fully paid shares. The quorum
for the first extraordinary shareholders' meeting is 75% of our outstanding and
fully paid shares, and for the second extraordinary shareholders' meeting the
quorum is 50% of our outstanding and fully paid shares.
Rights of Minority Shareholders
Our by-laws provide that holders of at least 10% of our capital stock
are entitled to demand the postponement of the voting on any resolution of
which they deem they have not been adequately informed.
Under Mexican law, holders of at least 20% of our outstanding capital
stock entitled to vote on a particular matter may seek to have any shareholder
action with respect to that matter set aside, by filing a complaint with a
court of law within 15 days after the close of the meeting at which that action
was taken and showing that the challenged action violates Mexican law or our
by-laws. Relief under these provisions is only available to holders who were
entitled to vote on, or whose rights as shareholders were adversely affected
by, the challenged shareholder action and whose shares were not represented
when the action was taken or, if represented, voted against it.
Under Mexican law, an action for civil liabilities against directors
may be initiated by a shareholders' resolution. In the event shareholders
decide to bring an action of this type, the persons against whom that action is
brought will immediately cease to be directors. Additionally, shareholders
representing not less than 15% of the outstanding shares may directly exercise
that action against the directors; provided that:
o those shareholders shall not have voted against exercising such
action at the relevant shareholders' meeting; and
o the claim covers all of the damage alleged to have been caused to
us and not merely the damage suffered by the plaintiffs.
Any recovery of damage with respect to these actions will be for our
benefit and not that of the shareholders bringing the action.
Registration and Transfer
Our common stock is evidenced by share certificates in registered form
with registered dividend coupons attached. Our shareholders may hold their
shares in the form of physical certificates or through institutions that have
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accounts with Indeval. Accounts may be maintained at Indeval by brokers, banks
and other entities approved by the Mexican securities authority. We maintain a
stock registry, and, in accordance with Mexican law, only those holders listed
in the stock registry and those holding certificates issued by Indeval and by
Indeval participants indicating ownership are recognized as our shareholders.
Redemption
Our capital stock is subject to redemption upon approval of our
shareholders at an extraordinary shareholders' meeting.
Share Repurchases
If our shareholders decide at a general shareholders' meeting that we
should do so, we may purchase our outstanding shares for cancellation. We may
also repurchase our equity securities on the Mexican Stock Exchange at the then
prevailing market prices in accordance with the Mexican securities law. If we
intend to repurchase shares representing more than 1% of our outstanding shares
at a single trading session, we must inform the public of such intention at
least ten minutes before submitting our bid. If we intend to repurchase shares
representing 3% or more of our outstanding shares during a period of twenty
trading days, we would be required to conduct a public tender offer for such
shares. We must conduct share repurchases through the person or persons approved
by our board of directors, through a single broker dealer during the relevant
trading session without submitting bids during the first and the last 30 minutes
of each trading session and we must inform the Mexican Stock Exchange of the
results of any share repurchase no later than the business day following any
such share repurchase.
Directors' and Shareholders' Conflict of Interest
Under Mexican law, any shareholder that has a conflict of interest with
us with respect to any transaction is obligated to disclose such conflict and is
prohibited from voting on that transaction. A shareholder who violates this
prohibition may be liable for damages if the relevant transaction would not have
been approved without that shareholder's vote.
Under Mexican law, any director who has a conflict of interest with us
in any transaction must disclose that fact to the other directors and is
prohibited from voting on that transaction. Any director who violates this
prohibition will be liable for damages. Additionally, our directors and
statutory auditors may not represent shareholders in the shareholders' meetings.
Withdrawal Rights
Whenever our shareholders approve a change of corporate purpose, change
of nationality or transformation from one form of corporate organization to
another, Mexican law provides that any shareholder entitled to vote on that
change that has voted against it may withdraw from CEMEX and receive the amount
calculated as specified by Mexican law attributable to its shares, provided that
it exercises that right within 15 days following the adjournment of the meeting
at which the change was approved. For further details on the calculation of the
withdrawal right, see "- General."
Dividends
At the annual ordinary general meeting of shareholders, our board of
directors submits our financial statements together with a report on them by our
board of directors and the statutory auditors, to our shareholders for approval.
The holders of our shares, once they have approved the financial statements,
determine the allocation of our net income, after provision for income taxes,
legal reserve and statutory employee profit sharing payments, for the preceding
year. All shares of our capital stock outstanding and fully paid at the time a
dividend or other distribution is declared are entitled to share equally in that
dividend or other distribution.
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Liquidation Rights
In the event we are liquidated, the surplus assets remaining after
payment of all our creditors will be divided among our shareholders in
proportion to the respective shares held by them. The liquidator may, with the
approval of our shareholders, distribute the surplus assets in kind among our
shareholders, sell the surplus assets and divide the proceeds among our
shareholders or put the surplus assets to any other uses agreed to by a
majority of our shareholders voting at an extraordinary shareholders' meeting.
Differences Between Our Corporate Governance Practices and NYSE Standards for
Domestic Companies
For a description of significant ways in which our corporate
governance practices differ from those required of domestic companies under
NYSE standards visit our website at www.cemex.com (under the heading "Investor
Center/Corporate Governance").
Material Contracts
On June 23, 2003, CEMEX Espana Finance LLC, as issuer, CEMEX Espana,
Sandworth Plaza Holding B.V., Cemex Caracas Investments B.V., Cemex Caracas II
Investments B.V., Cemex Manila Investments B.V. and Cemex Egyptian Investments
B.V., as guarantors, and several institutional purchasers, entered into a Note
Purchase Agreement in connection with a private placement by CEMEX Espana
Finance, LLC. CEMEX Espana Finance, LLC issued to the institutional purchasers
U.S.$103,000,000 aggregate principal amount of 4.77% Senior Notes due 2010,
U.S.$96,000,000 aggregate principal amount of 5.36% Senior Notes due 2013 and
U.S.$201,000,000 aggregate principal amount of 5.51% Senior Notes due 2015.
On October 15, 2003, New Sunward Holding B.V. entered into a U.S.$1.15
billion multi-tranche Term Loan Agreement. The indebtedness incurred under the
agreement was guaranteed by CEMEX, CEMEX Mexico and Empresas Tolteca de Mexico
and was composed of three different tranches. The first tranche was a two-year
Euro denominated loan in the amount of (euro)256,365,000. The second tranche
was a three-year Dollar denominated loan in the amount of U.S.$550,000,000. The
third tranche was a three-year Yen denominated loan in the amount of
(Y)32,688,000,000. The terms of the second and third tranches can be extended
for an additional period of six months, subject to certain conditions. The
proceeds were used to repurchase U.S.$650 million of preferred equity and to
refinance other outstanding debt. On July 7, 2004 the three-year Dollar
denominated loan in the amount of U.S.$550,000,000 was completely prepaid. On
July 12, 2004, the three-year Yen denominated loan in the amount of
(Y)32,688,000,000 was reduced to (Y)16,288,000,000. On June 30, 2005, all
outstanding amounts under this multi-tranche Term Loan Agreement were prepaid.
On March 30, 2004, CEMEX Espana, with Sandworth Plaza Holding B.V.,
Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V., Cemex Manila
Investments B.V. and Cemex Egyptian Investments, B.V., as guarantors, entered
into a Term and Revolving Facilities Agreement with Banco Bilbao Vizcaya
Argentaria, S.A. and Societe Generale, as mandated lead arrangers, relating to
three credit facilities with an aggregate amount of (euro)250,000,000 and
(Y)19,308,000,000. The first facility was a five-year multi-currency term loan
facility with a variable interest rate; the second facility was a 364-day
multi-currency revolving credit facility; and the third facility was a
five-year Yen denominated term loan facility with a fixed interest rate. The
proceeds of these facilities were used to prepay part of CEMEX Espana's
outstanding debt as of that date and for general corporate purposes. On March
18, 2005, the term of the 364-day multi-currency revolving credit facility (up
to an aggregate amount of (euro)100,000,000) was extended for an additional
year and on March 31, 2006, all outstanding amounts under the revolving credit
facility were paid and the revolving credit facility expired.
On April 15, 2004, CEMEX Espana Finance LLC, as issuer, CEMEX Espana,
Sandworth Plaza Holding B.V., Cemex Caracas Investments B.V., Cemex Caracas II
Investments B.V., Cemex Manila Investments B.V. and Cemex Egyptian Investments
B.V., as guarantors, and several institutional purchasers, entered into a Note
Purchase Agreement in connection with a private placement by CEMEX Espana
Finance, LLC. CEMEX Espana Finance, LLC issued to the institutional purchasers
(Y)4,980,600,000 aggregate principal amount of 1.79% Senior Notes due 2010,
(Y)6,087,400,000 aggregate principal amount of 1.99% Senior Notes due 2011. The
proceeds of the private placement were used to repay existing facilities and
for general corporate purposes.
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On June 23, 2004, we entered into a three-year U.S.$800 million
revolving credit facility guaranteed by CEMEX Mexico and Empresas Tolteca de
Mexico. The facility consists of credit lines with two different sublimits. The
facility provides for swing line loan availability of U.S.$100 million and has a
sublimit for standby letters of credit of U.S.$200 million. The proceeds were
applied to refinance outstanding debt. On June 6, 2005, this revolving credit
facility was amended; the total facility was reduced to U.S. $700 million and
extended to a new four-year period. The sublimits of the swing line and standby
letters of credit were left unchanged.
On September 24, 2004, New Sunward Holding B.V., entered into a
U.S.$1.25 billion multi-currency term loan that was guaranteed by CEMEX, CEMEX
Mexico and Empresas Tolteca de Mexico and consisted of two tranches. The first
tranche was a multi-currency one-year U.S.$500 million term loan denominated in
Dollars, Euros or Pounds (or a combination thereof) with an optional six-month
extension. The second tranche was a multi-currency three-year U.S.$750 million
term loan denominated in Dollars, Euros, or Pounds (or a combination thereof).
The proceeds of the facility were used to finance the RMC acquisition. This
facility was fully repaid on April 13, 2005.
On September 24, 2004, CEMEX Espana entered into a U.S.$3.8 billion
multi-currency term loan that consisted of three tranches. The first tranche was
a multi-currency one-year U.S.$1.5 billion back-up term loan denominated in
Dollars, Euros or Pounds (or a combination thereof) with an optional twelve
month extension. The second tranche was a multi-currency three-year U.S.$1.15
billion term loan denominated in Dollars, Euros or Pounds (or a combination
thereof). The third tranche was a multi-currency five-year U.S.$1.15 billion
term loan denominated in Dollars, Euros or Pounds (or a combination thereof).
Proceeds from the first tranche of the CEMEX Espana facility were used to
refinance RMC debt. All other proceeds were used to finance the RMC acquisition.
On February 25, 2005 the facilities agreement was amended and on June 21, 2005,
the first tranche was cancelled. On July 4, 2005, the facilities agreement was
amended and restated. The amended and restated facility is a U.S. $2.3 billion
multi-currency revolving facilities agreement. The first tranche is a
multi-currency U.S. $575 million revolving loan maturing on September 2007. The
second tranche is a multi-currency U.S. $1.15 billion revolving loan maturing on
September 2009. The third tranche is a multi-currency five-year U.S. $575
million revolving facility with two optional one-year extensions. All borrowings
under the amended and restated facilities agreement can be denominated in
Dollars, Euros, or Pounds (or a combination thereof). This indebtedness is
guaranteed by Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V.,
Cemex American Holdings B.V., Cemex Shipping B.V., Cemex Egyptian Investments
B.V. and Cemex Asia B.V. (which became a guarantor on December 16, 2005).
On September 27, 2004, CEMEX UK Limited and RMC entered into an
Implementation Agreement, pursuant to which the parties agreed to implement a
scheme of arrangement under U.K. law for the acquisition of RMC by CEMEX UK
Limited. The agreement contained assurances and confirmations between the
parties regarding the implementation of the scheme of arrangement on a timely
basis and the conduct of RMC's business in the ordinary course. On the same
date, CEMEX UK Limited acquired 50 million shares of RMC for approximately
(pound)432 million (U.S.$786 million, based on a Pound/Dollar exchange rate of
(pound)0.5496 to U.S.$1.00 on September 27, 2004), which represented
approximately 18.8% of RMC's outstanding shares. On March 1, 2005, following
board and shareholder approval and clearance from the applicable regulators, the
scheme of arrangement became effective and CEMEX UK Limited purchased the
remaining 81.2% of RMC's outstanding shares completing our acquisition of RMC.
On February 4, 2005, CEMEX, Inc. and Votorantim Participacoes S.A., or
Votorantim, entered into an Asset Purchase Agreement (which was amended by
Amendment No. 1 thereto entered into by the parties on March 31, 2005), pursuant
to which CEMEX, Inc. sold its Charlevoix, Michigan and Dixon, Illinois cement
plants and several distribution terminals located in the Great Lakes region to
Votorantim for an aggregate purchase price of approximately U.S.$389 million.
The distribution terminals sold to Votorantim are located in Green Bay,
Manitowoc and Milwaukee, Wisconsin; Chicago, Illinois; Ferrysburg, Michigan;
Cleveland and Toledo, Ohio; and Owen Sound, Ontario, Canada.
On March 16, 2005, CEMEX Espana and RMC entered into an Amended and
Restated (pound)1,000,000,000 Term and Revolving Credit Agreement, which was
originally entered into by RMC on October 18, 2002, relating to a multi-currency
five-year (pound)600,000,000 revolving credit facility and a multi-currency
five-year (pound)400,000,000 term loan facility. The amendments to the original
agreement included a waiver of the provision requiring mandatory
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prepayment in the event of a change of control, the inclusion of CEMEX Espana,
Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V., Cemex Manila
Investments B.V., Cemex Egyptian Investments B.V., Cemex American Holdings B.V.
and Cemex Shipping B.V, as guarantors, amendments to the financial covenants
applicable to CEMEX Espana on a consolidated basis and the extension of the
termination date of the revolving credit facility to six years from the date of
the amended and restated agreement. Simultaneous with the execution of the
amended and restated agreement, the total amount of the facilities was reduced
to (pound)604,354,196; the revolving credit facility was reduced to
(pound)425,558,038 and the term loan facility was reduced to (pound)178,796,154.
This Term and Revolving Credit Agreement was fully prepaid and cancelled on
November 7, 2005.
On April 5, 2005, we entered into a U.S.$1,000,000,000 180-day term
credit agreement guaranteed by CEMEX Mexico and Empresas Tolteca de Mexico. The
multi-currency credit facility was entered into to fund the repayment of amounts
outstanding under the credit agreement of New Sunward Holding B.V., dated
September 24, 2004. This credit agreement was fully prepaid on June 6, 2005.
On May 31, 2005, we entered into a multi-credit five-year U.S.$1.2
billion revolving credit agreement guaranteed by CEMEX Mexico and Empresas
Tolteca de Mexico. The multi-currency credit facility was entered into to fund
the repayment of amounts outstanding under the credit agreement of CEMEX, S.A.
de C.V. dated April 5, 2005.
On June 27, 2005, New Sunward Holding B.V. entered into a
U.S.$700,000,000 Term and Revolving Facilities Agreement with several lenders,
Banco Bilbao Vizcaya Argentaria, S.A., BNP Paribas and Citigroup Global Markets
as mandated lead arrangers and Citibank, N.A. as agent. This agreement is
guaranteed by CEMEX, CEMEX Mexico and Empresas Tolteca de Mexico. The proceeds
from this Term and Revolving Facilities Agreement was used to repay of all
amounts due and payable under the U.S.$1,150,000,000 term loan agreement dated
October 15, 2003 and to pay other debt of New Sunward Holding B.V.
On June 13, 2005, CEMEX Espana Finance LLC, as issuer, CEMEX Espana,
Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V., Cemex Manila
Investments B.V., Cemex Egyptian Investments B.V., Cemex American Holdings B.V.
and Cemex Shipping B.V., as guarantors, and several institutional purchasers,
entered into a Note Purchase Agreement in connection with a private placement
and issuance by CEMEX Espana Finance, LLC of U.S.$133,000,000 aggregate
principal amount of 5.18% Senior Notes due 2010, and U.S.$192,000,000 aggregate
principal amount of 5.62% Senior Notes due 2015. The proceeds of the private
placement were used to repay existing facilities and for general corporate
purposes. On December 16, 2005, Cemex Asia B.V. became a guarantor to the Notes
issued in connection with this Note Purchase Agreement. On December 31, 2005,
Cemex Manila Investments B.V. was merged with and into Cemex Asia B.V. The
surviving company was Cemex Asia B.V.
On July 1, 2005, we and Ready Mix USA entered into limited liability
company agreements and asset contribution agreements in connection with our
establishment of two jointly-owned limited liability companies, CEMEX Southeast,
LLC, a cement company, and Ready Mix USA, LLC, a ready-mix concrete company, to
serve the construction materials market in the southeast region of the United
States. Under the terms of the limited liability company agreements and related
asset contribution agreements, we contributed two cement plants (Demopolis,
Alabama and Clinchfield, Georgia) and eleven cement terminals to CEMEX
Southeast, LLC, representing approximately 98% of its contributed capital, while
Ready Mix USA contributed cash to CEMEX Southeast, LLC representing
approximately 2% of its contributed capital. In addition, we contributed our
ready-mix concrete, aggregates and concrete block assets in the Florida
panhandle and southern Georgia to Ready Mix USA, LLC, representing approximately
9% of its contributed capital, while Ready Mix USA contributed all its ready-mix
concrete and aggregate operations in Alabama, Georgia, the Florida panhandle and
Tennessee, as well as its concrete block operations in Arkansas, Tennessee,
Mississippi, Florida and Alabama to Ready Mix USA, LLC, representing
approximately 91% of its contributed capital. We own a 50.01% interest, and
Ready Mix USA owns a 49.99% interest, in the profits and losses and voting
rights of CEMEX Southeast, LLC, while Ready Mix USA owns a 50.01% interest, and
we own a 49.99% interest, in the profits and losses and voting rights of Ready
Mix USA, LLC. CEMEX Southeast, LLC is managed by us, and Ready Mix USA, LLC is
managed by Ready Mix USA. Under the terms of the limited liability company
agreements, after the third anniversary of the formation of these companies,
Ready Mix USA will have the option, but not the obligation, to require us to
purchase Ready Mix USA's interest in the two companies at a purchase price equal
to the greater of the book value of the companies' assets or a formula
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based on the companies' earnings. This option will expire on the twenty fifth
anniversary of the formation of these companies.
On September 1, 2005, RMC Mid-Atlantic, LLC, our indirect wholly-owned
U.S. subsidiary, and Ready Mix USA entered into an asset purchase agreement
pursuant to which we sold 27 ready-mix plants and four concrete block facilities
located in the Atlanta, Georgia metropolitan area to Ready Mix USA, LLC for
approximately U.S.$125 million.
Exchange Controls
See Item 3 -- "Key Information -- Mexican Peso Exchange Rates."
Taxation
Mexican Tax Considerations
General
The following is a summary of certain Mexican federal income tax
considerations relating to the ownership and disposition of our CPOs or ADSs.
This summary is based on Mexican income tax law that is in effect on
the date of this annual report, which is subject to change. This summary is
limited to non-residents of Mexico, as defined below, who own our CPOs or ADSs.
This summary does not address all aspects of Mexican income tax law. Holders are
urged to consult their tax counsel as to the tax consequences that the purchase,
ownership and disposition of our CPOs or ADSs, may have.
For purposes of Mexican taxation, an individual is a resident of Mexico
if he or she has established his or her home in Mexico. If the individual also
has a home in another country, he or she will be considered a resident of Mexico
if his or her center of vital interests is in Mexico. Under Mexican law, an
individual's center of vital interests is in Mexico if, among other things:
o more than the 50% of the individual's total income in the relevant
year comes from Mexican sources; or
o the individual's main center of professional activities is in
Mexico.
A legal entity is a resident of Mexico if it is organized under the
laws of Mexico or if it maintains the principal administration of its business
or the effective location of its management in Mexico.
A Mexican citizen is presumed to be a resident of Mexico for tax
purposes unless such person or entity can demonstrate otherwise. If a legal
entity or an individual is deemed to have a permanent establishment in Mexico
for tax purposes, all income attributable to such permanent establishment will
be subject to Mexican taxes, in accordance with relevant tax provisions.
Individuals or legal entities that cease to be residents of Mexico must
notify the tax authorities within 15 business days before their change of
residency.
A non-resident of Mexico is a legal entity or individual that does not
satisfy the requirements to be considered a resident of Mexico for Mexican
federal income tax purposes. The term U.S. Shareholder shall have the same
meaning ascribed below under the section "-- U.S. Federal Income Tax
Considerations."
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Taxation of Dividends
Dividends, either in cash or in any other form, paid to non-residents
of Mexico with respect to A shares or B shares represented by the CPOs (or in
the case of holders who hold CPOs represented by ADSs), will not be subject to
withholding tax in Mexico.
Disposition of CPOs or ADSs
Gains on the sale or disposition of ADSs by a holder who is a
non-resident of Mexico will not be subject to Mexican tax.
Gains on the sale or disposition of CPOs by a holder who is a
non-resident of Mexico will not be subject to any Mexican tax if the sale is
carried out through the Mexican Stock Exchange or other recognized securities
market, as determined by Mexican tax authorities. Gains realized on sales or
other dispositions of CPOs by non-residents of Mexico made in other
circumstances would be subject to Mexican income tax.
Under the terms of the Convention Between the United States and Mexico
for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect
to Income Taxes, and a Protocol thereto, the Tax Treaty, gains obtained by a
U.S. Shareholder eligible for benefits under the Tax Treaty on the disposition
of CPOs will not generally be subject to Mexican tax, provided that such gains
are not attributable to a permanent establishment of such U.S. Shareholder in
Mexico and that the eligible U.S. Shareholder did not own, directly or
indirectly, 25% or more of our outstanding stock during the 12-month period
preceding the disposition. In the case of non-residents of Mexico eligible for
the benefits of a tax treaty, gains derived from the disposition of ADSs or CPOs
may also be exempt, in whole or in part, from Mexican taxation under a treaty to
which Mexico is a party.
Deposits and withdrawals of ADSs will not give rise to any Mexican tax
or transfer duties.
Estate and Gift Taxes
There are no Mexican inheritance or succession taxes applicable to the
ownership, transfer or disposition of ADSs or CPOs by holders that are
non-residents of Mexico, although gratuitous transfers of CPOs may, in some
circumstances, cause a Mexican federal tax to be imposed upon a recipient.
There are no Mexican stamp, issue, registration or similar taxes or duties
payable by holders of ADSs or CPOs.
U.S. Federal Income Tax Considerations
General
The following is a summary of the material U.S. federal income tax
consequences relating to the ownership and disposition of our CPOs and ADSs.
This summary is based on provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), U.S. Treasury regulations promulgated under
the Code, and administrative rulings, and judicial interpretations of the Code,
all as in effect on the date of this annual report and all of which are subject
to change, possibly retroactively. This summary is limited to U.S. Shareholders
(as defined below) who hold our ADSs or CPOs, as the case may be, as capital
assets. This summary does not discuss all aspects of U.S. federal income
taxation which may be important to an investor in light of its individual
circumstances, for example, an investor subject to special tax rules (e.g.,
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, expatriates,
tax-exempt investors, persons who own 10% or more of our voting stock, or
holders whose functional currency is not the Dollar or U.S. Shareholders who
hold a CPO or an ADS as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset). In addition, this summary does
not address any aspect of state, local or foreign taxation.
For purposes of this summary, a "U.S. Shareholder" means a beneficial
owner of CPOs or ADSs, who is for U.S. federal income tax purposes:
o an individual who is a citizen or resident of the United States
for U.S. federal income tax purposes;
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o a corporation or other entity taxable as a corporation that is
created or organized in the United States or under the laws of the
United States or any state thereof (including the District of
Columbia);
o an estate the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one
or more United States persons have the authority to control all
substantial decisions of such trust.
If a partnership (including any entity treated as a partnership for
U.S. federal income tax purposes) is the beneficial owner of CPOs or ADSs, the
U.S. federal income tax treatment of a partner in such partnership will
generally depend upon the status of the partner and the activities of the
partnership. A partner in a partnership that is the beneficial owner of CPOs or
ADSs is urged to consult its own tax advisor regarding the associated tax
consequences.
U.S. Shareholders should consult their own tax advisors as to the
particular tax consequences to them under United States federal, state and
local, and foreign laws relating to the ownership and disposition of our CPOs
and ADSs.
Ownership of CPOs or ADSs in general
In general, for U.S. Federal income tax purposes, U.S. Shareholders
who own ADSs will be treated as the beneficial owners of the CPOs represented
by those ADSs, and each CPO will represent a beneficial interest in two A
shares and one B share.
Taxation of dividends with respect to CPOs and ADSs
Distributions of cash or property with respect to the A shares or B
shares represented by CPOs, including CPOs represented by ADSs, generally will
be includible in the gross income of a U.S. Shareholder as foreign source
"passive" or "financial services" income on the date the distributions are
received by the CPO trustee or successor thereof, to the extent paid out of our
current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. Pursuant to changes in U.S. tax law applicable to tax
years beginning after December 31, 2006, payments that would have been treated
as "financial services" income for these purposes will be treated as "general
category" income. These dividends will not be eligible for the
dividends-received deduction allowed to corporate U.S. Shareholders. To the
extent, if any, that the amount of any distribution by us exceeds our current
and accumulated earnings and profits as determined under U.S. federal income
tax principles, it will be treated first as a tax-free return of the U.S.
Shareholder's adjusted tax basis in the CPOs or ADSs and thereafter as capital
gain.
The gross amount of any dividends paid in Pesos will be includible in
the income of a U.S. Shareholder in a Dollar amount calculated by reference to
the exchange rate in effect the day the Pesos are received by the CPO trustee
or successor thereof whether or not they are converted into Dollars on that
day. Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date the dividend payment is includible in income to
the date such payment is converted into U.S. Dollars will be treated as
ordinary income or loss. Such gain or loss will generally be income from
sources within the United States for foreign tax credit limitation purposes.
Dividend income is generally taxed as ordinary income. However, a
maximum United States federal income tax rate of 15 percent will apply to
"qualified dividend income" received by U.S. Shareholders that are individuals
(as well as certain trusts and estates) in taxable years beginning before
January 1, 2011, provided that certain holding period requirements are met.
"Qualified dividend income" includes dividends paid on shares of "qualified
foreign corporations" if, among other things: (i) the shares of the foreign
corporation are readily tradable on an established securities market in the
United States; or (ii) the foreign corporation is eligible with respect to
substantially all of its income for the benefits of a comprehensive income tax
treaty with the United States which contains an exchange of information
program.
We believe that we are a "qualified foreign corporation" because (i)
the ADSs trade on the New York Stock Exchange and (ii) we are eligible for the
benefits of the comprehensive income tax treaty between Mexico and
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the United States which includes an exchange of information program.
Accordingly, we believe that any dividends we pay should constitute "qualified
dividend income" for United States federal income tax purposes. There can be no
assurance, however, that we will continue to be considered a "qualified foreign
corporation" and that our dividends will continue to be "qualified dividend
income."
Taxation of capital gains on disposition of CPOs or ADSs
The sale or exchange of CPOs or ADSs will result in the recognition of
gain or loss by a U.S. Shareholder for U.S. federal income tax purposes in an
amount equal to the difference between the amount realized and the U.S.
Shareholder's tax basis therein. That gain or loss recognized by a U.S.
Shareholder will be long-term capital gain or loss if the U.S. Shareholder's
holding period for the CPOs or ADSs exceeds one year at the time of disposition.
Long term capital gain realized by a U.S. Shareholder that is an individual (as
well as certain trusts and estates) upon the sale or exchange of CPOs or ADSs
before the end of a taxable year which begins before January 1, 2011, generally
will be subject to a maximum United States federal income tax rate of 15
percent. The deduction of capital losses is subject to limitations. Gain from
the sale or exchange of the CPOs or ADSs usually will be treated as U.S. source
for foreign tax credit purposes; losses will generally be allocated against U.S.
source income. Deposits and withdrawals of CPOs by U.S. Shareholders in exchange
for ADSs will not result in the realization of gain or loss for U.S. federal
income tax purposes.
United States Backup Withholding and Information Reporting
A U.S. Shareholder may, under certain circumstances, be subject to
information reporting with respect to some payments to that U.S. Shareholder
such as dividends or the proceeds of a sale or other disposition of the CPOs or
ADSs. Backup withholding at a 28 percent rate also may apply to amounts paid to
such holder unless such holder (i) is a corporation or comes within certain
exempt categories, and demonstrates this fact when so required, or (ii) provides
a correct taxpayer identification number and otherwise complies with applicable
requirements of the backup withholding rules. Backup withholding is not an
additional tax. Amounts withheld as backup withholding may be creditable against
the U.S. Shareholder's federal income tax liability, and the U.S. Shareholder
may obtain a refund of any excess amounts withheld under the backup withholding
rules by filing the appropriate claim for refund with the Internal Revenue
Service and furnishing any required information.
Documents on Display
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance with these requirements, file reports
and information statements and other information with the Securities and
Exchange Commission. These reports and information statements and other
information filed by us with the Securities and Exchange Commission can be
inspected and copied at the Public Reference Section of the Securities and
Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Item 11 - Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
See Item 5 -- "Operating and Financial Review and Prospects --
Derivatives and Other Hedging Instruments."
Item 12 - Description of Securities Other than Equity Securities
------------------------------------------------------
Not applicable.
135
PART II
Item 13 - Defaults, Dividend Arrearages and Delinquencies
-----------------------------------------------
None.
Item 14 - Material Modifications to the Rights of Security Holders and Use of
-------------------------------------------------------------------
Proceeds
--------
None.
Item 15 - Controls and Procedures
-----------------------
CEMEX, S.A. de C.V.
- -------------------
Disclosure Controls and Procedures. The Chief Executive Officer and
Executive Vice President of Planning and Finance of CEMEX, S.A. de C.V.
("CEMEX") have evaluated the effectiveness of CEMEX's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of December
31, 2005. Based on such evaluation, such officers have concluded that CEMEX's
disclosure controls and procedures are effective as of December 31, 2005.
Internal Control Over Financial Reporting. There were no changes in
CEMEX's internal control over financial reporting (as such term is defined in
Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during fiscal 2005 that
have materially affected, or are reasonably likely to materially affect, CEMEX's
internal control over financial reporting.
CEMEX Mexico, S.A. de C.V.
- --------------------------
Disclosure Controls and Procedures. The Chief Executive Officer and
Executive Vice President of Planning and Finance of CEMEX Mexico, S.A. de C.V.
("CEMEX Mexico") have evaluated the effectiveness of CEMEX Mexico's disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of December 31, 2005. Based on such
evaluation, such officers have concluded that CEMEX Mexico's disclosure controls
and procedures are effective as of December 31, 2005.
Internal Control Over Financial Reporting. There were no changes in
CEMEX Mexico's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during fiscal
2005 that have materially affected, or are reasonably likely to materially
affect, CEMEX Mexico's internal control over financial reporting.
Empresas Tolteca de Mexico, S.A. de C.V.
- ----------------------------------------
Disclosure Controls and Procedures. The Chief Executive Officer and
Executive Vice President of Planning and Finance of Empresas Tolteca de Mexico,
S.A. de C.V. ("Empresas Tolteca") have evaluated the effectiveness of Empresas
Tolteca's disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2005. Based
on such evaluation, such officers have concluded that Empresas Tolteca's
disclosure controls and procedures are effective as of December 31, 2005.
Internal Control Over Financial Reporting. There were no changes in
Empresas Tolteca's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during fiscal
2005 that have materially affected, or are reasonably likely to materially
affect, Empresas Tolteca's internal control over financial reporting.
136
Item 16A - Audit Committee Financial Expert
--------------------------------
Our board of directors has determined that it has an "audit committee
financial expert" (as defined in Item 16A of Form 20-F) serving on its audit
committee. Mr. Jose Manuel Rincon Gallardo meets the requisite qualifications.
Item 16B - Code of Ethics
--------------
We have adopted a written code of ethics that applies to all our
senior executives, including our principal executive officer, principal
financial officer and principal accounting officer.
You may request a copy of our code of ethics, at no cost, by writing
to or telephoning us as follows:
CEMEX, S.A. de C.V.
Av. Ricardo Margain Zozaya #325
Colonia Valle del Campestre
Garza Garcia, Nuevo Leon, Mexico 66265.
Attn: Luis Hernandez or Javier Amaya
Telephone: (011-5281) 8888-8888
Item 16C - Principal Accountant Fees and Services
--------------------------------------
Audit Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide charged us approximately Ps126.7 million in fiscal year 2005 in
connection with the professional services rendered for the audit of our annual
financial statements and services normally provided by them relating to
statutory and regulatory filings or engagements. In fiscal year 2004, KPMG
Cardenas Dosal, S.C. in Mexico and KPMG firms worldwide billed us approximately
Ps46.3 million for these services.
Audit-Related Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide billed us approximately Ps5.1 million in fiscal year 2005 for
assurance and related services reasonably related to the performance of our
audit. In fiscal year 2004, KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide charged us approximately Ps4.6 million for audit-related services.
These fees relate mainly to technical accounting support and guidance provided
by KPMG in connection with the implementation of newly issued accounting
standards.
Tax Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms worldwide
charged us approximately Ps28.9 million in fiscal year 2005 for tax compliance,
tax advice and tax planning. KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide billed us approximately Ps33.5 million for tax-related services in
fiscal year 2004.
All Other Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide billed us Ps1.2 million in fiscal year 2005 for products and services
other than those comprising audit fees, audit-related fees and tax fees. In
fiscal year 2004, KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms worldwide
charged us Ps13.6 million for products and services in this category. These fees
relate mainly to services provided by KPMG to us with respect to our due
diligence activities around the world.
Audit Committee Pre-approval Policies and Procedures
Our audit committee is responsible, among other things, for the
appointment, compensation and oversight of our external auditors. To assure the
independence of our independent auditors, our audit committee pre-approves
annually a catalog of specific audit and non-audit services in the categories
Audit Services, Audit-Related Services, Tax-Related Services, and Other Services
that may be performed by our auditors, as well as the budgeted fee levels for
each of these categories. All other permitted services must receive a specific
approval from our audit committee. Our external auditor periodically provides a
report to our audit committee in order for our audit committee to review the
services that our external auditor is providing, as well as the status and cost
of those services.
137
During 2005, none of the services provided to us by our external
auditors were approved by our audit committee pursuant to the de minimis
exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
Item 16D - Exemptions from the Listing Standards for Audit Committees
----------------------------------------------------------
Not applicable.
Item 16E - Purchases of Equity Securities by the Issuer and Affiliated
-----------------------------------------------------------
Purchasers
----------
In connection with our 2004 annual shareholders' meeting held on April
28, 2005, our shareholders approved a stock repurchase program in an amount of
up to Ps6 billion (approximately U.S.$565 million) to be implemented between
April 2005 and April 2006. Although this program was in place, during 2005
neither we nor any of our subsidiaries purchased any of our shares. This
program expired in April 2006 and no shares were repurchased under this
program.
In connection with our 2005 annual shareholders' meeting held on April
27, 2006, our shareholders approved a stock repurchase program in an amount of
up to Ps6 billion (approximately U.S.$545 million) to be implemented between
April 2006 and April 2007. As of the date of this annual report, no shares were
repurchased under this program.
138
PART III
Item 17 - Financial Statements
--------------------
Not applicable.
Item 18 - Financial Statements
--------------------
See pages F-1 through F-74, incorporated herein by reference.
Item 19 - Exhibits
--------
1.1 Amended and Restated By-laws of CEMEX, S.A. de C.V. (a)
2.1 Form of Trust Agreement between CEMEX, S.A. de C.V., as founder of the
trust, and Banco Nacional de Mexico, S.A. regarding the CPOs. (b)
2.2 Amendment Agreement, dated as of November 21, 2002, amending the Trust
Agreement between CEMEX, S.A. de C.V., as founder of the trust, and
Banco Nacional de Mexico, S.A. regarding the CPOs. (c)
2.3 Form of CPO Certificate. (b)
2.4 Form of Second Amended and Restated Deposit Agreement (A and B share
CPOs), dated as of August 10, 1999, among CEMEX, S.A. de C.V.,
Citibank, N.A. and holders and beneficial owners of American Depositary
Shares. (b)
2.5 Form of American Depositary Receipt (included in Exhibit 2.4)
evidencing American Depositary Shares. (b)
2.6 Form of Certificate for shares of Series A Common Stock of CEMEX, S.A.
de C.V. (b)
2.7 Form of Certificate for shares of Series B Common Stock of CEMEX, S.A.
de C.V. (b)
4.1 Note Purchase Agreement dated June 23, 2003, by and among CEMEX Espana
Finance, LLC, as issuer, CEMEX Espana, Sandworth Plaza Holding B.V.,
Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V.,
Cemex Manila Investments B.V. and Cemex Egyptian Investments B.V., as
guarantors, and several institutional purchasers named therein, in
connection with the issuance by CEMEX Espana Finance, LLC of U.S.$103
million aggregate principal amount of Senior Notes due 2010, U.S.$96
million aggregate principal amount of Senior Notes due 2013, U.S.$201
million aggregate principal amount of Senior Notes due 2015. (d)
4.2 $1,150,000,000 Term Loan Agreement, dated October 15, 2003, by and
among New Sunward Holding B.V. as borrower, CEMEX, S.A. de C.V., CEMEX
Mexico, S.A. de C.V. and Empresas Tolteca de Mexico, S.A. de C.V. as
guarantors, and the several lenders named therein. (d)
4.3 Term and Revolving Facilities Agreement, dated as of March 30, 2004, by
and among CEMEX Espana, as borrower, Sandworth Plaza Holding B.V.,
Cemex Caracas Investments B.V., Cemex Caracas II Investments B.V.,
Cemex Manila Investments B.V. and Cemex Egyptian Investments, B.V., as
guarantors, Banco Bilbao Vizcaya Argentaria, S.A. and Societe Generale,
as mandated lead arrangers, and the several banks and other financial
institutions named therein, as lenders, for an aggregate amount of
(euro)250,000,000 and (Y)19,308,000,000. (d)
4.4 (euro)250,000,000, (Y)19,308,000,000 Term and Revolving Facilities
Agreement, dated March 30, 2004, for CEMEX ESPANA, S.A., as Borrower,
CEMEX Caracas Investments B.V., CEMEX Caracas II Investments B.V.,
CEMEX Egyptian Investments B.V., CEMEX Manila Investments B.V. and
Sandworth Plaza Holding B.V., as Guarantors, arranged by Banco Bilbao
Vizcaya Argentaria, S.A. and Societe Generale, S.A., with Banco Bilbao
Vizcaya Argentaria, S.A. acting as Agent. (d)
4.5 CEMEX Espana Finance LLC Note Purchase Agreement, dated as of April 15,
2004 for (Y)4,980,600,000 1.79% Senior Notes, Series 2004, Tranche 1,
due 2010 and (Y)6,087,400,000 1.99% Senior Notes, Series 2004, Tranche
2, due 2011. (e)
4.6 U.S.$800,000,000 Credit Agreement, dated as of June 23, 2004, among
CEMEX, S.A. de C.V., as Borrower and CEMEX Mexico, S.A. de C.V. and
Empresas Tolteca de Mexico, S.A. de C.V., as Guarantors and Barclays
Bank PLC as Issuing Bank and Documentation Agent and ING Bank N.V. as
Issuing Bank and Barclays Capital, the Investment Banking division of
Barclays Bank Plc as Joint Bookrunner and ING Capital LLC as Joint
Bookrunner and Administrative Agent. (e)
139
4.7 U.S.$1,250,000,000 Term and Revolving Facilities Agreement, dated
September 24, 2004 for New Sunward Holding B.V., as Borrower, CEMEX,
S.A. de C.V., CEMEX Mexico, S.A. de C.V. and Empresas Tolteca De
Mexico, S.A. de C.V., as Guarantors, arranged by Citigroup Global
Markets Limited and Goldman Sachs International, with Citibank
International PLC acting as Agent. (e)
4.8 U.S.$3,800,000,000 Term and Revolving Facilities Agreement, dated
September 24, 2004 for CEMEX Espana, S.A., as Borrower, CEMEX Espana,
S.A., CEMEX Caracas Investments B.V., Cemex Caracas II Investments
B.V., Cemex Egyptian Investments B.V., CEMEX Manila Investments B.V.,
CEMEX American Holdings B.V., as Guarantors, arranged by Citigroup
Global Markets Limited and Goldman Sachs International with Citibank
International PLC acting as Agent. (e)
4.9 Implementation Agreement, dated September 27, 2004, by and between
CEMEX UK Limited and RMC Group p.l.c. (e) 4.10 Scheme of Arrangement,
dated October 25, 2004, pursuant to which CEMEX UK Limited acquired the
outstanding shares of RMC Group p.l.c. (e)
4.11 Asset Purchase Agreement by and between CEMEX, Inc. and Votorantim
Participacoes S.A., dated as of February 4, 2005. (e)
4.11.1 Amendment No. 1 to Asset Purchase Agreement, dated as of March 31,
2005, by and between CEMEX, Inc. and Votorantim Participacoes S.A. (e)
4.12 (pound)1,000,000,000 Amended and Restated Term and Revolving Credit
Agreement, dated March 16, 2005, by and among RMC Group Limited, CEMEX
Espana, S.A., Cemex Caracas Investments B.V., Cemex Caracas II
Investments B.V., Cemex Egyptian Investments B.V., Cemex Manila
Investments B.V., Cemex American Holdings B.V. and Cemex Shipping B.V.,
as Original Guarantors, RMC Group Limited, as Original Borrower, Banc
of America Securities Limited, BNP Paribas, HSBC Investment Bank plc,
the Royal Bank of Scotland plc, West LB AG, London Branch, as Mandated
Lead Arrangers and the Royal Bank of Scotland plc, as Agent. (e)
4.13 U.S.$1,000,000,000 Term Credit Agreement, dated as of April 5, 2005,
among CEMEX, S.A. de C.V., as Borrower, CEMEX Mexico, S.A. de C.V., as
Guarantor, Empresas Tolteca de Mexico, S.A. de C.V., as Guarantor,
Barclays Bank PLC, as Administrative Agent, Barclays Capital, the
Investment Banking Division of Barclays Bank PLC, as Joint Lead
Arranger and Joint Bookrunner, Citigroup Global Markets Inc., as
Documentation Agent, Joint Lead Arranger and Joint Bookrunner, Barclays
Bank PLC, Citibank, N.A., and Citibank, N.A., Nassau, Bahamas Branch as
Lenders. (e)
4.14 U.S.$1,200,000,000 Term Credit Agreement, dated as of May 31, 2005,
among CEMEX, S.A. de C.V., as Borrower, CEMEX Mexico, S.A. de C.V., as
Guarantor, Empresas Tolteca de Mexico, S.A. de C.V., as Guarantor,
Barclays Bank PLC, as Administrative Agent, Barclays Capital, the
Investment Banking Division of Barclays Bank PLC, as Joint Lead
Arranger and Joint Bookrunner, and Citigroup Global Markets Inc., as
Documentation Agent, Joint Lead Arranger and Joint Bookrunner. (f)
4.15 U.S.$700,000,000 Term and Revolving Facilities Agreement, dated June
27, 2005, for New Sunward Holding B.V., as Borrower, CEMEX, S.A. de
C.V., CEMEX Mexico, S.A. de C.V. and Empresas Tolteca De Mexico, S.A.
de C.V., as Guarantors, arranged by Banco Bilbao Vizcaya Argentaria,
S.A., BNP Paribas and Citigroup Global Markets Limited, as Mandated
Lead Arrangers and Joint Bookrunners, the several financial
institutions named therein, as Lenders, and Citibank, N.A., as Agent.
(f)
4.16 Note Purchase Agreement, dated as of June 13, 2005, among CEMEX Espana
Finance LLC, as issuer, CEMEX Espana, Cemex Caracas Investments B.V.,
Cemex Caracas II Investments B.V., Cemex Manila Investments B.V., Cemex
Egyptian Investments B.V., Cemex American Holdings B.V. and Cemex
Shipping B.V., as guarantors, and several institutional purchasers,
relating to the private placement by CEMEX Espana Finance, LLC of
U.S.$133,000,000 aggregate principal amount of 5.18% Senior Notes due
2010, and U.S.$192,000,000 aggregate principal amount of 5.62% Senior
Notes due 2015. (f)
4.17 Amended and Restated Limited Liability Company Agreement of CEMEX
Southeast LLC, dated as of July 1, 2005, among CEMEX Southeast LLC,
CEMEX Southeast Holdings, LLC, Ready Mix USA, Inc. and CEMEX, Inc. (f)
4.17.1 Amendment No. 1 to Amended and Restated Limited Liability Company
Agreement of CEMEX Southeast LLC, dated as of September 1, 2005, among
CEMEX Southeast LLC, CEMEX Southeast Holdings, LLC, Ready Mix USA, Inc.
and CEMEX, Inc. (f)
4.18 Limited Liability Company Agreement of Ready Mix USA, LLC, dated as of
July 1, 2005, among Ready Mix USA, LLC, CEMEX Southeast Holdings, LLC,
Ready Mix USA, Inc. and CEMEX, Inc. (f)
4.18.1 Amendment No. 1 to Limited Liability Company Agreement of Ready Mix
USA, LLC, dated as of September 1, 2005, among Ready Mix USA, LLC,
CEMEX Southeast Holdings, LLC, Ready Mix USA, Inc. and CEMEX, Inc. (f)
140
4.19 Asset and Capital Contribution Agreement, dated as of July 1, 2005,
among Ready Mix USA, Inc., CEMEX Southeast Holdings, LLC, and CEMEX
Southeast LLC. (f)
4.20 Asset and Capital Contribution Agreement, dated as of July 1, 2005,
among Ready Mix USA, Inc., CEMEX Southeast Holdings, LLC, and Ready Mix
USA, LLC. (f)
4.21 Asset Purchase Agreement, dated as of September 1, 2005, between Ready
Mix USA, LLC and RMC Mid-Atlantic, LLC. (f)
8.1 List of subsidiaries of CEMEX, S.A. de C.V. (f)
12.1 Certification of the Principal Executive Officer of CEMEX, S.A. de C.V.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (f)
12.2 Certification of the Principal Financial Officer of CEMEX, S.A. de C.V.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (f)
12.3 Certification of the Principal Executive Officer of CEMEX Mexico, S.A.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (f)
12.4 Certification of the Principal Financial Officer of CEMEX Mexico, S.A.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (f)
12.5 Certification of the Principal Executive Officer of Empresas Tolteca de
Mexico, S.A. de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. (f)
12.6 Certification of the Principal Financial Officer of Empresas Tolteca de
Mexico, S.A. de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. (f)
13.1 Certification of the Principal Executive and Financial Officers of
CEMEX, S.A. de C.V. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (f)
13.2 Certification of Principal Executive and Financial Officers of CEMEX
Mexico, S.A. de C.V. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (f)
13.3 Certification of Principal Executive and Financial Officers of Empresas
Tolteca de Mexico, S.A. de C.V. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (f)
14.1 Consent of KPMG Cardenas Dosal, S.C. to the incorporation by reference
into the effective registration statements of CEMEX, S.A. de C.V. under
the Securities Act of 1933 of their report with respect to the
consolidated financial statements of CEMEX, S.A. de C.V., which appears
in this Annual Report on Form 20-F. (f)
___________________
(a) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form F-3 of CEMEX, S.A. de C.V. (Registration
No. 333-11382), filed with the Securities and Exchange Commission on
August 27, 2003.
(b) Incorporated by reference to the Registration Statement on Form F-4 of
CEMEX, S.A. de C.V. (Registration No. 333-10682), filed with the
Securities and Exchange Commission on August 10, 1999.
(c) Incorporated by reference to the 2002 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April 8,
2003.
(d) Incorporated by reference to the 2003 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on May 11,
2004.
(e) Incorporated by reference to the 2004 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on May 27,
2005.
(f) Filed herewith.
141
SIGNATURES
CEMEX, S.A. de C.V. hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
CEMEX, S.A. de C.V.
By: /s/ Lorenzo H. Zambrano
-------------------------------------
Name: Lorenzo H. Zambrano
Title: Chief Executive Officer
Date: June 7, 2006
SIGNATURES
CEMEX Mexico, S.A. de C.V. hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
CEMEX Mexico, S.A. de C.V.
By: /s/ Lorenzo H. Zambrano
-------------------------------------
Name: Lorenzo H. Zambrano
Title Chief Executive Officer
Date: June 7, 2006
SIGNATURES
Empresas Tolteca de Mexico, S.A. de C.V. hereby certifies that it meets
all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
Empresas Tolteca de Mexico, S.A. de C.V.
By: /s/ Lorenzo H. Zambrano
-------------------------------------
Name: Lorenzo H. Zambrano
Title: Chief Executive Officer
Date: June 7, 2006
INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
----------------------------------------------------------------
Page
-----
CEMEX, S.A. de C.V. and subsidiaries:
Independent Auditors' Report--KPMG Cardenas Dosal, S.C..................... F-2
Audited consolidated balance sheets as of December 31, 2004 and 2005....... F-3
Audited consolidated statements of income for the years ended
December 31, 2003, 2004 and 2005......................................... F-4
Audited statements of changes in stockholders' equity for the years
ended December 31, 2003, 2004 and 2005................................... F-5
Audited consolidated statements of changes in financial position for
the years ended December 31, 2003, 2004 and 2005........................ F-6
Notes to the audited consolidated financial statements..................... F-7
SCHEDULES
Independent Auditors' Report on Schedules - KPMG Cardenas Dosal, S.C....... S-1
Schedule I - Parent company financials only................................ S-2
Schedule II - Valuation and qualifying accounts............................ S-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
CEMEX, S.A. de C.V.:
We have audited the consolidated balance sheets of CEMEX, S.A. de C.V. and
subsidiaries as of December 31, 2004 and 2005, and the related consolidated
statements of income, changes in stockholders' equity and changes in financial
position for each of the years ended December 31, 2003, 2004 and 2005. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and with auditing standards generally
accepted in Mexico. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatements and are prepared in accordance with accounting
principles generally accepted in Mexico. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based upon our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of CEMEX, S.A. de C.V. and subsidiaries at December 31, 2004 and 2005,
and the consolidated results of their operations, the changes in their
stockholders' equity and the changes in their financial position for each of the
years ended December 31, 2003, 2004 and 2005, in accordance with accounting
principles generally accepted in Mexico.
Accounting principles generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States of
America. Application of accounting principles generally accepted in the United
States of America would have affected results of operations for each of the
years ended December 31, 2003, 2004 and 2005, and stockholders' equity as of
December 31, 2004 and 2005, to the extent summarized in note 25 to the
consolidated financial statements.
KPMG Cardenas Dosal, S.C.
/s/ Leandro Castillo Parada
Monterrey, N.L., Mexico
January 27, 2006, except for note 25,
which is as of May 25, 2006
F-2
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of constant Mexican pesos as of December 31, 2005 and Dollars)
Years ended December 31, (unaudited)
2005
Assets Note 2004 2005 (Note 3A)
---------------- ---------------- ---------------
Current Assets
Cash and investments................................... 4 Ps 3,657 6,387 U.S.$ 601
Trade accounts receivable less allowance for doubtful 5
accounts............................................. 4,572 16,914 1,593
Other accounts receivable.............................. 6 4,857 8,236 776
Inventories............................................ 7 6,758 11,015 1,037
Other current assets................................... 8 1,006 1,697 160
---------------- ---------------- ---------------
Total current assets............................... 20,850 44,249 4,167
---------------- ---------------- ---------------
Investments and Noncurrent Receivables 9
Investments in affiliated companies.................... 15,973 8,923 840
Other noncurrent accounts receivable................... 3,732 7,635 719
---------------- ---------------- ---------------
Total investments and noncurrent receivables....... 19,705 16,558 1,559
---------------- ---------------- ---------------
Properties, Machinery and Equipment 10
Land and buildings .................................... 52,932 88,560 8,339
Machinery and equipment ............................... 149,010 181,340 17,076
Accumulated depreciation .............................. (102,668) (110,126) (10,370)
Construction in progress............................... 3,429 5,281 497
---------------- ---------------- ---------------
Net properties, machinery and equipment............ 102,703 165,055 15,542
---------------- ---------------- ---------------
Intangible Assets and Deferred Charges.................... 11 42,426 58,366 5,496
---------------- ---------------- ---------------
Total Assets....................................... Ps 185,684 284,228 U.S.$ 26,764
---------------- ---------------- ---------------
Liabilities and Stockholders' Equity
Current Liabilities
Bank loans............................................. 12 Ps 4,826 6,001 U.S.$ 565
Notes payable.......................................... 12 307 651 61
Current maturities of long-term debt .................. 12 6,018 5,995 565
Trade accounts payable................................. 5,720 14,466 1,362
Other accounts payable and accrued expenses............ 13 8,902 16,575 1,561
---------------- ---------------- ---------------
Total current liabilities ......................... 25,773 43,688 4,114
---------------- ---------------- ---------------
Long-Term Debt 12
Bank loans ............................................ 29,060 60,474 5,694
Notes payable ......................................... 29,165 33,527 3,157
Current maturities of long-term debt .................. (6,018) (5,995) (564)
---------------- ---------------- ---------------
Total long-term debt .............................. 52,207 88,006 8,287
---------------- ---------------- ---------------
Other Noncurrent Liabilities
Pension and other postretirement benefits.............. 14 630 6,390 602
Deferred income taxes.................................. 18B 12,302 25,889 2,438
Other noncurrent liabilities........................... 13 6,960 10,298 969
---------------- ---------------- ---------------
Total other noncurrent liabilities ................ 19,892 42,577 4,009
---------------- ---------------- ---------------
Total Liabilities.................................. 97,872 174,271 16,410
---------------- ---------------- ---------------
Stockholders' Equity 15
Majority interest:
Common stock-historical cost basis................... 62 64 6
Common stock-accumulated inflation adjustments ...... 3,735 3,735 351
Additional paid-in capital........................... 42,580 47,133 4,438
Deficit in equity restatement ....................... (73,900) (75,329) (7,093)
Cumulative initial deferred income tax effects....... 3S (5,850) (5,850) (551)
Retained earnings ................................... 103,065 112,166 10,562
Net income........................................... 13,965 22,425 2,112
---------------- ---------------- ---------------
Total majority interest ........................... 83,657 104,344 9,825
Minority interest...................................... 4,155 5,613 529
---------------- ---------------- ---------------
Total stockholders' equity ........................ 87,812 109,957 10,354
---------------- ---------------- ---------------
Total Liabilities and Stockholders' Equity......... Ps 185,684 284,228 U.S.$ 26,764
---------------- ---------------- ---------------
See accompanying notes to consolidated financial statements.
F-3
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Income
(Millions of constant Mexican pesos as of December 31, 2005, except for earnings per share)
Years ended December 31, (unaudited)
2005
Note 2003 2004 2005 (Note 3A)
- ------------------------------------------------------------- --------- --- --------- --------- --------- -----------
Net sales..................................................... Ps 82,045 87,062 162,709 U.S.$ 15,321
Cost of sales................................................. (47,296) (48,997) (98,460) (9,271)
--------- --------- --------- -----------
Gross profit............................................... 34,749 38,065 64,249 6,050
--------- --------- --------- -----------
Operating expenses:
Administrative........................................... (9,094) (8,847) (15,276) (1,438)
Selling.................................................. (8,990) (9,435) (22,564) (2,125)
--------- --------- --------- -----------
Total operating expenses............................... (18,084) (18,282) (37,840) (3,563)
--------- --------- --------- -----------
Operating Income........................................... 16,665 19,783 26,409 2,487
--------- --------- --------- -----------
Comprehensive financing result:
Financial expense........................................ (4,359) (3,977) (5,588) (526)
Financial income......................................... 191 250 417 39
Results from valuation and liquidation of financial
instruments............................................ (682) 1,280 4,101 386
Foreign exchange result, net............................. (1,965) (252) (837) (79)
Monetary position results................................ 3,752 4,123 4,507 425
--------- --------- --------- -----------
Net comprehensive financing result..................... (3,063) 1,424 2,600 245
--------- --------- --------- -----------
Other expense, net............................................ 3V (5,230) (5,169) (3,372) (318)
--------- --------- --------- -----------
Income before income taxes, employees' statutory profit
sharing and equity in income of affiliates............... 8,372 16,038 25,637 2,414
--------- --------- --------- -----------
Income tax and business assets tax, net....................... 18 (1,026) (1,960) (3,564) (336)
Employees' statutory profit sharing........................... 18 (195) (317) 9 1
--------- --------- --------- -----------
Total income tax, business assets tax and employees' (1,221) (2,277) (3,555) (335)
statutory profit sharing................................
--------- --------- --------- -----------
Income before equity in income of affiliates............... 7,151 13,761 22,082 2,079
--------- --------- --------- -----------
Equity in income of affiliates................................ 398 428 928 88
--------- --------- --------- -----------
Consolidated net income.................................... 7,549 14,189 23,010 2,167
Minority interest net income............................... 348 224 585 55
--------- --------- --------- -----------
Majority interest net income............................... Ps 7,201 13,965 22,425 U.S.$ 2,112
--------- --------- --------- -----------
Basic earnings per share.................................... 3A and 21 Ps 0.76 1.40 2.16 U.S.$ 0.20
Diluted earnings per share.................................. 3A and 21 Ps 0.74 1.39 2.15 U.S.$ 0.20
--------- --------- --------- -----------
See accompanying notes to consolidated financial statements.
F-4
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Statements of Changes in Stockholders' Equity
(Millions of constant Mexican pesos as of December 31, 2005)
Cumulative
initial
Additional Deficit in deferred
Common paid-in equity income tax
Note Stock capital restatement effects
- ----------------------------------------------------- -------- --------------- ------------- ------------- -------------
Balances at December 31, 2002........................ Ps 3,790 34,837 (69,700) (5,850)
Dividends (Ps0.41 pesos per share) .................. 15A 4 4,013 - -
Issuance of common stock............................. 16 - 47 - -
Share repurchase program............................. 15A - 420 - -
Restatement of investments and other transactions - - - -
relating to minority interest...................... .
Investment by subsidiaries........................... 9 - - (2,952) -
Comprehensive net income (loss)...................... 15G - - (424) -
------------- ------------- ------------- -------------
Balances at December 31, 2003........................ 3,794 39,317 (73,076) (5,850)
Dividends (Ps0.39 pesos per share) .................. 15A 3 4,279 - -
Issuance of common stock............................. 16 - 69 - -
Liquidation of optional instruments.................. 15F - (1,085) - -
Restatement of investments and other transactions - - - -
relating to minority interest......................
Investment by subsdiaries............................ 9 - - (3,372) -
Comprehensive net income (loss)...................... 15G - - 2,548 -
------------- ------------- ------------- -------------
Balances at December 31, 2004........................ 3,797 42,580 (73,900) (5,850)
Dividends (Ps0.83 pesos per share) .................. 15A 2 4,535 - -
Issuance of common stock ........................... 16 - 18 - -
Restatement of investments and other transactions - - - -
relating to minority interest......................
Investment by subsidiaries........................... 9 - - (7,866) -
Comprehensive net income (loss)...................... 15G - - 6,437 -
------------- ------------- ------------- -------------
Balances at December 31, 2005........................ Ps 3,799 47,133 (75,329) (5,850)
------------- ------------- ------------- -------------
Balances at December 31, 2005 (unaudited)............ US$ 358 4,438 (7,093) (551)
- ----------------------------------------------------- -------- ------------- ------------- ------------- -------------
[TABLE CONTINUED]
Total Total
Retained majority Minority stockholders'
earnings interest interest equity
- ------------------------------------------------------ ------------ ------------- ------------- -------------
Balances at December 31, 2002......................... 104,044 67,121 14,102 81,223
Dividends (Ps0.41 pesos per share) ................... (4,038) (21) - (21)
Issuance of common stock.............................. - 47 - 47
Share repurchase program.............................. - 420 - 420
Restatement of investments and other transactions
relating to minority interest....................... - - (8,358) (8,358)
Investment by subsidiaries............................ - (2,952) - (2,952)
Comprehensive net income (loss)....................... 7,201 6,777 348 7,125
------------ ------------- ------------- -------------
Balances at December 31, 2003......................... 107,207 71,392 6,092 77,484
Dividends (Ps0.39 pesos per share) ................... (4,142) 140 - 140
Issuance of common stock.............................. - 69 - 69
Liquidation of optional instruments................... - (1,085) - (1,085)
Restatement of investments and other transactions
relating to minority interest....................... - - (2,161) (2,161)
Investment by subsdiaries............................. - (3,372) - (3,372)
Comprehensive net income (loss)....................... 13,965 16,513 224 16,737
------------ ------------- ------------- -------------
Balances at December 31, 2004......................... 117,030 83,657 4,155 87,812
Dividends (Ps0.83 pesos per share) ................... (4,864) (327) - (327)
Issuance of common stock ............................ - 18 - 18
Restatement of investments and other transactions - - 874 874
relating to minority interest.......................
Investment by subsidiaries............................ - (7,866) - (7,866)
Comprehensive net income (loss)....................... 22,425 28,862 584 29,446
------------ ------------- ------------- -------------
Balances at December 31, 2005......................... 134,591 104,344 5,613 109,957
------------ ------------- ------------- -------------
Balances at December 31, 2005 (unaudited)............. 12,673 9,825 529 10,354
- ------------------------------------------------------ ------------ ------------- ------------- -------------
See accompanying notes to consolidated financial statements.
F-5
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Changes in Financial Position
(Millions of constant Mexican pesos as of December 31, 2005)
Years ended December 31, (unaudited)
2005
2003 2004 2005 (Note 3A)
- -------------------------------------------------------------------- ----------- ------------- ------------- ------------
Operating activities
Majority interest net income................................... Ps 7,201 13,965 22,425 U.S. $2,112
Adjustments to reconcile to resources provided by
operating activities:
Depreciation of properties, machinery and equipment.......... 6,584 6,407 9,986 940
Amortization of deferred charges and credits, net............ 2,861 2,752 1,605 151
Impairment of properties and intangible assets............... 1,206 1,505 166 16
Pensions, and other postretirement benefits.................. 471 451 2,001 188
Deferred income taxes charged to results..................... (447) 1,209 814 76
Equity in income of affiliates............................... (398) (428) (928) (87)
Minority interest............................................ 348 224 585 55
----------- ------------- ------------- ------------
Resources provided by operating activities................ 17,826 26,085 36,654 3,451
Changes in working capital, excluding acquisition effects:
Trade accounts receivable, net............................... (644) 706 (462) (43)
Other accounts receivables and other assets.................. 259 (319) (1,372) (129)
Inventories.................................................. 1,562 (145) 1,576 148
Trade accounts payable....................................... 815 150 1,825 172
Other accounts payable and accrued expenses.................. (1,881) (2,666) (1,921) (181)
----------- ------------- ------------- ------------
Net change in working capital............................. 111 (2,274) (354) (33)
----------- ------------- ------------- ------------
Net resources provided by operating activities............ 17,937 23,811 36,300 3,418
----------- ------------- ------------- ------------
Financing activities
Proceeds from bank loans (repayments), net..................... (3,116) 2,898 8,766 825
Notes payable, net, excluding foreign exchange effect......... 1,237 (6,800) 6,051 570
Investment by subsidiaries..................................... (23) - - -
Liquidation of optional instruments............................ - (1,085) - -
Dividends paid................................................. (4,038) (4,142) (4,864) (458)
Issuance of common stock from stock dividend elections......... 4,017 4,282 4,537 427
Issuance of common stock under stock option programs........... 47 69 18 2
Repurchase of preferred stock by subsidiaries................... (7,482) (759) - -
Disposal of shares under repurchase program.................... 420 - - -
Other financing activities, net................................ 3,589 (1,750) (5,571) (524)
----------- ------------- ------------- ------------
Resources provided by (used in) financing activities...... (5,349) (7,287) 8,937 842
----------- ------------- ------------- ------------
Investing activities
Properties, machinery and equipment, net....................... (4,510) (4,637) (8,341) (785)
Acquisition of subsidiaries and affiliates..................... (934) (179) (215) (21)
Investment in RMC Group p.l.c.................................. - (8,397) (47,080) (4,433)
Disposal of assets............................................. 160 680 6,084 573
Minority interest.............................................. (876) (1,402) (155) (15)
Deferred charges............................................... (579) 1,488 10,278 968
Other investments and monetary foreign currency effect......... (6,732) (3,757) (3,078) (290)
----------- ------------- ------------- ------------
Resources used in investing activities.................... (13,471) (16,204) (42,507) (4,003)
----------- ------------- ------------- ------------
Increase (decrease) in cash and investments .............. (883) 320 2,730 257
Cash and investments at beginning of year................. 4,220 3,337 3,657 344
----------- ------------- ------------- ------------
Cash and investments at end of year....................... Ps 3,337 3,657 6,387 U.S.$ 601
- ------------------------------------------------------------------ ----------- ------------- ------------- ------------
See accompanying notes to consolidated financial statements.
F-6
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Notes to the Financial Statements
As of December 31, 2003, 2004 and 2005
(Millions of constant Mexican pesos as of December 31, 2005)
1. DESCRIPTION OF BUSINESS
CEMEX, S.A. de C.V. (CEMEX or the Company) is a Mexican holding company (parent)
of entities whose main activities are oriented to the construction industry,
through the production and marketing of cement, ready-mix concrete and
aggregates.
2. OUTSTANDING EVENTS IN 2005
o On March 1, 2005, CEMEX completed the acquisition of a 100% equity interest
in RMC Group p.l.c. ("RMC"). RMC was one of the largest European cement
producers and one of the largest distributors of ready-mix concrete and
aggregates in the world. The purchase price of the shares, considering the
18.8% equity interest acquired in 2004 for approximately U.S.$786 million,
net from the sale of certain assets, and considering acquisition expenses,
amounted to approximately U.S.$4,217 million, not including approximately
U.S.$2,249 million of assumed debt (note 9).
o On April 28, 2005, CEMEX stockholders approved a stock split, which became
effective on July 1, 2005. In connection with the stock split, each of
CEMEX's series A shares was surrendered in exchange for two new series A
shares, and each of CEMEX's series B shares was surrendered in exchange for
two new series B shares. The proportional equity interest of existing
stockholders did not change as a result of the stock split (note 15).
o On October 3, 2005, CEMEX completed a secondary public offering of Ordinary
Participation Certificates ("CPOs") and American Depositary Shares ("ADSs"),
which included the sale of 22,943,340 ADSs (placed in international markets)
and 80,500,000 CPOs (placed in the Mexican market). The CPOs and ADSs placed
in the offering were owned by financial institutions, and were the underlying
securities in equity forward contracts in the Company's own stock negotiated
by CEMEX with those institutions. From the offering proceeds of approximately
U.S.$1,500 million, after related expenses, approximately U.S.$1,300 million
were used to settle the Company's obligations under such forward contracts
(note 17).
3. SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION AND DISCLOSURE
The accompanying financial statements have been prepared in accordance with
Generally Accepted Accounting Principles in Mexico ("Mexican GAAP"), which
recognize the effects of inflation on the financial information. When reference
is made to "pesos" or "Ps", it means Mexican pesos. When reference is made to
"dollars" or "U.S.$", it means millions of dollars of the United States of
America ("United States"). All amounts herein are presented in constant pesos
and, for the year 2005 amounts in the financial statements, also in dollars, the
latter being unaudited and presented solely for the convenience of the reader at
the rate of U.S.$1 = Ps10.62, the CEMEX accounting rate on December 31, 2005.
When reference is made to "(pound)" or "pounds", it means British Sterling
Pounds. Except when specific references are made to "earnings per share" and
"prices per share or per instrument", the amounts in these notes are stated in
millions of constant Mexican pesos as of the latest balance sheet date.
When reference is made to "CPO" or "CPOs" it means the Ordinary Participation
Certificates of CEMEX. As a result of the stock split previously mentioned, each
CPO was surrendered in exchange for two new CPOs. Each new CPO represents the
participation in two new series "A" shares and one new series "B" share of the
common stock.
References to "ADS" or "ADSs" refer to American Depositary Shares, listed on the
New York Stock Exchange ("NYSE"). The number of CEMEX's outstanding ADSs did not
change as a result of the stock split; instead the ratio of CPOs to ADSs was
modified so that each ADS now represents ten new CPOs. All amounts in CPOs,
shares and prices per share for 2003 and 2004 included in the financial
statements and their accompanying notes have been adjusted to retroactively
reflect the stock split.
Certain amounts reported in the consolidated financial statements and these
notes as of December 31, 2003 and 2004 have been reclassified to conform to the
presentation as of December 31, 2005.
B) RESTATEMENT OF COMPARATIVE FINANCIAL STATEMENTS
The restatement factors applied to the consolidated financial statements of
prior periods were calculated using the weighted average inflation and the
fluctuation in the exchange rate of each country in which the Company operates
relative to the peso.
Weighted average Mexican inflation
factor factor
------------------ ------------------
2002 to 2003............................. 1.1049 1.0387
2003 to 2004............................. 1.0624 1.0539
2004 to 2005............................. 0.9590 1.0300
------------------ ------------------
Common stock and additional paid-in capital are restated by Mexican inflation.
The weighted average inflation factor is used for all other restatement
adjustments to stockholders' equity.
F-7
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of CEMEX and the subsidiary
companies in which the Company holds more than 50% of their common stock and/or
has control. All significant balances and transactions between related parties
have been eliminated in consolidation.
Financial statements of joint ventures are consolidated through the
proportionate consolidation method, based on International Accounting Standard
31, "Interests in Joint Ventures". The Company applies full consolidation or the
equity method, as applicable, for those joint ventures in which one of the
venture partners controls the entity's administrative, financial and operating
policies.
As of December 31, 2005, the main operating subsidiaries, ordered by holding
company, and the percentage of interest directly held by their immediate holding
company, are as follows:
%
Subsidiary Country interest
- ------------------------------------------------- ------------------ ---------
CEMEX Mexico, S. A. de C.V. 1.................... Mexico 100.0
CEMEX Espana, S.A. 2............................. Spain 99.7
CEMEX Venezuela, S.A.C.A....................... Venezuela 75.7
CEMEX, Inc..................................... United States 100.0
CEMEX (Costa Rica), S.A. ...................... Costa Rica 99.1
Assiut Cement Company ......................... Egypt 95.8
CEMEX Colombia, S.A. .......................... Colombia 99.7
Cemento Bayano, S.A. .......................... Panama 99.3
CEMEX Dominicana, S.A.......................... Dominican Republic 99.9
CEMEX de Puerto Rico, Inc...................... Puerto Rico 100.0
RMC France, S.A.S.............................. France 100.0
CEMEX Asia Holdings Ltd. 3..................... Singapore 100.0
Solid Cement Corporation 4................... Philippines 99.9
APO Cement Corporation 4..................... Philippines 99.9
CEMEX (Thailand) Co. Ltd. ................... Thailand 100.0
CEMEX U.K. Ltd. 5.............................. United Kingdom 100.0
CEMEX Investments Limited.................... United Kingdom 100.0
CEMEX Deutschland, AG. ...................... Germany 100.0
CEMEX Austria p.l.c. ........................ Austria 100.0
Dalmacijacement d.d. ........................ Croatia 99.2
CEMEX Czech Republic, s.r.o. ................ Czech Republic 100.0
CEMEX Polska sp. z.o.o. ..................... Poland 100.0
Danubiusbeton Betonkeszito Kft............... Hungary 100.0
Readymix Plc. 6.............................. Ireland 61.7
CEMEX Holdings (Israel) Ltd. ................ Israel 100.0
SIA CEMEX ................................... Latvia 100.0
RMC Topmix LLC, Gulf Quarries Company,
RMC Supermix LLC y Falcon Cement LLC 7..... United Arab Emirates 100.0
- ------------------------------------------------- --------------------- -------
1. CEMEX Mexico, S.A. de C.V. ("CEMEX Mexico") holds 100% of the shares of
Empresas Tolteca de Mexico, S.A. de C.V. ("ETM") and Centro Distribuidor de
Cemento, S.A. de C.V. ("Cedice"). CEMEX Mexico indirectly holds CEMEX Espana,
S.A. and subsidiaries.
2. CEMEX Espana, S.A. is the indirect holding company of all CEMEX's
international operations, including those acquired from RMC.
3. In December 2005, the Company acquired an additional 0.9% equity interest in
CEMEX Asia Holdings Ltd. ("CAH") (note 9A). As of December 31, 2005, this
acquisition is pending for registration with the Singapore authorities.
4. Represents the Company's interest, held through CAH, in the economic benefits
of these entities.
5. CEMEX U.K. Ltd. is the indirect holding company of the entities that control
the operations acquired in 2005 from RMC, except those located in the United
States and France.
6. The Irish subsidiary is a public company, whose main minority shareholder is
the Bank of Ireland Nominees Ltd., which owns approximately 14.2% of the
subsidiary's common stock.
7. CEMEX owns 49% of the common stock and obtains 100% of the economic benefits
of the operating subsidiaries in that country, through an agreement with
other shareholders.
F-8
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
D) BUSINESS COMBINATIONS (notes 9 and 23)
Based on Bulletin B-7, "Business Acquisitions", which is effective for business
combinations beginning on January 1, 2005, CEMEX applies the following
accounting guidelines: a) adoption of the purchase method as the sole valuation
method for the accounting of acquired business; b) allocation of the purchase
price to all assets acquired and liabilities assumed based on their fair value
as of the acquisition date; c) goodwill is not amortized and is subject to
periodic impairment evaluations; d) intangible assets acquired are identified,
valued and recognized; and e) the unallocated portion of the purchase price
represents goodwill.
E) FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FOREIGN CURRENCY FINANCIAL
STATEMENTS
Transactions denominated in foreign currencies are recorded at the exchange
rates prevailing on the dates of their execution. Monetary assets and
liabilities denominated in foreign currencies are adjusted into pesos at the
exchange rates prevailing at the balance sheet date and the resulting foreign
exchange fluctuations are recognized in earnings, except for the exchange
fluctuations arising from foreign currency indebtedness directly related to the
acquisition of foreign entities and the fluctuations associated with related
parties balances denominated in foreign currency that are of a long-term
investment nature, which are recorded against stockholders' equity, as part of
the foreign currency translation adjustment of foreign subsidiaries.
The financial statements of foreign subsidiaries are restated in their
functional currency based on the subsidiary country's inflation rate and
subsequently translated by using the foreign exchange rate at the end of the
reporting period for balance sheet and income statement accounts. The peso to
U.S. dollar exchange rate used by CEMEX is an average of free market rates
available to settle its foreign currency transactions.
F) CASH AND INVESTMENTS (note 4)
Investments in this caption are held for trading purposes. Those investments in
fixed-income securities are recorded at cost plus accrued interest. Investments
in marketable securities are recorded at market value. Gains or losses resulting
from changes in market values, accrued interest and the effects of inflation are
included in the income statements as part of the Comprehensive Financing Result.
G) INVENTORIES AND COST OF SALES (note 7)
Inventories are recognized at the lower of replacement cost or market value.
Replacement cost is based on the latest purchase price, the average price of the
last purchases or production cost. Cost of sales reflects replacement cost of
inventories at the time of sale, expressed in constant pesos as of the balance
sheet date.
The Company analyzes its inventory balances to determine if, as a result of
internal events, such as physical damage, or external events, such as
technological changes or market conditions, certain portions of such balances
have become obsolete or impaired. When an impairment situation arises, the
inventory balance is adjusted to its net realizable value, whereas, if an
obsolescence situation occurs, the inventory obsolescence reserve is increased.
In both cases, these adjustments are recognized against the results of the
period.
H) INVESTMENTS AND NONCURRENT RECEIVABLES (note 9)
Investments in affiliated companies are accounted for by the equity method, when
the Company holds between 10% and 50% of the issuer's capital stock, and does
not have effective control. Under the equity method, after acquisition, the
investment's original cost is adjusted for the proportional interest of the
holding company in the affiliate's equity and earnings, considering the effects
of inflation.
Other long-term investments, included under this caption, are recognized at
their estimated fair value, and their changes in valuation are included in the
results of the period as part of the Comprehensive Financing Result.
I) PROPERTIES, MACHINERY AND EQUIPMENT (note 10)
Properties, machinery and equipment ("fixed assets") are presented at their
restated value, using the inflation index of the fixed assets' origin country
and the variation in the foreign exchange rate between the country of origin
currency and the Company's functional currency. Depreciation is calculated using
the straight-line method over the estimated useful lives. The maximum useful
lives by category of fixed assets are as follows:
Years
--------------
Administrative buildings....................................... 50
Industrial buildings........................................... 35
Machinery and equipment in plant............................... 20
Ready-mix trucks and motor vehicles............................ 8
Office equipment and other assets.............................. 10
--------------
Properties, machinery and equipment are subject to impairment evaluations (note
3K). The Comprehensive Financing Results arising from indebtedness incurred
during the construction or installation period of fixed assets are capitalized
as part of the carrying value of such assets.
F-9
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
J) INTANGIBLE ASSETS AND DEFERRED CHARGES (note 11)
Intangible assets acquired, as well as costs incurred in the development stages
of intangible assets, are capitalized when associated future benefits are
identified and the control over such benefits is established. Expenditures not
meeting these requirements are charged to earnings as incurred. Intangible
assets are presented at their restated value and are classified as having a
definite life, which are amortized over the benefited periods, and as having an
indefinite life, which are not amortized since the period cannot be accurately
established in which the benefits associated with such intangibles will
terminate. Amortization of intangible assets of definite life is calculated
under the straight-line method.
Intangible assets acquired in a business combination are accounted for at fair
value at the acquisition date. When the value cannot be reasonably estimated,
such value is included as part of goodwill, which is not amortized since January
1, 2005 and is subject to periodic impairment tests (note 3K). Until December
31, 2004, goodwill was amortized under the present worth or sinking fund method,
which was intended to provide a better matching of goodwill amortization with
the revenues generated from the acquired companies. Goodwill generated before
1992 was amortized over a maximum period of 40 years, while goodwill generated
from 1992 to 2004 was amortized over a maximum period of 20 years.
Direct costs incurred in debt issuances or borrowings are capitalized and
amortized as part of the effective interest rate of each transaction over its
maturity. These costs include discounts, commissions and professional fees.
Direct costs incurred in the development stage of computer software for internal
use are capitalized and amortized through the operating results over the useful
life of the software, which is approximately 4 years.
Preoperational expenses are recognized in the income statement as they are
incurred. Those preoperative expenses deferred until December 31, 2003, in
compliance with regulations effective as of that date, continue to be amortized
over their original periods.
K) IMPAIRMENT OF LONG LIVED ASSETS (notes 10 and 11)
The Company evaluates the balances of its machinery and equipment, intangible
assets of definite life and other investments to establish if factors such as
the occurrence of a significant adverse event, changes in the operating
environment in which the Company operates, changes in projected use or in
technology, as well as expectations of operating results for each cash
generating unit, provide elements indicating that the book value may not be
recovered, in which case an impairment loss is recorded in the income statement
for the period when such determination is made, resulting from the excess of the
carrying amount over the net present value of estimated cash flows related to
such assets.
Likewise, CEMEX periodically evaluates the balances of goodwill and other
intangible assets of indefinite life by determining the cash flows to be
generated by the reporting units to which those assets relate. A reporting unit
refers to a group of one or more cash generating units. Cash flows are
discounted at present value, and an impairment loss is recognized if such
discounted cash flows are lower than the net book value of the reporting unit.
L) DERIVATIVE FINANCIAL INSTRUMENTS (notes 12 and 17)
In compliance with the guidelines established by the Risk Committee, CEMEX uses
derivative financial instruments, in order to change the risk profile associated
with changes in interest rates and exchange rates of foreign currency
denominated debt instruments, as a vehicle to reduce financing costs (note 12);
as an alternative source of financing (note 17), and as hedges of: (i)
forecasted transactions, (ii) net assets in foreign subsidiaries and (iii)
executive stock option programs (note 16).
Derivative financial instruments are recognized as assets or liabilities in the
balance sheet at their estimated fair value and the changes in such values are
recognized in the income statement for the period in which they occur, unless
such instruments have been designated as accounting hedges of debt or equity
instruments. Until December 31, 2004, no specific rules existed in Mexico for
hedging transactions. Beginning January 1, 2005, Bulletin C-10, "Derivative
Financial Instruments and Hedging Activities", establishes accounting standards
for hedging instruments.
Until December 31, 2004, as a result of the absence of specific rules for
designated transactions that qualify as hedging activities, CEMEX applied the
following accounting rules, which remained effective in 2005, since they comply
with the rules set forth in Bulletin C-10:
a) Changes in the estimated fair value of interest rate swaps to exchange
floating rates for fixed rates, designated as accounting hedges of the
variability in the cash flows associated with the interest expense of a
portion of the contracted debt, as well as those instruments negotiated to
hedge the interest rates at which certain forecasted debt is expected to be
contracted or existing debt is expected to be renegotiated, are recognized
temporarily in stockholders' equity (note 15G). These effects are
reclassified to earnings, in the case of the forecasted debt, once the
related debt is recognized in the balance sheet and its related financial
expense is accrued.
b) Changes in the estimated fair value of foreign currency forwards, designated
as hedges of a portion of the Company's net investments in foreign
subsidiaries, are recognized in stockholders' equity, offsetting the foreign
currency translation result (notes 3E and 15D). The accumulated effect in
stockholders' equity is reversed through the income statement upon
disposition of the foreign investment.
F-10
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
c) Beginning in January 1, 2005, changes in fair value of all forward contracts
in the Company's own shares are recognized in the income statement as part of
the comprehensive financial result. Until December 31, 2004, only the effect
of those contracts designated as hedges for executive stock option programs
(note 16) were recognized in the income statement as part of the costs
related to such programs. The results derived from equity forward contracts
not designated as hedges of the stock option programs during 2004 and 2003,
and from equity instruments (appreciation warrants) during 2003, were
recognized in stockholders' equity upon settlement (notes 15F and 17A).
d) Changes in fair value of derivative instruments, such as foreign currency
forward contracts or options, negotiated to hedge a firm commitment are
recognized through stockholders' equity, following the cash flow hedging
model, and are reclassified to the income statement once the operation
underlying the firm commitment takes place, as the effects from the hedged
item are reflected in the income statement. With respect to hedges of the
foreign exchange risk associated with a firm commitment for the acquisition
of a net investment in a foreign country (note 17B), the accumulated effect
in stockholders' equity is reclassified to the income statement when the
purchase occurs.
e) Changes in fair value of the following derivative instruments are recognized
in the income statement within the valuation and liquidation of financial
instruments: (i) interest rate swaps not designated as cash flow hedges; (ii)
derivative instruments for the exchange of interest rates and currencies
(Cross Currency Swaps or "CCS"), negotiated to change the profile of the
interest rate and currency of existing debt; and (iii) other derivative
instruments not identified with a particular exposure.
Until December 31, 2004, financial debt related to CCS, was presented in the
balance sheet as if it had been negotiated in the exchanged currencies, through
the reclassification to such debt of a portion of the assets or liabilities
resulting from the estimated fair value recognition of such CCS. The
non-reclassified portion, resulting mainly from the difference between the
forward exchange rates and those in effect as of the balance sheet date,
remained within other assets or other liabilities. Beginning on January 1, 2005,
Bulletin C-10, does not allow the synthetic presentation of two financial
instruments, the primary position and the derivative instrument, as if they were
a single instrument; therefore, the reclassification mentioned above was
discontinued; consequently, financial debt related to CCS is presented in the
currencies originally negotiated.
Interest accruals generated by interest rate swaps and CCS, are recognized as
financial expense, adjusting the effective interest rate of the related debt.
Interest accruals from other hedging derivative instruments are recorded within
the same item when the effects of the primary instrument subject to the hedging
relation are recognized. Transaction costs are deferred and amortized in
earnings over the life of the instrument or immediately upon settlement.
Derivative instruments are negotiated with institutions with significant
financial capacity; therefore, the Company considers the risk of non-performance
of the obligations agreed to by such counterparties to be minimal. The estimated
fair value represents the amount at which a financial asset could be bought or
sold, or a financial liability could be extinguished, between willing parties in
an arm's length transaction. Occasionally, there is a reference market that
provides the estimated fair value; in the absence of a market, such value is
determined by the net present value of projected cash flows or through
mathematical valuation models. The estimated fair values of derivative
instruments, determined by CEMEX and used for recognition and disclosure
purposes in the financial statements and their notes, are supported by the
confirmations of these values received from the financial counterparties.
M) ASSET RETIREMENT OBLIGATIONS (note 13)
Beginning in 2003, the Company recognizes unavoidable obligations, legal or
assumed, to restore the site or the environment when removing operating assets
at the end of their useful lives. These obligations represent the net present
value of expected cash outflows to be incurred in the restoration process, and
are initially recognized against the related assets' book value. The additional
asset is depreciated during its remaining useful life. The increase in the
liability, by the passage of time, is charged to results of the period.
Adjustments to the obligation for changes in the estimated cash flows or the
estimated disbursement period are made against fixed assets and depreciation is
modified prospectively.
Asset retirement obligations in the case of CEMEX are related mainly to future
costs of demolition, cleaning and reforestation, derived from commitments, both
legal or assumed, so that at the end of the operation, the sites where raw
material is extracted, the maritime terminals and other production sites, are
left in acceptable condition. For those situations identified and quantified,
effective January 1, 2003, a remediation liability was recorded for
approximately Ps515, against fixed assets for Ps372, deferred income tax assets
for Ps56 and an initial cumulative effect for Ps87, which was recorded in
stockholders' equity as an element of comprehensive net income. Before 2003,
CEMEX had already provided accruals for certain situations.
N) CONTINGENCIES AND COMMITMENTS (note 22)
Obligations or losses, related to contingencies, are recognized as liabilities
in the balance sheet when present obligations exist, and when, as a result of
past events, it is probable that the effects will materialize and can be
reasonably quantified. Otherwise, a qualitative disclosure is included in the
notes to the financial statements. The effects of long-term commitments
established with third parties, such as supply contracts formalized with
suppliers or clients, are recognized in the financial statements on the incurred
or accrued basis, taking into consideration the substance of the agreements.
Relevant commitments are disclosed in the notes to the financial statements. The
Company does not recognize contingent revenues, income or assets.
F-11
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
O) PENSIONS AND OTHER POSTRETIREMENT BENEFITS (note 14)
The costs related to benefits to which employees are entitled by pension plans
and other postretirement benefits, including medical expenses, life insurance,
severance payments and seniority premiums, legally or by Company grant, are
recognized in the operating results, as services are rendered, based on
actuarial estimations of the benefits' present value. The amortization of prior
service cost (transition asset) and of changes in assumptions and adjustments
based on experience is recognized over the employee's estimated active service
life. For certain pension plans, irrevocable trust funds have been created to
cover future benefit payments.
The actuarial assumptions upon which the Company's employee benefit liabilities
are determined consider the use of real rates (nominal rates discounted by
inflation). Until December 31, 2004, postemployment benefits paid upon
termination of the working relationship but before retirement, such as severance
benefits, were recognized as an expense in the year in which they were paid. In
some circumstances, however, provisions were made for these benefits. Starting
January 1, 2005, according to Bulletin D-3, "Labor Obligations", the costs
related to severance benefits are recognized over the estimated active service
life of the employees.
P) DEFICIT IN EQUITY RESTATEMENT (note 15)
The deficit in equity restatement includes: (i) the accumulated effect from
holding non-monetary assets; (ii) the currency translation effects from foreign
subsidiaries' financial statements, net of exchange fluctuations arising from
foreign currency indebtedness directly related to the acquisition of foreign
subsidiaries and foreign currency related parties balances that are of a
long-term investment nature (notes 3E and 15D); and (iii) valuation and
liquidation effects of certain derivative financial instruments that qualify as
hedge instruments, which are recorded temporarily or permanently in
stockholders' equity (note 3L).
Q) COMPREHENSIVE NET INCOME (note 15G)
The Company presents comprehensive net income and its components as a single
item in the statement of changes in stockholders' equity. Comprehensive net
income represents the change in stockholders' equity during a period for
transactions and other events not representing contributions, reductions or
distributions of capital.
R) EXECUTIVE STOCK OPTION PROGRAMS (note 16)
Until December 31, 2004, the Company recognized the cost associated with
executive stock options programs as part of the cost of the period, using the
intrinsic value method, for those options which, as of the grant date, it was
not known the exercise price at which the underlying shares would be exercised,
because such exercise price is increasing (variable) over the life of the
options, and did not imply the issuance of new shares upon exercise. The
intrinsic value method represents the existing appreciation between the market
price of the share and the exercise price established in the option. The Company
did not recognize cost for those programs in which the exercise price was equal
to the CPO price at the option's grant date, remained fixed for the life of the
option and implied the issuance of new shares upon exercise.
Beginning in 2005, under Mexican GAAP, the Company adopted the International
Financial Reporting Standard No. 2, "Shared-based Payment" ("IFRS 2"). Based on
IFRS 2, options granted to executives are defined as equity instruments, in
which services received from employees are settled through the delivery of
shares; or as liability instruments, in which the Company incurs a liability by
committing to pay, in cash or other instruments, the intrinsic value of the
option as of the exercise date. The Company determined that the options in its
fixed program (note 16) are defined as equity instruments, while the other
programs (note 16) are liability instruments. The cost of equity instruments
represents their estimated fair value at the date of grant and is recognized in
earnings during the instruments' vesting period. Liability instruments under
IFRS 2 are valued at their estimated fair value at each reporting date,
recognizing the changes in valuation through the income statement. The estimated
fair value of options should be determined using financial option pricing
models.
In addition, under IFRS 2, a cost should be recognized for those equity
instruments which as of the adoption date have a remaining vesting period.
Regarding the Company's fixed program, as of the adoption date, the exercise
rights were fully vested. In respect to the liability instruments, CEMEX
determined the estimated fair value of the outstanding options in the different
programs and recognized in the income statement an expense of approximately
Ps992 (Ps860 after income tax), resulting from the difference between the
estimated fair value of the instruments and the existing accrual related to such
programs, which was quantified through the intrinsic value of the options. This
expense was recognized as the initial cumulative effect of changes in accounting
standards and is presented within the results from valuation and liquidation of
financial instruments. In accordance with Bulletin A-7, "Comparability", the
Company did not restate the financial information of prior years in connection
with the accounting change mentioned above.
F-12
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Had the Company used the same accounting rules during the years ended December
31, 2003 and 2004, net income as well as basic net earnings per share would have
been as follows:
2003 2004
------------ ------------
Majority net income as reported.................... Ps 7,201 Ps 13,965
Options' fair value 1.............................. (454) (363)
------------ ------------
Majority net income pro forma...................... Ps 6,747 Ps 13,602
============ ============
Basic earnings per share as reported............... 0.76 1.40
------------ ------------
Basic earnings per share pro forma................. 0.71 1.36
============ ============
1 In order to determine fair value in 2003 and 2004, considering the different
exchanges of options which had previously occurred, CEMEX opted for
simplicity to value the same portfolio of options outstanding as of the
adoption date in 2005, as if it had been in effect in 2003 and 2004, using
the market prices and other assumptions prevailing during those years in the
option pricing models.
S) INCOME TAX, BUSINESS ASSETS TAX, EMPLOYEES' STATUTORY PROFIT SHARING AND
DEFERRED INCOME TAXES (note 18)
The Income Tax ("IT"), Business Assets Tax ("BAT") and Employees' Statutory
Profit Sharing ("ESPS"), reflected in the income statements, include amounts
incurred during the period and the effects of deferred IT and ESPS. Consolidated
deferred IT represents the summary of the effect determined in each subsidiary
by the assets and liabilities method, by applying the enacted statutory income
tax rate to the total temporary differences resulting from comparing the book
and taxable values of assets and liabilities, considering when the effects
became available and subject to a recoverability analysis, reflecting tax loss
carryforwards as well as other recoverable taxes and tax credits. The effect of
a change in the effective statutory tax rate is recognized in the income
statement for the period in which the change occurs and is officially declared.
The effect of deferred ESPS is recognized for those temporary differences, which
are of a non-recurring nature, arising from the reconciliation of the net income
for the period and the taxable income for the period for ESPS.
The cumulative initial effect, arising from the adoption of the asset and
liability method, was recognized on January 1, 2000 in stockholders' equity
under the caption "Cumulative initial deferred income tax effects". In the
statement of changes in stockholders' equity, the cumulative initial effect
corresponds to the consolidated entity. The difference between the Parent
Company's and the consolidated accumulated initial deferred IT effects is
included under the caption "Deficit in Equity Restatement".
T) REVENUE RECOGNITION
Revenue is recognized upon shipment of cement, ready-mix concrete and aggregates
to customers, and they assume the risk of loss. Income from activities other
than the Company's main line of business is recognized when the revenue has been
realized, thorough goods delivered or services rendered, and there is no
condition or uncertainty implying a reversal thereof.
U) MONETARY POSITION RESULT
The monetary position result, which represents the gain or loss from holding
monetary assets and liabilities in inflationary environments, is calculated by
applying the inflation rate of the country of each subsidiary to its net
monetary position (difference between monetary assets and liabilities).
V) OTHER INCOME AND EXPENSE
Other income and expense, in the statements of income, consists primarily of
goodwill amortization until 2004, dumping duties, results from the sales of
fixed assets, impairment losses of long-lived assets, net results from the early
extinguishment of debt and other unusual or non-recurring transactions.
W) USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
period. The main captions subject to estimates and assumptions include the book
value of fixed assets, allowances for doubtful accounts, inventories and assets
for deferred income taxes, the fair market values of financial instruments and
the assets and liabilities related to labor obligations. Actual results could
differ from these estimates.
X) CONCENTRATION OF CREDIT
CEMEX sells its products primarily to distributors in the construction industry,
with no specific geographic concentration within the countries in which the
Company operates. No single customer accounted for a significant amount of the
Company's sales in 2003, 2004 and 2005, and there were no significant accounts
receivable from a single customer for the same periods. In addition, there is no
significant concentration of a specific supplier relating to the purchase of raw
materials.
F-13
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
4. CASH AND INVESTMENTS
Consolidated cash and investments as of December 31, 2004 and 2005 consists of:
2004 2005
---------- ----------
Cash and bank accounts............................... Ps 1,549 3,532
Fixed-income securities.............................. 1,650 2,384
Investments in marketable securities................. 458 471
---------- ----------
Ps 3,657 6,387
========== ==========
5. TRADE ACCOUNTS RECEIVABLE
The Company evaluates each of its customers' credit and risk profiles in order
to establish the required allowance for doubtful accounts. Consolidated trade
accounts receivable as of December 31, 2004 and 2005, include allowances for
doubtful accounts of Ps725 and Ps1,242, respectively.
As of December 31, 2004 and 2005, the Company has established sales of trade
accounts receivable programs with financial institutions ("securitization
programs") in Mexico, United States and Spain, through which accounts receivable
have been sold for Ps6,822 (U.S.$642) and Ps7,334 (U.S.$691), respectively.
Through these programs, the Company effectively surrenders control, risks and
the benefits associated with the accounts receivable sold; therefore, the amount
of accounts receivable sold is recognized as a sale of financial assets and the
balances are removed from the balance sheet at the moment of sale, except for
the amounts that the counterparties have not paid, which are reclassified to
other accounts receivable (note 6). The accounts receivable qualifying for sale
do not include amounts over certain days past due or concentrations over certain
limits to any one customer, according to the terms of the programs. Expenses
incurred under these programs, originated by the discount granted to the
acquirers of the accounts receivable, are recognized in the income statements
and were approximately Ps109 (U.S.$10) in 2003, Ps121 (U.S.$11) in 2004
and.Ps210 (U.S.$20) in 2005
6. OTHER ACCOUNTS RECEIVABLE
Consolidated other accounts receivable as of December 31, 2004 and 2005 consist
of:
2004 2005
---------- ----------
Non-trade accounts receivable....................... Ps 1,160 4,849
Advances and valuation of
derivative instruments (notes 12 and 17).......... 1,762 964
Interest and notes receivable....................... 1,148 1,389
Advances for travel expenses and
loans to employees............................... 415 262
Refundable taxes.................................... 372 772
---------- ----------
Ps 4,857 8,236
========== ==========
Non-trade accounts receivable are mainly originated by the sale of assets.
Interest and notes receivable include Ps1,114 (U.S.$105) in 2004 and Ps1,369
(U.S.$129) in 2005, arising from securitization programs (note 5).
7. INVENTORIES
Consolidated balances of inventories as of December 31, 2004 and 2005 are
summarized as follows:
2004 2005
---------- ----------
Finished goods...................................... Ps 1,607 3,330
Work-in-process..................................... 1,538 1,712
Raw materials....................................... 639 2,563
Supplies and spare parts,
net of obsolescence provision.................... 2,404 2,523
Advances to suppliers............................... 255 351
Inventory in transit................................ 315 536
---------- ----------
Ps 6,758 11,015
========== ==========
In December 2004, impairment losses of approximately Ps182 were recognized
within other expenses (note 3G).
F-14
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
8. OTHER CURRENT ASSETS
Other current assets in the consolidated balance sheets as of December 31, 2004
and 2005 consist of:
2004 2005
---------- ----------
Advance payments.................................... Ps 452 1,047
Assets held for sale................................ 554 650
---------- ----------
Ps 1,006 1,697
========== ==========
Assets held for sale are stated at their estimated realizable value and mainly
consist of: (i) non-cement related assets acquired in business combinations and
(ii) assets held for sale received from customers as payment of trade
receivables.
9. INVESTMENTS AND NONCURRENT ACCOUNTS RECEIVABLE
A) INVESTMENTS IN SUBSIDIARIES AND AFFILIATED COMPANIES
Consolidated investments in affiliated companies as of December 31, 2004 and
2005 are summarized as follows:
2004 2005
---------- ----------
Book value at acquisition date...................... Ps 12,635 5,034
Revaluation by equity method........................ 3,338 3,889
---------- ----------
Ps 15,973 8,923
========== ==========
Investments held by subsidiaries in CEMEX shares, amounting to Ps11,999
(154,014,032 CPOs) in 2004 and Ps19,864 (314,308,790 CPOs) in 2005, are offset
against majority interest stockholders' equity in the accompanying financial
statements.
The Company's principal acquisitions and divestitures during 2003, 2004 and 2005
are as follows:
I. On March 1, 2005, following board and shareholders approval and clearance
from applicable regulators, CEMEX completed the acquisition of 100% of the
outstanding stock of RMC Group p.l.c. ("RMC"). The purchase price of the
shares, considering the 18.8% equity interest acquired in 2004 for
approximately U.S.$786, net from the sale of certain assets and considering
acquisition expenses, amounted to approximately U.S.$4,217 (Ps44,787). This
amount does not include approximately U.S.$2,249 (Ps23,886) of assumed debt.
RMC, headquartered in the United Kingdom, was one of Europe's largest cement
producers and one of the world's largest suppliers of ready-mix and
aggregates. RMC had operations in 22 countries, primarily in Europe and the
United States, and employed over 26,000 people. In 2004, RMC sold 14.4
million tons of cement, 51.4 million cubic meters of ready-mix and 131.6
million tons of aggregates. The assets acquired include 13 cement plants
with total installed capacity of approximately 17 million tons, located in
the United Kingdom, the United States, Germany, Croatia, Poland and Latvia.
The acquisition, which began in September 2004 through a public purchase
offer, was subject to the approval by RMC shareholders and applicable
regulators in Europe and the United States.
On December 22, 2005 CEMEX terminated its joint ventures with the French
construction materials company Lafarge S.A. ("Lafarge"), through the sale to
Lafarge of its 50% equity interest in ReadyMix Asland S.A. ("RMA") in Spain
and Betecna Betao Pronto S.A. ("Betecna") in Portugal after receiving
regulatory approval from the applicable regulators. Subsequent to the sale
and according to the terms of the agreement, CEMEX acquired from RMA assets
in the ready-mix and aggregates sector, representing 29 concrete plants and
5 aggregate quarries. The net sale price, considering the purchase of assets
from RMA, was approximately U.S.$61. The Company's equity interest in RMA
and Betecna was acquired through the purchase of RMC. The consolidated
income statement for the year ended December 31, 2005, includes the
operating results of RMA and Betecna from March 1 to December 22, 2005, and
both companies were consolidated through the proportionate consolidation
method (note 3C).
In addition, as a condition of the authorities in the United States to
approve the acquisition of RMC, on August 29, 2005, ready-mix assets were
sold to California Portland Cement Company in the area of Tucson, AZ, for an
approximate amount of U.S.$16. These assets derived from RMC's operations in
the United States.
II. On July 1, 2005, CEMEX Inc., the Company's subsidiary in the United States,
and Ready Mix USA, Inc. ("Ready Mix USA"), a private ready-mix producer with
operations in the Southeastern United States, established two joint ventures
to satisfy construction needs in that region. Under the terms of the
arrangement, CEMEX Inc. contributed a to a cement joint venture, two cement
plants (Demopolis, AL and Clinchfield, GA) and eleven cement terminals in
exchange for a 50.01% equity interest in this entity. To a second joint
venture, CEMEX Inc. contributed ready-mix, aggregates and concrete blocks
plants in Florida and Georgia, in exchange for a 49.99% equity interest in
such venture. Ready Mix USA contributed all its ready-mix concrete and
aggregate operations in Alabama, Georgia, the Florida Panhandle and
Tennessee, as well as its concrete block operations in Arkansas, Tennessee,
Mississippi, Florida and Alabama, in exchange for a 49.99% equity interest
in the cement joint venture and a 50.01% equity interest in the ready-mix
concrete and aggregates joint venture. In addition, on September 1, 2005,
CEMEX sold to the ready-mix joint venture 27 ready-mix plants and 4 concrete
block facilities located in the Atlanta, GA area, as well as working capital
related to these assets, in exchange for approximately U.S$125.
F-15
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
After the third year of the strategic alliance and for a 25-year period,
Ready Mix USA will have the right, but not the obligation, to require CEMEX
to acquire the interests contributed by Ready Mix USA to the joint ventures.
As of December 31, 2005, CEMEX has control and consolidates in the balance
sheet the cement joint venture, while Ready Mix USA controls the joint
venture that manages the ready-mix and construction materials assets;
therefore, CEMEX interest in this business is accounted for by the equity
method.
III. In March 2005, the Company sold the Charlevoix, Michigan, and Dixon,
Illinois cement plants, both in the United States, including a cement
terminal located in the Great Lakes region to Votorantim Participacoes S.A.,
for an aggregate purchase price of approximately U.S.$413. The combined
capacity of the two cement plants sold was approximately two million tons
per year and the operations of these plants represented approximately 9% of
CEMEX's annual operating cash flow in the United States before the RMC
acquisition. The consolidated income statement for the year ended December
31, 2005 includes the results of operations relating to these plants for the
three-month period ended March 31, 2005.
IV. On December 23, 2005 the Company acquired 0.9% (93,241 shares) of CAH, stock
that remained owned by third parties, for approximately U.S.$8 (Ps84). In
2004, CEMEX acquired approximately 20.6% (2,093,667 shares) of CAH stock in
exchange for a cash payment of approximately U.S.$70 and 27,850,713 CPOs,
with a value of approximately U.S.$172 (Ps1,837), recognizing a loss of
Ps960 in equity in 2004 as part of comprehensive income (loss), resulting
from the excess of the price paid over the book value of the shares. CAH is
the holding company of the subsidiaries in the Philippines, Thailand and
Bangladesh, as well as the investment in Indonesia. CAH was constituted in
1999 by CEMEX and institutional investors in Asia with the objective of
investing in that region. Through these operations, the Company's interest
on CAH increased to 100%.
V. On April 26, 2005, CEMEX concluded the divestiture of its 11.9% equity
interest in the Chilean cement company Cementos Bio Bio, S.A., for
approximately U.S.$65 (Ps690), recognizing a gain of Ps207 within the
caption of other income. Until the date of the sale, this investment was
accounted for by the equity method.
VI. In August and September 2003, for a combined price of approximately U.S.$100
(Ps1,142), CEMEX, Inc. acquired Mineral Resource Technologies, Inc. ("MRT"),
distributor of minerals used in manufacturing of ready-mix concrete, and a
cement plant and quarry with an annual production capacity of 560 thousand
tons located in Dixon, Illinois, United States. The consolidated income
statement of 2003, includes the operating results of MRT and the Dixon plant
since the respective acquisition dates. As noted in III above, the Dixon
plant was sold in March 2005.
As of December 31, 2004 and 2005, the consolidated investments in affiliated
companies were as follows:
Activity Country % 2004 2005
------------ --------------- -------- --------- ---------
RMC Group p.l.c. ................................... Concrete United Kingdom 18.8 Ps 8,810 -
PT Semen Gresik, Tbk................................ Cement Indonesia 25.5 2,661 2,541
Control Administrativo Mexicano, S.A. de C.V........ Cement Mexico 49.0 2,147 2,491
Ready Mix USA....................................... Concrete EUA 49.0 - 341
Trinidad Cement Ltd................................. Cement Trinidad 20.0 286 325
Cementos Bio Bio, S.A............................... Cement Chile 11.9 453 -
Cancem, S.A. de C.V................................. Cement Mexico 10.0 219 255
Lehigh White Cement Company......................... Cement EUA 24.5 136 148
Societe des Ciments Antillais....................... Cement French Antilles 26.1 190 177
Caribbean Cement Company Ltd........................ Cement Jamaica 5.0 112 -
Other............................................... - - 959 2,645
--------- ---------
Ps 15,973 8,923
========= =========
During 2003, the management of PT Semen Padang ("Padang"), subsidiary of Gresik,
by different means obstructed the ownership rights of Gresik, by not
acknowledging the administration of Padang elected by Gresik at the May 2003
stockholders' meeting. In September 2003, pursuant to a court order, the
management appointed by Gresik finally assumed its duties. In December 2003,
Gresik designated new auditors to review the 2002 and 2003 consolidated
financial statements. The in-depth troubles persist and are related to the
agreements of 1998 between the Indonesian government and CEMEX, which are
determinant for the Company's decision to invest in Indonesia. According to
these agreements, the government would sell to CEMEX the majority interest of
Gresik and subsidiaries, which has not occurred mainly due to the opposition of
the provincial administration of West Sumatra, which has argued that the
original sale of Padang by the government to Gresik in 1995 is invalid, since
certain necessary approvals were not obtained.
In December 2003, CEMEX filed before the International Center for the Settlement
of Investments Disputes a request for arbitration against the Indonesian
government. The arbitration tribunal held its first session in July 2004, at
which the Indonesian government objected to the tribunal's jurisdiction. As of
December 31, 2005, the tribunal was still determining if it has jurisdiction to
hear the dispute. The resolution of in-depth issues can take several years.
CEMEX evaluates its investment in conformity with its accounting policies. As of
December 31, 2004 and 2005, CEMEX used the best information available in order
to value its investment in Gresik.
F-16
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
B) OTHER INVESTMENTS AND NONCURRENT ACCOUNTS RECEIVABLE
Amounts include assets for the valuation of derivative instruments (notes 12 and
17) of Ps1,592 in 2004 and.Ps4,190 in 2005 Furthermore, the amounts include
investments in private funds, recorded at fair value of U.S.$8 (Ps89) in 2004
and U.S.$19 (Ps203) in 2005. In 2004 and 2005, approximately U.S.$2 (Ps25) and
U.S.$9 (Ps91), were contributed to these funds, respectively.
10. PROPERTIES, PLANT AND EQUIPMENT
During 2004 and 2005, impairment losses of approximately Ps1,084 and Ps166 were
recognized within other expenses, respectively, derived from idle assets
resulting from the closing of cement assets in Mexico and the Philippines. These
assets were adjusted to their estimated realizable value.
11. INTANGIBLE ASSETS AND DEFERRED CHARGES
As of December 31, 2004 and 2005, consolidated intangible assets of definite and
indefinite life and deferred charges are summarized as follows:
2004 2005
---------- ---------
Intangible assets of indefinite useful life:
Goodwill............................................. Ps 45,872 57,331
Accumulated amortization ............................ (9,794) (9,593)
---------- ---------
36,078 47,738
Intangible assets of definite useful life:
Cost of internally developed software................ 2,891 3,233
Intangible asset for pensions (note 14) ............. 874 604
Accumulated amortization ............................ (1,858) (2,579)
---------- ---------
1,907 1,258
Deferred charges:
Prepaid pension costs (note 14)...................... 422 -
Deferred financing costs............................. 529 528
Deferred income taxes (note 18B)..................... 1,835 3,667
Others............................................... 3,422 7,455
Accumulated amortization ............................ (1,767) (2,280)
---------- ---------
4,441 9,370
---------- ---------
Ps 42,426 58,366
========== =========
As a result of the Company's periodic impairment evaluations (note 3K), in 2003
and 2004, the book values of the Company's information technology business unit
and the Company's business unit in the Philippines were determined to exceed the
respective amount of expected cash flows; therefore, impairment losses of
goodwill were recognized within other expenses for Ps898 in 2003 and Ps239 in
2004. The losses related to the Company's information technology business unit
were Ps160 in 2003 and Ps239 in 2004 and those related to the business unit in
the Philippines in 2003 were Ps738. In 2005 no impairment losses were determined
in connection with the impairment evaluations.
The amortization expenses of intangible assets and deferred charges were Ps2,861
in 2003, Ps2,752 in 2004 and Ps1,605 in 2005, of which approximately 69%, 66%
and14%, respectively, were recognized in other expenses, while the difference in
each year was recognized within operating expenses.
F-17
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
12. SHORT-TERM AND LONG-TERM BANK LOANS AND NOTES PAYABLE
As of December 31, 2004 and 2005, short-term and long-term consolidated debt and
their related derivative instruments are summarized as follows:
According to the interest rate in which debt was contracted:
2004 2005
--------------------------- ----------------------------
Effective Carrying Effective Carrying
rate 1 amount rate 1 amount
---------- ------------ ---------- ------------
Short-term
Floating rate 3..................................... 2.35% Ps 11,136 4.65% Ps 11,818
Fixed rate 3........................................ 6.98% 15 11.08% 829
------------ ------------
11,151 12,647
------------ ------------
Long-term
Fixed rate 3........................................ 5.54% 22,247 5.14% 42,269
Floating rate 3..................................... 3.67% 29,960 4.01% 45,737
------------ ------------
52,207 88,006
------------ ------------
Ps 63,358 Ps 100,653
============ ============
According to currency contracted:
2004 2005
----------------------------------------------- ---------------------------------------------
Short Long Total 2 Effective Short Long Total 2 Effective
term term rate 1 term term rate 1
------------ ------------ ----------- --------- ------------ ----------- ----------- --------
Dollar................. Ps 3,186 Ps 32,177 Ps 35,363 4.9% Ps 5,478 Ps 45,921 Ps 51,399 5.2%
Japanese yen........... 3,071 5,908 8,979 1.2% 337 4,224 4,561 1.1%
Euros.................. 4,698 4,978 9,676 3.1% 2,052 18,772 20,824 2.9%
Sterling pounds........ - 8,906 8,906 5.5% 537 1,872 2,409 5.5%
Pesos.................. 185 214 399 6.2% 4,064 17,166 21,230 10.4%
Egyptian pounds........ 11 - 11 13.5% 54 - 54 9.6%
Other currencies....... - 24 24 15.6% 125 51 176 10.6%
------------ ------------ ----------- ------------ ----------- -----------
Ps 11,151 Ps 52,207 Ps 63,358 Ps 12,647 Ps 88,006 Ps 100,653
============ ============ =========== ============ =========== ===========
By category or instrument type:
2004 Short- Long-
term term
--------- ----------
Bank loans
Lines of credit in Mexico.............................. Ps 509 -
Lines of credit in foreign countries................... 4,317 -
Syndicated loans, 2005 to 2009......................... - 29,060
--------- ----------
4,826 29,060
Notes payable
Foreign commercial paper............................... 242 -
Euro medium-term notes, 2005 to 2009................... - 1,212
Medium-term notes, 2005 to 2008........................ - 8,075
Medium-term notes, 2005 to 2015........................ - 18,774
Other documents........................................ 65 1,104
--------- ----------
307 29,165
--------- ----------
Total bank loans and notes payable..................... 5,133 58,225
Current maturities..................................... 6,018 (6,018)
--------- ----------
Ps 11,151 52,207
========= ==========
F-18
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
2005 Short- Long-
term term
--------- ----------
Bank loans
Lines of credit in Mexico.............................. Ps 2,039 -
Lines of credit in foreign countries................... 3,962 -
Syndicated loans, 2006 to 2010......................... - 51,728
Bank Loans, 2006 to 2007............................... - 8,746
--------- ----------
6,001 60,474
Notes payable
Euro medium-term notes, 2006 to 2009................... - 1,204
Euro medium-term notes, 2006 to 2008................... - 5,818
Euro medium-term notes, 2006 to 2015................... - 24,088
Other notes............................................ 651 2,417
--------- ----------
651 33,527
--------- ----------
Total bank loans and notes payable..................... 6,652 94,001
Current maturities..................................... 5,995 (5,995)
--------- ----------
Ps 12,647 88,006
========= ==========
(1) Represents the weighted average effective rate.
(2) In 2004, includes the effects for currencies exchange originated by the
Cross Currency Swaps ("CCS") (note 12B).
(3) Includes the effects of Interest Rate Swaps (note 12A), as well as CCS (note
12B).
The most representative exchange rates to the financial debt as of December 31,
2004 and 2005 are as follows:
2004 2005
---------- ---------
Mexican pesos per dollar................................ 11.14 10.62
Japanese yen per dollar................................. 102.49 117.81
Euros per dollar........................................ 0.7383 0.8440
Sterling pounds per dollar.............................. 0.5218 0.5812
========== =========
The most important transactions in the consolidated financial debt during 2005
are as follows:
Debt as of December 31, 2004.................................... Ps 63,358
=========
Transactions during 2005:
Credits in connection with the financing of the RMC acquisition Ps 37,170
New bank loans.................................................... 30,267
Debt assumed through RMC acquisition.............................. 23,886
Medium-term Mexican commercial paper.............................. 3,640
Medium-term foreign commercial paper.............................. 3,452
Debt repayments, net.............................................. (61,120)
---------
Change during the period....................................... 37,295
---------
Ps 100,653
=========
The maturities of long-term debt as of December 31, 2005 are as follows:
2005
---------
2007.............................................................. Ps 14,246
2008.............................................................. 15,878
2009.............................................................. 25,894
2010.............................................................. 22,241
2011 and thereafter............................................... 9,747
---------
Ps 88,006
=========
As of December 31, 2004 and 2005, there were short-term debt transactions
amounting to U.S.$847 (Ps9,051) and U.S.$505 (Ps5,362), respectively, classified
as long-term debt due to the Company's ability and the intention to refinance
such indebtedness with the available amounts of committed long-term lines of
credit.
F-19
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
As of December 31, 2005, the Company and its subsidiaries have the following
lines of credit, both committed and subject to the banks' availability, at
annual interest rates ranging between 0.42% and 17.74%, depending on the
negotiated currency:
Line of
Credit Available
---------- ---------
European commercial paper (U.S.$600).................... Ps 6,372 6,372
Revolving credit facility (U.S.$700).................... 7,434 1,328
Multi-currency revolving credit (U.S.$1,200)............ 12,744 7,222
Other lines of credit in foreign subsidiaries........... 67,405 13,567
Other lines of credit form banks........................ 11,470 2,835
---------- ---------
Ps 105,425 31,324
========== =========
Derivative Financial Instruments (note 3L)
As of December 31, 2004 and 2005, in order to: (i) change the profile of the
interest rate originally negotiated on a debt portion (note 12A), and (ii)
reduce the financial cost of debt originally contracted in dollars or pesos
(note 12B), the Company has negotiated derivative financing instruments related
to existing short-term and long-term debt, which are described as follows:
A) Interest Rate Swap Contracts
As of December 31, 2004 and 2005, information with respect to interest rate
swaps ("IRS") related to short-term and long-term financial debt is summarized
as follows:
(Amounts in millions) Notional Fair Effective
Amount Value rate
--------- ---------- ---------
2004
----
Swaps related to long-term debt 3..................... U.S.$ 1,950 (174) 5.8%
========= ========== =========
2005
----
Swaps related to long-term debt 1..................... U.S.$ 387 6 4.4%
Swaps related to long-term debt 2..................... 1,113 6 4.5%
Swaps related to long-term debt 3..................... 1,000 37 4.9%
Swaps related to long-term debt 4..................... 225 3 4.9%
--------- ---------- ---------
U.S.$ 2,725 52
========= ========== =========
1 As of December 31, 2005, under these contracts, CEMEX receives a floating
LIBOR* rate and pays a fixed rate of 4.0%. These contracts were designated as
accounting hedges of contractual cash flows (interest payments) of the
related underlying U.S. dollar floating rate debt, and mature in June 2009.
Changes in the estimated fair value of these instruments are recognized in
stockholders' equity.
2 As of December 31, 2005, under these contracts, CEMEX receives a floating
LIBOR* rate and pays a fixed rate of 4.1%. The contracts were designated as
accounting hedges of contractual cash flows (interest payments) of the
related underlying U.S. dollar floating rate debt, and mature in August 2009.
Changes in the estimated fair value of these instruments are recognized in
stockholders' equity.
3 As of December 31, 2004 and 2005, these contracts were not designed as
accounting hedges since they have optionality. Nevertheless, the contracts
complement CEMEX's financial strategy. Under these instruments, CEMEX
receives a floating LIBOR* rate and pays a fixed rate of 4.6%. The maturity
of these contracts is in October 2009. Changes in the estimated fair value of
these instruments are recognized in the income statement of the period.
4 Likewise, as of December 31, 2005, these contracts were not designed as
accounting hedges since they have optionality. Through these instruments,
CEMEX receives a floating LIBOR* rate and pays a fixed rate of 3.9%. These
contracts mature in April 2010. Changes in the estimated fair value are
recognized in the income statement of the period.
* LIBOR represents the London Interbank Offering Rate, used in the market for
debt denominated in US dollars. "Bps" means basis points. One basis point is
.01 percent.
During 2004 and 2005, due to changes in the interest rate mix of the financial
debt portfolio, interest rate swap contracts were settled for a nominal amount
of U.S.$100 and U.S.$775, respectively. As a result of the settlement, the
Company recognized losses of approximately U.S.$8 (Ps89) in 2004 and U.S.$4
(Ps38) in 2005, representing the estimated fair value of the contracts as of the
settlement date, which were recognized in the income statement of the period.
In addition, on March 1, 2005, as a result of the acquisition of RMC, CEMEX
assumed interest rate swap contracts for a notional amount of approximately
U.S.$585, with an estimated loss in the fair value of approximately U.S.$28.
These interest rate derivative instruments were settled by CEMEX in June 2005,
generating a gain in Comprehensive Financial Income for the change in the fair
value between the purchase date and the settlement date for approximately U.S.$8
(Ps79).
F-20
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
In July 2004, CEMEX negotiated with a financial institution interest rate swap
contracts for a notional amount of U.S.$200, receiving a fixed interest rate and
paying a floating interest rate for a five-year period. These contracts resulted
from the exercise, by the financial institution, of interest rate swap options
(swaptions) sold by CEMEX in previous years. In 2003, considering the premiums
obtained for the sale of swaptions net of changes in the fair value and
settlement effects, the Company recognized a net gain of approximately U.S.$3
(Ps31) in earnings of the period.
In June 2003, resulting from the settlement of Forward Rate Agreements ("FRAs")
for a notional amount of U.S.$650, the Company negotiated interest rate swap
contracts. FRAs were designated as accounting hedges of the interest rate of
forecasted debt issuances. Upon settlement, a loss of approximately U.S.$38
(Ps431) was recognized in stockholders' equity and is being amortized to the
financial expense as part of the effective interest rate of the related existing
debt. The amount amortized was U.S.$8 (Ps89) in 2003, U.S.$4 (Ps46) in 2004 and
U.S.$3 (Ps34) in 2005.
B) Cross Currency Swap Contracts ("CCS") and Other Currency Instruments (note
3L)
As of December 31, 2004 and 2005, there were Cross Currency Swaps ("CCS"),
through which the Company exchanges the originally contracted interest rates and
currencies on notional amounts of related short-term and long-term debt. During
the life of the CCS and at their maturity, the cash flows related to the
exchange of interest rates and currencies under the CCS, match, in interest
payment dates and conditions, those of the underlying debt.
As of December 31, 2004 and 2005, information with respect to the CCS is
summarized as follows:
(Amounts in millions) Nominal Fair Effective
amount value rate
---------- --------- ----------
2004
Short-term
----------
Exchange U.S.$67 to (Y)1,904 million 7........................... U.S.$ 67 93 2.9%
---------- ---------
Long-term
---------
Exchange Ps3,804 to dollars 2.................................... 308 33 4.0%
Exchange Ps3,369 to dollars 3.................................... 233 88 3.3%
Exchange Ps4,022 to dollars 4.................................... 378 3 3.9%
Exchange Ps800 to dollars 5...................................... 80 (6) 4.3%
Exchange Ps602 to (Y)6,008 million 8............................. 52 (2) 1.3%
---------- ---------
1,051 116
---------- ---------
U.S.$ 1,118 209
========== =========
2005
Short-term
----------
Exchange Ps5,362 to dollars 1.................................... U.S.$ 500 6 4.7%
Exchange Ps2,800 to dollars 2.................................... 260 5 4.9%
---------- ---------
760 11
---------- ---------
Long-term
---------
Exchange Ps2,488 to dollars 3.................................... 142 100 4.8%
Exchange Ps6,888 to dollars 4.................................... 618 86 4.0%
Exchange Ps2,940 to dollars 5.................................... 270 17 4.8%
Exchange Ps5,281 to dollars 6.................................... 500 (2) 4.5%
---------- ---------
1,530 201
---------- ---------
U.S.$ 2,290 212
========== =========
2004 2005
-------------------------------------- -------------------------------------------
Maturity CEMEX receives CEMEX pays CEMEX receives CEMEX pays
-------------------- ----------------- ---------------------- --------------------
1 June 2006 - - TIIE+25bps L+28bps
2 June 2006 TIIE+55bps L+125bps TIIE+80bps L+55bps
3 April 2007 MXN 12.4% L+97bps MXN 10.8% L+96bps
4 April 2012 MXN 8.6% US 4.6% MXN 9.2% US 5.1%
5 April 2009 CETES+145bps US 4.3% CETES+112bps US 4.8%
6 June 2011 - - MXN 8.3% L+25bps
7 - L+27bps (Y) 1.9% - -
8 - MXN 8.8% (Y) 2.6% - -
* TIIE represents the Interbank Offering Rate in Mexico and CETES are public
debt instruments issued by the Mexican government. As of December 31, 2005,
the LIBOR rate was 4.39%, the TIIE was 8.56% and the CETES yield was 8.01%.
F-21
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
As of December 31, 2004 and 2005, related to the fair value of the CCS, the
Company recognized net assets of U.S.$209 (Ps2,227) and U.S.$212 (Ps2,250),
respectively, of which U.S.$301 (Ps3,299) in 2004 and U.S.$138 (Ps1,466) in 2005
relate to prepayments made to yen and dollar denominated obligations under the
CCS. As of December 31, 2004, the amount of the prepayments was presented by
decreasing the carrying amount of the related debt. The estimated fair value of
the CCS, without the effects of prepayments, resulted in a net liability of
U.S.$92 (Ps985) in 2004 and a net asset of U.S.$74 (Ps784) in 2005. The CCS have
not been designated as accounting hedges; therefore, changes in fair value are
recognized through the income statement. For the years ended December 31, 2003,
2004 and 2005, changes in the estimated fair values of the CCS, excluding the
effects of prepayments, resulted in a loss of U.S.$150 (Ps1,714), a gain of
U.S.$10 (Ps110) and a gain of U.S.$3 (Ps36), respectively, which were recognized
in the income statements of the respective periods.
As of December 31, 2005, the assets and liabilities arising from the valuation
of the CCS were presented separately from the related debt. As of December 31,
2004, in accordance with presentation guidelines applied by the Company as of
that date (note 3L), a portion of the net liability resulting from the fair
value recognition of the CCS of approximately U.S.$132 (Ps1,408), directly
related to variations in exchange rates between the origination of the CCS and
the balance sheet date, was presented as part of the related debt carrying
amount, in order to reflect the expected cash flows that the Company expected to
receive or pay upon settlement of these financial instruments. Through this
presentation, the carrying amount of the financial indebtedness directly related
to the CCS was presented as if it had been effectively negotiated in the
exchange currencies instead of in the originally negotiated currencies.
The periodic cash flows underlying the CCS arising from the exchange of interest
rates are determined over the notional amounts of the exchanged currency. These
cash flows are recognized as part of the effective interest rate of the related
financial debt within the interest expense.
The portion of the estimated fair value of the CCS, attributable to accrued
interest as of the reporting date, is presented as an adjustment of the related
financing interest payable.
On March 1, 2005, as a result of the acquisition of RMC, CEMEX assumed CCS for a
notional amount of approximately U.S.$397, with an estimated loss in the fair
value of approximately U.S.$84. These CCS were settled by CEMEX in May and June
2005, generating a gain of approximately U.S.$21 (Ps227) in the Comprehensive
Financial Income for the change in the fair value between the acquisition date
and the settlement date.
During 2003, resulting from the settlement of other currency derivative
instruments for a notional amount of U.S.$105, the Company recognized a loss of
approximately U.S.$4 (Ps41) in the income statement of the period.
The estimated fair value of derivative instruments fluctuates over time and will
be determined by future interest rates and currency prices, according to the
yield curves shown in the market as of the balance sheet date. These values
should be viewed in relation to the fair values of the underlying transactions
and as part of the Company's overall exposure attributable to fluctuations in
interest rates and foreign exchange rates. The notional amounts of derivative
instruments do not necessarily represent amount exchanged by the parties, and
consequently, there is no direct measure of the Company's exposure to the use of
these derivatives. The amounts exchanged in cash are determined based on the
basis of the notional amounts and other terms included in the derivative
financial instruments.
C) Guaranteed Debt
As of December 31, 2004 and 2005, CEMEX Mexico and ETM jointly, fully and
unconditionally guaranteed indebtedness of the Company for an aggregate amount
of U.S.$3,088 (Ps32,988) and U.S.$3,780 (Ps40,145), respectively. The combined
summarized financial information of these guarantors as of December 31, 2005,
2004 and 2003 is as follows:
2004 2005
---------- ---------
Assets............................................... Ps 146,436 193,617
Liabilities.......................................... 100,921 83,953
Stockholders' equity................................. 45,515 109,664
========== =========
2003 2004 2005
--------- ---------- ---------
Net sales.................................. Ps 24,868 24,970 26,914
Operating income........................... 2,831 3,188 11,032
Net income................................. 6,150 16,464 26,911
========= ========== =========
Certain debt contracts guaranteed by the Company and/or some of its subsidiaries
contain restrictive covenants limiting sale of assets and requiring maintenance
of a controlling interest in certain subsidiaries. As of December 31, 2004 and
2005, CEMEX was in compliance with such covenants.
F-22
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
13. OTHER SHORT-TERM AND LONG-TERM LIABILITES
As of December 31, 2004 and 2005, consolidated other accounts payable and
accrued expenses are as follows:
2004 2005
---------- ---------
Other accounts payable and accrued expenses............. Ps 1,781 4,091
Interest payable........................................ 552 544
Tax payable............................................. 1,394 2,760
Dividends payable....................................... 17 33
Provisions.............................................. 3,437 6,572
Advances from customers................................. 780 1,126
Valuation of derivative instruments (notes 12 and 17)... 941 1,449
---------- ---------
Ps 8,902 16,575
========== =========
Short-term provisions primarily consist of: (i) remuneration and other personnel
benefits accrued at the balance sheet date; (ii) insurance payments, and (iii)
accruals related to the portion of legal and environmental assessments to be
settled in the short-term (notes 22C and 22G). Commonly, these amounts are
revolving in nature and are to be settled and replaced by similar amounts within
the next 12 months.
Other long-term liabilities as of December 31, 2004 and 2005 consist of:
2004 2005
---------- ---------
Valuation of derivative instruments
(notes 12 and 17).................................. Ps 3,539 1,896
Accruals for legal assessments and
other responsibilities............................. 1,315 2,063
Asset retirement obligations and other
environmental liabilities.......................... 830 4,699
Other liabilities and deferred credits ............... 1,276 1,640
---------- ---------
Ps 6,960 10,298
========== =========
Liabilities from derivative financial instruments represent the accumulated
valuation losses resulting from the estimated fair value recognition of these
instruments (notes 12 and 17). Accruals for legal assessments and other
responsibilities refer to the best estimation of cash flows with respect to
legal claims where the Company is determined to be responsible and which are
expected to be settled over a period greater than twelve months (note 22).
During 2005, the balance of this caption increased primarily as a result of the
asset retirement obligations and other remediation liabilities assumed in the
acquisition of RMC for approximately Ps4,005. Asset retirement obligations and
other environmental liabilities include estimated future estimated costs for
demolition, cleaning and reforestation of production sites at the end of their
operation (note 3M). The expected average period to settle these obligations is
greater than 15 years.
14. PENSIONS AND OTHER POSTRETIREMENT BENEFITS (note 3O)
On January 10, 2006, CEMEX communicated to its Mexican employees subject to
pension benefits about the beginning of a new defined contribution pension plan
scheme, which, from the communication date, replaces the former defined benefit
pension plan scheme. Those employees born before March 1, 1956, which represent
approximately 5% of the employees eligible for these benefits, have the option
to remain in the defined benefit plan, and have been requested to confirm their
selection before March 31, 2006. For all other employees, the change is
automatic.
As part of the plan conversion process, CEMEX will contribute to the employees'
retirement individual accounts, with a private retirement funds manager, an
approximate amount of Ps1,060. This amount represents the actuarial value of the
projected benefit obligations ("PBO") as of the change date, which represented
32% of the total PBO from the previous pension plan. The amount assumes that
approximately 85% of the employees with 50 years will elect to remain in the
current plan. The cash contribution will be obtained from the existing pension
funds. The administrative execution of the plans change is expected to occur
during the first quarter of 2006.
The initiation of the new defined contribution pension plan was considered to be
a material event which occurred before the issuance of the financial statements;
therefore, the accounting effects arising from the change were retroactively
recognized in the consolidated financial statements as of December 31, 2005. As
a result of the new plan, events of settlement and curtailment of obligations
occurred. For these reasons, the unrecognized net actuarial results (actuarial
gains and losses) were amortized proportionally to the decrease in the PBO,
while the unrecognized prior service cost was amortized proportionally to the
reduction of the expected years of future service of the present employees
within the plan. The combined net effect of the amortization of the items
mentioned above represented a loss of approximately Ps976, which was recognized
in the 2005 income statement within other expenses.
F-23
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
For the years ended December 31, 2003, 2004 and 2005, the net periodic cost of
pension plans and other postretirement benefits, is described as follows:
Pensions Other Postretirement Benefits* (OPB)
------------------------------- ------------------------------------
Net periodic cost: 2003 2004 2005 2003 2004 2005
--------- ---------- ---------- ------------ ---------- ------------
Service cost............................... Ps 293 295 641 32 39 81
Interest cost.............................. 290 348 1,139 46 33 75
Actuarial return on plan assets............ (341) (381) (1,077) (1) (1) (1
Amortization of prior service cost,
changes in assumptions and experience
adjustments.............................. 134 126 123 15 (8) 44
Settlements and curtailments(1)............ 3 - 976 - - -
--------- ---------- ---------- ----------- ----------- ------------
Ps 379 388 1,802 92 63 199
========= ========== ========== =========== =========== ============
(1) Effect of change of plan in Mexico
As of December 31, 2004 and 2005, the actuarial value of pension plans and other
postretirement benefits ("OPB"), as well as the funded status, are presented as
follows:
Pensions OPB*
--------------------- --------------------
2004 2005 2004 2005
---------- ---------- --------- ----------
Change in benefits obligation:
PBO at beginning of year.................................................. Ps 6,498 6,210 818 586
Service cost.............................................................. 295 641 39 81
Interest cost............................................................. 348 1,139 33 75
Actuarial result.......................................................... (299) 677 (214) 83
Employee' contributions................................................... - 64 - -
PBO from acquisitions..................................................... (1) 20,166 - 656
Initial valuation of other postretirement benefits........................ - - - 305
Foreign exchange variations and inflation adjustments..................... (190) (2,371) 13 (62)
Settlements and curtailments.............................................. (9) (1,060) (33) -
Benefits paid............................................................. (432) (1,093) (70) (130)
---------- ---------- --------- ----------
PBO at end of year........................................................ 6,210 24,373 586 1,594
---------- ---------- --------- ----------
Change in plan assets:
Fair value of plan assets at beginning of year............................ 5,612 5,713 35 20
Return on plan assets..................................................... 456 3,054 1 6
Foreign exchange variations and inflation adjustments..................... (182) (1,830) - -
Assets for acquisitions................................................... - 14,450 - -
Funds contribution........................................................ 168 852 - 48
Employee contribution..................................................... - 64 - -
Settlements and curtailments.............................................. (9) (1,060) - -
Benefits paid............................................................. (332) (1,093) (16) (48)
---------- ---------- --------- ----------
Fair value of plan assets at end of year.................................. 5,713 20,150 20 26
---------- ---------- --------- ----------
Amounts recognized in the balance sheets:
Funded status............................................................. 497 4,223 566 1,568
Net transition obligation ................................................ (1,346) (106) (14) (386)
Prior service cost and actuarial results.................................. (438) 417 69 70
---------- ---------- --------- ----------
Accrued benefit liability (prepayment).................................... (1,287) 4,534 621 1,252
Additional minimum liability.............................................. 865 331 9 273
---------- ---------- --------- ----------
Net projected liability (prepayment) recognized........................... Ps (422) 4,865 630 1,525
========== ========== ========= ==========
* OPB includes the cost and obligations of seniority premiums, severance
payments, health care and life insurance benefits.
At December 31, 2004 and 2005, the combined actual benefit obligation ("ABO") of
pensions and other postretirement benefits, equivalent to the PBO not
considering salary increases, amounted to Ps5,862 and Ps23,234, respectively. An
additional minimum liability is recognized in those individual cases when the
ABO less the plan assets (net actual liability) is lower than the net projected
liability. The Company recognized minimum liabilities against intangible assets
for approximately Ps874 in 2004 and Ps604 in 2005.
F-24
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Net transition obligations, prior service costs and net actuarial results are
amortized over the estimated service life of the employees under plan benefits.
As of December 31, 2005, the average estimated service life for pension plans is
approximately 15.2 years, and for other postretirement benefits is approximately
13.3 years.
As of December 31, 2004 and 2005, the consolidated assets of the pension plans
and other postretirement benefits are valued at their estimated fair value and
are aggregated as follows:
2004 2005
--------- ----------
Fixed-income securities................................ Ps 1,861 8,653
Marketable securities.................................. 3,354 9,605
Private funds and other investments.................... 518 1,918
--------- ----------
Ps 5,733 20,176
========= ==========
As of December 31, 2005, estimated future benefit payments for pensions and
other postretirement benefits during the next ten years are as follows:
2005
----------------
2006....................................................... Ps 1,442
2007....................................................... 1,405
2008....................................................... 1,484
2009....................................................... 1,469
2010....................................................... 1,561
2011- 2015................................................. 8,204
================
CEMEX applies real rates (nominal rates discounted for inflation) in the
actuarial assumptions used to determine pensions and other postretirement
benefit liabilities. The most significant assumptions used in the determination
of the net periodic cost are summarized as follows:
2003 2004 2005
-------------- --------------- -------------
Range of discount rates used
to reflect the obligations' present value............ 3.0% to 7.0% 4.5% to 8.0% 3.5% to 5.5%
Weighted average rate of return on plan assets......... 7.8% 7.8% 6.7%
Weighted average rate of salary increases.............. 7.8% 7.8% 3.2%
-------------- --------------- -------------
15. STOCKHOLDERS' EQUITY
A) COMMON STOCK
The Company's common stock as of December 31, 2004 and 2005 is as follows:
2004 2005 (4)
Shares Series A (1) Series B (2) Series A (1) Series B (2)
- -------------------------------------------------- ---------------- ----------------- ---------------- ----------------
Subscribed and paid shares........................ 7,407,268,488 3,703,634,244 7,676,571,754 3,838,285,877
Treasury shares (3)............................... 498,267,340 249,133,670 213,087,000 106,543,500
Unissued shares authorized for Stock Option Plans. 215,921,248 107,960,624 213,530,982 106,765,491
---------------- ----------------- ---------------- ----------------
8,121,457,076 4,060,728,538 8,103,189,736 4,051,594,868
================ ================= ================ ================
(1) Series "A" or Mexican shares must represent at least 64% of capital stock.
(2) Series "B" or free subscription shares must represent at most 36% of capital
stock.
(3) Includes the shares issued pursuant to the ordinary stockholders' meeting of
April 28, 2005 that were not subscribed.
(4) Includes the effect of the stock split approved in 2005.
Of the total number of shares, 6,534,000,000 in 2004 and 2005 correspond to the
fixed portion, and 5,648,185,614 in 2004 and 5,620,784,604 in 2005 to the
variable portion.
On April 29, 2004, the annual stockholders' meeting approved: (i) a reserve for
share repurchases of up to Ps6,000 (nominal amount); (ii) an increase in the
variable common stock through the capitalization of retained earnings of up to
Ps4,169 (nominal amount), issuing shares as a stock dividend for up to 600
million shares equivalent to up 200 million CPOs, at a subscription price of
Ps53.129 (nominal) per CPO, or instead, stockholders could have chosen to
receive Ps2.35 (nominal amount) in cash for each CPO. As a result, shares
equivalent to 75,433,165 CPOs were subscribed and paid, representing an increase
in common stock of Ps3, considering a nominal value of Ps0.0333 pesos per CPO,
and in additional paid-in capital of Ps4,279, while an approximate cash payment
through December 31, 2004 was made for Ps161; and (iii) the cancellation of the
corresponding shares held in the Company's treasury.
F-25
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
On April 28, 2005, the annual ordinary stockholders' meeting approved: (i) a
reserve for share repurchases of up to Ps6,000 (nominal amount); (ii) an
increase in the variable common stock through the capitalization of retained
earnings of up to Ps4,815 (nominal amount), issuing shares as a stock dividend
for up to 360 million shares (before the split) equivalent to up 120 million
CPOs, at a subscription price of Ps66.448 pesos (nominal) per CPO, or instead,
stockholders could have chosen to receive Ps2.60 pesos (nominal amount) in cash
for each CPO. As a result, shares equivalent to 66,728,250 CPOs were subscribed
and paid, representing an increase in common stock of Ps2, considering a nominal
value of Ps0.0333 pesos per CPO, and in additional paid-in capital of Ps4,535,
while an approximate cash payment through December 31, 2005 was made for Ps380;
and (iii) the cancellation of the corresponding shares held in the Company's
treasury.
On April 28, 2005, the annual extraordinary stockholders' meeting approved a
stock split, which became effective on July 1, 2005. In connection with the
stock split, each of CEMEX's series "A" shares was surrendered in exchange for
two new series "A" shares, and each of CEMEX's series "B" shares was surrendered
in exchange for two new series "B" shares. The proportional equity interest of
the stockholders did not change as a result of the stock split.
B) RETAINED EARNINGS
Retained earnings as of December 31, 2005 include Ps99,537 of earnings generated
by subsidiaries and affiliated companies that are not available to be paid as
dividends by CEMEX until these entities distribute such amounts to CEMEX.
Additionally, retained earnings as of December 31, 2005 include a share
repurchase reserve in the amount of Ps5,737. Net income for the year is subject
to a 5% allocation toward a legal reserve until such reserve equals one fifth of
the common stock. As of December 31, 2005 the legal reserve amounted to Ps1,526.
C) EFFECTS OF INFLATION
The effects of inflation on majority interest stockholders' equity as of
December 31, 2005 are as follows:
Inflation
Nominal adjustment Total
---------- ---------- -----------
Common stock......................................... Ps 64 3,735 3,799
Additional paid-in capital........................... 28,506 18,627 47,133
Deficit in equity restatement........................ - (75,329) (75,329)
Cumulative initial deferred income tax effects....... (4,698) (1,152) (5,850)
Retained earnings.................................... 63,396 48,770 112,166
Net income........................................... Ps 22,817 (392) 22,425
========== =========== ===========
D) FOREIGN CURRENCY TRANSLATION
The foreign currency translation results recorded in stockholders' equity as of
December 31, 2003, 2004 and 2005, are summarized as follows:
2003 2004 2005
---------- ----------- ----------
Foreign currency translation adjustment............... Ps 5,267 3,117 (5,174)
Foreign exchange gain (loss) (1)....................... (1,594) 156 1,414
---------- ----------- ----------
Ps 3,673 3,273 (3,760)
========== =========== ==========
(1) Foreign exchange gain (loss) resulting from the financing identified with
the acquisitions of foreign subsidiaries.
The foreign currency translation adjustment includes foreign exchange results
from financing related to the acquisition of foreign subsidiaries made by the
Company's subsidiary in Spain, representing a gain of approximately Ps61, a gain
of Ps3 and a loss of Ps11, in 2003, 2004 and 2005, respectively.
E) PREFERRED STOCK
In October 2003, CEMEX repurchased the remaining balance of preferred stock of
U.S.$650 (Ps7,444), which was to mature in February and August 2004. The
preferred stock was issued in 2000 by a Dutch subsidiary for U.S.$1,500 with an
original maturity in May 2002. The preferred stock was mandatorily redeemable
upon maturity and granted its holders 10% of the subsidiary's voting rights, as
well as the right to receive a guaranteed variable preferred dividend, and the
option, in certain circumstances, to subscribe for additional preferred stock or
common shares for up to 51% of the subsidiary's voting rights. Until its
liquidation, this transaction was included as minority interest. Preferred
dividends declared for approximately U.S.$13 (Ps147) in 2003 were recognized as
part of minority interest in the consolidated income statement in that period.
F-26
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
In October 2004, CEMEX liquidated the remaining capital securities for
approximately U.S.$66 (Ps705). The capital securities were issued in 1998 by a
Spanish subsidiary for U.S.$250, with an annual dividend rate of 9.66%. In April
2002, through a tender offer, U.S.$184 of capital securities were repurchased.
The amount paid to holders in excess of the nominal amount of the capital
securities pursuant to the early retirement of approximately U.S.$20 (Ps229) was
recognized against stockholders' equity. During 2004 and until its termination,
as a result of the adoption of new accounting principles, this transaction was
recognized as financial debt. Preferred dividends declared in 2003 were
recognized in the income statement as minority interest of approximately U.S.$6
(Ps75). Meanwhile, preferred dividends declared during 2004 of U.S.$6 (Ps63),
were recognized in earnings as part of financial expenses
F) OTHER EQUITY TRANSACTIONS
In December 2004, 13,772,903 appreciation warrants ("warrants") remaining from
the public purchase offer that took place in December 2003, and which was
concluded in January 2004, were settled upon maturity. Through the prior offer
90,018,042 warrants were repurchased at a purchase price of Ps7.8 pesos per
warrant (Ps38.80 pesos per American Depositary Warrant or ADW). Considering the
results of the purchase of warrants in January 2004, the expiration in December
2004, and the direct expenses related to these transactions, approximately
Ps1,010 was paid. This amount was recognized against stockholders' equity within
additional paid-in capital. At the end of 2003, CEMEX announced a public offer
to purchase in cash up to 90,018,042 warrants in the Mexican Stock Exchange
("MSE"), and warrants represented by ADWs, each ADW representing five warrants,
traded on the New York Stock Exchange ("NYSE"). The warrants purchased pursuant
to the offer represented approximately 86.73% of the then total outstanding
warrants and included approximately 34.9 million warrants owned by or controlled
by CEMEX and its subsidiaries.
The warrants and ADWs were originally issued in 1999 by means of a public offer
on the MSE and the NYSE, in which 105 million warrants and warrants represented
by ADWs were sold. Each ADW represented five warrants. The warrants permitted
the holders to benefit from the future increases in the market price of the
Company's CPOs above the strike price, which as of December 31, 2003 was
approximately U.S.$5.45 per CPO (U.S.$27.23 per ADS). The benefit was settled in
CPOs. Until September 2003, the CPOs and ADSs required to cover exercises of
warrants were held in equity forward contracts with financial institutions.
These forward contracts were settled in October 2003 as a result of a
simultaneous secondary equity offering, made by the Company and the banks
holding the shares.
In addition, in December 2003, through the payment of approximately U.S.$76
(Ps869), CEMEX exercised the option that it retained and repurchased the assets
related to a financial transaction through which, in December 1995, CEMEX
transferred assets to a trust, while simultaneously investors contributed
U.S.$124, in exchange for notes representing a beneficial interest in the trust.
During the life of the transaction and until maturity in 2007, periodic
repurchases of the assets underlying in the trust were stipulated. CEMEX
maintained an option to reacquire the related assets at different dates. The
cost of retaining this option was recognized as interest expense for
approximately U.S.$15 (Ps166) in 2003. Until its settlement in December 2003,
this transaction was included as part of the minority interest in stockholders'
equity.
G) COMPREHENSIVE NET INCOME
For the years ended December 31 2003, 2004 and 2005, consolidated comprehensive
net income is as follows:
2003 2004 2005
---------- --------- ----------
Majority interest net income............................................. Ps 7,201 13,965 22,425
Effects from holding non-monetary assets................................. (3,498) (2,759) 5,558
Foreign currency translation results..................................... 5,267 3,117 (5,174)
Capitalized foreign exchange result (note 15D) .......................... (1,594) 156 1,414
Hedge derivative instruments (notes 12 and 17)........................... 467 2,300 2,894
Deferred IT of the year recorded in stockholders' equity (note 18)....... (219) 685 1,745
Excess of price paid over book value of minority interests............... - (958) -
Settlement of equity instruments......................................... (666) - -
Cumulative initial effects of asset retirement obligations............... (87) - -
Inflation effect on equity(1)............................................ (94) 7 -
---------- --------- ----------
Total comprehensive income items......................................... (424) 2,548 6,437
---------- --------- ----------
Majority comprehensive net income........................................ 6,777 16,513 28,862
Minority interest........................................................ 348 224 584
---------- --------- ----------
Comprehensive net income................................................. Ps 7,125 16,737 29,446
========== ========= ==========
(1) Relates to the adjustment resulting from the use of the weighted average
inflation index for the restatement of stockholders' equity and the use of
the index of inflation in Mexico to restate common stock and additional
paid-in capital (note 3B).
F-27
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
16. EXECUTIVE STOCK OPTION PROGRAMS
In May 2005, as a result of change of control clauses, the existing executive
stock option and share programs in RMC Group p.l.c. as of the acquisition date
were liquidated through the payment of approximately (pound)40 million (U.S.$69
or Ps735). This amount was included as part of the purchase price of RMC. Except
for the stock option program of the Irish subsidiary mentioned in the last
paragraph of the caption below, there are no other stock option programs in
subsidiaries of CEMEX that were acquired in 2005.
Equity Programs
From June 1995 through June 2001, CEMEX granted stock options with a fixed
exercise price in pesos ("fixed program"), equivalent to the market price of the
CPO at the grant date and with a tenure of 10 years. Exercise prices are
adjusted for stock dividends. The employees option rights vested up to 25%
annually during the first four years after having been granted.
As mentioned in note 3R, in 2005, CEMEX adopted IFRS 2 to account for its stock
option programs. According to IFRS 2, the Company's fixed program qualified as
equity instruments, and no cost was recognized, considering that all options
were fully vested as of the adoption date of IFRS 2. During 2004 and 2005, the
new CPOs issued pursuant to exercise of these options generated an additional
paid-in capital of approximately Ps64 and Ps18, respectively, and increased the
number of shares outstanding.
The information related to options granted under the Company's fixed program,
for the years ended December 31, 2004 and 2005, is summarized as follows:
Options Fixed Program
------------------
Options at the beginning of 2004........................ 4,689,335
Changes in 2004:
Options exercised....................................... (1,998,466)
------------------
Options at the end of 2004.............................. 2,690,869
Changes in 2005:
Options cancelled....................................... (1,141,345)
Options exercised....................................... (469,224)
------------------
Options at the end of 2005.............................. 1,080,300
==================
Exercise prices:
Options outstanding at the beginning of 2005 *.......... Ps15.1
Options exercised during the year *..................... Ps15.0
Options outstanding at the end of 2005 *................ Ps14.5
==================
* Weighted average exercise prices per CPO. Prices include the effects of the
stock split (note 15A).
Considering the anti-dilution adjustments to options, resulting from the stock
split and stock dividends declared by CEMEX, as of December 31, 2005, there are
1,355,587 CPOs underlying the outstanding options under the fixed program.
In addition, as of December 31, 2005, CEMEX's subsidiary in Ireland, Ready Mix,
Ltd., acquired on March 1, 2005 as part of the RMC acquisition, has 1,640,000
options outstanding under an executive option plan in the subsidiary's own
shares. The average exercise price of these options is approximately 1.35 Euros
per option. The market price of the subsidiary's share as of December 31, 2005
was 2.35 Euros.
F-28
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Liability Programs
According to IFRS 2, those executive option programs in which the Company,
through the exercise of the option, commits to pay the executive the intrinsic
value of the options are classified as liability instruments. These programs are
valued at their estimated fair value as of the date of the financial statements,
recognizing changes in fair value through the income statement. As of December
31, 2004 and 2005, the information of those programs, which do not generate
dilution to existing shareholders, is summarized as follows:
Restricted Variable Special program
Options programs (A) program (B) (C)
---------------- ---------------- ---------------
Options at the beginning of 2004..................... - 120,916,763 15,258,520
Changes in 2004:
Options granted...................................... 273,582,522 14,554,323 5,485,010
Options exercised.................................... (121,517,922) (132,393,239) (1,489,010)
---------------- ---------------- ---------------
Options at the end of 2004........................... 152,064,600 3,077,847 19,254,520
Changes in 2005:
Options granted...................................... - - 1,859,000
Options exercised.................................... (135,254,554) (592,848) (4,475,460)
---------------- ---------------- ---------------
Options at the end of 2005........................... 16,810,046 2,484,999 16,638,060
================ ================ ===============
Exercise prices:
Options outstanding at the beginning of 2005 *....... U.S.$3.7 U.S.$2.6 U.S.$2.5
Options exercised during the year *.................. U.S.$3.6 U.S.$2.7 U.S.$2.4
Options outstanding at the end of 2005 *............. U.S.$3.8 U.S.$2.7 U.S.$2.6
================ ================ ===============
* Weighted average exercise prices per CPO. Prices include the effects of the
stock split (note 15A).
Considering the anti-dilution adjustments to the options, resulting from the
stock split and stock dividends declared by CEMEX, as of December 31, 2005,
there are 40,599,334 CPOs underlying the outstanding options under the
restricted and variable programs.
A) Restricted Programs
In January 2005, the 1,190,224 options then outstanding as a result of the
exchange which occurred in February 2004 and that contained a mandatory exercise
condition, were automatically exercised when the CPO market price reached the
level of U.S.$3.75.
Likewise, in June 2005, 131,996,243 options that contained a mandatory exercise
condition, of which 11,168,873 options were granted in June 2004 and 120,827,370
options were issued in the exchange which occurred in December 2004, were
automatically exercised when the CPO market price reached the level of
U.S.$4.25. As a result of the mandatory exercises of options occurred during
2005, the Company recognized a cost of approximately U.S.$177 (Ps1,880) in the
income statement of the period.
In February 2004, through a voluntary option exchange program, 112,495,811
options from the variable program and 1,625,547 options from other programs were
redeemed, and 122,708,146 new options were granted with a remaining tenure of
8.4 years. These options had an initial exercise price of U.S.$2.53 per CPO,
which increased annually at a 7% rate, and included a mandatory exercise
condition when the CPO price reached U.S.$3.75. The gains obtained by the
employees were paid in the form of CPOs, which were acquired at a 20% discount
to market. These CPOs were restricted for sale for an approximate period of four
years, depending on the exercise date. This program was intended, by limiting
the potential for gains, to be an improved hedge through equity forward
contracts (note 17). As consideration to the employees resulting from the
mandatory exercise condition and the sale restriction, CEMEX paid in 2004
U.S.$0.10 per option, net of taxes.
In addition, in December 2004, through a voluntary early exercise program,
16,580,004 options from the variable program, 120,827,370 options issued in the
exchange of February 2004 and 399,848 options from other programs were redeemed,
through the payment of the options' intrinsic value, and the issuance of
139,151,236 new options with an initial exercise price of U.S.$3.73 per CPO,
which increased annually at a 5.5% rate and had a remaining tenure of 7.5 years,
of which, 120,827,370 options included a mandatory exercise condition when the
CPO price reached U.S.$4.25, while the remaining 18,323,866 options do not have
exercise conditions. The initial exercise price was U.S.$0.25 higher than the
CPO market price at the early exercise date. The intrinsic value was paid in the
form of CPOs, which were restricted for sale for a period of four years from the
exercise date. This early exercise was intended to make a more efficient hedge
through equity forward contracts (note 17). The cost of the early exercise of
approximately U.S.$61 (Ps653) was recognized in earnings in the year 2004. As
consideration to the employees resulting from the initial exercise price being
above market, the mandatory exercise condition and the sale restriction, CEMEX
paid in 2005 U.S.$0.11 per option, net of taxes.
B) Variable program
In November 2001, by means of a voluntary exchange program for options granted
under the fixed program, CEMEX initiated a stock option program with exercise
prices denominated in U.S. dollars increasing a annually at a 7% rate, through
the payment of the options' intrinsic value and the issuance of 88,937,805 new
options. In the exchanges of February 2004 and December 2004, 129,075,815
options granted under the variable program were exercised.
F-29
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
C) Special program
Starting in 2001, a stock option program to purchase CEMEX ADSs was established
in the United States. The options granted have a fixed exercise price in dollars
and tenure of 10 years. The employees' option rights vest up to 25% annually
after having been granted. The options exercises are hedged using ADSs currently
owned by subsidiaries, potentially increasing stockholders' equity and the
number of shares outstanding. The amounts of these ADS programs are presented in
terms of equivalent CPOs (ten CPOs represent one ADS).
D) Number of options by exercise price:
Fixed program Special program Restricted program Variable program
- ---------------- ------------------- ------------------- ------------------
301,730 - Ps10.4 2,341,510 - US$2.3 16,810,046 - US$3.8 1,624,896 - US$2.7
72,893 - Ps12.0 3,476,190 - US$2.7 - 386,703 - US$3.0
150,944 - Ps15.7 4,045,250 - US$1.9 - 67,295 - US$2.4
155,099 - Ps14.2 4,916,110 - US$2.8 - 347,363 - US$2.2
153,189 - Ps17.4 1,859,000 - US$3.8 - 58,742 - US$2.6
246,445 - Ps18.3 - - 1,624,896 - US$2.7
As of December 31, 2005, the options from the fixed, special, restricted and
variable programs have a remaining average tenure of 2.7 years, 7.5 years, 6.5
years and 6.3 years, respectively. Likewise, the employees' option rights under
such programs are vested in 100%, 49.3%, 100% and 85.3%, respectively.
In addition, as of December 31, 2005 there are 5,000 remaining options from
voluntary programs sold to executives in April 2002. These options have an
exercise price of U.S.$3.05 per CPO and a remaining tenure of approximately 2
years.
E) Options hedging activities
In December 2005, CEMEX negotiated a derivative instrument in its own shares, by
means of which, through a prepayment of U.S.$145 (Ps1,540), CEMEX secures the
appreciation over 25 million CPOs, sufficient to hedge cash flows from the
exercise of options in the short and medium term. As of December 31, 2005, the
fair value of this instrument was a gain of approximately U.S.$3 (Ps32)
recognized in earnings.
Beginning in 2001 and until September 2005, CEMEX hedged most of its stock
option programs through forward contracts in its own stock (note 17A),
negotiated to guarantee that shares would be available at prices equivalent to
those established in the options, without the necessity of issuing new CPOs into
the market; therefore, these programs do not increase the number of shares
outstanding and consequently do not result in dilution of the basic earnings per
share. The equity forward contracts were fully settled during September 2005
through a secondary public offer (note 17A).
Commencing in 2005, as a result of the adoption of IFRS 2, CEMEX recognizes the
cost of its option plans that qualify as liability instruments through the fair
value of the options as of the balance sheet date (note 3R). For the year ended
December 31, 2005, the income statement includes the cumulative effect from the
adoption of IFRS 2, which represented an expense of approximately Ps992 (Ps860
net of IT). Beginning in 2001 and until September 2005, CEMEX recognized the
cost of its stock option programs, except for its fixed program, through valuing
the intrinsic value of the options as of the balance sheet date.
In addition, during 2005, the Company recognized an expense of approximately
U.S.$41 (Ps435), resulting from changes in the fair value of the options after
the adoption of IFRS 2 until year-end. Moreover, for the years ended December
31, 2003 and 2004, and during 2005 before the adoption of IFRS 2, the expense
arising from the options measured by the intrinsic value was approximately
U.S.$45 (Ps519), U.S.$51 (Ps541) and U.S.$116 (Ps1,232), respectively. Likewise,
the Company recognized in the income statement the changes in the estimated fair
value and the cash flows generated by the settlement of the equity forward
contracts designated as hedges for these plans (note 17A), which resulted in a
loss of approximately U.S.$28 (Ps321) in 2003, a gain of approximately U.S.$45
(Ps479) in 2004 and a gain of approximately U.S.$422 (Ps4,482) in 2005. The
gains or losses resulting from the hedging instruments negotiated in the
Company's own stock are recognized in addition to the expense related to the
stock option programs.
The fair value of the options was determined through binomial option pricing
models. As of December 31, 2005, the most important assumptions used in
valuation are the following:
Assumptions 2005
--------------
Expected dividend.............................................. 3.8%
Volatility..................................................... 35%
Interest rate.................................................. 4.4%
Weighted average remaining tenure.............................. 6.8 years
==============
During 2005, CEMEX only granted options under its special program. The other
eligible executives received a salary bonus, recognized in operating expense,
which was used by the executives to purchase CPOs in the market. These CPOs are
held in an employees' trust during a restriction for sale period of
approximately 4 years.
F-30
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
17. DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 2004 and 2005, the Company's derivative financial
instruments, other than those related to financial debt (note 12), are
summarized as follows:
2004 2005
---------------------------------- -------------------------------
Millions of dollars Notional amount Fair value Notional amount Fair value
------------------- -------------- ----------------- -------------
A) Equity forward contracts....................... 1,157 66 - -
B) Foreign exchange instruments................... 4,898 63 3,200 173
C) Derivatives related to energy projects......... 168 (6) 159 (4)
=================== ============== ================= =============
Upon liquidation and at CEMEX's option, the equity forward contracts allowed for
physical or net cash settlement of the estimated fair value. In 2005, the fair
value effects related to these instruments were recognized in the income
statement, while in 2004, such effects were recognized in the income statement
or as part of stockholders' equity, according to their characteristics and use.
At maturity, if these forward contracts were not settled or replaced, or if the
Company defaulted on the agreements established, this might have had an adverse
affect on the Company's stock market price or its ability to operate.
A) On October 3, 2005, through a secondary equity offering agreed to by the
Company, launched simultaneously on the MSE and the NYSE, financial
institutions offered and sold 30,993,340 ADSs (22,943,340 ADSs and
80,500,000 CPOs) held through forward contracts, at a price of approximately
U.S.$49.5 per ADS and Ps53.9 per CPO. Of the total sale proceeds of
approximately U.S.$1,500 (Ps15,930), net of the offering expenses, the
financial institutions kept approximately U.S.$1,300 as payment for the
liquidation of the related forward contracts. The ADSs subject to the offer
represented the entire amount of shares subject to the forward contracts in
the Company's stock as of the offering date. This transaction did not
increase the number of shares outstanding. For the year ended December 31,
2005, considering the results of the secondary offer, as well as those of
the forward contracts initiated and settled during the year to hedge the
exercises of options under the stock option programs, CEMEX recognized in
the income statement a gain of approximately U.S.$422 (Ps4,482), which was
recognized in addition to the expenses generated by the stock option
programs (note 16E).
As of December 31, 2004, there were forward contracts with different
maturities until October 2006, for a notional amount of U.S.$1,112 covering
30,644,267 ADSs, which were designated to hedge the exercise of the options
granted under the employee stock option programs. Changes in the estimated
fair value of these contracts were recognized in the income statement as a
complement of the cost generated by such programs. As of December 31, 2004,
the estimated fair value of these contracts was a gain of approximately
U.S.$45 (Ps479).
During 2004, contracts representing 2,509,524 CPOs that were held to meet
the Company's requirements of shares under the remaining warrants from the
repurchase in 2003 were settled, resulting in a gain of approximately U.S.$3
(Ps28), recognized in stockholders' equity. In addition, in October 2003,
through a secondary equity offering, forward contracts for a notional amount
of U.S.$461, covering 24,008,392 ADSs (120,041,960 CPOs) and 33.8 million
shares of CEMEX's subsidiary in Spain were settled, resulting a net gain of
approximately U.S.$20 (Ps223), which was recognized in stockholders' equity.
These contracts were negotiated in 1999 to hedge future exercises under the
105 million warrants program (note 15F). These warrants were subject to a
voluntary repurchase offer by CEMEX in December 2003, and the remaining
warrants expired in December 2004 (note 15F). From execution of the
contracts until their settlement, the Spanish subsidiary's shares underlying
the contracts were considered as owned by CEMEX.
In addition, during 2004, forward contracts covering 23,622,500 CPOs that
hedged the purchase of CAH shares through exchange of the Company's CPOs
(note 9A) were settled. Through this settlement, a gain of approximately
U.S.$15 (Ps155) was recognized in stockholders' equity.
As of December 31, 2004, there were forward contracts with different
maturities until January 2006, for a notional amount of U.S.$45 that covered
1,364,061 ADSs. Until December 31, 2004, these contracts were treated as
equity instruments; therefore, changes in their fair value were recognized
in stockholders' equity when settled. During 2005, changes in the fair value
of these contracts were recognized against the income statement. As of
December 31, 2004, the estimated fair value was a gain of approximately
U.S.$6 (Ps64).
B) In order to hedge financial risks associated with variations in foreign
exchange rates, CEMEX has negotiated foreign exchange forward contracts for
notional amounts of U.S.$957 and U.S.$3,137, at December 31, 2004 and 2005,
respectively, with different maturities until 2007. These contracts have
been designated as hedges of the Company's net investment in foreign
subsidiaries. The estimated fair value of these instruments is recorded in
stockholders' equity as part of the foreign currency translation effect
(note 15D). In addition, as of December 31, 2004, there were foreign
exchange options for a notional amount of U.S.$488, which matured in June
2005. For the sale of these options, CEMEX received premiums of
approximately U.S.$63 in 2003. The changes in the estimated fair value
resulted in losses of U.S.$57 (Ps605) in 2003, U.S.$19 (Ps205) in 2004 and
U.S.$6 (Ps60) in 2005, which were recognized in earnings. In addition, as of
December 31, 2005 there is a foreign exchange forward contract for a
notional amount of U.S.$63, not designated as hedge, whose effects are
recognized in earnings.
F-31
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
In September 2004, in connection with the commitment to acquire RMC (notes 2
and 9A) that was denominated in sterling pounds, CEMEX entered into a
foreign exchange hedge program, oriented to hedge the variability in cash
flows associated with exchange fluctuations between the U.S. dollar, the
currency in which CEMEX obtained the proceeds, and sterling pounds. For this
purpose, the Company negotiated foreign exchange forwards, collars and
digital options, for a combined notional amount of U.S.$3,453. These
contracts were designated as accounting hedges of the foreign exchange risk
associated with the firm commitment agreed on November 17, 2004, the date on
which RMC's shareholders committed to sell their shares at a fixed price.
Changes in the estimated fair value of these contracts from the designation
date, which represented a gain of approximate U.S.$132 (Ps1,411), was
recognized in stockholders' equity in 2004 and was reclassified to earnings
in 2005 on the purchase date. Changes in the estimated fair value of these
contracts from their origination until their designation in 2004 as hedges,
were a gain of approximately U.S.$102 (Ps1,094), which was recognized in
earnings in 2004.
C) As of December 31, 2004 and 2005, CEMEX had an interest rate swap maturing
in May 2017, with a notional amount of U.S.$159 and U.S.$150, respectively,
negotiated to exchange floating for fixed interest rates in connection with
agreements entered into by CEMEX for the acquisition of electric energy
(note 22F). During the life of the swap and based on its notional amount,
CEMEX will pay a LIBOR rate and will receive a 7.53% fixed rate until May
2017. In addition, during 2001, the Company sold a floor option with a
notional amount of U.S.$168 in 2004 and U.S.$159 in 2005, related to the
interest rate swap contract, pursuant to which, until 2017, CEMEX will pay
the difference between the 7.53% fixed rate and the LIBOR rate. As of
December 31, 2004 and 2005, the combined fair value of the swap and the
floor option represented losses of approximately U.S.$6 (Ps67) and U.S.$4
(Ps44), respectively, recognized in earnings during the respective periods.
The nominal amount of both contracts is not aggregated, considering that
there is only one notional amount with exposure to changes in interest rates
and the effects of one contract are proportionally inverse to the changes in
the other one.
The estimated fair values of derivative financial instruments fluctuate over
time and are based on estimated settlement costs or quoted market prices. These
values should be viewed in relation to the fair values of the underlying
instruments or transactions and as part of the Company's overall exposure to
fluctuations in foreign exchange rates, interest rates and prices of shares. The
notional amounts of derivative instruments do not necessarily represent amounts
exchanged by the parties and, therefore, are not a direct measure of the
Company's exposure through its use of derivatives. The amounts exchanged are
determined on the basis of the notional amounts and other terms included in the
derivative instruments.
18. INCOME TAX (IT), BUSINESS ASSETS TAX (BAT), EMPLOYEES' STATUTORY PROFIT
SHARING (ESPS) AND DEFERRED INCOME TAXES
The income tax law in Mexico provides that companies must pay either IT or BAT
depending on which amount is greater with respect to their Mexican operations.
Both taxes recognize the effects of inflation, although in a manner different
from Mexican GAAP. ESPS is calculated on similar basis as IT without recognizing
the effects of inflation.
A) IT, BAT AND ESPS
CEMEX and its Mexican subsidiaries generate IT and BAT on a consolidated basis;
therefore, the amounts of these items included in the financial statements, with
respect to the Mexican subsidiaries, represent the consolidated result of these
taxes. For ESPS purposes, the amount presented is the sum of the individual
results of each company.
Beginning in 1999, the determination of the consolidated IT for the Mexican
companies considers a maximum of 60% of the taxable income or loss of each of
the subsidiaries. In addition, the taxable income of those subsidiaries that
have tax loss carryforwards generated before 1999 will be considered by the
parent company according to its equity ownership. Beginning in 2002, in the
determination of consolidated IT, 60% of the taxable result of the controlling
entity should be considered, unless it obtains taxable income, in which case
100% should be considered, until the restated balance of the individual tax loss
carryforwards before 2001 are amortized. Beginning in 2002, a new IT law became
effective in Mexico, establishing that the IT rate were scheduled to be
decreased by 1% each year, beginning in 2003, until the rate reached 32% in
2005. Nevertheless, according to reforms approved to such law in November 2004,
the tax rate for 2005 will be 30%, 29% for 2006 and 28% starting in 2007. In
addition, beginning in 2005, the maximum of 60% for tax consolidation factor was
eliminated, except in those situations when the subsidiaries would have
generated tax loss carryforwards in the period from 1999 to 2004, or the parent
company from the period of 2002 to 2004. In those cases, the 60% factor will
prevail in the IT consolidation, until tax loss carryforwards are extinguished
in each company.
The IT expense, presented in the income statements, is summarized as follows:
2003 2004 2005
---------- ----------- ----------
Current income tax........................ Ps (1,645) (1,024) (2,440)
Deferred IT............................... 518 (1,006) (1,124)
Effects of inflation (note 3B)............ 101 70 -
---------- ----------- ----------
Ps (1,026) (1,960) (3,564)
========== =========== ==========
F-32
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
For the years ended December 31, 2003, 2004 and 2005, the total consolidated IT
includes expenses of Ps1,423, Ps1,207and Ps1,413, respectively, from foreign
subsidiaries, and income of Ps397 in 2003, expense of Ps753 in 2004 and expense
of Ps2,151 in 2005 from Mexican subsidiaries. In addition, the Company
recognized a consolidated tax benefit, excluding deferred taxes, of Ps1,352,
Ps1,302 and Ps1,548, in 2003, 2004 and 2005, respectively.
For its operations in Mexico, CEMEX has tax loss carryforwards, which, restated
for inflation, can be amortized against taxable income in the succeeding ten
years. The tax loss carryforwards at December 31, 2005 are as follows:
Year in which tax loss occurred Amount of Year of
carryforwards expiration
--------------- ----------
2001............................................ Ps 863 2011
2002............................................ 4,192 2012
2003............................................ 596 2013
---------------
Ps 5,651
===============
The BAT Law in Mexico establishes a 1.8% tax levy on assets, restated for
inflation in the case of inventory and fixed assets, and deducting certain
liabilities. BAT levied in excess of IT for the period may be recovered,
restated for inflation, in any of the succeeding ten years, provided that the IT
incurred exceeds BAT in such period. The recoverable BAT as of December 31, 2005
is as follows:
Year in which BAT exceeded IT Amount of Year of
carryforwards expiration
-------------- -----------
1997........................................... Ps 177 2007
2005........................................... 96 2015
-------------- -----------
Ps 273
==============
B) DEFERRED IT AND ESPS (note 3S)
Deferred IT for the period represents the difference in nominal pesos between
the initial balance and the year-end balance. As of December 31, 2004 and 2005,
the IT effects of the main temporary differences that generate the consolidated
deferred IT assets and liabilities are presented below:
2004 2005
------------- ------------
Deferred tax assets and liabilities(1):
Tax loss carryforwards and other tax credits to be amortized................ Ps 12,728 13,788
Accounts payable and accrued expenses....................................... 3,684 3,890
Trade accounts receivable................................................... 104 217
Others...................................................................... - 589
------------- ------------
Total deferred tax assets................................................. 16,516 18,484
Less - Valuation allowance.................................................. (4,127) (5,665)
------------- ------------
Net deferred tax assets................................................... 12,389 12,819
Properties, plant and equipment............................................. (19,953) (27,957)
Inventories................................................................. (150) (16)
Others...................................................................... (2,489) (7,068)
------------- ------------
Total deferred tax liabilities............................................ (22,592) (35,041)
------------- ------------
Net deferred tax position (liability)..................................... (10,203) (22,222)
Less - Deferred IT of acquired subsidiaries at the acquisition date......... (4,614) (17,386)
------------- ------------
Total effect of deferred IT in stockholders' equity at end of year.......... (5,589) (4,836)
Total effect of deferred IT in stockholders' equity at beginning of year.... (5,268) (5,589)
------------- ------------
Change in deferred IT for the period........................................ Ps (321) 753
============= ============
(1) Bulletin D-4 does not allow the offsetting of deferred IT assets and
liabilities relating to different tax jurisdictions.
F-33
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
For the years ended December 31, 2003, 2004 and 2005, the breakdown of the
change in consolidated deferred income tax for the period is as follows:
2003 2004 2005
--------- ---------- ---------
Deferred IT charged (credited) to the income statement............ Ps 518 (1,006) (1,124)
Changes in accounting principles.................................. - - 132
Deferred IT applied directly to stockholders' equity(2)........... (219) 685 1,745
--------- ---------- ---------
Change in deferred IT for the period.............................. Ps 299 (321) 753
========= ========== =========
(2) Bulletin D-4 states that all items whose effects are recorded directly in
stockholders' equity should be recognized net of their deferred income tax
effects.
The Company's management considers that sufficient taxable income will be
generated as to realize the tax benefits associated with the deferred income tax
assets, and the tax loss carryforwards, prior to their expiration. In the event
that present conditions change, and it is determined that future operations
would not generate enough taxable income, or that tax strategies are no longer
viable, the valuation allowance would be increased and reflected in the income
statement.
Temporary differences between net income of the period and taxable income for
ESPS generated expense of Ps71 in 2003, expense of Ps203 in 2004 and income of
Ps178 in 2005, reflected in the income statement of each period.
C) EFFECTIVE TAX RATE
The effects of inflation are recognized differently for IT and for accounting
purposes. This situation, and other differences between the book and the IT
basis, arising from the several income tax rates and laws in each of the
countries in which CEMEX operates, give rise to permanent differences between
the approximate statutory tax rate and the effective tax rate presented in the
consolidated income statement, which for the years ended December 31, 2003, 2004
and 2005 are as follows:
2003 2004 2005
--------- ---------- ---------
% % %
Approximated consolidated statutory tax rate.................... 34.0 33.0 30.0
Additional deductions and other deductible items................ (15.8) (21.6) (10.7)
Expenses and other non-deductible items......................... 1.2 1.9 (1.4)
Non-taxable sale of marketable securities and fixed assets...... - 0.4 (0.3)
Difference between book and tax inflation....................... (0.3) 1.6 1.2
Others(3)...................................................... (6.8) (3.1) (4.9)
--------- ---------- ---------
Effective consolidated tax rate................................. 12.3 12.2 13.9
========= ========== =========
(3) Includes the effects for the different IT rates enacted in the countries
where CEMEX operates, and the difference between the 2004 rate in Mexico of
33% and those in effect in 2005 (30%) and 2006 (29%) until reaching a tax
rate of 28% in 2007.
F-34
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
19. GEOGRAPHIC SEGMENT DATA
The Company operates principally in the construction industry segment through
the production and marketing of cement, ready-mix concrete and aggregates.
The following table presents, in accordance with information analyzed for
decision-making by management, selected condensed financial information,
referring to the main countries or regions in which CEMEX operates, and includes
new operations resulting from the acquisition of RMC for the ten-month period
ended December 31, 2005.
Selected financial information by geographic segment for the years ended
December 31, 2003, 2004 and 2005, is presented below:
Net Sales(1) Operating Income
----------------------------- ------------------------------
2003 2004 2005 2003 2004 2005
--------- --------- --------- --------- ---------- ---------
NORTH AMERICA
Mexico...............................................Ps 30,102 31,196 33,732 11,593 11,707 10,734
United Status(2)...................................... 19,836 21,097 43,441 2,344 2,776 7,145
EUROPE
Spain(3).............................................. 13,910 14,741 16,098 3,037 3,582 3,819
United Kingdom........................................ - - 16,299 - - 567
Rest of Europe(4)..................................... - - 28,837 - - 1,795
CENTRAL AND SOUTH AMERICA AND THE CARIBBEAN
Venezuela............................................. 3,652 3,742 4,399 1,218 1,169 1,432
Colombia.............................................. 2,530 2,620 2,664 1,052 1,194 362
Rest of Central and South America and the Caribbean(5) 6,794 7,357 7,195 1,202 1,685 685
AFRICA AND MIDDLE EAST
Egypt................................................. 1,542 2,028 2,806 341 613 1,045
Rest of Africa and Middle East(6)..................... - - 2,981 - - 100
ASIA
Philippines........................................... 1,536 1,617 2,039 (145) 289 437
Rest of Asia(7)....................................... - - 1,019 - - (18)
Others(8)............................................. 9,602 10,587 14,145 (3,977) (3,232) (1,694)
--------- --------- --------- --------- ---------- ---------
89,504 94,985 175,655 16,665 19,783 26,409
Eliminations.......................................... (7,459) (7,923) (12,946) - - -
--------- --------- --------- --------- ---------- ---------
Consolidated.........................................Ps 82,045 87,062 162,709 16,665 19,783 26,409
========= ========= ========= ========= ========== =========
Depreciation and Amortization(9) 2003 2004 2005
-----------------------------
-------- -------- --------
NORTH AMERICA
Mexico......................................................................... Ps 1,676 1,743 1,654
United States(2)............................................................... 2,051 2,266 3,204
EUROPE
Spain(3)....................................................................... 1,395 1,387 759
United Kingdom................................................................. - - 986
Rest of Europe(4).............................................................. - - 1,771
CENTRAL AND SOUTH AMERICA AND THE CARIBBEAN
Venezuela...................................................................... 647 568 560
Colombia....................................................................... 846 413 369
Rest of Central and South America and the Caribbean(5)......................... 614 585 604
AFRICA AND MIDDLE EAST
Egypt.......................................................................... 361 190 202
Rest of Africa and Middle East(6).............................................. - - 98
ASIA
Philippines.................................................................... 453 374 227
Rest of Asia(7)................................................................ - - 69
Others(8)...................................................................... 1,402 1,633 1,088
-------- -------- --------
Consolidated................................................................... Ps 9,445 9,159 11,591
======== ======== ========
F-35
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Total assets and investment in fixed assets ("FA") by geographic segment are
summarized as follows:
Total Assets Investment in FA (11)
---------- --------- ---------- ---------
2004 2005 2004 2005
---------- --------- ---------- ---------
NORTH AMERICA
Mexico....................................................... Ps 61,741 72,356 1,128 1,098
United States(2)............................................. 42,936 72,256 1,174 1,721
EUROPE
Spain(3)..................................................... 31,452 27,896 577 704
United Kingdom............................................... - 49,001 - 577
Rest of Europe(4)............................................ - 48,531 - 1,466
CENTRAL AND SOUTH AMERICA AND THE CARIBBEAN
Venezuela.................................................... 8,106 9,609 143 241
Colombia..................................................... 8,785 8,728 98 79
Rest of Central and South America and the Caribbean(5)....... 13,040 14,031 302 1,264
AFRICA AND MIDDLE EAST
Egypt........................................................ 5,796 6,930 89 100
Rest of Africa and Middle East(6)............................ - 2,522 - 73
ASIA
Philippines.................................................. 7,692 6,734 25 38
Rest of Asia(7).............................................. 4,035 4,587 33 53
Others(8, 10)................................................ 80,120 88,631 1,009 1,044
---------- --------- ---------- ---------
263,703 411,812 4,578 8,458
Eliminations................................................. (78,019) (127,584) - -
---------- --------- ---------- ---------
Consolidated................................................. Ps 185,684 284,228 4,578 8,458
========== ========= ========== =========
(1) Net sales between geographic segments are presented in the country or
region of origin and cancelled under the caption "eliminations".
(2) In 2005, United States includes the 10-month results of the operations
acquired from RMC (note 9A).
(3) In 2005, Spain includes the approximately 10-month results of the
operations acquired from RMC (note 9A).
(4) Rest of Europe includes the operations in Germany, France, Republic of
Ireland, Czech Republic, Austria, Poland, Croatia, Hungary, Latvia and
Denmark, acquired from RMC.
(5) Rest of Central and South America and the Caribbean includes the operations
in Costa Rica, Panama, Dominican Republic, Nicaragua, Guatemala and the
Caribbean. Likewise, in 2005, this region includes Jamaica and Argentina,
acquired from RMC.
(6) Rest of Africa and Middle East includes the operations in United Arab
Emirates and Israel, acquired from RMC.
(7) Rest of Asia includes operations in Thailand and Bangladesh. In addition,
in 2005, Malaysia, acquired from RMC is included.
(8) Refers to the trade maritime operations, the information solutions company
(Neoris, S.A. de C.V.) and other minor subsidiaries.
(9) For the years 2003 and 2004, goodwill amortization reported by holding
companies was allocated to the segment that originated such goodwill.
Therefore, this information is not directly comparable with the information
of the individual entities, which are comprised in each segment. Goodwill
amortization was recognized as part of other expenses, net.
(10) Includes, in addition to trade maritime operating assets and other assets,
related party balances of the Parent Company of Ps32,354 in 2004 and
Ps31,739 in 2005, which are eliminated in consolidation. In addition, other
assets in 2004 include Ps8,810 related to the equity interest in RMC (notes
2 and 9A).
(11) Corresponds to investments in fixed assets not considering the effects of
inflation. As a result, this balance differs from the amount presented as
investing activities in the Statement of Changes in the Financial Position
within "Properties, machinery and equipment", which considers the inflation
effects in accordance with Bulletin B-10.
As of December 31, 2004 and 2005, of the consolidated financial debt amounting
to Ps63,358 and Ps100,653, respectively, approximately 35% in 2004 and 36% in
2005 was in the Parent Company, 14% and 7% in the United States, 15% and 32% in
Spain and 36% and 25% in other countries, respectively. Of the 36% and 25% of
such financial debt in other countries in 2004 and 2005, respectively, 62% and
29% was in a Dutch subsidiary, guaranteed by the subsidiaries conducting Mexican
operations and the Parent. The other 24% in 2004 and 35% in 2005 was in finance
companies in the United States, guaranteed by the subsidiaries conducting
Spanish operations.
F-36
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
20. FOREIGN CURRENCY POSITION
As of December 31, 2005, the main balances denominated in foreign currencies,
are as follows:
U.S. dollars millions Mexico Foreign Total
--------- ---------- ---------
Current assets................................ 55 4,295 4,350
Noncurrent assets *........................... 2,552 16,252 18,804
--------- ---------- ---------
Total assets................................ 2,607 20,547 23,154
--------- ---------- ---------
Current liabilities........................... 419 2,222 2,641
Long-term liabilities......................... 1,919 8,370 10,289
--------- ---------- ---------
Total liabilities........................... 2,338 10,592 12,930
========= ========== =========
* In the case of Mexico refer to non-monetary assets of foreign origin.
The peso to dollar exchange rate as of December 31, 2003, 2004 and 2005 was
Ps11.24, Ps11.14 and Ps10.62 pesos per dollar, respectively. As of January 27,
2006, the exchange rate was Ps10.45 pesos per dollar.
Transactions of the Company's Mexican operations denominated in foreign
currencies during 2003, 2004 and 2005 are summarized as follows:
U.S. dollars millions 2003 2004 2005
--------- ---------- ---------
Export sales.................................. 57 76 124
Import purchases.............................. 91 88 85
Financial income.............................. 8 13 16
Financial expense............................. 389 338 337
--------- ---------- ---------
21. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing majority interest net income
for the year by the weighted average number of common shares outstanding during
the year. Diluted earnings per share reflect the effects of any transactions
carried out by the Company, which have a potentially dilutive effect on the
weighted average number of common shares outstanding. The amounts considered for
calculations, which in 2003 and 2004 include the effect of the stock split, are
summarized as follows:
Basic number Diluted number
of shares of shares
--------------- ----------------
December 31, 2003............................ 9,456,402,458 9,674,388,376
December 31, 2004............................ 9,987,365,042 10,039,265,534
December 31, 2005............................ 10,378,589,918 10,410,888,190
--------------- ----------------
Majority Basic Diluted
net income EPS EPS
--------- ---------- ---------
December 31, 2003............................ Ps 7,201 0.76 0.74
December 31, 2004............................ 13,965 1.40 1.39
December 31, 2005............................ Ps 22,425 2.16 2.15
--------- ---------- ---------
The difference between the basic and diluted average number of shares in 2003,
2004 and 2005 is attributable to the additional shares to be issued under the
Company's fixed employee stock option programs (note 16). In addition, beginning
in 2003, the Company has included the dilutive effect on the basic number of
shares resulting from the equity forward contracts in the Company's own stock,
determined under the inverse treasury method.
22. CONTINGENCIES AND COMMITMENTS
A) GUARANTEES
As of December 31, 2004 and 2005, CEMEX, S.A. de C.V. had signed as guarantor of
loans made to certain subsidiaries for approximately U.S.$1,355 and U.S.$711,
respectively. As of December 31, 2004, the Company and certain subsidiaries had
guaranteed the risks associated with certain financial transactions, assuming
contingent obligations under standby letters of credit, issued by financial
institutions for a total of U.S.$26.
F-37
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
B) TAX ASSESSMENTS
CEMEX and some of its subsidiaries in Mexico have been notified of several tax
assessments related to different tax periods, determined by the Mexican tax
authorities according to their verification attributions. These tax assessments
are for an amount of approximately Ps742 as of December 31, 2005. The tax
assessments result primarily from: (i) disallowed restatement of tax loss
carryforwards in the same period in which they occurred and (ii) disallowed
determination of tax loss carryforwards. The companies involved are using the
available defense actions granted by law in order to cancel the tax claims. The
appeals are pending resolution.
Pursuant to amendments to the Mexican Income tax Law, which became effective on
January 1, 2005, Mexican companies with direct or indirect investments in
entities incorporated in foreign countries whose income tax liability in those
countries is less than 75% of the income tax that would be payable in Mexico,
are required to pay taxes in Mexico on income derived from such foreign
entities, provided that the income is not derived from entrepreneurial
activities in such countries. In those applicable cases, the tax payable by
Mexican companies in respect of the 2005 tax year pursuant to these amendments
will be due upon filing their annual tax returns in 2006. CEMEX believes these
amendments are contrary to Mexican constitutional principles; consequently, on
August 8, 2005 the Company filed a motion in the Mexican federal courts
challenging the constitutionality of the amendments. In this endeavor, the
Company obtained a favorable ruling on December 23, 2005 in the first stage but
it is possible that the authority would challenge the ruling.
The Philippine Bureau of Internal Revenue notified the Company's subsidiaries in
the Philippines, of tax assessments related to different tax periods for an
amount of approximately 3,119 million Philippine pesos (approximately U.S.$59)
as of December 31, 2005. Tax assessments result primarily from: (i) disallowed
determination certain tax benefits, and (ii) deficiencies in the determination
of national taxes. The affected companies have appealed available defense
actions granted by law and in some cases, some resources are pending resolution.
C) ANTI-DUMPING DUTIES
In 1990, the United States Department of Commerce ("DOC") imposed an
anti-dumping duty order on imports of gray Portland cement and clinker from
Mexico. As a result, since that year and until December 31, 2005, CEMEX has paid
anti-dumping duties for cement and clinker exports to the United States at rates
that in the most recent years have fluctuated between 37.49% and 80.75% over the
transaction amount, and beginning in August 2003, anti-dumping duties had been
paid at a fixed rate of approximately U.S.$52.4 per ton, which decreased to
U.S.$32.9 per ton starting in December 2004 and to U.S.$26.0 per ton in 2005.
Through these years, CEMEX has used all available legal resources to revoke the
order from the United States International Trade Commission ("ITC"). During
October 2005, the DOC and the ITC started their second sunset review for the
collection of anti-dumping duties, held every five years, to determine if the
imposed anti-dumping order should continue.
On January 19, 2006, officials from the Mexican and the United States
governments informed that they had reached an agreement in principle that will
bring to an end the longstanding dispute over Mexican cement exports to the
United States. According to the agreement, restrictions imposed by the United
States will first be eased during a three-year transition period and completely
eliminated in early 2009, allowing cement from Mexico to enter the U.S. without
duties or other limits on volumes. During the transition period, 3 million tons
of Mexican cement per year will be allowed into the U.S. This amount may be
increased in response to market conditions during the second and third year of
the transition period, subject to a maximum increase per year of 4.5%. Quota
allocations to competitors will be made on a regional basis. The transitional
anti-dumping duty will be lowered to U.S.$3.0 per ton from current amount of
approximately U.S.$26.0 per ton.
As of December 31, 2005, CEMEX has accrued a liability of U.S.$68, including
accrued interest, for the difference between the anti-dumping duties paid on
imports and the latest findings of the DOC in its administrative reviews for all
periods under review. If implemented as proposed, the changes related to the
anti-dumping order cancellation and its effect on the anti-dumping duties paid
since the order was imposed, CEMEX will receive approximately U.S.$100 in cash
and will also reverse approximately U.S.$65 of the accrued liability. The final
resolutions related to this settlement are expected during the second half of
2006.
During 2001, the Ministry of Finance ("MOF") of Taiwan in response of the claim
of five Taiwanese cement producers, initiated a formal anti-dumping
investigation involving imported gray Portland cement and clinker from the
Philippines and South Korea. In July 2002, the MOF gave notice of a cement and
clinker import duty, from imports on South Korea and the Philippines, beginning
on July 19, 2002. The imposed tariff was 42% on imports from the Company's
Philippine subsidiaries.
In September 2002, these entities appealed the anti-dumping duty before the
Taipei High Administrative Council ("THAC"). In August 2004, the Company
received an adverse response to its requests from the THAC. CEMEX did not appeal
this resolution.
On September 13, 2005, Tunwoo Co. Ltd. ("Tunwoo"), the Company's subsidiary in
Taiwan, was notified by the Taiwan Fair Trade Commission ("FTC"), of an
investigation based on connection to the presumption that Tunwoo, together with
other cement companies in Taiwan, were coordinated in activities that violated
the regulations of fair competition in that country. Tunwoo received the FTC's
decision issued on December 21, 2005 to impose a penalty order varying from 5 to
18 million Taiwanese dollars fine against 21 cement companies in Taiwan. Tunwoo
was imposed with a fine of 18 million Taiwanese dollars. The company has two
months to appeal such resolution.
F-38
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
D) LEASES
CEMEX has entered into various operating leases, primarily for operating
facilities, cement storage and distribution facilities and certain
transportation and other equipment, under which annual rental payments are
required plus the payment of certain operating expenses. Future minimum rental
payments due under such leases are as follows:
Year ending December 31, U.S. dollars
millions
- --------------------------------------------------------------- --------------
2006........................................................... U.S.$ 178
2007........................................................... 149
2008........................................................... 102
2009........................................................... 71
2010........................................................... 42
2011........................................................... 23
2012 and thereafter............................................ 69
--------------
U.S.$ 634
==============
Rental expense for the years ended December 31, 2003, 2004 and 2005 was
approximately U.S.$56 (Ps641), U.S.$114 (Ps1,218) and U.S.$152 (Ps1,614),
respectively. The estimated future minimum payments of U.S.$634 at December 31,
2005, include U.S.$109 of operating leases assumed through the purchase of RMC.
E) PLEDGED ASSETS
As of December 31, 2004 and 2005, there are liabilities amounting to U.S.$2 and
U.S.$100, respectively, secured by properties, machinery and equipment.
F) COMMITMENTS
As of December 31, 2004 and 2005, the Company had commitments for the purchase
of raw materials for an approximate amount of U.S.$172 and U.S.$169,
respectively.
During 1999, CEMEX entered into agreements with an international partnership,
which built and currently operates an electrical energy generating plant in
Mexico. According to the agreements, CEMEX will purchase, starting from the
beginning of operations of the plant, all the energy generated for a term of not
less than 20 years. The electrical energy generating plant started operations on
April 29, 2004. In addition, as part of the agreements, CEMEX has committed to
supply the electrical energy plant with all fuel necessary for its operations, a
commitment that has been hedged through a 20-year agreement entered into by the
Company with Petroleos Mexicanos. The Company is not required to make any
capital investment in the project. By means of this transaction, at December 31,
2005, the energy generated by the plant has supplied electricity to 10 cement
plants of CEMEX in Mexico, covering 73% of their needs and decreasing
electricity costs by 28%.
G) OTHER CONTINGENCIES
On August 5, 2005, Cartel Damages Claims, S.A. ("CDC"), filed a lawsuit in the
District Court in Dusseldorf, Germany against CEMEX Deutschland AG, the
subsidiary of the Company in Germany, and other German cement companies. By
means of this lawsuit, CDC is seeking 102 million euros (approximately U.S.$121)
in respect of damage claims by 28 entities relating to alleged price and quota
fixing by German cement companies between 1993 and 2002. CDC is a Belgian
company established in the aftermath of the German cement cartel investigation
that took place from July 2002 to April 2003 by Germany's Federal Cartel Office,
with the purpose of purchasing potential damage claims from cement consumers and
pursuing those claims against the cartel participants. At this preliminary stage
in the proceedings, it is not possible to assess the likelihood of an adverse
result in this lawsuit for CEMEX or the potential damages. However, at December
31, 2005, CEMEX has accrued a provision of approximately Ps428 (euros 34
million) in connection with this legal proceeding representing CEMEX's best
estimate of the possible future cash outflows.
In August 2005, a lawsuit was filed against a subsidiary of CEMEX Colombia,
claiming that it was liable along with certain employees and former employees of
Asociacion Colombiana de Productores de Concreto, or ASOCRETO, a union formed by
all the ready-mix producers in Colombia, and the company in charge of building
the mass public transportation system of Bogota, Colombia, for the premature
distress of the roads built for such transportation system using ready-mix
concrete supplied by CEMEX Colombia and other ASOCRETO members. The plaintiffs
allege that the ASOCRETO defendants modified the initial specifications of the
transportation system to include certain construction materials supplied by
CEMEX Colombia, and that as a result of these changes in the specifications, the
base material supplied for the road construction failed to meet certain
technical quality standards.
The plaintiffs seek the repair of the roads and estimate that the cost of such
repair will be approximately U.S.$45. CEMEX Colombia is vigorously contesting
this lawsuit. At this preliminary stage in the proceedings, it is not possible
to assess the likelihood of an adverse result in this lawsuit, or the potential
damages that could be borne by CEMEX Colombia. Typically, proceedings of this
nature continue for several years before final resolution.
F-39
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
As of December 31, 2005, CEMEX Inc., the Company's subsidiary in the United
States, has accrued liabilities specifically relating to environmental matters
in the aggregate amount of approximately Ps276 (U.S.$26). The environmental
matters relate to: a) in the past, in accordance with industry practices,
disposing of various materials, which might be currently categorized as
hazardous substances or wastes, and b) the cleanup of sites used or operated by
the Company, including discontinued operations, in regard to the disposal of
hazardous substances or wastes, either individually or jointly with other
parties. Most of the proceedings remain in the preliminary stage, and a final
resolution might take several years. For purposes of recording any provision,
the subsidiary considers that it is probable that a liability has been incurred
and the amount of the liability is reasonably estimable, whether or not claims
have been asserted, and without giving effect to any possible future recoveries.
Based on the information developed to date, the subsidiary does not believe it
will be required to spend significant sums on these matters in excess of the
amounts previously recorded. Until all environmental studies, investigations,
remediation work and negotiations with or litigation against potential sources
of recovery have been completed, the ultimate cost that might be incurred to
resolve these environmental issues cannot be assured. In addition, at December
31, 2005, CEMEX recorded a provision of approximately Ps244 (U.S.$23)
representing the potential future cash outflows, in connection with other
environmental matters in the U.S. assumed through the acquisition of RMC during
2005.
During 2001, a subsidiary of the Company in Colombia received a civil liability
suit from 42 transporters, alleging that this subsidiary is responsible for
alleged damages caused by the alleged breach of provision of raw materials
contracts. The plaintiffs have asked for relief in an amount in Colombian pesos
equivalent, as of December 31, 2005, to approximately U.S.$57. As of December
31, 2005, the evidentiary stage has been closed, the final arguments have been
presented and the final decision is pending.
In addition, during 1999, several companies filed a lawsuit against two
subsidiaries of the Company in Colombia, alleging that the Ibague plants were
causing damage to their lands due to the pollution they generate. In January
2004, CEMEX Colombia, S.A. was notified that the court's decision was that
plaintiffs should be paid in the amount in Colombian pesos equivalent, as of
December 31 2005, to approximately U.S.$8. The Company's subsidiary sought leave
to appeal the resolution, which was accepted, and the case was sent to the
Superior Court of Ibague. The claim is under review in the Court of Appeals.
Typically, this process will continue for several years before its final
resolution.
23. ALLOCATION OF THE PURCHASE PRICE OF RMC AND PRO FORMA FINANCIAL INFORMATION
A) ALLOCATION OF THE PURCHASE PRICE
As of December 31, 2005, the Company is in the final stage of allocating the
price paid in the purchase of RMC of Ps44,787 (U.S.$4,217) to the fair values of
the assets acquired and the liabilities assumed. The price paid for RMC's shares
was adjusted to include: (i) direct acquisition expenses, and (ii) the proceeds
received from the sale of some RMC's assets (note 9A).
CEMEX considers that the unassigned portion of the purchase price that was
recognized as goodwill as of December 31, 2005, is representative of the final
amount that will result when the allocation process finishes at the end of the
first quarter of 2006. The Company has substantially finished with the valuation
of the assets acquired and the liabilities assumed and, recognizing that some
other issues may arise, the only pending issue is to conclude whether any
portion of goodwill should be further allocated to other intangible assets,
others than brands and trade names.
The allocation of the purchase price of RMC to the fair value of the assets
acquired and liabilities assumed is presented below:
As of March 1, 2005 RMC
---------
Current assets..................................................... Ps 21,915
Investments and other noncurrent assets............................ 2,536
Properties, machinery and equipment................................ 70,317
Other assets A .................................................... 979
Intangible assets B ............................................... 1,850
Goodwill........................................................... 12,411
---------
Total assets acquired.............................................. 110,008
---------
Current liabilities C.............................................. 28,556
Long-term debt C................................................... 13,173
Remediation liabilities............................................ 4,005
Pensions and other postretirement benefits......................... 5,561
Deferred IT liability.............................................. 13,186
Other long-term liabilities ....................................... 740
---------
Total liabilities assumed.......................................... 65,221
---------
Total net assets .................................................. Ps 44,787
=========
A Includes Ps718 of deferred tax assets.
B Identified intangible assets refer mainly to trade names and brands, which
have been assigned with an average useful life of approximately 5 years.
C Current liabilities include Ps11,983 of short-term financial debt, while
long-term debt includes Ps11,903 of financial debt.
F-40
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
B) PRO FORMA FINANCIAL INFORMATION
The following condensed pro forma income statements for the twelve-month periods
ended December 31, 2004 and 2005, gives effect to the RMC acquisition as if it
had occurred on January 1, 2004.
The pro forma adjustments consider the fair values of the net assets acquired,
under certain assumptions that CEMEX considers are reasonable.
Year ended December 31, 2004 CEMEX RMC Adjustments CEMEX pro
(1) (2) (3) forma
------------ ------------ ------------ -----------
Sales.......................................................... Ps 87,062 82,162 - 169,224
Operating income............................................... 19,783 2,510 (761) 21,532
Comprehensive financing result................................. 1,424 (971) 3,851 4,304
Other expenses, net............................................ (5,169) (5,237) (836) (11,242)
Income taxes................................................... (2,277) (630) (377) (3,284)
Equity in income of affiliates................................. 428 504 - 932
------------ ------------ ------------ -----------
Consolidated net income........................................ 14,189 (3,824) 1,877 12,242
Minority interest.............................................. 224 228 - 452
------------ ------------ ------------ -----------
Majority net income............................................ Ps 13,965 (4,052) 1,877 11,790
============ ============ ============ ===========
Basic EPS ..................................................... Ps 1.40 1.18
------------ -----------
Diluted EPS ................................................... 1.39 1.17
============ ===========
Year ended December 31, 2005 CEMEX RMC Adjustments CEMEX pro
1 2 3 forma
------------ ------------ ------------ -----------
Sales.......................................................... Ps 162,709 10,085 - 172,794
Operating income............................................... 26,409 (293) (115) 26,001
Comprehensive financing result................................. 2,600 (107) (1,790) 703
Other expenses, net............................................ (3,372) 2 (38) (3,408)
Income taxes................................................... (3,555) (46) 265 (3,336)
Equity in income of affiliates................................. 928 10 - 938
------------ ------------ ------------ -----------
Consolidated net income........................................ 23,010 (434) (1,678) 20,898
Minority interest.............................................. 585 13 - 598
------------ ------------ ------------ -----------
Majority net income............................................ Ps 22,425 (447) (1,678) 20,300
============ ============ ============ ===========
Basic EPS ..................................................... Ps 2.16 1.96
------------ -----------
Diluted EPS ................................................... 2.15 1.95
============ ===========
(1) Information derived from the consolidated income statements for the years
2004 and 2005, as reported. In 2005, includes RMC's operating results for
the ten-month period ended December 31, 2005.
(2) In 2005, the information relates to the two-month period (unaudited) ended
February 28, prepared under International Financial Reporting Standards
("IFRS"). In 2004, the information was obtained from the audited
consolidated financial statements, prepared under generally accepted
accounting principles in the United Kingdom ("UK GAAP"), and include
reclassifications to conform RMC amounts to CEMEX's presentation. RMC's
information was translated into pesos at the exchange rates of Ps18.27 and
Ps21.30, effective as of December 31, 2004 and February 28, 2005,
respectively, per (pound)1 United Kingdom sterling pound, and was restated
to constant pesos as of December 31, 2005.
(3) The pro forma adjustments for the two-month period of RMC in 2005 and the
twelve-month period of RMC in 2004 include adjustments related to the
allocation of RMC's purchase price. Likewise, the 2004 pro forma
adjustments include adjustments resulting from the relevant differences
identified between UK GAAP and Mexican GAAP. The main adjustments as of
December 31, 2004 and February 28, 2005, consist of:
F-41
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Items 2004 2005
----------- -----------
Complementary depreciation expense................. Ps (761) (115)
Financial expense D ............................... (1,114) (168)
Valuation of derivative instruments................ 1,475 (1,314)
Foreign exchange fluctuations D.................... 1,290 (351)
Monetary position result........................... 2,200 42
Intangible assets amortization..................... (246) (37)
Goodwill amortization.............................. (590) -
Deferred income tax................................ (377) 265
----------- -----------
Ps 1,877 (1,678)
=========== ===========
D Determined on the basis of the U.S.$3,326 in 2004 and U.S.$3,311 in 2005 of
average debt assumed for the purchase, using the interest rates of 2.4% in
2004 and 2.8% in 2005.
Pro forma financial information is not an indication of the consolidated results
of operations that CEMEX would have reported had the RMC acquisition been
completed as of January 1, 2004, nor should such information be taken as
representative of the Company's future consolidated results.
24. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
Until May 2004, the Accounting Principles Commission ("CPC") of the Mexican
Institute of Public Accountants was the accounting standards setter in Mexico.
Beginning in June 2004, this function was transferred to the Consejo Mexicano
para la Investigacion y Desarrollo de Normas de Informacion Financiera
("CINIF"). The CINIF is a private organization whose objectives are to develop
Financial Reporting Standards ("FRS") in Mexico that would be useful for
financial information issuers and users, as well as to accomplish the possible
convergence with IFRS, issued by the International Accounting Standards Board.
Through December 2005, the CINIF issued eight series A FRS and one series B FRS.
Effective January 1, 2006, standards in Mexico include the FRS issued by the
CINIF, as well as the Bulletins issued by the CPC that have not been modified,
superseded or revoked by a new FRS.
The main changes, included in the FRS issued, are the following:
a) Elimination of special and extraordinary items, classifying captions in the
income statements as ordinary and non-ordinary.
b) Retroactive recognition of the effects of changes in accounting principles.
c) Disclosure of the authorized date for the issuance of the financial
statements, as well as the officer or entity that authorized their
issuance.
F-42
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
25. DIFFERENCES BETWEEN MEXICAN AND UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in Mexico (Mexican GAAP), which differ in certain
significant respects from those applicable in the United States (U.S. GAAP).
The Mexican GAAP consolidated financial statements include the effects of
inflation as provided for under Bulletin B-10 and Bulletin B-15, whereas
financial statements prepared under U.S. GAAP are presented on a historical cost
basis. The reconciliation to U.S. GAAP includes (i) a reconciling item for the
reversal of the effect of applying Bulletin B-15 for the restatement to constant
pesos for the years ended December 31, 2003 and 2004, and (ii) a reconciling
item to reflect the difference in the carrying value of machinery and equipment
of foreign origin and related depreciation between the methodology set forth by
Bulletin B-10 (integrated document) and the amounts that would be determined by
using the historical cost/constant currency method. As described below, these
provisions of inflation accounting under Mexican GAAP do not meet the
requirements of Rule 3-20 of Regulation S-X of the Securities and Exchange
Commission. The reconciliation does not include the reversal of other Mexican
GAAP inflation accounting adjustments as these adjustments represent a
comprehensive measure of the effects of price level changes in the inflationary
Mexican economy and, as such, is considered a more meaningful presentation than
historical cost-based financial reporting for both Mexican and U.S. accounting
purposes. The other principal differences between Mexican GAAP and U.S. GAAP for
the years ended December 31, 2003, 2004 and 2005, and their effect on
consolidated net income and earnings per share, are presented below:
Years ended December 31,
---------------------------------------
2003 2004 2005
---------------------------------------
Net income reported under Mexican GAAP................................... Ps 7,201 13,965 22,425
Inflation adjustment (*)................................................. 471 1,034 -
---------------------------------------
Net income reported under Mexican GAAP after inflation adjustment........ 7,672 14,999 22,425
U.S. GAAP adjustments:
1. Amortization of goodwill (note 25(a)).................................... 2,113 910 -
2. Deferred income taxes (note 25(b))....................................... (67) 394 (200)
3. Deferred employees' statutory profit sharing (note 25(b))................ 97 (58) 149
4. Other employee benefits (note 25(c))..................................... 94 28 (794)
5. Capitalized interest (note 25(d))........................................ (50) 10 4
6. Minority interest (note 25(e)):
a) Financing transactions................................................ (190) - -
b) Effect of U.S. GAAP adjustments....................................... (26) (32) 9
7. Hedge accounting (note 25(l))............................................ (897) 190 1,075
8. Depreciation (note 25(f))................................................ 53 20 18
9. Accruals for contingencies (note 25(g)).................................. (118) (33) -
10. Equity in net income of affiliated companies (note 25(h))................ (11) (8) 4
11. Inflation adjustment of fixed assets (note 25(i))........................ (284) (247) (306)
12. Temporary equity from forward contracts (note 25(j))..................... 804 - -
13. Derivative instruments (note 25(l))...................................... - 1,515 (1,471)
quity forward contracts in CEMEX's stock (note 25(m))...................
14. E 451 444 -
15. Employee stock option programs (note 25 (r))............................. - - 860
16. Other adjustments - Computer software development (note 25(k))........... (377) (29) -
17. Other adjustments - Deferred charges (note 25(k))........................ 98 93 167
18. Other adjustments - Monetary position result (note 25(k))................ 317 309 175
---------------------------------------
U.S. GAAP adjustments before cumulative effect of accounting change...... 2,007 3,506 (310)
---------------------------------------
Net income under U.S. GAAP before cumulative effect of accounting change. 9,679 18,505 22,115
Cumulative effect of accounting change (notes 25(k) and 25(m))........... (695) - -
---------------------------------------
Net income under U.S. GAAP after cumulative effect of accounting change.. Ps 8,984 18,505 22,115
=======================================
Basic EPS under U.S. GAAP before cumulative effect of accounting change...... Ps 1.02 1.85 2.13
Diluted EPS under U.S. GAAP before cumulative effect of accounting change.... 1.00 1.84 2.12
=======================================
Basic EPS under U.S. GAAP after cumulative effect of accounting change....... Ps 0.95 1.85 2.13
Diluted EPS under U.S. GAAP after cumulative effect of accounting change..... 0.93 1.84 2.12
=======================================
F-43
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
At December 31, 2004 and 2005, the other principal differences between Mexican
GAAP and U.S. GAAP, and their effect on consolidated stockholders' equity, with
an explanation of the adjustments, are presented below:
At December 31,
--------------------------
2004 2005
------------- ------------
Total stockholders' equity reported under Mexican GAAP.............................. Ps 87,812 109,957
Inflation adjustment (*)............................................................ 6,501 -
------------- ------------
Total stockholders' equity reported under Mexican GAAP after inflation adjustment... 94,313 109,957
U.S. GAAP adjustments:
1. Goodwill, net (note 25(a)).......................................................... 5,790 4,767
2. Deferred income taxes (note 25(b)).................................................. 1,020 569
3. Deferred employees' statutory profit sharing (note 25(b))........................... (3,151) (2,907)
4. Other employee benefits (note 25(c))................................................ (153) (348)
5. Capitalized interest (note 25(d))................................................... (521) 54
6. Minority interest--U.S. GAAP presentation (note 25(e))............................... (4,672) (5,729)
7. Depreciation (note 25(f))........................................................... (81) (60)
8. Investment in net assets of affiliated companies (note 25(h))....................... (275) (237)
9. Inflation adjustment for machinery and equipment (note 25(i))....................... 3,305 4,548
10. Derivative instruments and equity forward contracts in CEMEX's stock (notes 25(l)
and 25(m)).......................................................................... 246 -
11. Employee stock option programs (note 25 (r))........................................ - 992
12. Other adjustments - Deferred charges (note 25(k))................................... (409) (225)
------------- ------------
U.S. GAAP adjustments............................................................... 1,099 1,424
------------- ------------
Stockholders' equity under U.S. GAAP................................................ Ps 95,412 111,381
============= ============
(*) Adjustment that reverses the restatement of prior periods into constant
pesos as of December 31, 2005, using the CEMEX weighted average inflation
factor (note 3B), and restates such prior periods into constant pesos as of
December 31, 2005 using the Mexican-only inflation factor, in order to comply
with current requirements of Regulation S-X. The Mexican and U.S. GAAP prior
periods amounts, included throughout note 25, were restated using the Mexican
inflation index, with the exception of those amounts of prior periods that are
also disclosed in notes 1 to 24, which were not restated in note 25 using the
Mexican inflation in order to have more straightforward cross-references
between note 25 and the Mexican GAAP notes.
The reconciling item cumulative effect of accounting change in the
reconciliation of net income to U.S. GAAP for the year ended December 31, 2003,
relates to the adoption of SFAS 143 Accounting for Asset Retirement Obligations
("SFAS 143") and SFAS 150 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity ("SFAS 150") (notes 25(k) and
25(m)). The term "SFAS" as used herein refers to U.S. Statements of Financial
Accounting Standards.
(a) Goodwill, acquisitions and other agreements
Goodwill
Goodwill represents the difference between the purchase price and the estimated
fair value of the acquired entity at the acquisition date. Goodwill recognized
under Mexican GAAP has been adjusted for U.S. GAAP purposes for (i) the effect
on goodwill from the U.S. GAAP adjustments as of the acquisition dates; (ii)
beginning January 1, 2002, SFAS 142, Goodwill and Other Intangible Assets,
("SFAS 142"), eliminated the amortization of goodwill under U.S. GAAP (note
25(s)) while under Mexican GAAP goodwill was amortized until December 31, 2004;
and (iii) the difference between goodwill amounts under U.S. GAAP, under which
are carried in the reporting unit's functional currency, are restated by the
inflation factor of the reporting unit's country, and are translated into
Mexican pesos at the exchange rates prevailing at the reporting date; as
compared to goodwill under Mexican GAAP, under which amounts are carried in the
functional currencies of the holding companies, translated into pesos and then
restated using the Mexican inflation index.
For the years ended December 31, 2003, and 2004, amortization of goodwill was
recorded within other expenses under Mexican GAAP. Starting January 1, 2005,
Mexican GAAP ceased amortization of goodwill (note 3D). According to SFAS 142
goodwill is not amortized and is subject to impairment testing at least once a
year. As a result, goodwill amortization recorded under Mexican GAAP for the
years ended December 31, 2003 and 2004 is adjusted for purposes of the
reconciliation of net income and stockholders' equity to U.S. GAAP.
CEMEX assesses goodwill for impairment annually unless events occur that require
more frequent reviews. Discounted cash flow analyses are used to assess goodwill
impairment (note 25(s)). If an assessment indicates impairment, the impaired
asset is written down to its fair market value based on the best information
available. Estimated fair market value is generally measured using estimated
discounted future cash flows. Considerable management judgment is necessary to
estimate discounted future cash flows. Assumptions used for these cash flows are
consistent with internal forecasts.
F-44
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
During 2004, CEMEX acquired CAH shares held by minority shareholders through the
exchange for CEMEX's CPOs (note 9A), resulting in an excess in the fair value of
the assets delivered over the fair value of the assets received of approximately
Ps960. Under Mexican GAAP, this excess was recognized as an adjustment to
stockholders' equity. Under U.S. GAAP, this amount was reclassified and charged
to earnings in the reconciliation of net income by considering that estimations
of future cash flows did not support recognition of this amount as goodwill.
This reclassification had no effect in the reconciliation of stockholders'
equity to U.S. GAAP as of December 31, 2004.
Acquisitions
In addition, related to the purchase accounting exercise of RMC, the Company
concluded, in respect to the identification and valuation of intangibles assets,
other than goodwill, that there were no additional intangible assets which
required separate recognition in addition to trademarks and commercial names,
which were valued at December 31, 2005 under Mexican GAAP, as discussed in note
23A.
Other agreements
In connection with the ventures entered into with Ready Mix USA on July 1, 2005
(note 9A), pursuant to the relevant agreements, two limited liability companies
were formed, CEMEX Southeast, LLC and Ready Mix USA, LLC. CEMEX's contributions
to CEMEX Southeast, LLC, the entity that owns the cement related assets,
represented approximately 98% of the contributed capital, while Ready Mix USA's
contributions represented approximately 2% of the contributed capital. CEMEX's
contributions to Ready Mix USA, LLC, the entity that owns the ready-mix related
assets, represented approximately 9% of the contributed capital, while Ready Mix
USA's contributions represented approximately 91% of the contributed capital.
CEMEX owns a 50.01% interest, and Ready Mix USA owns a 49.99% interest, in the
profits and losses and voting rights of CEMEX Southeast, LLC, while Ready Mix
USA owns a 50.01% interest, and CEMEX owns a 49.99% interest, in the profits and
losses and voting rights of Ready Mix USA, LLC.
(b) Deferred Income Taxes ("IT") and Employees' Statutory Profit Sharing
("ESPS")
For U.S. GAAP purposes, CEMEX accounts for income taxes according to SFAS 109,
Accounting for Income Taxes ("SFAS 109"), which requires the asset and liability
method of accounting for deferred income taxes, under which deferred tax assets
and liabilities are recognized for the future tax consequences of "temporary
differences", which result from applying the enacted statutory tax rates
applicable in future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities,
considering tax loss carryforwards. The deferred income tax charged or credited
to earnings is determined by the difference between the beginning and the
year-end balance of the deferred tax assets or liabilities, and is recognized in
nominal pesos. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities under U.S. GAAP at
December 31, 2004 and 2005 are presented below:
2004 2005
------------ -----------
Deferred tax assets:
Net operating loss and assets tax carryforwards........................................ Ps 13,670 13,788
Trade accounts receivable.............................................................. 112 217
Accounts payable and accrued expenses.................................................. 3,957 3,890
Other.................................................................................. 675 806
------------ -----------
Total gross deferred tax assets........................................................ 18,414 18,701
Less valuation allowance............................................................... 4,432 5,665
------------ -----------
Total deferred tax assets under U.S. GAAP............................................ 13,982 13,036
------------ -----------
Deferred tax liabilities:
Property, plant and equipment.......................................................... 23,125 29,804
Investments in securities and related parties transactions............................. 2,477 4,917
Advanced payments...................................................................... 191 396
Inventories............................................................................ 161 16
Other.................................................................................. 212 1,738
------------ -----------
Total deferred tax liability under U.S. GAAP......................................... 26,166 36,871
------------ -----------
Net deferred tax liability under U.S. GAAP............................................. 12,184 23,835
Less--U.S. GAAP deferred IT liability of acquired subsidiaries at date of acquisition... 7,201 19,568
------------ -----------
Net deferred IT effect in stockholders' equity under U.S. GAAP......................... 4,983 4,267
Less-- Deferred IT effect in stockholders' equity under Mexican GAAP (note 18B)......... 5,589 4,836
------------ -----------
Income in reconciliation of stockholders' equity to U.S. GAAP.......................... 606 569
Inflation adjustment (note 3B)......................................................... 414 -
------------ -----------
Net income in reconciliation of stockholders' equity to U.S. GAAP...................... Ps 1,020 569
============ ===========
F-45
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Management considers that there is existing evidence that, in the future, CEMEX
will generate sufficient taxable income to realize the tax benefits associated
with the deferred tax assets, and the tax loss carryforwards that are expected
to be utilized prior to their expiration. In the event that present conditions
change, and it is determined that future operations would not generate enough
taxable income, or that tax strategies are no longer viable, the deferred tax
assets' valuation allowance would be increased by a charge to income.
CEMEX records a valuation allowance for the estimated amount of the deferred tax
assets, which may not be realized due to the expiration of tax loss
carryforwards. Through its continual evaluation of the effects of tax
strategies, among other economic factors, during 2004 and 2005 CEMEX increased
the valuation allowance by approximately Ps 443 and Ps1,233, respectively.
Under Mexican GAAP, CEMEX determines deferred income tax in a manner similar to
U.S. GAAP (notes 3S and 18B). Nonetheless, there are specific differences as
compared to the calculation under SFAS 109, resulting in adjustments in the
reconciliation to U.S. GAAP. These differences arise from: (i) the recognition
of the accumulated initial effect of the asset and liability method under
Mexican GAAP, which was recorded directly to stockholders' equity and therefore,
did not consider the provisions of APB Opinion 16 for the deferred tax
consequences in business combinations made before January 1, 2000; and (ii) the
effects of deferred tax on the reconciling items between Mexican and U.S. GAAP.
For Mexican GAAP presentation purposes, deferred tax assets and liabilities are
long-term items.
CEMEX has recorded a deferred tax liability for U.S. GAAP purposes, related to
ESPS in Mexico, under the asset and liability method at the statutory rate of
10%. The principal effects of temporary differences that give rise to
significant portions of the deferred ESPS liabilities at December 31, 2004 and
2005 are presented below:
2004 2005
------------- -------------
Deferred assets:
Employee benefits.......................... Ps 19 225
Trade accounts receivable.................. 25 20
Other...................................... 72 85
------------- -------------
Gross deferred assets under U.S. GAAP......... 116 330
------------- -------------
Deferred liabilities:
Property, plant and equipment.............. 3,060 2,965
Inventories................................ 1 -
Other...................................... 206 272
------------- -------------
Gross deferred liabilities under U.S. GAAP.... 3,267 3,237
------------- -------------
Net deferred liabilities under U.S. GAAP...... Ps 3,151 2,907
============= =============
In the condensed financial information presented under U.S. GAAP in note 25(o),
ESPS effect, both current and deferred, is included in the determination of
operating income. For Mexican GAAP presentation, ESPS effect, both current and
deferred, is considered as a separate line item equivalent to income tax.
Under Mexican GAAP, CEMEX recognizes deferred ESPS for those temporary
differences arising from the reconciliation of net income of the period and the
taxable income for ESPS. In the reconciliation of net income to U.S. GAAP,
deferred ESPS expense of Ps71 in 2003, expense of Ps203 in 2004 and income of
Ps178 in 2005, determined under Mexican GAAP, were reversed.
(c) Other Employee Benefits
Paid absences (Vacations)
Beginning in 2003, CEMEX recognizes vacation expense under Mexican GAAP during
the period the employees earn it, consistently with SFAS 43, Accounting for
Compensated Absences. For the year ended December 31, 2002, in some business
units of CEMEX, vacation expense was recorded for purposes of Mexican GAAP when
taken rather than during the period the employees earn it; therefore, a
reconciling item was determined for U.S. GAAP purposes representing expense of
approximately Ps1 in 2003. The amount of expense recognized during 2003 under
U.S. GAAP represents the difference between the estimated accrual made under
U.S. GAAP through December 31, 2002 and the accumulated initial effect from the
accounting change under Mexican GAAP, which was recognized as of January 1, 2003
directly to stockholders' equity.
Severance
Under U.S. GAAP, post-employment benefits for former or inactive employees,
including severance payments which are not part of a specific event of
restructuring, are accrued over an employee's service life. Until December 31,
2004 under Mexican GAAP, severance payments, which were not part of a business
restructuring or a substitution for pension benefits, were recognized in
earnings in the period in which they were paid. Beginning January 1, 2005,
according to newly issued Mexican GAAP, severance payments should also be
accrued over the employee's service life according to actuarial computations, in
a manner similar to U.S. GAAP (note 14).
F-46
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
For the years ended December 31, 2003, 2004 and 2005, severance provisions
recorded for U.S. GAAP purposes resulted in income of Ps94, income of Ps28 and
expense of Ps101, respectively, with an accrual of Ps153 and Ps295 at December
31, 2004 and 2005, respectively. At December 31, 2005, the provision for
severance payments under U.S. GAAP amounted to approximately Ps295,
approximately Ps250 higher that the provision accrued under Mexican GAAP. The
difference between the provision under U.S. GAAP and Mexican GAAP represents the
cumulative initial effect from the accounting change under Mexican GAAP, which
was recognized as of January 1, 2005 as part of the unrecognized net transition
obligation (note 14), net of the amortization expense recorded under Mexican
GAAP during 2005 related to such transition obligation.
Additionally, in connection with the purchase of RMC, as of December 31, 2005,
for purposes of the financial statements under Mexican GAAP, CEMEX recorded
restructuring costs, mainly integrated by severance payments, for approximately
Ps595 against goodwill. For purposes of the reconciliation to U.S. GAAP, such
restructuring costs have deemed not to comply with the rules of SFAS 141,
"Business Combinations" for recognition as part of the purchase price of RMC. As
a result, such restructuring costs under Mexican GAAP for approximately Ps595
(Ps422 after tax) were charged to earnings in the reconciliation of net income
to U.S. GAAP and removed from goodwill in the condensed financial information
under U.S. GAAP (note 25(o)).
Pension and other benefits
In connection with the change from defined benefit scheme to defined
contribution scheme for a portion of CEMEX's employees in Mexico effective
January 10, 2006 (note 14), considering that such change was a material event
which occurred before the issuance of the financial statements, under Mexican
GAAP, CEMEX recognized at December 31, 2005, a nonrecurring net expense of
approximately Ps976 related to: 1) an event of settlement of obligations, which
represented an income of approximately Ps98; and 2) an event of curtailment,
which represented an expense of approximately Ps1,074. The results from the
change in the pension plans were determined using a methodology consistent with
the rules set forth by SFAS 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits". For
purposes of the reconciliation of net income to U.S. GAAP, according to the
provisions of SFAS 88, settlement events should be recognized in the year in
which the settlement occurred. As a result, in the reconciliation of net income
to U.S. GAAP, the settlement income of approximately Ps98 (Ps74 after tax)
recognized under Mexican GAAP was canceled against the provision of pensions and
other postretirement benefits under U.S. GAAP.
CEMEX accounts for employee pension benefits based on the net present value of
the obligations determined by independent actuaries (notes 3J and 14), in a
manner similar to SFAS 87, Employers' Accounting for Pensions, under U.S. GAAP;
therefore, no reconciling item is necessary. The information of pensions and
other postretirement benefits, presented in note 14, include the obligations for
these items in all Mexican and foreign subsidiaries.
At December 31, 2004 and 2005, CEMEX has established self-insured health care
benefits plans in several of its operations. These plans, which are administered
on cost plus fee arrangements with major insurance companies or provided through
health maintenance organizations, contain stop-loss limits per employee. In
certain countries, CEMEX has established stop-loss limits for continued medical
assistance derived from a specific cause (e.g. an automobile accident, illness,
etc.) ranging from U.S.$23 thousand to U.S.$140 thousand; while in other
countries, CEMEX has established stop-loss limits per employee regardless the
number of events ranging from U.S.$300 thousand to U.S.$1. In theory, there is a
risk that all employees qualifying for health care benefits may require medical
services simultaneously; in that case, the contingency for CEMEX would be
significantly larger. However, this scenario while possible is not probable. The
amount expensed for the year ended December 31, 2005 through self-insured health
care benefits granted to our employees was approximately Ps531 (US$50). CEMEX
also provides life insurance benefits to its active and retired employees.
Generally, life insurance benefits for retired employees are reduced over a
number of years from the date of retirement to a minimum level.
(d) Capitalized Interest
Under Mexican GAAP, CEMEX capitalizes interest related to debt incurred to
finance construction projects, which is comprehensively measured in order to
include the following effects: (i) the interest cost, plus (ii) any foreign
currency fluctuations, and less (iii) the related monetary position result.
Under U.S. GAAP, only interest is considered an additional cost of constructed
assets to be capitalized and depreciated over the lives of the related assets.
The U.S. GAAP reconciliation removes the foreign currency gain or loss and the
monetary position result capitalized for Mexican GAAP derived from borrowings
denominated in foreign currency. For the years ended December 31, 2004 and 2005,
capitalized interest amounts were immaterial.
(e) Minority Interest
Financing Transactions
For U.S. GAAP presentation purposes (note 25(o)), related to the preferred stock
described in note 15E and as a result of the adoption of SFAS 150 during 2003,
preferred dividends declared in 2003 for approximately U.S.$13 (Ps147) were
classified as interest expense under U.S. GAAP.
For U.S. GAAP presentation purposes (note 25(o)), in respect to the capital
securities described in note 15E and as a result of the adoption of SFAS 150
during 2003, capital securities dividends declared in 2003 for approximately
U.S.$6 (Ps75) were classified as interest expense. During 2004, as a result of
newly issued Mexican GAAP, this transaction was treated as financial debt until
its termination; consequently, dividends declared in 2004 were recorded as
interest expense under both Mexican and U.S. GAAP.
F-47
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
U.S. GAAP adjustments to minority interest
Under Mexican GAAP, the minority interest in consolidated subsidiaries is
presented as a separate component within stockholders' equity. Under U.S. GAAP,
minority interest is classified separately from stockholders' equity (note
25(o)). At December 31, 2004 and 2005, the amount presented in the
reconciliation of stockholders' equity to U.S. GAAP includes the
reclassification previously mentioned, as well as the share on minority interest
of the adjustments to U.S. GAAP determined in the consolidated subsidiaries.
(f) Depreciation
A subsidiary of CEMEX in Colombia records depreciation expense utilizing the
sinking fund method. This methodology for depreciation was in place before CEMEX
acquired the subsidiary in 1997. For Mexican GAAP purposes, CEMEX has maintained
this accounting practice due to tax consequences in Colombia arising from a
change in methodology and the immateriality of the effects in CEMEX's
consolidated results. For U.S. GAAP purposes, depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets. As a result,
for the years ended December 31, 2003, 2004 and 2005, income of Ps53, Ps20 and
Ps18, respectively, was reflected in the reconciliation of net income to U.S.
GAAP.
(g) Accruals for Contingencies
In prior years, CEMEX recorded accruals for contingent items related primarily
to guarantees given and other responsibilities that did not meet the accrual
criteria of SFAS 5, Accounting for Contingencies, under U.S. GAAP. Since the
likelihood of a loss occurring from these contingencies is considered to be
possible but not probable, the accruals under Mexican GAAP were reversed for
U.S. GAAP purposes. During 2003 and 2004, as a result of the adoption of new
Bulletin C-9, Liabilities, accruals, contingent assets and liabilities and
commitments, which is similar to SFAS 5 in respect to the accounting for
contingencies, CEMEX has evaluated certain previously created accruals and
determined to reverse them under Mexican GAAP. The amount presented in the
reconciliation of net income to U.S. GAAP in 2004 corresponds to the reversal of
the adjustment made in prior years under U.S. GAAP.
(h) Affiliated Companies
CEMEX has adjusted its investment and equity method in affiliated companies
(note 9A) for CEMEX's share of the approximate U.S. GAAP adjustments applicable
to these affiliates.
(i) Inflation Adjustment of Machinery and Equipment
For purposes of the reconciliation to U.S. GAAP, fixed assets of foreign origin
are restated by applying the inflation rate of the country that holds the
assets, regardless of the assets' origin countries, instead of using the Mexican
GAAP methodology, under which a fixed asset of foreign origin is restated by
applying a factor that considers the inflation of the asset's origin country,
not the inflation of the country that holds the asset, and the fluctuation of
the functional currency (currency of the country that holds the asset) against
the currency of the asset's origin country. Depreciation expense is based upon
the revised amounts.
(j) Temporary Equity from Forward Contracts
In October 2003, as a result of a secondary equity offering (note 17A), CEMEX
settled equity forward contracts that it held in connection with its
appreciation warrants (notes 15F and 17A), resulting in a gain of approximately
U.S.$19.5 (Ps223), recognized in stockholders' equity under Mexican GAAP. For
Mexican GAAP purposes, since origination, the forward contracts were treated as
equity transactions and gains or losses were recognized upon settlement or
extension as an adjustment to stockholders' equity. During the life of the
contracts, the difference between the proceeds from the sale of CEMEX equity and
the forward price, which was periodically paid to the counterparties, was
treated as a prepayment toward the forward contracts' final price and was
presented as other accounts receivable. Such prepayments were also treated as
preferred dividends in the reconciliation of net income to U.S. GAAP, in a
manner similar to a mandatorily redeemable preferred stock, representing an
income of approximately Ps804 in 2003. The amount of income in 2003 included:
(i) a net gain of Ps877 from the results of the secondary equity offering and
the reversal of prepayments accrued until settlement that were recognized as
preferred dividends during the life of the contracts and that were not realized
as a result of the offering and settlement; and (ii) expense of Ps73 from
prepayments made in 2003 treated as preferred dividends.
In connection with the secondary equity offering of CEMEX shares which occurred
during 2005, the equity forward contracts were settled and had been accounted at
fair value through earnings under Mexican GAAP, consistently with the accounting
treatment under U.S. GAAP. Accordingly, in 2005 there is no reconciling
adjustment.
(k) Other U.S. GAAP Adjustments
Capitalization of costs of computer software development--Under U.S. GAAP,
certain direct costs related to the development stage or purchase of
internal-use software are capitalized and amortized over the estimated useful
life of the software. Costs related to the preliminary project stage and the
post-implementation/operations stage, are expensed as incurred.
F-48
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Until December 31, 2000, under U.S. GAAP, CEMEX capitalized direct costs
incurred in the development and implementation of internal-use software. Under
Mexican GAAP such costs were expensed as incurred. Beginning in 2001, under
Mexican GAAP, CEMEX implemented the policy of capitalizing the direct costs
associated with internal-use software developments (note 11) in a manner similar
to U.S. GAAP. As a result, in the reconciliation of net income to U.S. GAAP for
the years ended December 31, 2003 and 2004, the reconciling item refers
exclusively to the amortization of the amounts capitalized under U.S. GAAP until
December 2000, which led to amortization expenses of Ps377 in 2003 and Ps29 in
2004. At December 31, 2004, the capitalized costs under U.S. GAAP until December
31, 2000 were fully amortized.
For the years ended December 31, 2003, 2004 and 2005, for both Mexican and U.S.
GAAP, direct costs capitalized associated with internal-use software
developments and implementations amounted to Ps129, Ps106 and Ps178,
respectively. The estimated average useful lives to amortize these capitalized
costs is between 3 and 5 years.
Deferred charges
Capitalized costs, net of accumulated amortization, that did not qualify for
deferral under U.S. GAAP were reversed through earnings under U.S. GAAP in the
period incurred, resulting in income of Ps98 in 2003, income of Ps 93 in 2004
and income of Ps167 in 2005. During 2003, 2004 and 2005, all amounts capitalized
under Mexican GAAP also met the requirements for capitalization under U.S. GAAP.
Accordingly, the adjustments in the reconciliation of net income to U.S. GAAP
for the years ended December 31, 2003, 2004 and 2005, refer exclusively to
amounts amortized under Mexican GAAP during the respective year and which were
expensed in prior years under U.S. GAAP. The net effect in the reconciliation of
stockholders' equity to U.S. GAAP was a decrease of Ps409 and Ps225 at December
31, 2004 and 2005, respectively.
Asset retirement obligations and other environmental costs
Effective January 1, 2003, SFAS 143, Accounting for Asset Retirement Obligations
("SFAS 143"), requires entities to record the fair value of an asset retirement
obligation as a liability in the period in which a legal or a constructive
obligation is incurred associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development, and/or
normal use of the assets. Such liability would be recorded against an asset that
is depreciated over the life of the long-lived asset. Subsequent to the initial
measurement, the obligation will be adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. Also effective January 1, 2003, Mexican GAAP's
Bulletin C-9 established generally the same requirements as SFAS 143. The
difference between Mexican GAAP and U.S. GAAP concerning this item relates to
the recognition of the cumulative initial effect from adoption, which under SFAS
143 was recognized in earnings after net income, while under Mexican GAAP it was
recognized in stockholders' equity. Accordingly, the reconciling item presented
in the reconciliation of net income to U.S. GAAP for the year ended December 31,
2003, includes the reclassification of approximately Ps87 of the cumulative
effect from adoption from stockholders' equity under Mexican GAAP to net income
under U.S. GAAP (notes 3M and 13).
In addition, environmental expenditures related to current operations are
expensed or capitalized, as appropriate. Other than those contingencies
disclosed in notes 13 and 22G, CEMEX is not currently facing other material
contingencies, which might result in the recognition of an environmental
remediation liability.
Monetary position result
Monetary position result of the U.S. GAAP adjustments is determined by (i)
applying the annual inflation factor to the net monetary position of the U.S.
GAAP adjustments at the beginning of the period, plus (ii) the monetary position
effect of the adjustments during the period, determined in accordance with the
weighted average inflation factor for the period.
(l) Financial Instruments
Derivative Financial Instruments (notes 3L, 12 and 17)
Under U.S. GAAP, all derivative instruments, including derivative instruments
embedded in other contracts, should be recognized in the balance sheet as assets
or liabilities at their fair values, and changes in fair value are recognized
immediately in earnings, unless the derivatives qualify as hedges of future cash
flows, in which case the effective portion of such changes in fair value is
recorded temporarily in equity, and then recognized in earnings along with the
related effects of the hedged items. Any ineffective portion of a hedge is
reported in earnings as it occurs. Mexican GAAP, through Bulletin C-2 (note 3L),
establishes a methodology similar to that of U.S. GAAP (SFAS 133, Derivative
Instruments and Hedging Activities). The differences between SFAS 133 and
Bulletin C-2 relate to the rules for hedge accounting. SFAS 133 provides
specific rules for hedge accounting, while under Bulletin C-2, hedge accounting
is based solely on an entity's intention and designation, provided that the
underlying hedged asset or liability is already recognized in the balance sheet.
Bulletin C-2 does not provide guidance for hedging forecasted transactions, for
cash flow hedges, for derivative instruments by an entity in its own equity, and
for hedges of an entity's net investment in its foreign subsidiaries.
Accordingly, such instruments have been accounted for by CEMEX in accordance
with SFAS 133 or with other U.S. GAAP accounting pronouncements, as appropriate.
Fair value hedges, as defined by SFAS 133, were precluded by Mexican GAAP until
December 31, 2004, since it was not permitted to record primary hedged
instruments at fair value (note 24).
F-49
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
At December 31, 2004 and 2005, the differences in derivative instruments' hedge
accounting between Mexican and U.S. GAAP, as they relate to CEMEX, led to an
adjustment in the reconciliation of net income to U.S. GAAP, and a
reclassification in the condensed financial information under U.S. GAAP in note
25(o), which are explained as follows:
o In connection with the fair value recognition of the derivatives related to
CEMEX's acquisition of RMC (note 17B) under Mexican GAAP, CEMEX designated
such derivatives as hedge of the variability in cash flows associated with
exchange fluctuations between the U.S. dollar, the currency in which CEMEX
obtained the funds to purchase, and the British pound, the currency in which
the firm commitment was established. As a result of this designation, CEMEX
recognized, in stockholders' equity, the changes in fair value of the
derivatives from the designation date that took place on November 17, 2004
until December 31, 2004, and which represented a gain of approximately
Ps1,515. This gain was reclassified to earnings under Mexican GAAP in March
2005, the date when the purchase occurred. Consequently, for purposes of the
reconciliation of net income to U.S. GAAP, for the year ended December 31,
2004, this gain was reclassified from stockholders' equity under Mexican GAAP
to earnings under U.S. GAAP for an amount of approximately Ps1,553, as SFAS
133, does not permit an entity to establish a cash flow hedging relationship
in a transaction that involves a business combination. Likewise, for the year
ended December 31, 2005, the gain recorded in earnings under Mexican GAAP was
reclassified to stockholders' equity under U.S. GAAP; therefore, an expense
of approximately Ps1,471 is presented as a reconciling item.
o As discussed in note 12B, as of December 31, 2004, related to the estimated
fair value of Cross Currency Swaps ("CCS"), CEMEX recognized net assets of
U.S.$209 (Ps2,227). Under U.S. GAAP, such amounts do not qualify for net
presentation and thus have been presented as gross amounts for purposes of
the condensed financial information under U.S. GAAP presented in note 25(o).
As a result, under U.S. GAAP at December 31, 2004, in respect to the portion
of the estimated fair value attributable to changes in exchange rates,
short-term and long-term debt increased U.S.$132 (Ps1,408), including
prepayments, against current and non-current assets, while in respect of the
portion of the estimated fair value attributable to accrued interest, current
liabilities increased U.S.$10.9 (Ps116) against current assets. As of
December 31, 2005, the Company did not make net presentation under Mexican
GAAP.
See note 25(m) for changes in accounting principles regarding CEMEX's equity
forward contracts in its own shares due to the adoption of SFAS 150. All
derivative instruments, with the exceptions described above and the equity
forwards described in notes 25(j) and 25(m), entered into by CEMEX and disclosed
in notes 12 and 17, were accounted under Mexican GAAP consistently with the
provisions of U.S. GAAP.
For all hedging relationships for accounting purposes, CEMEX formally documents
the hedging relationship and its risk-management objective and strategy for
undertaking the hedge, the hedging instrument, the hedged item, the nature of
the risk being hedged, how the hedging instrument's effectiveness in offsetting
the hedged risk will be assessed, and a description of the method of measuring
ineffectiveness. This process includes linking all derivatives that are
designated as cash-flow or foreign-currency hedges to specific assets and
liabilities on the balance sheet or to specific firm commitments or forecasted
transactions.
As of December 31, 2004 and 2005, CEMEX has not designated any derivative
instrument as a fair value hedge for accounting purposes under both Mexican GAAP
and U.S. GAAP. CEMEX also formally assesses, both at the hedge's origination and
on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of hedged
items. When it is determined that a derivative is not highly effective as a
hedge or that it has ceased to be a highly effective hedge, CEMEX discontinues
hedge accounting prospectively.
Fair Value of Financial Instruments
The carrying amount of cash, trade accounts receivable, other accounts
receivable, trade accounts payable, other accounts payable and accrued expenses
and short-term debt, approximates fair value because of the short-term maturity
of these financial assets and liabilities.
Marketable securities and long-term investments are accounted for at fair value,
which is based on quoted market prices for these or similar instruments.
The carrying value of CEMEX's long-term debt and the related fair value based on
quoted market prices for the same or similar instruments or on current rates
offered to CEMEX for debt of the same remaining maturities (or determined by
discounting future cash flows using borrowing rates currently available to
CEMEX) at December 31, 2005 is summarized as follows:
At December 31, 2005
-------------------------------------
Million of U.S. Dollars Carrying amount Estimated fair
value
------------------ -----------------
Bank loans............................ Ps 5,694 5,638
Notes payable......................... 3,157 3,110
================== =================
F-50
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
As discussed in notes 3D and 15D, CEMEX has designated certain debt as hedges of
its investment in foreign subsidiaries and, for Mexican GAAP purposes, records
foreign exchange fluctuations on such debt in stockholders' equity. For purposes
of the U.S. GAAP net income reconciliation, expense of Ps 897 in 2003, income of
Ps 190 in 2004 and income of Ps1,075 in 2005, were recognized as foreign
exchange results since the related debt did not meet the conditions for hedge
accounting purposes, given that the currencies involved do not move in tandem.
(m) Financial Instruments with Characteristics of both Liabilities and Equity
In May 2003, the FASB issued SFAS 150, which requires an issuer to classify
financial instruments as liabilities (or assets under certain circumstances)
when they meet the following criteria: (i) a financial instrument issued in the
form of shares that is mandatorily redeemable, through the unconditional
obligation of transferring its assets at a specified or determinable date (or
dates) or upon an event that is certain to occur; (ii) a financial instrument,
other than an outstanding share, that, at origination, embodies an obligation to
repurchase the issuer's shares, or is indexed to such an obligation, and that
requires or may require the issuer to settle the obligation by transferring
assets (for example, a forward purchase contract or written put option on the
issuer's shares that is to be physically settled or net cash settled); and (iii)
a financial instrument that embodies an unconditional obligation, which the
issuer must or may settle by issuing a variable number of its shares if, at
origination, the monetary value of the obligation is based solely or
predominantly in a fixed monetary amount known at origination, if variations are
based on something other than the fair value of the issuer's shares, or if
variations are inversely related to changes in the fair value of the issuer's
shares. SFAS 150 is effective for all transactions entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003.
Under SFAS 150, mandatorily redeemable instruments must be classified as a
liability and initially measured at fair value against equity. Equity forward
contracts that require physical settlement by repurchase of a fixed number of
the issuer's shares in exchange for cash are measured initially at the fair
value of the shares at origination, adjusted for any consideration or unstated
rights or privileges, against equity. Subsequently, those instruments should be
measured at the net present value of the amount to be paid at settlement,
accruing interest cost using the rate implicit at origination. Other instruments
within the scope of SFAS 150 shall be initially measured at fair value with
subsequent changes in fair value recognized in earnings as interest expense.
SFAS 150 was adopted presenting the cumulative effect of a change in an
accounting principle for financial instruments created before the issuance date
of the statement. Restatement is not permitted.
Equity Forward Contracts in CEMEX's own Shares
As described in notes 16 and 17A, as of December 31, 2004, CEMEX held equity
forward contracts negotiated to hedge future exercises under its stock option
programs, for a notional amount of U.S.$1,112. In October 2005, as described in
note 17A, these equity forward contracts were liquidated. Since January 1, 2001,
under Mexican GAAP, these forward contracts, which could have been physically or
net cash settled at CEMEX's option, were recognized at their estimated fair
value as assets or liabilities in the balance sheet, and changes in fair value
and the result from the liquidation of the contracts have been recorded in
earnings for the years ended December 31, 2003, 2004 and 2005. The accounting
treatment given to these contracts since 2001 was consistent with SFAS 150 and,
therefore, with respect to these forwards, no reconciling adjustment was
required pursuant to the implementation of the statement.
In addition, as of December 31, 2004, CEMEX held other equity forward contracts
(note 17A), for a notional amount of U.S.$45, which could be physically or net
cash settled at CEMEX's option and were considered as equity transactions under
Mexican GAAP. For U.S. GAAP purposes, until December 31, 2002, the effects of
these contracts were recognized upon settlement as an adjustment to
stockholders' equity and no periodic recognition was made. Under SFAS 150, these
instruments should be initially recognized at their estimated fair market value
as assets or liabilities in the balance sheet, and subsequent changes in fair
value should be recorded in earnings, with the cumulative effect of adoption
recognized as an adjustment to net income. CEMEX adopted SFAS 150 as of June 30,
2003 and, as a result, for purposes of the reconciliation of net income to U.S.
GAAP for the year ended December 31, 2003, the estimated fair value of such
forward contracts was recognized against the cumulative effect from the change
in accounting principle, which represented an expense of approximately Ps608.
After initial recognition under U.S. GAAP, CEMEX recorded a gain related to
changes in fair value during 2003 amounting to approximately Ps454.
Related to the equity forwards in CEMEX's own shares, during 2004, upon
settlement of several contracts, CEMEX recognized a gain of approximately Ps444
(U.S.$39) under Mexican GAAP within stockholders' equity. Under U.S. GAAP,
instruments with a variety of settlement options are required to be marked to
market through earnings; accordingly, the gain recognized under Mexican GAAP was
reclassified to earnings under U.S. GAAP. The reclassification under U.S. GAAP
had no effect on stockholders' equity.
(n) Supplemental Debt Information
At December 31, 2004 and 2005, due to CEMEX's ability and its intention to
refinance short-term debt with the available amounts of the committed long-term
lines of credit, U.S.$ 847 (Ps 9,051) and U.S.$505 (Ps5,362), respectively, were
reclassified from short-term debt to long-term debt under Mexican GAAP (note
12). For purposes of the condensed balance sheets under U.S. GAAP in note 25(o),
this reclassification was reversed given that under U.S. GAAP the
reclassification is precluded when the long-term agreements contain "Material
Adverse Events" clauses, which in the case of CEMEX are customary covenants.
F-51
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
(o) Condensed Financial Information under U.S. GAAP
The following table presents consolidated condensed income statements for the
years ended December 31, 2003, 2004 and 2005, prepared under U.S. GAAP, and
includes all differences described in this note as well as certain other
reclassifications required for purposes of U.S. GAAP:
Years ended December 31,
-----------------------------------------
Statements of income 2003 2004 2005
------------- ------------- -------------
Net sales................................................................ Ps 86,568 92,553 159,516
Gross profit............................................................. 36,110 39,038 63,464
Operating income...................................................... 14,770 17,007 24,706
Comprehensive financial result........................................... (3,078) 3,495 2,862
Other expenses, net...................................................... (1,218) (630) (2,191)
Income tax (including deferred taxes).................................... (1,206) (1,684) (3,912)
Equity in income of affiliates........................................... 582 590 1,226
------------- ------------- -------------
Consolidated net income............................................... 9,850 18,778 22,691
Minority interest net income............................................. 171 273 576
------------- ------------- -------------
Majority interest net income before cumulative effect of accounting change 9,679 18,505 22,115
Cumulative effect of accounting change................................ (695) - -
------------- ------------- -------------
Majority interest net income............................................. Ps 8,984 18,505 22,115
============= ============= =============
The following table presents consolidated condensed balance sheets at December
31, 2004 and 2005, prepared under U.S. GAAP, including all differences and
reclassifications as compared to Mexican GAAP described in this note 25:
At December 31,
----------------------------------
Balance sheets 2004 2005
----------------- ----------------
Current assets.............................................................. Ps 25,282 43,398
Investments and non-current assets.......................................... 21,746 16,971
Property, machinery and equipment........................................... 112,829 169,553
Deferred charges............................................................ 52,693 63,821
----------------- ----------------
Total assets............................................................ 212,550 293,743
================= ================
Current liabilities......................................................... 37,327 52,763
Long-term debt.............................................................. 44,949 82,610
Other non-current liabilities............................................... 30,190 41,260
----------------- ----------------
Total liabilities....................................................... 112,466 176,633
----------------- ----------------
Minority interest....................................................... 4,672 5,729
----------------- ----------------
Stockholders' equity including cumulative effect of accounting change... 95,412 111,381
----------------- ----------------
Total liabilities and stockholders' equity.............................. Ps 212,550 293,743
================= ================
The prior period amounts presented in the tables above were restated to constant
pesos as of December 31, 2005 using the Mexican inflation rate in order to
comply with current requirements of Regulation S-X, instead of the weighted
average inflation factor used by CEMEX under Mexican GAAP (note 3B).
Reclassifications
The condensed financial information under U.S. GAAP presented in the tables
above, include, in addition to the adjustments included in the reconciliation of
net income and stockholders' equity, several reclassifications as compared to
the consolidated financial statements under Mexican GAAP, which arise from the
differences in the consolidation policy and other presentation rules under
Mexican GAAP and U.S. GAAP. The main reclassifications at December 31, 2004 and
2005 and for the years ended December 31, 2003, 2004 and 2005 are as follows:
o Under Mexican GAAP, CEMEX consolidates its investments in joint ventures
(note 3C) through the proportionate consolidation method, which incorporates
line-by-line all assets, liabilities, revenues and expenses according to
CEMEX's equity ownership in such joint ventures. Under U.S. GAAP, equity
interests between 20% and 50% are accounted for by the equity method.
Consequently, under U.S. GAAP, all assets, liabilities, revenues and expenses
related to CEMEX's joint ventures in Spain and Portugal were removed
line-by-line against the equity in affiliates for both the balance sheets and
the income statements.
o Assets held for sale (note 8) of Ps 554 and Ps650, as of December 31, 2004
and 2005, respectively, were reclassified to long-term assets for purposes of
the condensed financial information of balance sheet under U.S. GAAP in note
25(o). These assets are stated at their estimated fair value. Estimated costs
to sell these assets are not significant.
F-52
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
o Under Mexican GAAP, for the years ended December 31, 2003, 2004 and 2005,
other expenses, net, included goodwill amortization until 2004, dumping
duties, results from idle facilities, results from the sales of fixed assets,
impairment losses of long-lived assets, net results from the early
extinguishment of debt and other unusual or non-recurring transactions. For
purposes of the income statement condensed financial information under U.S.
GAAP in note 25(o), from other expenses, net, under Mexican GAAP, expenses of
Ps3,146 in 2003, Ps2,708 in 2004 and Ps891 in 2005 were reclassified to
operating expenses. Likewise, expenses of Ps479 in 2004 and Ps383 in 2005
were reclassified to the comprehensive financial result under U.S. GAAP.
(p) Supplemental Cash Flow Information Under U.S. GAAP
Under Mexican GAAP, statements of changes in financial position identify the
sources and uses of resources based on the differences between beginning and
ending financial statements in constant pesos. Monetary position results and
unrealized foreign exchange results are treated as cash items in the
determination of resources provided by operations. Under U.S. GAAP (SFAS 95),
statements of cash flows present only cash items and exclude non-cash items.
SFAS 95 does not provide any guidance with respect to inflation-adjusted
financial statements. The differences between Mexican GAAP and U.S. GAAP in the
amounts reported is primarily due to (i) the elimination of inflationary effects
of monetary assets and liabilities from financing and investing activities
against the corresponding monetary position result in operating activities, (ii)
the elimination of foreign exchange results from financing and investing
activities against the corresponding unrealized foreign exchange result included
in operating activities and (iii) the recognition in operating, financing and
investing activities of the U.S. GAAP adjustments.
The following table summarizes the cash flow items as required under SFAS 95
provided by (used in) operating, financing and investing activities for the
years ended December 31, 2003, 2004 and 2005, giving effect to the U.S. GAAP
adjustments, excluding the effects of inflation required by Bulletin B-10 and
Bulletin B-15. The following information is presented in millions of pesos on a
historical peso basis and is not presented in pesos of constant purchasing
power:
Years ended December 31,
----------------------------------------------
2003 2004 2005
--------------- ------------- ----------------
Net cash provided by operating activities................... Ps 9,772 21,885 28,909
Net cash provided by (used in) financing activities......... (4,874) (3,723) 12,502
Net cash used in investing activities....................... (5,419) (17,734) (38,818)
=============== ============= ================
Net cash flow from operating activities reflects cash payments for interest and
income taxes as follows:
Years ended December 31,
----------------------------------------------
2003 2004 2005
--------------- ------------- ----------------
Interest paid............................................... Ps 4,897 3,654 5,124
Income taxes paid........................................... 576 1,314 2,433
=============== ============= ================
Non-cash activities are comprised of the following:
Long-term debt assumed through the acquisition of businesses was Ps137.8 in 2003
and Ps11,903 in 2005.
(q) Restatement to Constant Pesos of Prior Years
The following table presents summarized financial information under Mexican GAAP
of the consolidated income statements for the years ended December 31, 2003 and
2004 and balance sheet information as of December 31, 2004, in constant Mexican
pesos as of December 31, 2005, using the Mexican inflation index:
Years ended December 31, 2003 2004
-------------------- --------------------
Sales....................................................... Ps 87,414 93,507
Gross profit................................................ 37,023 40,883
Operating income............................................ 17,755 21,247
Majority interest net income................................ 7,672 14,999
==================== ====================
At December 31, 2004
--------------------
Current assets.............................................. Ps 22,394
Non-current assets.......................................... 177,038
Current liabilities......................................... 27,680
Non-current liabilities..................................... 77,438
Majority interest stockholders' equity...................... 89,851
Minority interest stockholders' equity...................... 4,463
====================
F-53
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
(r) Stock Option Programs
Stock options activity during 2004 and 2005, the balance of options outstanding
at December 31, 2004 and 2005 and other general information regarding CEMEX's
stock option programs is presented in note 16. Until December 31, 2004, the
availability of CPOs for the potential future exercise of the programs was fully
hedged through equity forward contracts in CEMEX's own stock (note 17A).
Resulting from the secondary equity offering and the concurrent settlement of
the equity forward contracts, as of December 31, 2005, the availability of CPOs
for the potential future exercise of the programs is mainly hedged through the
use of treasury shares.
At December 31, 2004, for financial reporting under Mexican GAAP, CEMEX
accounted for its stock option programs (note 16) using a methodology that is
consistent with the rules set forth in APB Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25") under U.S. GAAP. According to APB 25,
compensation cost should be determined under the intrinsic value method, which
represents the difference between the strike price and the market price of the
stock at the reporting date, for all plans that do not meet the following
characteristics: (i) the exercise price established in the option is equal to
the quoted market price of the stock at the measurement date, (ii) the exercise
price is fixed for the option's life, and (iii) the option's exercise is hedged
through the issuance of new shares of common stock. After considering these
characteristics, no compensation cost was recognized for the CEMEX's fixed
program (note 16-Equity programs), while compensation cost, under the intrinsic
method, was periodically determined for all other programs granted by CEMEX
(note 16-Liability programs).
During 2005, as mentioned in notes 3R and 16, under Mexican GAAP CEMEX
obligatorily adopted IFRS 2, "Share-based Payment" ("IFRS 2") As a result of the
adoption of IFRS 2, as of December 31, 2005, CEMEX accrued a provision
representing the fair value of the outstanding options classified as liability
instruments of approximately Ps2,659 (U.S.$250). During the year ended December
31, 2005, CEMEX recorded an expense in its income statement from the change in
fair value of approximately Ps2,119 (U.S.$200).
For purposes of the reconciliation of net income to US GAAP, for the year ended
December 31, 2005, CEMEX reversed the adjustment to fair value made under
Mexican GAAP and maintained the valuation of the outstanding options under the
intrinsic value method, which resulted in a decrease in the compensation expense
in 2005 of approximately Ps860 (Ps992 before the related income tax effect) as
compared to the accrual under the fair value method.
As of and for the years ended December 31, 2003, 2004 and 2005, under U.S. GAAP,
CEMEX applied the disclosure rules of SFAS 123, Accounting for Stock-Based
Compensation ("SFAS 123") SFAS 123 requires compensation cost for stock option
plans that meet the characteristics of equity instruments, to be determined
based on the options' fair value at the grant date, using a qualified
option-pricing model, and recorded in results of operations during the options'
vesting period, after which no further recognition is required. Moreover, SFAS
123 requires that compensation cost related to stock awards that meet the
characteristics of liability instruments should be determined based on the
intrinsic value of the awards at each balance sheet date, recording changes in
such intrinsic value through earnings, in a manner similar to the accounting
treatment prescribed under APB 25 for variable plans and that was applied by
CEMEX under Mexican GAAP until December 31, 2004 as mentioned above. SFAS 123
allows entities to continue the use of APB 25 for valuation purposes, requiring
entities to disclose the estimated effect as if they had applied the fair value
method during the periods presented.
In 2005, CEMEX identified that its option programs granted in prior years,
except for the fixed program, and that were accounted for as variable awards
under Mexican GAAP were considered as fixed awards for purposes of determining
the pro forma impact of the fair value of option grants. As a result, on the pro
forma disclosure, CEMEX removed the expense for those periods determined under
Mexican GAAP, and recorded on a pro forma basis under U.S. GAAP, the fair values
of these awards determined at the date of grant using an option pricing model.
Pro forma adjustments were not necessary since the variable accounting under
Mexican GAAP for these programs was in accordance with the rules of both APB 25
and SFAS 123. Accordingly, the pro forma disclosures for the years 2003 and 2004
were removed to reflect the correction of this error.
Compensation cost (income) by plan recorded under Mexican GAAP according to the
intrinsic value method for the years ended December 31, 2003 and 204 were as
follows:
For the years ended December 31, 2003 2004
----------- -----------
Restricted program 2.............................. Ps - 221
Special program................................... 63 157
Variable program 2................................ 385 (238)
Voluntary programs 1.............................. 48 (84)
----------- -----------
496 56
=========== ===========
F-54
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
For the year ended December 31, 2005, had compensation cost be determined under
SFAS 123, based on the intrinsic value of stock options at each reporting date,
CEMEX's net income and earnings per share would have been as follows:
For the year ended December 31, 2005 Restricted Special Variable Total
program program program
------------ ------------ ------------ ------------
Net income, as reported (Mexican GAAP).......................... Ps 22,425
Reversal of cost (income) under Mexican GAAP according to
IFRS(2)(3)................................................. (214) 511 1,822 2,119
(Cost) income of options according to intrinsic value method
under SFAS (1)(2)(3)....................................... (577) (349) (90) (1,016)
------------ ------------ ------------ ------------
Approximate net income, pro forma............................... 23,528
============
Basic earnings per share, as reported........................... Ps 2.16
------------
Basic earnings per share, pro forma............................. Ps 2.27
============
(1) For the year ended December 31, 2003, net income under Mexican GAAP
includes a liquidation cost of approximately Ps710 related to the voluntary
program, which was fully exercised during the year.
(2) As a result of the early exercise in December 2004, CEMEX recognized a
liquidation cost of approximately U.S.$61 (Ps653) related to options
redeemed from old programs (note 16), including those of the variable
program granted in February 2004 and those of the restricted program
initiated also in February 2004.
(3) The amount of expense (income), recognized under Mexican GAAP and reversed
for purposes of the pro forma disclosure under U.S. GAAP, reflects the
change between the initial balance of the provision created for under the
intrinsic value method, and the year-end balance of the provision created
for under the fair value method in 2005, and does not include amounts
expensed in actual exercises or liquidations. Amounts expensed are included
in earnings under Mexican GAAP and are not reversed for U.S. GAAP disclosure
purposes.
In December 2004, the FASB issued SFAS 123R, Share-Based Payment, which is
effective for companies beginning January 1, 2006 (note 25(w)). SFAS 123R
eliminates the alternative to use APB 25's intrinsic value method and requires
entities to recognize the cost of employee services received in exchange of
awards of equity instruments based on the grant-date fair value of those awards.
Moreover, SFAS 123R requires that stock awards that meet the characteristics of
liabilities to be recorded at their fair value at each reporting date,
recognizing changes in valuation through earnings. CEMEX will adopt SFAS 123R
under U.S. GAAP during 2006.
(s) Impairment of Long Lived Assets
Under U.S. GAAP, effective January 1, 2002, CEMEX adopted SFAS 142, which
eliminates the amortization of goodwill and of indefinite-lived intangible
assets, addresses the amortization of intangible assets with finite lives,
impairment testing and the recognition of goodwill and other intangible assets
acquired in business combinations. Likewise, effective January 1, 2002, CEMEX
adopted SFAS 144, which establishes a single model for the impairment of
long-lived assets and broadens the presentation of discontinued operations to
include disposal of an individual business.
As a result of such adoption under U.S. GAAP, CEMEX ceased the amortization of
the goodwill balances determined at December 31, 2001; however, such amounts
remain subject to impairment evaluations. During the first half of 2002, in
connection with SFAS 142's transitional goodwill impairment evaluation, which
required an assessment of whether there was an indication that goodwill was
impaired as of the date of adoption, CEMEX identified its reporting units and
determined the carrying value of each reporting unit as of January 1, 2002, by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units. CEMEX also determined the fair
value of each reporting unit and compared it to their related carrying amounts.
Fair value of the reporting units exceeded in each case the corresponding
carrying amount and, therefore, no impairment charges resulted from the
transitional evaluation performed on the recorded goodwill as of January 1,
2002. For the years ended December 31, 2003 and 2004, goodwill under Mexican
GAAP continued to be an amortizable intangible asset. Based on the similarities
of the components of the operating segments (cement, ready-mix concrete,
aggregates and other construction materials), CEMEX's geographical segments
under SFAS 131 are also the reporting units under SFAS 142 for purposes of
assessing fair value in determining potential impairment at transition and in
future periods.
Under U.S. GAAP, CEMEX assesses goodwill and indefinite-lived intangibles for
impairment annually unless events occur that require more frequent reviews.
Long-lived assets, including amortizable intangibles, are tested for impairment
if impairment triggers occur. Discounted cash flow analyses are used to assess
the possible impairment of non-amortizable intangible assets and goodwill, while
undiscounted cash flow analyses are used to assess the existence of impairment
of other long-lived assets such as property, plant and equipment. If an
assessment indicates impairment, the impaired asset is written down to its fair
value based on the best information available.
F-55
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
The useful lives of amortizable intangibles are evaluated periodically, and
subsequent to impairment reviews, to determine whether revision is warranted. If
cash flows related to a non-amortizable intangible are not expected to continue
for the foreseeable future, a useful life is assigned. Considerable management
judgment is necessary to estimate undiscounted and discounted future cash flows.
Assumptions used for these cash flows are consistent with internal forecasts and
industry practices. For the years ended December 31, 2003, 2004 and 2005, there
were no impairment charges under U.S. GAAP in addition to those described in
notes 10 and 11, which were recorded under Mexican GAAP, as CEMEX's policy for
impairment is consistent with U.S. GAAP, except, during 2004, for the expense of
approximately Ps960 reclassified from stockholders' equity under Mexican GAAP to
net income under U.S. GAAP in connection with the purchase of CAH shares in
exchange for CEMEX's CPOs (note 25(a)). Impairment charges are recorded as other
expenses under Mexican GAAP and are reclassified to operating income under U.S.
GAAP (note 25 (o)). Approximate goodwill by reporting unit under U.S. GAAP is
summarized as follows:
Inflation Inflation
Acquisi- and Acquisi- and
tions currency tions currency
December (divesti- Impairment fluctuation December (divesti- fluctuation December
31, 2003 tures)(1) losses (2) 31, 2004 tures(1) (2) 31, 2005
----------- ---------- ---------- ----------- ---------- ----------- ----------- ----------
NORTH AMERICA
United States.............. 17,560 103 - (516) 17,147 5,248 (729) 21,666
Mexico..................... 6,820 - - - 6,820 - - 6,820
EUROPE
Spain...................... 12,166 - - 572 12,738 63 (2,049) 10,752
France..................... - - - - - 2,209 - 2,209
UK......................... - - - - - 648 - 648
Other Europe (3)........... - - - - - 745 - 745
SOUTH, CENTRAL AMERICA &
THE CARIBBEAN
Colombia................... 4,020 - - 635 4,655 - 111 4,766
Venezuela.................. 344 - - (23) 321 - (18) 303
Dominican Republic......... 358 - - 122 480 - (52) 428
Costa Rica................. 335 - - (14) 321 - (14) 307
The Caribbean.............. 457 - - (13) 444 - (19) 425
Other South, Central. America
& the Caribbean (4)...... 73 - - (2) 71 320 (4) 387
AFRICA & MIDDLE EAST
Egypt...................... 253 - - - 253 - 11 264
United Arab Emirates....... - - - - - 1,378 - 1,378
ASIA
The Philippines............ 1,437 - - (5) 1,432 - 48 1,480
Thailand................... 520 - - (5) 515 - (38) 477
Other Asia................. 364 - - (10) 354 - (15) 339
Other reporting units (5).. 1,073 - (256) (47) 770 - (33) 737
Affiliates (note 9A)....... 608 - - (4) 604 (14) (6) 584
----------- ---------- ---------- ----------- ---------- ----------- ----------- ----------
46,388 103 (256) 690 46,925 10,597 (2,807) 54,715
=========== ========== ========== =========== ========== =========== =========== ==========
1. During 2004 CEMEX acquired a ready-mix company in the state of Georgia for
approximately U.S.$16.7 (Ps 178.0). In addition, during 2005, CEMEX acquired
RMC and other minor operations in Central America. The net increase in
goodwill for Ps10,597, includes the decrease in goodwill resulting from
assets disposals in the U.S. (note 9A) for approximately Ps1,570 and the
decrease of Ps595 of restructuring charges considered as part of the
purchase price of RMC under Mexican GAAP, wich were charged to earnings
under U.S. GAAP.
2. The amounts presented in this column include: (i) the effects on goodwill
from foreign exchange fluctuations during the period between the reporting
unit's currencies and the Mexican peso, and (ii) the effect of removing the
restatement into constant pesos as of December 31, 2005, using Mexican
inflation, applied to the goodwill balances at the beginning of the year.
3. Other Europe refers to goodwill determined on the operations located in the
Czech Republic, Ireland and Latvia, generated in the acquisition of RMC.
4. Other South, Central America and the Caribbean refer mainly to goodwill
determined on the operations located in Panama and Puerto Rico, acquired in
prior years.
5. Other reporting units primarily consist of units engaged in software
development projects.
F-56
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
(t) Sale of Accounts Receivable
CEMEX accounts for transfers of receivables under Mexican GAAP consistently with
the rules set forth by SFAS 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. Under SFAS 140,
transactions that meet the criteria for surrender of control are recorded as
sales of receivables and their amounts are removed from the consolidated balance
sheet at the time they are sold (note 5).
(u) Other Disclosures Under U.S. GAAP
Accounting for Costs Associated with Exit or Disposal Activities
Effective January 1, 2003, CEMEX adopted SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146, which addresses financial
accounting and reporting for costs associated with exit or disposal activities,
basically requires, as a condition to accrue for the costs related to an exit or
disposal activity, including severance payments, that the entity communicate the
plan to all affected employees and that the plan be terminated in the
short-term; otherwise, associated costs should be expensed as incurred. For the
years ended December 31, 2003, 2004 and 2005, CEMEX did not recognize any such
costs related to exit or disposal activities.
Guarantor's Accounting and Disclosure Requirements for Guarantees
Effective January 1, 2003, CEMEX adopted Interpretation 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements 5, 57
and 107 and a rescission of FASB Interpretation 34, which elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The interpretation
also clarifies that a guarantor is required to recognize, at origination of a
guarantee, a liability for the fair value of the obligation undertaken. As of
December 31, 2004 and 2005, CEMEX has not guaranteed any third parties'
obligations; however, with respect to the electricity supply long-term contract
discussed in note 22F, CEMEX may also be required to purchase the power plant
upon the occurrence of specified material defaults or events, such as failure to
purchase the energy and pay when due, bankruptcy or insolvency, and revocation
of permits necessary to operate the facility. For the years ended December 31,
2004 and 2005, for accounting purposes under Mexican GAAP and U.S. GAAP, CEMEX
has considered this agreement as a long-term supply agreement and no liability
has been created, based on the contingent characteristics of CEMEX's obligation
and given that, absent a default under the agreement, CEMEX's obligations are
limited to the purchase of energy from, and the supply of fuel to, the plant.
In addition, as a result of the newly created strategic alliance with Ready Mix
USA, as mentioned in note 9A, after the third anniversary of the venture and for
a period of 25 years, the venture partner has an option to require CEMEX to
purchase its interest in the joint ventures. Considering the contingent nature
of this agreement and the absence of a present obligation at the balance sheet
date, CEMEX has not accrued any provision related to this contingency under both
Mexican and U.S. GAAP.
Variable Interest Entities
Effective March 15, 2004, CEMEX adopted Interpretation 46R (revised December
2003), Consolidation of Variable Interest Entities, an interpretation of ARB 51
("FIN 46R"). The interpretation addresses the consolidation by business
enterprises of variable interest entities ("VIEs"), which are defined in FIN 46R
as those that have one or more of the following characteristics: (i) entities
which equity investment at risk is not sufficient to finance their operations
without requiring additional subordinated financing support provided by any
parties, including the equity holders; and (ii) the equity investors lack one or
more of the following attributes: a) the ability to make decisions about the
entity's activities through voting or similar rights, b) the obligation to
absorb the expected losses of the entity, and c) the right to receive the
expected residual returns of the entity. Among others, entities that are deemed
to be a business according to FIN 46R, including operating joint ventures, need
not be evaluated to determine if they are VIEs under FIN 46R. Variable
interests, among other factors, may be represented by operating losses, debt,
contingent obligations or residual risks and may be assumed by means of loans,
guarantees, management contracts, leasing, put options, derivatives, etc. A
primary beneficiary is the entity that assumes the variable interests of a VIE,
or the majority of them in the case of partnerships, directly or jointly with
related parties, and is the entity that should consolidate the VIE. FIN 46R
applies to financial statements for periods ending after March 15, 2004. As
discussed in the preceding paragraph, CEMEX has an electricity supply long-term
contract (note 22F), through which, an international partnership, which built
and currently operates an electrical energy generating plant, sells to CEMEX,
starting in 2004, all the energy generated for a term of no less than 20 years.
Under FIN 46R, after analysis of the provisions of the agreements, CEMEX
believes that such partnership is not a VIE under the scope of the
interpretation, and, therefore, as of and for the years ended December 31, 2004
and 2005, CEMEX has not consolidated any asset, liability or operating results
of such partnership.
F-57
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
(v) Newly Issued Accounting Pronouncements under U.S. GAAP
o In December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS 123R, Share-Based Payment ("SFAS 123R"), a revision of SFAS 123, which
establishes standards for the accounting of all share-based payment
transactions, with a primary focus on schemes in which an entity obtains
employee services in share-based payment transactions, also clarifies and
expands guidance in several areas, including measuring fair value,
classifying an award as equity or as a liability, and attributing
compensation cost to reporting periods. SFAS 123R requires companies to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award and
eliminates the alternative to use APB 25's intrinsic value method of
accounting, permitted by SFAS 123 as originally issued (note 25(r)), under
which, upon compliance of certain rules, issuing stock options to employees
resulted in recognition of no compensation cost.
The cost under SFAS 123R for equity awards should be recognized over the
period during which an employee is required to provide service in exchange
for the award (usually the vesting period). In addition, for liability
awards, the cost should be determined by the changes in the estimated fair
value of the awards at each reporting date. The grant-date fair value, and
the fair value at the reporting date, for employee equity and liability
awards, respectively, will be estimated using option-pricing models, unless
observable market prices for the same or similar instruments are available.
SFAS 123R will be effective for CEMEX as of January 1, 2006 and will apply to
all awards classified as equity granted after the required effective date and
to awards modified, repurchased, or cancelled after that date, and to all
outstanding liability awards. The cumulative effect of initially applying
this statement, if any, will be recognized as of the required effective date.
As of the required effective date, entities that used the fair-value-based
method for either recognition or disclosure under SFAS 123 will apply SFAS
123R using a modified version of prospective application, under which,
compensation cost is recognized for the portion of outstanding awards for
which the requisite service has not yet been rendered, based on the
grant-date fair value of those awards calculated under SFAS 123 for either
recognition or pro forma disclosures. For periods before the required
effective date, entities may elect to apply a modified version of
retrospective application under which financial statements for prior periods
are adjusted on a basis consistent with the pro forma disclosures required
for those periods by SFAS 123.
In connection with the adoption of SFAS 123R in 2006, considering all the
outstanding liability awards, SFAS 123R may have a material impact in CEMEX's
net income under U.S. GAAP (see pro forma historical information in note
25(r)). As of the effective date of SFAS 123R, there will be no outstanding
unvested equity awards.
o In December 2004, the FASB issued SFAS 151, Inventory Costs ("SFAS 151"),
which clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Under SFAS 151, such
items will be recognized as current-period charges. In addition, SFAS 151
requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. SFAS
151 will be effective for CEMEX for inventory costs incurred on or after
January 1, 2006. CEMEX does not expect any material impact from the adoption
of this statement.
o In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets
("SFAS 153"), which eliminates an exception in APB 29 for nonmonetary
exchanges of similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have commercial
substance. The exception provides that those exchanges should be measured
based on the recorded amount of the nonmonetary assets relinquished, rather
than on the fair values of the exchanged assets. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 will be effective
for CEMEX for nonmonetary asset exchanges occurring on or after January 1,
2006. CEMEX does not expect any material impact from the adoption of this
statement.
o In May 2005, the FASB issued SFAS 154, Accounting Changes and Error
Corrections ("SFAS 154"), which establishes, unless impracticable,
retrospective application as the required method for reporting a change in
accounting principle in the absence of explicit transition requirements
specific to a newly adopted accounting principle. SFAS 154 will be effective
for CEMEX for all accounting changes and any error corrections occurring
after January 1, 2006.
o In September 2005, the EITF issued EITF Issue No. 04-13 Accounting for
Purchases and Sales of Inventory with the Same Counterparty. EITF 04-13
provides guidance as to when purchases and sales of inventory with the same
counterparty should be accounted for as a single exchange transaction. EITF
04-13 also provides guidance as to when a nonmonetary exchange of inventory
should be accounted for at fair value. EITF 04-13 will be applied to new
arrangements entered into, and modifications or renewals of existing
arrangements occurring after January 1, 2007. The application of EITF 04-13
is not expected to have a significant impact on the CEMEX's financial
statements.
(w) Recent Developments (unaudited)
In January 2006, CEMEX acquired a grinding mill with a grinding capacity of
400,000 tons per year in Guatemala for approximately U.S.$17.4. CEMEX entered
into an agreement to purchase these operations in September 2005.
F-58
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
In January 2006, officials from the Mexican and U.S. governments reached an
agreement in principle that will bring an end to the longstanding dispute over
U.S. imports of Mexican cement (note 22C). Under the agreement, the U.S. and
Mexican cement industries will share unliquidated historical duties associated
with the antidumping order. CEMEX will receive approximately U.S.$100 in cash
from this settlement and will also eliminate approximately U.S.$65 in
provisions.
On March 2, 2006, CEMEX sold 4K Beton A/S, a Danish subsidiary, which operated
18 ready-mix concrete plants in Denmark, to Unicon A/S, a subsidiary of Cementir
Group, an Italian cement producer, for approximately (euro)22 million. As part
of the transaction, CEMEX purchased from Unicon A/S two companies engaged in the
ready-mix concrete and aggregates business in Poland for approximately (euro)12
million. These companies operate nine ready-mix concrete plants and one
aggregates quarry in Poland. CEMEX received net cash proceeds of approximately
(euro)6 million, after cash and debt adjustments, from this transaction.
On March 20, 2006, CEMEX agreed to terminate the operating lease on the Balcones
cement plant located in New Braunfels, Texas, prior to expiration and purchased
the Balcones cement plant for approximately U.S.$61.2.
On April 27, 2006, the annual stockholders' meeting approved: (i) an increase in
the variable common stock through the capitalization of retained earnings of up
to Ps6,718, issuing shares as a stock dividend for up to 720 million shares
equivalent to up 240 million CPOs, at a subscription price of U.S.$0.1330 per
CPO, or instead, stockholders may choose to receive U.S.$0.1330 per CPO in cash;
(ii) a further stock split, which CEMEX expect to occur in July 2006, by means
of which each of the existing series A shares will be surrendered in exchange
for two new series A shares, and each of our existing series B shares will be
surrendered in exchange for two new series B shares; and (iii) the change of the
legal and commercial name of CEMEX was changed to CEMEX, S.A.B. de C.V.,
Sociedad Anonima Bursatil de Capital Variable, that means a "public stock
corporation with variable capital". The new name will be in effect on July 1,
2006, the change in the name of CEMEX was made to comply with the requirements
of the new Mexican Securities Law that was enacted on December 28, 2005.
On May 4, 2006, CEMEX agreed to sell 24.9% of PT Semen Gresik to Indonesia-based
Rajawali Group for approximately U.S.$337 or U.S.$2.28 dollars per share.
According to the terms of the agreement, the purchaser's obligations are subject
to obtaining the approval of the Indonesian goverment and the fulfillment of
other conditions. On May 17, 2006, CEMEX received a letter from the Indonesian
government purporting to exercise its right of first refusal in respect of the
Gresik shares we agreed to sell to the Rajawali Group. No assurance can be given
either that the sale to the Rajawali Group will be consummated, or that the
Indonesian will purchase the Gresik shares, on the terms outlined above. In the
event this sale is consummated, CEMEX's remaining interest in Gresik will be
0.6%.
During May 2006, CEMEX and some of its subsidiaries in Mexico were notified by
the Mexican tax authorities of several tax assessments related to different tax
periods. These tax assessments are for an amount of approximately Ps3,793 as of
May 31, 2006. The tax assessments result primarily from: (i) disallowed
restatement of tax loss carryforwards in the same period in which they occurred,
and (ii) tax consecuences from investments in foreign subsidiaries. At this
preliminary stage in the proceedings, it is not possible to assess the
likelihood of an adverse result in these tax assessments for CEMEX.
In connection with the stock split mentioned above, a new CPO representing two
new series A shares and one new series B share will be delivered to each holder
of a CPO. The ratio of CPOs to ADSs will not change as a result of the stock
split; each ADS will represent ten (10) CPOs following the stock split,
accordingly, a new ADS will be delivered to each holder of an ADS to reflect the
two-for-one split. The proportional equity interest participation of existing
shareholders will not change as a result of the stock split. The financial data
set forth in this annual report have not been adjusted to give retroactive
effect to the stock split. Earnings per share, the average number of shares
outstanding, as well as the CPO numbers included throughout the financial
statements and related notes for the years ended December 31, 2003, 2004 and
2005, were not adjusted to make the effect of the stock split retroactive.
Had the per share amounts and the average number of shares been restated in
order to give retroactive effect to the stock split mentioned above, the pro
forma information would had been as follows:
For the years ended December 31, (unaudited)
2003 2004 2005 2005
------------ ----------- ------------ ----------
Pro forma per share information under Mexican GAAP:
Basic earnings per share..................................... Ps 0.38 0.70 1.08 U.S.$ 0.10
Diluted earnings per share................................... 0.37 0.70 1.08 0.10
Pro forma per share information under U.S. GAAP:
Basic earnings per share..................................... Ps 0.47 0.93 1.07 U.S.$ 0.10
Diluted earnings per share................................... 0.46 0.92 1.06 0.10
Pro forma number of shares (millions):
Basic average number of shares outstanding................... 18,912 19,974 20,756 -
Diluted average number of shares outstanding................. 19,348 20,078 20,820 -
F-59
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
(x) Guaranteed debt
In June 2000, CEMEX concluded the issuance of U.S.$200 aggregate principal
amount of 9.625% Exchange Notes due 2009 in a registered public offering in the
United States of America in exchange for U.S.$200 aggregate principal amount of
its then outstanding 9.625% Notes due 2009. The Exchange Notes are fully and
unconditionally guaranteed, on a joint and several basis, as to payment of
principal and interest by two of CEMEX's Mexican subsidiaries: CEMEX Mexico and
ETM (note 3C). These two companies, together with their subsidiaries, account
for substantially all of the revenues and operating income of CEMEX's Mexican
operations.
As mentioned in note 12C, as of December 31, 2004 and 2005, indebtedness of
CEMEX in an aggregate amount of U.S.$ 3,088 (Ps32,988) and U.S.$3,780
(Ps40,145), respectively, is fully and unconditionally guaranteed, on a joint
and several basis, by CEMEX Mexico and ETM.
As of December 31, 2003, 2004 and 2005, CEMEX owned a 100% equity interest in
CEMEX Mexico, and CEMEX Mexico owned a 100% equity interest in ETM at the end of
each of the three years.
For purposes of the accompanying condensed consolidated balance sheets, income
statements and statements of changes in financial position under Mexican GAAP,
the first column, "CEMEX," corresponds to the parent company issuer, which has
no material operations other than its investments in subsidiaries and affiliated
companies. The second column, "Combined guarantors", represents the combined
amounts of CEMEX Mexico and ETM on a Parent Company-only basis, after
adjustments and eliminations relating to their combination. The third column,
"Combined non-guarantors", represents the amounts of CEMEX's international
subsidiaries, CEMEX Mexico and ETM non-Guarantor subsidiaries, and other
immaterial Mexican non-guarantor subsidiaries of CEMEX. The fourth column,
"Adjustments and eliminations", includes all the amounts resulting from
consolidation of CEMEX, the Guarantors and the non-guarantor subsidiaries, as
well as the corresponding constant pesos adjustment as of December 31, 2005, for
the years ended December 31, 2003 and 2004 described below. The fifth column,
"CEMEX consolidated", represents CEMEX's consolidated amounts as reported in the
consolidated financial statements. The amounts presented under the line item
"investments in affiliates" for both the balance sheet and the income statement
are accounted for by the equity method.
As mentioned in note 3B, under Mexican GAAP, the financial statements of those
entities with foreign consolidated subsidiaries should be presented in constant
pesos as of the latest balance sheet presented, considering the inflation of
each country in which the entity operates, as well as the changes in the
exchange rate between the functional currency of each country vis-a-vis the
reporting currency (in this case, the Mexican peso). As a result of the
aforementioned, for comparability purposes the condensed financial information
of CEMEX, the "Combined Guarantors" and the "Combined non-guarantors" amounts
have been adjusted to reflect constant pesos as of December 31, 2005, using the
Mexican inflation index. Therefore, the corresponding inflation adjustment
derived from the application of the weighted average inflation factor in the
consolidated amounts is presented within the "Adjustments and eliminations"
column.
F-60
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
The condensed consolidated financial information is as follows:
Condensed consolidated balance sheets:
Adjustments
Combined Combined and CEMEX
As of December 31, 2004 CEMEX guarantors non-guarantors eliminations consolidated
- ------------------------------------------- -----------------------------------------------------------------------
Current assets............................ Ps 1,834 8,469 79,927 (69,380) 20,850
Investment in affiliates.................. 100,467 122,791 72,954 (280,239) 15,973
Other non-current accounts receivable..... 34,934 473 17,992 (49,667) 3,732
Net property, machinery and equipment..... 1,868 31,758 76,911 (7,834) 102,703
Intangible assets and deferred charges.... 4,259 6,313 90,248 (58,394) 42,426
------------ ------------- ------------- ------------ ------------
Total assets........................... 143,362 169,804 338,032 (465,514) 185,684
------------ ------------- ------------- ------------ ------------
Current liabilities....................... 10,628 28,844 44,156 (57,855) 25,773
Long-term debt............................ 47,670 38 28,643 (24,144) 52,207
Other non-current liabilities............. 1,407 36,438 17,872 (35,825) 19,892
------------ ------------- ------------- ------------ ------------
Total liabilities...................... 59,705 65,320 90,671 (117,824) 97,872
------------ ------------- ------------- ------------ ------------
Majority interest stockholders' equity.... 83,657 104,484 186,441 (290,925) 83,657
------------ ------------- ------------- ------------ ------------
Minority interest...................... - - 60,920 (56,765) 4,155
------------ ------------- ------------- ------------ ------------
Stockholders' equity under Mexican GAAP... 83,657 104,484 247,361 (347,690) 87,812
------------ ------------- ------------- ------------ ------------
Total liabilities and stockholders' equity Ps 143,362 169,804 338,032 (465,514) 185,684
------------ ------------- ------------- ------------ ------------
Adjustments
Combined Combined and CEMEX
As of December 31, 2005 CEMEX guarantors non-guarantors eliminations consolidated
- ------------------------------------------- ------------------------------------------------------------------------
Current assets............................ Ps 1,260 7,643 102,869 (67,523) 44,249
Investment in affiliates.................. 132,795 147,704 45,526 (317,102) 8,923
Other non-current accounts receivable..... 23,487 7,069 15,333 (38,254) 7,635
Net property, machinery and equipment..... 1,864 29,252 134,075 (136) 165,055
Intangible assets and deferred charges.... 3,121 6,534 55,341 (6,630) 58,366
------------- ------------- ------------ ------------- -------------
Total assets............................ 162,527 198,202 353,144 (429,645) 284,228
------------- ------------- ------------ ------------- -------------
Current liabilities....................... 7,261 47,312 35,024 (45,909) 43,688
Long-term debt............................ 50,426 65 52,467 (14,952) 88,006
Other non-current liabilities............. 496 20,533 46,098 (24,550) 42,577
------------- ------------- ------------ ------------- -------------
Total liabilities....................... 58,183 67,910 133,589 (85,411) 174,271
------------- ------------- ------------ ------------- -------------
Majority interest stockholders' equity.... 104,344 130,292 169,044 (299,336) 104,344
------------- ------------- ------------ ------------- -------------
Minority interest....................... - - 50,511 (44,898) 5,613
------------- ------------- ------------ ------------- -------------
Stockholders' equity under Mexican GAAP... 104,344 130,292 219,555 (344,234) 109,957
------------- ------------- ------------ ------------- -------------
Total liabilities and stockholders' equity Ps 162,527 198,202 353,144 (429,645) 284,228
------------- ------------- ------------ ------------- -------------
F-61
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Condensed consolidated income statements:
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2003 CEMEX guarantors non-guarantors eliminations consolidated
- -------------------------------------------- -----------------------------------------------------------------------
Net sales.................................. Ps - 26,496 62,576 (7,027) 82,045
Operating income........................... (60) 3,673 4,445 8,607 16,665
Net comprehensive financing result......... (1,920) (3,256) 1,087 1,026 (3,063)
Other income (expense), net................ 4,741 (531) 3,550 (12,990) (5,230)
Total IT, BAT and ESPS..................... 858 409 (1,274) (1,214) (1,221)
Equity in income of affiliates............. 3,582 5,688 210 (9,082) 398
------------- ------------ ------------ ------------- -------------
Consolidated net income.................... 7,201 5,983 8,018 (13,653) 7,549
------------- ------------ ------------ ------------- -------------
Minority interest....................... - - 22 326 348
------------- ------------ ------------ ------------- -------------
Majority interest net income............... Ps 7,201 5,983 7,996 (13,979) 7,201
============= ============ ============ ============= =============
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2004 CEMEX guarantors non-guarantors eliminations consolidated
- -------------------------------------------- -----------------------------------------------------------------------
Net sales.................................. Ps - 27,579 72,312 (12,829) 87,062
Operating income........................... (39) 3,779 4,535 11,508 19,783
Net comprehensive financing result......... 1,262 508 6,822 (7,168) 1,424
Other income (expense), net................ (1,208) (478) 6,047 (9,530) (5,169)
Total IT, BAT and ESPS..................... 313 365 (1,214) (1,741) (2,277)
Equity in income of affiliates............. 13,637 15,199 3,118 (31,526) 428
------------- ------------ ------------ ------------- -------------
Consolidated net income.................... 13,965 19,373 19,308 (38,457) 14,189
------------- ------------ ------------ ------------- -------------
Minority interest........................ - - 3,332 (3,108) 224
------------- ------------ ------------ ------------- -------------
Majority interest net income............... Ps 13,965 19,373 15,976 (35,349) 13,965
============= ============ ============ ============= =============
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2005 CEMEX guarantors non-guarantors eliminations consolidated
- -------------------------------------------- -----------------------------------------------------------------------
Net sales.................................. Ps - 27,398 148,347 (13,036) 162,709
Operating income........................... (58) 3,761 12,968 9,738 26,409
Net comprehensive financing result......... (2,031) (493) 10,040 (4,916) 2,600
Other income (expense), net................ (768) (440) 5,829 (7,993) (3,372)
Total IT, BAT and ESPS..................... 635 482 (3,474) (1,198) (3,555)
Equity in income of affiliates............. 24,647 24,916 6,628 (55,263) 928
------------- ------------ ------------ ------------- -------------
Consolidated net income.................... 22,425 28,226 31,991 (59,632) 23,010
------------- ------------ ------------ ------------- -------------
Minority interest....................... - - (6,792) 7,377 585
------------- ------------ ------------ ------------- -------------
Majority interest net income............... Ps 22,425 28,226 38,783 (67,009) 22,425
============= ============ ============ ============= =============
F-62
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Condensed consolidated statements of changes in financial position:
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2003 CEMEX guarantors non-guarantors eliminations consolidated
- --------------------------------------------- ----------------------------------------------------------------------
Operating activities:
Majority interest net income................ Ps 7,201 5,983 7,996 (13,979) 7,201
Adjustments to reconcile to resources
provided by operating activities............ (1,775) (3,407) 23,446 (7,639) 10,625
----------------------------------------------------------------------
Resources provided by operations......... 5,426 2,576 31,442 (21,618) 17,826
Net change in working capital............... 19,662 15,058 (45,017) 10,408 111
----------------------------------------------------------------------
Resources provided by operations, net.... 25,088 17,634 (13,575) (11,210) 17,937
Financing activities:
Bank loans and notes payable, net........... (12,594) (240) 10,833 122 (1,879)
Dividends paid.............................. (4,038) (6,123) 152 5,971 (4,038)
Issuance of common stock.................... 4,064 - - - 4,064
Repurchase of preferred stock by
subsidiaries................................ - - (8,036) 554 (7,482)
Others...................................... 811 (9,109) 2,952 9,332 3,986
----------------------------------------------------------------------
Resources used in financing activities... (11,757) (15,472) 5,901 15,979 (5,349)
Investing activities:
Property, machinery and equipment, net...... - (1,034) (3,601) 285 (4,350)
Acquisitions, net of cash acquired.......... (7,505) (2,160) 13,880 (5,149) (934)
Dividends received.......................... 5,605 - - (5,605) -
Minority interest........................... - - (933) 57 (876)
Deferred charges and others................. (11,728) 686 7,216 (3,485) (7,311)
----------------------------------------------------------------------
Resources used in investing activities... (13,628) (2,508) 16,562 (13,897) (13,471)
Change in cash and investments........... (297) (346) 8,888 (9,128) (883)
Cash and investments initial balance..... 415 2,071 3,545 (1,811) 4,220
------------- ------------ ------------- -------------- -------------
Cash and investments ending balance...... Ps 118 1,725 12,433 (10,939) 3,337
============= ============ ============= ============== =============
F-63
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2004 CEMEX guarantors non-guarantors eliminations consolidated
- --------------------------------------------- ----------------------------------------------------------------------
Operating activities:
Majority interest net income................ Ps 13,965 19,373 15,976 (35,349) 13,965
Adjustments to reconcile to resources
provided by operating activities............ (11,214) (13,937) 14,111 23,160 12,120
----------------------------------------------------------------------
Resources provided by operations......... 2,751 5,436 30,087 (12,189) 26,085
Net change in working capital............... (888) 11,720 (9,656) (3,450) (2,274)
----------------------------------------------------------------------
Resources provided by operations, net.... 1,863 17,156 20,431 (15,639) 23,811
Financing activities:
Bank loans and notes payable, net........... (1,572) 61 (11,698) 9,307 (3,902)
Bank loans acquisition of RMC Group......... - - 9,019 (9,019) -
Appreciation warrants....................... (1,085) - - - (1,085)
Dividends paid.............................. (4,142) - (292) 292 (4,142)
Issuance of common stock.................... 4,351 - - - 4,351
Issuance (repurchase) of preferred stock by
subsidiaries................................ - - (2,695) 1,936 (759)
Others...................................... (556) (14,741) 4,914 8,633 (1,750)
----------------------------------------------------------------------
Resources used in financing activities... (3,004) (14,680) (752) 11,149 (7,287)
Investing activities:
Property, machinery and equipment, net...... - (671) (4,309) 1,023 (3,957)
Acquisitions, net of cash acquired.......... (1,687) (1,405) (192) 3,105 (179)
Investment in RMC Group..................... - - (9,019) 622 (8,397)
Dividends received.......................... 272 - - (272) -
Minority interest........................... - - (1,506) 104 (1,402)
Deferred charges and others................. 2,546 (76) (1,869) (2,870) (2,269)
----------------------------------------------------------------------
Resources used in investing activities... 1,131 (2,152) (16,895) 1,712 (16,204)
Change in cash and investments........... (10) 324 2,784 (2,778) 320
Cash and investments initial balance..... 118 1,725 12,433 (10,939) 3,337
------------- ------------ ------------- -------------- -------------
Cash and investments ending balance...... Ps 108 2,049 15,217 (13,717) 3,657
============= ============ ============= ============== =============
F-64
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2005 CEMEX guarantors non-guarantors eliminations consolidated
- --------------------------------------------- ----------------------------------------------------------------------
Operating activities:
Majority interest net income................ Ps 22,425 28,226 38,783 (67,009) 22,425
Adjustments to reconcile to resources
provided by operating activities............ (22,497) (23,652) 11,847 48,531 14,229
----------------------------------------------------------------------
Resources provided by operations......... (72) 4,574 50,630 (18,478) 36,654
Net change in working capital............... (5,905) 20,135 (27,014) 12,430 (354)
----------------------------------------------------------------------
Resources provided by operations, net.... (5,977) 24,709 23,616 (6,048) 36,300
Financing activities:
Bank loans and notes payable, net........... 10,380 60 4,377 - 14,817
Dividends paid.............................. (4,864) - - - (4,864)
Issuance of common stock from reinvestment
of dividends................................ 4,537 9,088 (9,088) - 4,537
Issuance of common stock under stock option
plan........................................ 18 - - - 18
Others...................................... (911) (15,202) 4,903 5,639 (5,571)
----------------------------------------------------------------------
Resources used in financing activities... 9,160 (6,054) 192 5,639 8,937
Investing activities:
Property, machinery and equipment, net...... - (1,069) (1,188) - (2,257)
Acquisitions, net of cash acquired.......... (10,165) (16,747) 26,782 (85) (215)
Investment in RMC Group..................... - - (47,080) - (47,080)
Minority interest........................... - - (155) - (155)
Deferred charges and others................. 6,874 (136) 6,101 (5,639) 7,200
----------------------------------------------------------------------
Resources used in investing activities... (3,291) (17,952) (15,540) (5,724) (42,507)
Change in cash and investments........... (108) 703 8,268 (6,133) 2,730
Cash and investments initial balance..... 108 2,049 15,217 (13,717) 3,657
------------- ------------ ------------- -------------- -------------
Cash and investments ending balance...... Ps - 2,752 23,485 (19,850) 6,387
============= ============ ============= ============== =============
F-65
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
The tables below present consolidated balance sheets as of December 31, 2004 and
2005, and income statements and statements of changes in financial position for
each of the three-year periods ended December 31, 2005 for the Guarantors. Such
information presents in separate columns each individual Guarantor on a Parent
Company-only basis, consolidation adjustments and eliminations, and the combined
Guarantors. All significant related parties balances and transactions between
the Guarantors have been eliminated in the "Combined guarantors" column.
The amounts presented in the column "Combined guarantors" are readily comparable
with the information of the Guarantors included in the condensed consolidated
financial information. As previously described, amounts presented under the line
item "Investments in affiliates" for both the balance sheets and income
statements, include the net investment in affiliates accounted for by the equity
method. In addition, the Guarantors' reconciliation of net income and
stockholders' equity to U.S. GAAP are presented below:
Guarantors' Combined Balance Sheets:
December 31, 2004 Guarantors (Parent Company-only)
--------------------------------------------------------------
Adjustments Combined
CEMEX and
Assets Mexico ETM eliminations guarantors
------ --------------- -------------- ------------- --------------
Current Assets
Cash and investments............................... Ps 855 1,194 - 2,049
Trade accounts receivable, net..................... 98 - - 98
Other receivables and other current assets......... 794 412 (310) 896
Related parties receivables........................ 3,843 1,777 (1,846) 3,774
Inventories........................................ 1,652 - - 1,652
--------------- -------------- ------------- --------------
Total current assets............................ 7,242 3,383 (2,156) 8,469
--------------- -------------- ------------- --------------
Other Investments
Investments in subsidiaries and affiliates......... 142,391 30,400 (50,000) 122,791
Long-term related parties receivables.............. 149 35,123 (35,123) 149
Other investments.................................. 324 - - 324
--------------- -------------- ------------- --------------
Total other investments......................... 142,864 65,523 (85,123) 123,264
--------------- -------------- ------------- --------------
Property, machinery and equipment.................. 31,758 - - 31,758
--------------- -------------- ------------- --------------
Intangible assets and deferred charges............. 1,883 4,430 - 6,313
--------------- -------------- ------------- --------------
Total Assets.................................... Ps 183,747 73,336 (87,279) 169,804
=============== ============== ============= ==============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Current maturities of long-term debt............... Ps 39 - - 39
Trade accounts payable............................. 767 - - 767
Other accounts payable and accrued expenses........ 1,402 309 (310) 1,401
Related parties payables........................... 28,410 73 (1,846) 26,637
--------------- -------------- ------------- --------------
Total current liabilities....................... 30,618 382 (2,156) 28,844
--------------- -------------- ------------- --------------
Total long-term debt............................... 38 - - 38
--------------- -------------- ------------- --------------
Other Noncurrent Liabilities
Deferred income taxes.............................. 7,808 75 - 7,883
Others............................................. 214 - - 214
Long-term related parties payables................. 40,585 22,879 (35,123) 28,341
--------------- -------------- ------------- --------------
Total other noncurrent liabilities.............. 48,607 22,954 (35,123) 36,438
--------------- -------------- ------------- --------------
Total Liabilities............................... 79,263 23,336 (37,279) 65,320
--------------- -------------- ------------- --------------
Stockholders' equity............................... 85,111 49,597 (49,597) 85,111
Net income......................................... 19,373 403 (403) 19,373
--------------- -------------- ------------- --------------
Total stockholders' equity...................... 104,484 50,000 (50,000) 104,484
--------------- -------------- ------------- --------------
Total Liabilities and Stockholders' Equity...... Ps 183,747 73,336 (87,279) 169,804
=============== ============== ============= ==============
F-66
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Guarantors' Combined Balance Sheets:
December 31, 2005 Guarantors (Parent Company-only)
--------------------------------------------------------------
Adjustments Combined
CEMEX and
Assets Mexico ETM eliminations guarantors
------ --------------- -------------- ------------- --------------
Current Assets
Cash and investments.............................. Ps 835 1,917 - 2,752
Trade accounts receivable, net.................... 262 - - 262
Other receivables and other current assets........ 681 567 (103) 1,145
Related parties receivables....................... 2,017 8,043 (8,043) 2,017
Inventories....................................... 1,467 - - 1,467
----------------------------------------------------------------
Total current assets.......................... 5,262 10,527 (8,146) 7,643
----------------------------------------------------------------
Other Investments
Investments in subsidiaries and affiliates........ 167,751 35,001 (55,048) 147,704
Long-term related parties receivables............. 14,351 26,550 (34,304) 6,597
Other investments................................. 452 20 - 472
----------------------------------------------------------------
Total other investments....................... 182,554 61,571 (89,352) 154,773
----------------------------------------------------------------
Property, machinery and equipment................. 29,252 - - 29,252
----------------------------------------------------------------
Intangible assets and deferred charges............ 2,105 4,429 - 6,534
----------------------------------------------------------------
Total Assets.................................. Ps 219,173 76,527 (97,498) 198,202
================================================================
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Current maturities of long-term debt.............. 72 - - 72
Trade accounts payable............................ 976 - - 976
Other accounts payable and accrued expenses....... 1,538 293 (103) 1,728
Related parties payables.......................... 52,579 - 8,043) 44,536
----------------------------------------------------------------
Total current liabilities..................... 55,165 293 (8,146) 47,312
----------------------------------------------------------------
Total long-term debt.............................. 65 - - 65
----------------------------------------------------------------
Other Noncurrent Liabilities
Deferred income taxes............................. 6,684 273 - 6,957
Others............................................ 417 - - 417
Long-term related parties payables................ 26,550 20,913 (34,304) 13,159
----------------------------------------------------------------
Total other noncurrent liabilities............ 33,651 21,186 (34,304) 20,533
----------------------------------------------------------------
Total Liabilities............................. 88,881 21,479 (42,450) 67,910
----------------------------------------------------------------
Stockholders' equity.............................. 102,066 49,396 (49,396) 102,066
Net income........................................ 28,226 5,652 (5,652) 28,226
----------------------------------------------------------------
Total stockholders' equity.................... 130,292 55,048 (55,048) 130,292
----------------------------------------------------------------
Total Liabilities and Stockholders' Equity.... Ps 219,173 76,527 (97,498) 198,202
================================================================
F-67
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Guarantors' Combined Income Statements:
Guarantors (Parent Company-only)
---------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2003 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ------------
Net sales................................................ Ps 26,496 - - 26,496
Cost of sales............................................ (9,518) - - (9,518)
---------------------------------------------------
Gross profit........................................ 16,978 - - 16,978
Total operating expenses............................ (13,304) - (1) (13,305)
--------------------------------------------------
Operating income................................. 3,674 - (1) 3,673
--------------------------------------------------
Net comprehensive financing result............... (4,428) 1,172 - (3,256)
--------------------------------------------------
Other income (expense), net.............................. (508) (23) - (531)
--------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... (1,262) 1,149 (1) (114)
--------------------------------------------------
Total IT, BAT and ESPS.............................. 487 (78) - 409
--------------------------------------------------
Income before equity in income of affiliates........ (775) 1,071 (1) 295
Equity in income of affiliates................... 6,758 815 (1,885) 5,688
--------------------------------------------------
Net income.......................................... Ps 5,983 1,886 (1,886) 5,983
==================================================
Guarantors (Parent Company-only)
------------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2004 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ---------------
Net sales................................................ Ps 27,579 - - 27,579
Cost of sales............................................ (10,252) - - (10,252)
------------------------------------------------------
Gross profit........................................ 17,327 - - 17,327
Total operating expenses............................ (13,548) - - (13,548)
------------------------------------------------------
Operating income................................. 3,779 - - 3,779
------------------------------------------------------
Net comprehensive financing result............... 18 490 - 508
------------------------------------------------------
Other income (expense), net.............................. (419) (59) - (478)
------------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... 3,378 431 - 3,809
------------------------------------------------------
Total IT, BAT and ESPS.............................. 756 (391) - 365
------------------------------------------------------
Income before equity in income of affiliates........ 4,134 40 - 4,174
Equity in income of affiliates................... 15,239 363 (403) 15,199
-------------------------------------------------------
Net income.......................................... Ps 19,373 403 (403) 19,373
======================================================-
Guarantors (Parent Company-only)
-------------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2005 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ----------------
Net sales................................................ Ps 27,398 - - 27,398
Cost of sales............................................ (10,548) - - (10,548)
-------------------------------------------------------
Gross profit........................................ 16,850 - - 16,850
Total operating expenses............................ (13,089) - - (13,089)
-------------------------------------------------------
Operating income................................. 3,761 - - 3,761
-------------------------------------------------------
Net comprehensive financing result............... (2,118) 1,625 - (493)
-------------------------------------------------------
Other income (expense), net.............................. (267) (173) - (440)
-------------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... 1,376 1,452 - 2,828
-------------------------------------------------------
Total IT, BAT and ESPS.............................. 679 (197) - 482
-------------------------------------------------------
Income before equity in income of affiliates........ 2,055 1,255 - 3,310
Equity in income of affiliates................... 26,171 4,397 (5,652) 24,916
-------------------------------------------------------
Net income.......................................... Ps 28,226 5,652 (5,652) 28,226
=======================================================
F-68
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Guarantors' Combined Statements of Changes in Financial Position:
Guarantors (Parent Company-only)
-------------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2003 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ----------------
Operating activities
Net income Ps 5,983 1,886 (1,886) 5,983
Adjustments to reconcile to resources provided by
operating activities...................................... (5,396) 103 1,886 (3,407)
-------------- -------- ------------- ----------------
Resources provided by operating activities................ 587 1,989 - 2,576
Net change in working capital......................... 41,659 1,146 (27,747) 15,058
-------------- -------- ------------- ----------------
Net resources provided by operating activities........ 42,246 3,135 (27,747) 17,634
-------------- -------- ------------- ----------------
Financing activities
Bank loans and notes payable, net......................... (274) 35 (1) (240)
Dividends................................................. (6,123) - - (6,123)
Long-term related parties receivables and payables, net... (42,057) - 32,910 (9,147)
Other noncurrent assets and liabilities, net.............. 38 (7,012) 7,012 38
-------------- -------- ------------- ----------------
Resources used in financing activities.................... (48,416) (6,977) 39,921 (15,472)
-------------- -------- ------------- ----------------
Investing activities
Property, plant and equipment, net........................ (1,034) - - (1,034)
Investments in subsidiaries and affiliates................ 5,948 (1,096) (7,012) (2,160)
Deferred charges.......................................... 654 - - 654
Other investments......................................... 32 5,163 (5,163) 32
-------------- -------- ------------- ----------------
Resources used in investing activities................ 5,600 4,067 (12,175) (2,508)
-------------- -------- ------------- ----------------
Change in cash and investments........................ (570) 225 (1) (346)
Cash and investments initial balance.................. 1,404 667 - 2,071
-------------- -------- ------------- ----------------
Cash and investments ending balance................... Ps 834 892 (1) 1,725
============== ======== ============= ================
Guarantors (Parent Company-only)
-------------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2004 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ----------------
Operating activities
Net income................................................ Ps 19,373 403 (403) 19,373
Adjustments to reconcile to resources provided by
operating activities...................................... (14,052) (288) 403 (13,937)
-------------- -------- ------------- ----------------
Resources provided by operating activities................ 5,321 115 - 5,436
Net change in working capital......................... 8,428 3,180 112 11,720
-------------- -------- ------------- ----------------
Net resources provided by operating activities........ 13,749 3,295 112 17,156
-------------- -------- ------------- ----------------
Financing activities
Bank loans and notes payable, net......................... 61 - - 61
Dividends................................................. - - - -
Long-term related parties receivables and payables, net... (12,673) 22,879 (24,993) (14,787)
Other noncurrent assets and liabilities, net.............. 46 - - 46
-------------- -------- ------------- ----------------
Resources used in financing activities.................... (12,566) 22,879 (24,993) (14,680)
-------------- -------- ------------- ----------------
Investing activities
Property, plant and equipment, net........................ (671) - - (671)
Investments in subsidiaries and affiliates................ (453) (25,834) 24,882 (1,405)
Deferred charges.......................................... (183) (38) - (221)
Other investments......................................... 145 - - 145
-------------- -------- ------------- ----------------
Resources used in investing activities................ (1,162) (25,872) 24,882 (2,152)
-------------- -------- ------------- ----------------
Change in cash and investments........................ 21 302 1 324
Cash and investments initial balance.................. 834 892 (1) 1,725
-------------- -------- ------------- ----------------
Cash and investments ending balance................... Ps 855 1,194 - 2,049
============== ======== ============= ================
F-69
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Guarantors' Combined Statements of Changes in Financial Position:
Guarantors (Parent Company-only)
-------------------------------------------------------
Adjustments
and Combined
For the year ended December 31, 2005 CEMEX Mexico ETM eliminations guarantors
-------------- -------- ------------- ----------------
Operating activities
Net income................................................ Ps 28,226 5,652 (5,652) 28,226
Adjustments to reconcile to resources provided by
operating activities...................................... (25,104) (4,200) 5,652 (23,652)
-------------- -------- ------------- ----------------
Resources provided by operating activities................ 3,122 1,452 - 4,574
Net change in working capital......................... 26,294 55 (6,214) 20,135
-------------- -------- ------------- ----------------
Net resources provided by operating activities........ 29,416 1,507 (6,214) 24,709
-------------- -------- ------------- ----------------
Financing activities
Bank loans and notes payable, net......................... 60 - - 60
Stockholders contribution................................. 9,088 - - 9,088
Long-term related parties receivables and payables, net... (14,035) (8,232) 7,085 (15,182)
Other noncurrent assets and liabilities, net.............. - (20) - (20)
-------------- -------- ------------- ----------------
Resources used in financing activities.................... (4,887) (8,252) 7,085 (6,054)
-------------- -------- ------------- ----------------
Investing activities
Property, plant and equipment, net........................ (1,069) - - (1,069)
Investments in subsidiaries and affiliates................ (23,363) 7,487 (871) (16,747)
Deferred charges.......................................... (117) (19) - (136)
Other investments......................................... - - - -
-------------- -------- ------------- ----------------
Resources used in investing activities................ (24,549) 7,468 (871) (17,952)
-------------- -------- ------------- ----------------
Change in cash and investments........................ (20) 723 - 703
Cash and investments initial balance.................. 855 1,194 - 2,049
-------------- -------- ------------- ----------------
Cash and investments ending balance................... Ps 835 1,917 - 2,752
============== ======== ============= ================
Guarantors--Cash and investments
At December 31, 2004 and 2005, ETM's temporary investments are primarily
comprised of CEMEX CPOs. In June 2004 and 2005, CEMEX issued 650,424 CPOs and
1,794,446 CPOs, respectively, through dividends to ETM amounting to Ps18 and
Ps60, respectively.
Guarantors--Trade receivables
During December 2002, CEMEX Mexico and one of its subsidiaries established sales
of trade accounts receivable program ("securitization program"). With this
program, these companies effectively transferred control, risks and benefits
related to some of the trade accounts receivable balances. As of December 31,
2004 and 2005, these balances amounted to Ps 1,778 and Ps1,663 from CEMEX
Mexico, respectively, and Ps 1,460 and Ps1,592 from its subsidiary,
respectively.
Guarantors--Investment in affiliates
At December 31, 2004 and 2005, of the Guarantors' total investment in
affiliates, which are accounted for under the equity method, Ps 122,539 and
Ps147,445, respectively, correspond to investments in non-guarantors, and Ps 252
in 2004 and Ps259 in 2005, are related to minority investments in third parties.
At December 31, 2004 and 2005, the main Guarantors' investments in
non-guarantors are in CEMEX Concretos, S.A. de C.V and CEMEX Internacional, S.A.
de C.V., which together integrate the ready-mix concrete operations and export
trading activities in Mexico; and CEDICE, which is the parent company of the
international operations of CEMEX.
Guarantors--Indebtedness
At December 31, 2004 and 2005, the Guarantors had total indebtedness of U.S.$6.7
(Ps77) and U.S.$13 (Ps137), respectively. At December 31, 2004 and 2005, the
average annual interest rate of this indebtedness was approximately 9.9% during
2004 and 2005. Of the total indebtedness of the Guarantors at December 31, 2005,
approximately U.S.$6.8 (Ps72) matures in 2006 and U.S.$6.1 (Ps.65) matures in
2007 and thereafter.
F-70
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Guarantors--Balances and transactions with related parties
Balances with related parties result primarily from (i) the sale and purchase of
cement and clinker to and from affiliates, (ii) the sale and/or acquisition of
subsidiaries' shares within the CEMEX group, (iii) the invoicing of
administrative and other services received or provided from and to affiliated
companies, and (iv) the transfer of funds between the Guarantors, their
respective parents and certain affiliates. The related parties balance detail is
as follows:
Guarantors Assets Liabilities
------ -----------
At December 31, 2004 Short-Term Long-Term Short-Term Long-Term
---------- --------- ---------- ---------
CEMEX, S.A. de C.V........................................... Ps 939 - - 28,341
CEMEX Central, S.A. de C.V................................... 1,385 - - -
CEMEX Concretos, S.A. de C.V................................. 247 - - -
Corporacion Gouda, S.A. de C.V............................... 131 - - -
Incalpa, S.A. de C.V. ..................................... . 644 - - -
Construmexcla, S.A. de C.V. ................................. - - 6,369 -
CEMEX Irish Investments Company Limited. .................... - - 4,852 -
CEMEX Trademarks Worldwide................................... - - 5,589 -
Servicios CEMEX Mexico, S.A. de C.V. ........................ - - 344 -
Inmobiliaria Rio la Silla, S.A. de C.V...................... - 149 73 -
Centro Distribuidor de Cemento, S.A. de C.V. ................ - - 2,697 -
Petrocemex, S.A. de C.V..................................... - - 4,208 -
CEMEX Internacional, S.A. de C.V............................. - - 312 -
Turismo CEMEX, S.A. de C.V.. ................................ - - 1,105 -
Others....................................................... 428 - 1,088 -
---------- --------- ---------- ---------
Ps 3,774 149 26,637 28,341
========== ========= ========== =========
Guarantors Assets Liabilities
------ -----------
At December 31, 2005 Short-Term Long-Term Short-Term Long-Term
---------- --------- ---------- ---------
Proveedora Mexicana de Materiales, S.A. de C.V. ........... Ps 845 - - -
CEMEX Concretos, S.A. de C.V. .............................. 617 6,500 - -
CEMEX, S.A. de C.V. ........................................ 314 - 13,159
CEMEX International Finance Co. ............................ - - 18,706 -
Arkio de Mexico S.A. de C.V. ............................... - - 6,746 -
CEMEX Irish Investments Company Limited. .................. - - 4,555 -
Petrocemex, S.A. de C.V.. .................................. - - 4,376 -
Centro Distribuidor de Cemento, S.A. de C.V. .............. - - 3,504 -
Turismo CEMEX, S.A. de C.V.. .............................. - - 1,320 -
CEMEX Central, S.A. de C.V.. .............................. - - 1,301 -
MexCement Holdings ....................................... - - 1,124 -
Profesionales en Logistica de Mexico S.A. de C.V. ......... - - 1,040 -
CEMEX Internacional, S.A. de C.V. .......................... - - 345 -
Inmobiliaria Rio la Silla, S.A. de C.V. .................... - 97 73 -
Others ..................................................... 241 - 1,446 -
---------- --------- ---------- ---------
Ps 2,017 6,597 44,536 13,159
========== ========= ========== =========
The principal transactions carried out with affiliated companies are as follows:
Years ended December 31,
-------------------------------------------------
Guarantors 2003 2004 2005
-------------- ------------- -------------
Net sales......................................................... Ps 3,964 4,693 5,605
Purchases......................................................... (1,422) (1,423) (1,476)
Selling and administrative expenses .............................. (8,872) (7,914) (6,786)
Financial expense................................................. (5,112) (2,916) (6,999)
Financial income ................................................. 371 890 2,032
Other expense, net ............................................... Ps 304 598 (571)
============== ============= =============
F-71
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Net sales--The Guarantors sell cement and clinker to affiliated companies in
arms-length transactions.
Purchases--The Guarantors purchase raw materials from affiliates in arms-length
transactions.
Selling and administrative expenses--CEMEX allocates part of its corporate
expense to the Guarantors, which also incur rental and trademark rights expenses
payable to CEMEX.
Financial income and expense is recorded in receivables from and payables to
affiliated companies as described above. Additionally, the Guarantors receive
financial income on their temporary investment position, invested in the
non-guarantor treasury company.
Guarantors--U.S. GAAP reconciliation of net income and stockholders' equity:
As discussed at the beginning of this note 25, the following reconciliation to
U.S. GAAP does not include the reversal of Mexican GAAP inflation accounting
adjustments, as these adjustments represent a comprehensive measure of the
effects of price level changes in the inflationary Mexican economy, which is
considered a more meaningful presentation than historical cost-based financial
reporting for both Mexican and U.S. accounting purposes. The other principal
differences between Mexican GAAP and U.S. GAAP and the effect on net income and
stockholders' equity are presented below, with an explanation of the
adjustments, as follows:
Years ended December 31,
-----------------------------------------------
2003 2004 2005
------------ --------------- ---------------
Net income reported under Mexican GAAP........................... Ps 5,983 19,373 28,226
Approximate U.S. GAAP adjustments:
1. Deferred income taxes and ESPS (note B)....................... (9) (557) 107
2. Other employees' benefits (note C)............................ 38 11 (171)
3. Inflation adjustment of machinery and equipment (note D)...... (127) (112) (188)
4. Other U.S. GAAP adjustments (note E).......................... (181) 1,195 1,065
5. Monetary position result (note F)............................. 122 188 103
------------ --------------- ---------------
Total approximate U.S. GAAP adjustments...................... (157) 725 916
------------ --------------- ---------------
Total approximate net income under U.S. GAAP................. Ps 5,826 20,098 29,142
============ =============== ===============
>
At December 31,
-------------------------------------
2004 2005
---------------- ----------------
Total stockholders' equity under Mexican GAAP.................... Ps 104,484 130,292
Approximate U.S. GAAP adjustments:
1. Effect of pushdown of goodwill, net (note A).................. 1,744 1,839
2. Deferred income taxes and ESPS (note B)....................... (3,346) (3,485)
3. Other employees' benefits (note C)............................ (92) (171)
4. Inflation adjustment for machinery and equipment (note D)..... 1,863 3,546
5. Other U.S. GAAP adjustments (note E).......................... 6,856 16,886
---------------- ----------------
Total approximate U.S. GAAP adjustments...................... 7,025 18,615
---------------- ----------------
Total approximate stockholders' equity under U.S. GAAP....... Ps 111,509 148,907
================ ================
Guarantors--Notes to the U.S. GAAP reconciliation:
A. Business Combinations
In 1989 and 1990, through an exchange of its shares with CEMEX, CEMEX Mexico
acquired substantially all its Mexican subsidiaries from CEMEX. The original
excess of the purchase price paid by CEMEX over the fair value of the net assets
of these subsidiaries was Ps 7,876, of which Ps 4,074 were recorded in ETM under
Mexican GAAP at the time of the acquisition. The net adjustment in the
Guarantors stockholders' equity reconciliation to U.S. GAAP arising from this
pushed-down goodwill, after eliminating the amounts recorded under Mexican GAAP,
was Ps 854 in 2004 and Ps1,175 in 2005.
In addition, during 1995, CEMEX acquired an additional 24.2% equity interest in
TOLMEX, S.A. de C.V. ("TOLMEX"), through a public exchange offer pursuant to
which CEMEX exchanged its own shares for TOLMEX's shares. TOLMEX merged during
1999 with other Mexican subsidiaries creating CEMEX Mexico. The excess of the
purchase price paid by CEMEX over the fair value of the net assets of TOLMEX was
Ps 1,002. The net adjustment in the Guarantors' stockholders' equity
reconciliation to U.S. GAAP arising from this pushed-down goodwill was Ps 890 in
2004 and Ps664 in 2005.
F-72
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
As mentioned in note 25(a), for purposes of the reconciliation to U.S. GAAP,
CEMEX adopted SFAS 142 and SFAS 144 in 2002. As a result of this adoption,
effective January 1, 2002, amortization ceased for goodwill under U.S. GAAP and,
therefore, beginning in 2002, goodwill amortization recorded under Mexican GAAP
is adjusted for purposes of the reconciliation of net income and stockholders'
equity.
B. Deferred income taxes and Employees' Statutory Profit Sharing
Deferred income taxes adjustment in the stockholders' equity reconciliation to
U.S. GAAP, at December 31, 2004 and 2005, represented expense of Ps 418 and
expense of Ps719, respectively. In addition, deferred ESPS adjustment to U.S.
GAAP was an expense of Ps 2,928 in 2004 and an expense of Ps2,811 in 2005.
C. Other employees' benefits
Under U.S. GAAP, post-employment benefits for former or inactive employees,
including severance payments which are not part of a specific event of
restructuring, are accrued over an employee's service life. Until December 31,
2004 under Mexican GAAP, severance payments, which were not part of a business
restructuring or a substitution for pension benefits, were recognized in
earnings in the period in which they were paid. Beginning January 1, 2005,
according to newly issued Mexican GAAP, severance payments should also be
accrued over the employee's service life according to actuarial computations, in
a manner similar to U.S. GAAP (note 14).
For the years ended December 31, 2003, 2004 and 2005, severance provisions
recorded for U.S. GAAP purposes resulted in income of Ps38, income of Ps11 and
expense of Ps9, respectively, with an accrual of Ps92 and Ps108 at December 31,
2004 and 2005, respectively. At December 31, 2005, the provision for severance
payments under U.S. GAAP amounted to approximately Ps108, approximately Ps101
higher that the provision accrued under Mexican GAAP. The difference between the
provision under U.S. GAAP and Mexican GAAP represents the cumulative initial
effect from the accounting change under Mexican GAAP, which was recognized as of
January 1, 2005 as part of the unrecognized net transition obligation (note 14),
net of the amortization expense recorded under Mexican GAAP during 2005 related
to such transition obligation.
In connection with the change from defined benefit scheme to defined
contribution scheme for a portion of the Company's employees in Mexico effective
January 10, 2006 (note 14), considering that such change was a material event
which occurred before the issuance of the financial statements, under Mexican
GAAP, CEMEX recognized at December 31, 2005, a nonrecurring net expense of
approximately Ps203 related to: 1) an event of settlement of obligations, which
represented an income of approximately Ps162; and 2) an event of curtailment,
which represented an expense of approximately Ps365. The results from the change
in the pension plans were determined using a methodology consistent with the
rules set forth by SFAS 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits". For
purposes of the reconciliation of net income to U.S. GAAP, according to the
provisions of SFAS 88, settlement events should be recognized in the year in
which the settlement occurred. As a result, in the reconciliation of net income
to U.S. GAAP, the settlement income of approximately Ps162 (Ps117 after tax)
recognized under Mexican GAAP was canceled against the provision of pensions and
other postretirement benefits under U.S. GAAP.
D. Inflation Adjustment of Machinery and Equipment
As previously mentioned in note 25(i), for purposes of the U.S. GAAP
reconciliation, fixed assets of foreign origin were restated using the inflation
factor arising from the Consumer Price Index ("CPI") of each country, and
depreciation is based upon the revised amounts.
E. Other U.S. GAAP adjustments
Subsidiary companies--The Guarantors have adjusted their investment and their
equity in the earnings of subsidiary companies for the share of the approximate
U.S. GAAP adjustments applicable to these affiliates. The net effect in the
stockholders' equity reconciliation to U.S. GAAP at December 31, 2004 was an
income of Ps 6,856 and an expense of Ps16,886 in 2005. The effect on the net
income reconciliation to U.S. GAAP was an expense of Ps 181 in 2003, and income
of Ps 1,195 in 2004 and Ps1,065 in 2005. From the U.S. GAAP adjustments to
subsidiary companies in the Guarantors' reconciliation of stockholders' equity,
expense of Ps 3,346 in 2004 and expense of Ps3,485 in 2005, are related to
deferred IT and deferred ESPS.
F. Monetary position result
Monetary position result of the U.S. GAAP adjustments is determined by (i)
applying the annual inflation factor to the net monetary position of the U.S.
GAAP adjustments at the beginning of the period, plus (ii) the monetary position
effect of the adjustments during the period, determined in accordance with the
CPI inflation factor for the period.
F-73
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Supplemental Guarantors' Cash Flow Information under U.S. GAAP
The classifications of cash flows under Mexican GAAP and U.S. GAAP are basically
the same in respect of the transactions presented under each caption. The nature
of the differences between Mexican GAAP and U.S. GAAP in the amounts reported is
primarily due to (i) the elimination of inflationary effects in the variations
of monetary assets and liabilities arising from financing and investing
activities, against the corresponding monetary position result in operating
activities, (ii) the elimination of exchange rate fluctuations resulting from
financing and investing activities, against the corresponding unrealized foreign
exchange gain or loss included in operating activities, and (iii) the
recognition in operating, financing and investing activities of the U.S. GAAP
adjustments.
For the Guarantors, the following table summarizes the cash flow items as
required under SFAS 95 provided by (used in) operating, financing and investing
activities for the years ended December 31, 2003, 2004 and 2005, giving effect
to the U.S. GAAP adjustments, excluding the effects of inflation required by
Bulletin B-10 and Bulletin B-15. The following information is presented, in
millions of pesos, on a historical peso basis and it is not presented in pesos
of constant purchasing power:
Years ended December 31,
----------------------------------
2003 2004 2005
--------- ---------- ---------
Net cash provided by
operating activities.................. Ps 6,970 17,388 27,827
Net cash provided by (used in)
financing activities.................. (5,886) 31 9,085
Net cash used in investing activities.... (1,561) (17,355) (36,909)
========== ========== =========
Net cash flow from operating activities reflects cash payments for interests and
income taxes as follows:
Years ended December 31,
----------------------------------
2003 2004 2005
--------- ---------- ---------
Interest paid............................ Ps 150 - -
Income taxes paid........................ - 1 23
========= ========== =========
Guarantors' non-cash activities are comprised of the following:
Dividends declared to CEMEX amounting to Ps6,460.0 in 2003 were recognized by
the Guarantors as accounts payable to CEMEX as of December 31, 2003.
Contingent liabilities of the Guarantors
As of December 31, 2004 and 2005, CEMEX Mexico and ETM guaranteed debt of CEMEX
in the amount of U.S.$ 3,088 (Ps32,988) and U.S.$3,780 (Ps40,145) (note 12C).
F-74
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SCHEDULES
The Board of Directors and Stockholders
CEMEX, S.A. de C.V.:
Under the date of January 27, 2006, we reported on the consolidated balance
sheets of CEMEX, S.A. de C.V. and subsidiaries as of December 31, 2004 and 2005,
and the related consolidated statements of income, changes in stockholders'
equity and changes in financial position for each of the years ended December
31, 2003, 2004 and 2005, which are included in this annual report on Form 20-F.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules in the annual report. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Cardenas Dosal, S.C.
/s/ Leandro Castillo Parada
Monterrey, N.L. Mexico
January 27, 2006
S-1
SCHEDULE I
CEMEX, S.A. DE C.V. (PARENT COMPANY ONLY)
Balance Sheets
(Millions of constant Mexican Pesos as of December 31, 2005)
December 31,
--------------------------
Assets Note 2004 2005
----------- -----------
Current Assets
Cash and investments ............................................ Ps 108 -
Other accounts receivable........................................ C 1,014 761
Related parties accounts receivable.............................. H 712 499
----------- -----------
Total current assets......................................... 1,834 1,260
----------- -----------
Investments And Noncurrent Receivables
Investments in subsidiaries and affiliated companies............. D 100,467 132,795
Other investments and noncurrent accounts receivable............. 897 2,574
Long-term related parties accounts receivable.................... H 34,037 20,913
----------- -----------
Total investments and noncurrent accounts receivable......... 135,401 156,282
----------- -----------
Land and Buildings
Land............................................................. 1,691 1,691
Buildings........................................................ 434 434
Accumulated depreciation......................................... (257) (261)
----------- -----------
Total land and buildings..................................... 1,868 1,864
----------- -----------
Intangible Assets and Deferred Charges.............................. E 4,259 3,121
----------- -----------
Total Assets................................................. Ps 143,362 162,527
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Bank loans....................................................... G Ps 1,588 2,039
Current maturities of long-term debt............................. G 1,812 4,365
Other accounts payable and accrued expenses...................... F 674 452
Related parties accounts payable................................. H 6,554 405
----------- -----------
Total current liabilities.................................... 10,628 7,261
----------- -----------
Long Term Debt
Bank loans....................................................... G 9,529 17,967
Notes payable.................................................... G 15,020 16,511
Current maturities of long-term debt............................. G (1,812) (4,365)
Long-term related parties accounts payable....................... H 24,933 20,313
----------- -----------
Total long-term debt......................................... 47,670 50,426
----------- -----------
Other noncurrent liabilities................................. 1,407 496
----------- -----------
Total Liabilities............................................ 59,705 58,183
----------- -----------
Stockholders' Equity
Common stock-historical cost basis .............................. 62 64
Common stock-accumulated inflation adjustments................... 3,735 3,735
Additional paid-in capital....................................... 42,580 47,133
Deficit in equity restatement.................................... (80,958) (82,387)
Cumulative initial deferred income tax effects................... 1,208 1,208
Retained earnings................................................ 103,065 112,166
Net income....................................................... 13,965 22,425
----------- -----------
Total stockholders' equity................................... 83,657 104,344
----------- -----------
Total Liabilities and Stockholders' Equity .................. Ps 143,362 162,527
=========== ===========
See accompanying notes to Parent Company-only financial statements.
S-2
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V. (PARENT COMPANY ONLY)
Statements of Income
(Millions of constant Mexican Pesos as of December 31, 2005, except for earnings per share)
---------------------------------------
Years ended December 31,
---------------------------------------
Note 2003 2004 2005
---------- ----------- ----------
Equity in income of subsidiaries and affiliates........................ 2,722 12,661 23,650
Rental income.......................................................... 299 287 273
License fees........................................................... 561 689 724
---------- ----------- ----------
Total revenues...................................................... H 3,582 13,637 24,647
---------- ----------- ----------
Administrative expenses................................................ (60) (39) (58)
---------- ----------- ----------
Operating income.................................................... 3,522 13,598 24,589
---------- ----------- ----------
Comprehensive financing result:
Financial expense................................................. (3,347) (2,685) (4,622)
Financial income.................................................. 3,333 1,540 1,592
Results from valuation and liquidation of financial instruments... 16 459 932
Foreing exchange result, net...................................... (2,788) 847 (779)
Monetary position result.......................................... 866 1,101 846
---------- ----------- ----------
Net comprehensive financing result.............................. (1,920) 1,262 (2,031)
---------- ----------- ----------
Other income (expense), net............................................ H 4,741 (1,208) (768)
---------- ----------- ----------
Income before income taxes.......................................... 6,343 13,652 21,790
Income tax benefit and business assets tax, net........................ K 858 313 635
---------- ----------- ----------
Net income.......................................................... 7,201 13,965 22,425
========== =========== ==========
Basic earnings per share............................................ L 0.76 1.40 2.16
Diluted earnings per share.......................................... L 0.74 1.39 2.15
========== =========== ==========
See accompanying notes to Parent Company-only financial statements.
S-3
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V. (PARENT COMPANY ONLY)
Statements of Changes in Financial Position
(Millions of constant Mexican Pesos as of December 31, 2005)
---------------------------------------------------
Years ended December 31,
---------------------------------------------------
2003 2004 2005
--------------- --------------- ---------------
Operating activities
Net income......................................................... Ps 7,201 13,965 22,425
Adjustments to reconcile to resources provided by operating activities:
Depreciation of properties....................................... 6 7 4
Amortization of deferred charges and credits, net................ 347 355 128
Deferred income tax charged to results........................... 594 1,085 1,021
Equity in income of subsidiaries and affiliates.................. (2,722) (12,661) (23,650)
--------------- --------------- ---------------
Resources provided by (used in) operating activities........... 5,426 2,751 (72)
--------------- --------------- ---------------
Changes in working capital:
Other accounts receivable........................................ 447 (241) 253
Short-term related parties accounts receivable and payable, net.. 19,374 1,736 (5,936)
Other accounts payable and accrued expenses...................... (159) (2,383) (222)
--------------- --------------- ---------------
Net change in working capital................................ 19,662 (888) (5,905)
--------------- --------------- ---------------
Net resources provided by (used in) operating activities........ 25,088 1,863 (5,977)
--------------- --------------- ---------------
Financing activities
Proceeds from bank loans (repayments), net......................... (10,198) 5,883 8,889
Notes payable, net................................................. (2,396) (7,455) 1,491
Liquidation of optional instruments................................ - (1,085) -
Dividends paid..................................................... (4,038) (4,142) (4,864)
Issuance of common stock from stock dividend elections............. 4,017 4,282 4,537
Issuance of common stock under stock option programs............... 47 69 18
Disposal of shares under repurchase program........................ 420 - -
Other financing activities, net.................................... 391 (556) (911)
--------------- --------------- ---------------
Resources provided by (used in) financing activities........... (11,757) (3,004) 9,160
--------------- --------------- ---------------
Investing activities
Long-term related parties accounts receivable, net................. (11,210) 2,066 8,504
Net change in investment in subsidiaries........................... (7,505) (1,687) (10,165)
Dividends received................................................. 5,605 272 -
Deferred charges................................................... (52) 276 52
Other noncurrent accounts receivable............................... (466) 204 (1,682)
--------------- --------------- ---------------
Resources provided by (used in) investing activities........... (13,628) 1,131 (3,291)
--------------- --------------- ---------------
Increase (decrease) in cash and investments.................... (297) (10) (108)
Cash and investments at beginning of year...................... 415 118 108
--------------- --------------- ---------------
Cash and investments at end of year............................ Ps 118 108 -
=============== =============== ===============
See accompanying notes to Parent Company-only financial statements.
S-4
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS
As of December 31, 2003, 2004 and 2005
(Millions of constant Mexican pesos as of December 31, 2005)
1. DESCRIPTION OF BUSINESS
CEMEX, S.A. de C.V. (CEMEX or the Company) is a Mexican holding company (parent)
of entities whose main activities are oriented to the construction industry,
through the production and marketing of cement, ready-mix concrete and
aggregates.
B. SIGNIFICANT ACCOUNTING POLICIES
B.1) BASIS OF PRESENTATION AND DISCLOSURE
The financial statements have been prepared in accordance with Generally
Accepted Accounting Principles in Mexico ("Mexican GAAP"), which recognize the
effects of inflation on the financial information.
The preparation of the Parent Company's financial statements considered, when
applicable, the same accounting policies listed in note 3 to CEMEX and
subsidiaries' consolidated financial statements included elsewhere in this
annual report.
In addition, this section includes references to other notes to the consolidated
financial statements, in those cases when information also refers to the Parent
Company.
B.2) RESTATEMENT OF COMPARATIVE FINANCIAL STATEMENTS
The restatement factors applied to the Parent Company's financial statements of
prior periods were determined using Mexican inflation.
Factor using
Mexican
inflation
---------------
2002 to 2003.................................................... 1.0387
2003 to 2004.................................................... 1.0539
2004 to 2005.................................................... 1.0300
---------------
C. OTHER ACCOUNTS RECEIVABLE
As of December 31, 2004 and 2005, other short-term accounts receivable of the
Parent Company consist of:
2004 2005
---------- ---------
Non-trade receivables.................................... Ps 236 225
Advances and valuation of derivative instruments (1)..... 403 53
Other refundable taxes................................... 375 483
---------- ---------
Ps 1,014 761
========== =========
(1) See notes 12 and 17 to our consolidated financial statements included
elsewhere in this annual report
D. INVESTMENTS IN SUBSIDIARIES AND AFFILIATES
As of December 31, 2004 and 2005, investments of the Parent Company in
subsidiaries and affiliated companies, accounted for by the equity method, are
as follows:
2004 2005
---------- ---------
Book value at acquisition date.......................... Ps 67,143 78,126
Revaluation by equity method............................ 33,324 54,669
---------- ---------
Ps 100,467 132,795
========== =========
S-5
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS-(Continued)
As of December 31, 2003, 2004 and 2005
(Millions of constant Mexican pesos as of December 31, 2005)
E. INTANGIBLE ASSETS AND DEFERRED CHARGES
As of December 31, 2004 and 2005, intangible assets of indefinite life and
deferred charges of the Parent Company are summarized as follows:
2004 2005
---------- ---------
Intangible assets of indefinite useful life:
Goodwill................................................Ps 2,143 2,080
Accumulated amortization ............................... (193) (187)
---------- ---------
1,950 1,893
Deferred charges:
Deferred financial expenses............................. 203 163
Deferred taxes.......................................... 2,029 1,009
Others.................................................. 390 378
Accumulated amortization ............................... (313) (322)
---------- ---------
Ps 2,309 1,228
---------- ---------
4,259 3,121
========== =========
F. OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other accounts payable and accrued expenses of the Parent Company as of December
31, 2004 and 2005 consist of:
2004 2005
---------- ---------
Accounts payable and accrued expenses..................Ps 1 1
Interests payable...................................... 212 256
Taxes payable.......................................... 178 190
Dividends payable...................................... 5 5
Valuation of derivative instruments (1)................ 278 -
---------- ---------
Ps 674 452
========== =========
(1) See notes 12 and 17 to our consolidated financial statements included
elsewhere in this annual report
Short-term provisions primarily consist of: (i) accruals for insurance payments
and (ii) accruals related to the portion of legal assessments to be settled in
short-term. Commonly, these amounts are revolving in nature and are to be
settled and replaced by similar amounts within the next 12 months.
G. SHORT-TERM AND LONG-TERM BANK LOANS AND NOTES PAYABLE
The maturities of long-term debt of the Parent Company as of December 31, 2005
are as follows:
Parent
----------
2007..............................................................Ps 2,930
2008.............................................................. 8,383
2009.............................................................. 11,776
2010.............................................................. 5,522
2011 and thereafter...............................................Ps 1,502
----------
30,113
==========
As of December 31, 2004 and 2005, 90% and 41%, respectively of the Parent
Company's short-term debt is denominated in dollars. Relating to long-term debt,
84% and 62% is denominated in dollars in 2004 and 2005, respectively. The
remaining debt, in both years, is primarily denominated in Mexican pesos.
In the Parent Company's balance sheet at December 31, 2004 and 2005, there were
short-term debt transactions, classified as long-term debt, for U.S.$350
(Ps3,717) and U.S.$125 (Ps1,328), respectively, due to the Company's ability and
the intention to refinance such indebtedness with the available amounts of
committed long-term lines of credit.
S-6
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS-(Continued)
As of December 31, 2003, 2004 and 2005
(Millions of constant Mexican pesos as of December 31, 2005)
H. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
The main balances of accounts receivable from and accounts payable of the Parent
Company with related parties as of December 31, 2004 and 2005 are as follows:
Assets Liabilities
2004 Short term Long term Short term Long term
----------- ------------ ----------- -----------
CEMEX Mexico, S.A. de C.V................................ Ps - 11,158 6,433 275
CEMEX International Finance Co........................... - - 62 20,538
Empresas Tolteca de Mexico, S.A. de C.V.................. 73 22,879 - -
CEMEX Irish Investments Company Limited.................. - - 23 3,981
Centro Distribuidor de Cemento, S.A. de C.V.............. - - 33 139
CEMEX Manila Investments B.V............................. 607 - - -
CEMEX Venezuela, S.A.C.A................................. 19 - - -
Others................................................... 13 - 3 -
----------- ------------ ----------- -----------
Ps 712 34,037 6,554 24,933
=========== ============ =========== ===========
Assets Liabilities
2005 Short term Long term Short term Long term
----------- ------------ ----------- -----------
CEMEX Mexico, S.A. de C.V................................ Ps - - 314 7,754
CEMEX International Finance Co........................... - - 44 8,833
Empresas Tolteca de Mexico, S.A. de C.V.................. - 20,913 - -
CEMEX Irish Investments Company Limited.................. - - 36 3,726
CEMEX UK Limited......................................... 461 - - -
CEMEX Venezuela, S.A.C.A................................. 30 - - -
Latin Asia Investments, Pte. Ltd......................... 5 - - -
Others................................................... 3 - 11 -
----------- ------------ ----------- -----------
Ps 499 20,913 405 20,313
=========== ============ =========== ===========
The main operations with related parties are:
Parent 2003 2004 2005
---------- --------- ----------
Rental income............................................ Ps 299 287 273
License fees............................................. 561 689 724
Financial expenses....................................... (861) (968) (1,984)
Management service expense............................... (1,549) (958) (837)
Financial income......................................... 3,330 1,533 1,586
Dividends received....................................... Ps 6,020 292 -
========== ========= ==========
I. STOCKHOLDERS' EQUITY AND COMPREHENSIVE NET INCOME (LOSS)
See note 15 to our consolidated financial statements included elsewhere in this
annual report.
J. EXECUTIVE STOCK OPTION PROGRAMS
See note 16 to our consolidated financial statements included elsewhere in this
annual report.
S-7
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS-(Continued)
As of December 31, 2003, 2004 and 2005
(Millions of constant Mexican pesos as of December 31, 2005)
K. INCOME TAX (IT) AND BUSINESS ASSETS TAX (BAT)
The income tax law in Mexico provides that companies must pay either IT or BAT
depending on which amount is greater with respect to their Mexican operations.
Both taxes recognize the effects of inflation, although in a manner different
from Mexican GAAP. See note 18 to our consolidated financial statements included
elsewhere in this annual report.
The IT benefit (income), presented in the income statement is integrated as
follows:
2003 2004 2005
---------- --------- ----------
Received from subsidiaries................. Ps 1,452 1,398 1,656
Deferred IT................................ (594) (1,085) (1,021)
---------- --------- ----------
Ps 858 313 635
========== ========= ==========
CEMEX has accumulated IT loss carryforwards which, restated for inflation, can
be amortized against taxable income in the succeeding ten years according to
income tax law:
Year in which tax loss occurred Amount of Year of
carryforwards expiration
--------------- -------------
1998....................................... Ps 3,614 2008
2001....................................... 1,812 2011
2002....................................... 5,870 2012
2003....................................... 4,281 2013
2004....................................... 42 2014
2005....................................... 295 2015
---------------
Ps 15,914
===============
The Company must generate taxable income to preserve the benefit of the tax loss
carryforwards generated beginning in 2002.
The BAT Law establishes a 1.8% tax levy on assets, restated for inflation in the
case of inventory and fixed assets, and deducting certain liabilities. CEMEX,
S.A. de C.V. is a Parent Company, authorized by Mexican Tax Authorities to
consolidate for tax purposes in accordance with the Income Tax Law; as a result,
the Company is obliged in terms of the BAT law to calculate and file the
consolidated asset value for the exercise.
L. EARNINGS PER SHARE
See note 21 to our consolidated financial statements included elsewhere in this
annual report.
M. CONTINGENCIES AND COMMITMENTS
See note 22 to our consolidated financial statements included elsewhere in this
annual report.
S-8
SCHEDULE II
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
December 31, 2003, 2004 and 2005
(Millions of constant Mexican Pesos as of December 31, 2005)
Valuation and Qualifying Accounts as of December 31, 2003, 2004 and
2005, is a follows:
Description Balance at Charged to Balance at
beginning costs and end of
of period expenses Deductions Others (1) period
------------ ------------ ------------ ------------ -------------
Year ended December 31, 2003:
Allowance for doubtful accounts........... Ps 539 358 286 34 645
============ ============ ============ ============ =============
Year ended December 31, 2004:
Allowance for doubtful accounts........... 645 401 341 20 725
============ ============ ============ ============ =============
Year ended December 31, 2005:
Allowance for doubtful accounts........... 725 279 256 494 1,242
============ ============ ============ ============ =============
(1) The column "Others" includes the balances of allowance for doubtful
accounts assumed through business combination as of the acquisition date,
which for the year ended December 31, 2005 was approximately Ps462
calculated to the acquisition of RMC. In addition, this column includes the
effects of foreign currency translation and the inflation adjustment of the
initial balance in the restatement to constant pesos as of the end of the
same period.
S-9
EXHIBIT INDEX
-------------
Exhibit
No. Description
- --------- -----------
1.1 Amended and Restated by-laws of CEMEX, S.A. de C.V. (a)
2.1 Form of Trust Agreement between CEMEX, S.A. de C.V., as founder
of the trust, and Banco Nacional de Mexico, S.A. regarding the
CPS. (b)
2.2 Amendment Agreement, dated as of November 21, 2002, amending the
Trust Agreement between CEMEX, S.A. de C .V., as founder of the
trust, and Banco Nacional de Mexico, S.A. regarding the CPOs. (c)
2.3 Form of CPO Certificate. (b)
2.4 Form of Second Amended and Restated Deposit Agreement (A and B
share CPOs), dated as of August 10, 1999, among CEMEX, S.A. de
C.V., Citibank, N.A. and holders and beneficial owners of
American Depositary Shares. (b)
2.5 Form of American Depositary Receipt (included in Exhibit 2.3)
evidencing American Depositary Shares. (b)
2.6 Form of Certificate for shares of Series A Common Stock of CEMEX,
S.A. de C. V. (b)
2.7 Form of Certificate for shares of Series B Common Stock of CEMEX,
S.A. de C.V. (b)
4.1 Note Purchase Agreement dated June 23, 2003, by and among CEMEX
Espana Finance, LLC, as issuer, CEMEX Espana, Sandworth Plaza
Holding B.V., Cemex Caracas Investments 13.V., Cemex Caracas II
Investments B.V., Cemex Manila Investments B.V. and Cemex
Egyptian Investments B.V., as guarantors, and several
institutional purchasers named therein, in connection with the
issuance by CEMEX Espana Finance, LLC of U.S.$103 million
aggregate principal amount of Senior Notes due 2010, U.S.$96
million aggregate principal amount of Senior Notes due 2013,
U.S.$201 million aggregate principal amount of Senior Notes due
2015. (d)
4.2 $1,150,000,000 Term Loan Agreement, dated October 15, 2003, by
and among New Sunward Holding B.V. as borrower, CEMEX, S.A. de
C.V., CEMEX Mexico, S.A. de C.V. and Empresas Tolteca de Mexico,
S.A. de C.V. as guarantors, and the several lenders named
therein. (d)
4.3 Term and Revolving Facilities Agreement, dated as of March 30,
2004, by and among CEMEX Espana, as borrower, Sandworth Plaza
Holding B.V., Cemex Caracas Investments B.V., Cemex Caracas II
Investments B.V., Cemex Manila Investments E.V. and Centex
Egyptian Investments, E.V., as guarantors, Banco Bilbao Vizcaya
Argentaria, S.A. and Societe Generale, as mandated lead
arrangers, and the several banks and other financial institutions
named therein, as lenders, for an aggregate amount of
E250,000,000 and V19.308,000,000. (d)
4.4 (euro)250,000,000, (Y)19,308,000,000 Term and Revolving
Facilities Agreement, dated March 30, 2004, for CEMEX ESPANA,
S.A., as Borrower, CEMEX Caracas Investments B.V., CEMEX Caracas
II Investments B.V., CEMEX Egyptian Investments B.V., CEMEX
Manila Investments B.V. and Sandworth Plaza Holding B.V., as
Guarantors, arranged by Banco Bilbao Vizcaya Argentaria, S.A. and
Societe Generale, S.A., with Banco Bilbao Vizcaya Argentaria,
S.A. acting as Agent. (d)
4.5 CEMEX Espana Finance LLC Note Purchase Agreement, dated as of
April 15, 2004 for (Y)4,980,600,000 1.79% Senior Notes, Series
2004, Tranche 1, due 2010 and (Y)6,087,400,000 1.99% Senior
Notes, Series 2004, Tranche 2, due 2011. (e)
4.6 U.S.$800,000,000 Credit Agreement, dated as of June 23, 2004,
among CEMEX, S.A. de C.V., as Borrower and CEMEX Mexico, S.A. de
C.V. and Empresas Tolteca de Mexico, S.A. de C.V., as Guarantors
and Barclays Bank PLC as Issuing Bank and Documentation Agent and
ING Bank N.V. as Issuing Bank and Barclays Capital, the
Investment Banking division of Barclays Bank Plc as Joint
Bookrunner and ING Capital LLC as Joint Bookrunner and
Administrative Agent. (e)
4.7 U.S.$1,250,000,000 Term and Revolving Facilities Agreement, dated
September 24, 2004 for New Sunward Holding B.V., as Borrower,
CEMEX, S.A. de C.V., CEMEX Mexico, S.A. de C.V. and Empresas
Tolteca De Mexico, S.A. de C.V., as Guarantors, arranged by
Exhibit
No. Description
- ---------- ------------
Citigroup Global Markets Limited and Goldman Sachs International,
with Citibank International PLC acting as Agent. (e)
4.8 U.S.$3,800,000,000 Term and Revolving Facilities Agreement, dated
September 24, 2004 for CEMEX Espana, S.A., as Borrower, CEMEX
Espana, S.A., CEMEX Caracas Investments B.V., Cemex Caracas II
Investments B.V., Cemex Egyptian Investments B.V., CEMEX Manila
Investments B.V., CEMEX American Holdings B.V., as Guarantors,
arranged by Citigroup Global Markets Limited and Goldman Sachs
International with Citibank International PLC acting as Agent.
(e)
4.9 Implementation Agreement, dated September 27, 2004, by and
between CEMEX UK Limited and RMC Group p.l.c. (e)
4.10 Scheme of Arrangement, dated October 25, 2004, pursuant to which
CEMEX UK Limited acquired the outstanding shares of RMC Group
p.l.c. (e)
4.11 Asset Purchase Agreement by and between CEMEX, Inc. and
Votorantim Participacoes S.A., dated as of February 4, 2005. (e)
4.11.1 Amendment No. 1 to Asset Purchase Agreement, dated as of March
31, 2005, by and between CEMEX, Inc. and Votorantim Participacoes
S.A. (e)
4.12 (pound)1,000,000,000 Amended and Restated Term and Revolving
Credit Agreement, dated March 16, 2005, by and among RMC Group
Limited, CEMEX Espana, S.A., Cemex Caracas Investments B.V.,
Cemex Caracas II Investments B.V., Cemex Egyptian Investments
B.V., Cemex Manila Investments B.V., Cemex American Holdings B.V.
and Cemex Shipping B.V., as Original Guarantors, RMC Group
Limited, as Original Borrower, Banc of America Securities
Limited, BNPParibas, HSBC Investment Bank plc, the Royal Bank of
Scotland plc, West LB AG, London Branch, as Mandated Lead
Arrangers and the Royal Bank of Scotland plc, as Agent. (e)
4.13 U.S.$1,000,000,000 Term Credit Agreement, dated as of April 5,
2005, among CEMEX, S.A. de C.V., as Borrower, CEMEX Mexico, S.A.
de C.V., as Guarantor, Empresas Tolteca de Mexico, S.A. de C.V.,
as Guarantor, Barclays Bank PLC, as Administrative Agent,
Barclays Capital, the Investment Banking Division of Barclays
Bank plc, as Joint Lead Arranger and Joint Bookrunner, Citigroup
Global Markets Inc., as Documentation Agent, Joint Lead Arranger
and Joint Bookrunner, Barclays Bank plc, Citibank, N.A., and
Citibank, N.A., Nassau, Bahamas Branch as Lenders. (e)
4.14 U.S.$1,200,000,000 Term Credit Agreement, dated as of May 31,
2005, among CEMEX, S.A. de C.V., as Borrower, CEMEX Mexico, S.A.
de C.V., as Guarantor, Empresas Tolteca de Mexico, S.A. de C.V.,
as Guarantor, Barclays Bank PLC, as Administrative Agent,
Barclays Capital, the Investment Banking Division of Barclays
Bank PLC, as Joint Lead Arranger and Joint Bookrunner, and
Citigroup Global Markets Inc., as Documentation Agent, Joint Lead
Arranger and Joint Bookrunner. (f)
4.15 U.S.$700,000,000 Term and Revolving Facilities Agreement, dated
June 27, 2005, for New Sunward Holding B.V., as Borrower, CEMEX,
S.A. de C.V., CEMEX Mexico, S.A. de C.V. and Empresas Tolteca De
Mexico, S.A. de C.V., as Guarantors, arranged by Banco Bilbao
Vizcaya Argentaria, S.A., BNP Paribas and Citigroup Global
Markets Limited, as Mandated Lead Arrangers and Joint
Bookrunners, the several financial institutions named therein, as
Lenders, and Citibank, N.A., as Agent. (f)
4.16 Note Purchase Agreement, dated as of June 13, 2005, among CEMEX
Espana Finance LLC, as issuer, CEMEX Espana, Cemex Caracas
Investments B.V., Cemex Caracas II Investments B.V., Cemex Manila
Investments B.V., Cemex Egyptian Investments B.V., Cemex American
Holdings B.V. and Cemex Shipping B.V., as guarantors, and several
institutional purchasers, relating to the private placement by
CEMEX Espana Finance, LLC of U.S.$133,000,000 aggregate principal
amount of 5.18% Senior Notes due 2010, and U.S.$192,000,000
aggregate principal amount of 5.62% Senior Notes due 2015. (f)
4.17 Amended and Restated Limited Liability Company Agreement of CEMEX
Southeast LLC, dated as of July 1, 2005, among CEMEX Southeast
LLC, CEMEX Southeast Holdings, LLC, Ready Mix USA, Inc. and
CEMEX, Inc. (f)
Exhibit
No. Description
- ---------- ------------
4.17.1 Amendment No. 1 to Amended and Restated Limited Liability Company
Agreement of CEMEX Southeast LLC, dated as of September 1, 2005,
among CEMEX Southeast LLC, CEMEX Southeast Holdings, LLC, Ready
Mix USA, Inc. and CEMEX, Inc. (f)
4.18 Limited Liability Company Agreement of Ready Mix USA, LLC, dated
as of July 1, 2005, among Ready Mix USA, LLC, CEMEX Southeast
Holdings, LLC, Ready Mix USA, Inc. and CEMEX, Inc. (f)
4.18.1 Amendment No. 1 to Limited Liability Company Agreement of Ready
Mix USA, LLC, dated as of September 1, 2005, among Ready Mix USA,
LLC, CEMEX Southeast Holdings, LLC, Ready Mix USA, Inc. and
CEMEX, Inc. (f)
4.19 Asset and Capital Contribution Agreement, dated as of July 1,
2005, among Ready Mix USA, Inc., CEMEX Southeast Holdings, LLC,
and CEMEX Southeast LLC. (f)
4.20 Asset and Capital Contribution Agreement, dated as of July 1,
2005, among Ready Mix USA, Inc., CEMEX Southeast Holdings, LLC,
and Ready Mix USA, LLC. (f)
4.21 Asset Purchase Agreement, dated as of September 1, 2005, between
Ready Mix USA, LLC and RMC Mid-Atlantic, LLC. (f)
8.1 List of subsidiaries of CEMEX, S.A. de C.V. (f)
12.1 Certification of the Principal Executive Officer of CEMEX, S.A.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (f)
12.2 Certification of the Principal Financial Officer of CEMEX, S .A.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (f)
12.3 Certification of the Principal Executive Officer of CEMEX Mexico,
S.A. de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (f)
12.4 Certification of the Principal Financial Officer of CEMEX Mexico,
S.A. de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (f)
12.5 Certification of the Principal Executive Officer of Empresas
Tolteca de Mexico, S.A. de CV. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (f)
12.6 Certification of the Principal Financial Officer of Empresas
Tolteca de Mexico, S.A. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (f)
13.1 Certification of the Principal Executive and Financial Officers
of CEMEX, S. 1. de C.V. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (f)
13.2 Certification of Principal Executive and Financial Officers of
CEMEX Mexico, S.A. de C.V. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (f)
13.3 Certification of Principal Executive and Financial Officers of
Empresas Tolteca de Mexico, S.A. de C.V. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (f)
14.1 Consent of KPMG Cardenas Dosal, S.C. to the incorporation by
reference into the effective registration statements of CEMEX,
S.A. de C.V. under the Securities Act of 1933 of their report
with respect to the consolidated financial statements of CEMEX,
S.A. de C. V, which appears in this Annual Report on Form 20-F.
(f)
___________________________
(a) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form F-3 of CEMEX, S.A. de C.V. (Registration
No. 333-11382), filed with the Securities and Exchange Commission on
August 27, 2003
(b) Incorporated by reference to the Registration Statement on Font F-4 of
CEMEX, S .A. de C.V. (Registration No. 333-10682), tiled with the
Securities and Exchange Commission on August 10, 1999.
(c) Incorporated by reference to the 2002 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April 8,
2003.
(d) Incorporated by reference to the 2003 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on May 11,
2004.
(e) Incorporated by reference to the 2005 annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on May 27,
2005.
(f) Filed herewith.
Exhibit 4.14
CREDIT AGREEMENT
among
CEMEX, S.A. de C.V.,
as Borrower
and
CEMEX MEXICO, S.A. de C.V.,
as Guarantor
and
EMPRESAS TOLTECA de MEXICO, S.A. de C.V.,
as Guarantor
and
The Several Lenders Party Hereto,
as Lenders
and
BARCLAYS BANK PLC, NEW YORK BRANCH,
as Administrative Agent
and
BARCLAYS CAPITAL,
THE INVESTMENT BANKING DIVISION
OF BARCLAYS BANK PLC,
as Joint Lead Arranger and Joint Bookrunner
and
CITIGROUP GLOBAL MARKETS INC.,
as Documentation Agent, Joint Lead Arranger and Joint Bookrunner
US$1,200,000,000
Dated as of May 31, 2005
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................................................1
1.01 Certain Definitions................................................................................1
1.02 Other Definitional Provisions.....................................................................18
1.03 Accounting Terms and Determinations...............................................................19
ARTICLE II THE LOAN FACILITIES............................................................................19
2.01 Revolving Loans...................................................................................19
2.02 Interest..........................................................................................23
ARTICLE III TERMINATION AND REDUCTION OF COMMITMENTS; FEES, TAXES, PAYMENT PROVISIONS......................24
3.01 Termination or Reduction of Commitments...........................................................24
3.02 Fees..............................................................................................25
3.03 Computation of Fees...............................................................................25
3.04 Taxes.............................................................................................25
3.05 General Provisions as to Payments.................................................................28
3.06 Funding Losses....................................................................................29
3.07 Basis for Determining Interest Rate Inadequate or Unfair..........................................30
3.08 Capital Adequacy..................................................................................30
3.09 Illegality........................................................................................31
3.10 Requirements of Law...............................................................................32
3.11 Substitute Lenders................................................................................33
3.12 Sharing of Payments, Etc..........................................................................33
ARTICLE IV CONDITIONS PRECEDENT...........................................................................34
4.01 Conditions to Effectiveness.......................................................................34
4.02 Conditions Precedent to Borrowings and Continuation or
Conversion of the Loans..........................................................................36
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................36
5.01 Corporate Existence and Power.....................................................................36
5.02 Power and Authority; Enforceable Obligations......................................................36
5.03 Compliance with Law and Other Instruments.........................................................37
5.04 Consents/Approvals................................................................................37
5.05 Financial Information.............................................................................37
5.06 Litigation........................................................................................37
5.07 No Immunity.......................................................................................38
5.08 Governmental Regulations..........................................................................38
5.09 Direct Obligations; Pari Passu; Liens.............................................................38
5.10 Subsidiaries......................................................................................38
5.11 Ownership of Property.............................................................................38
5.12 No Recordation Necessary..........................................................................38
5.13 Taxes.............................................................................................39
5.14 Compliance with Laws..............................................................................39
5.15 Absence of Default................................................................................39
5.16 Full Disclosure...................................................................................40
5.17 Choice of Law; Submission to Jurisdiction and
Waiver of Sovereign Immunity.....................................................................40
5.18 Aggregate Exposure................................................................................40
5.19 Pension and Welfare Plans.........................................................................40
5.20 Environmental Matters.............................................................................40
5.21 Margin Regulations................................................................................41
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS...............................................42
6.01 Corporate Existence and Power.....................................................................42
6.02 Power and Authority; Enforceable Obligations......................................................42
6.03 Compliance with Law and Other Instruments.........................................................42
6.04 Consents/Approvals................................................................................43
6.05 Litigation; Material Adverse Effect...............................................................43
6.06 No Immunity.......................................................................................43
6.07 Governmental Regulations..........................................................................43
6.08 Direct Obligations; Pari Passu....................................................................43
6.09 No Recordation Necessary..........................................................................43
6.10 Choice of Law; Submission to Jurisdiction and
Waiver of Sovereign Immunity.....................................................................44
ARTICLE VII AFFIRMATIVE COVENANTS..........................................................................44
7.01 Financial Reports and Other Information...........................................................44
7.02 Notice of Default and Litigation..................................................................45
7.03 Compliance with Laws and Contractual Obligations, Etc.............................................45
7.04 Payment of Obligations............................................................................46
7.05 Maintenance of Insurance..........................................................................46
7.06 Conduct of Business and Preservation of Corporate Existence.......................................46
7.07 Books and Records.................................................................................46
7.08 Maintenance of Properties, Etc....................................................................46
7.09 Use of Proceeds...................................................................................47
7.10 Aggregate Exposure................................................................................47
7.11 Pari Passu Ranking................................................................................47
7.12 Transactions with Affiliates......................................................................47
7.13 Maintenance of Governmental Approvals.............................................................47
7.14 Measurement Date..................................................................................47
7.15 Inspection of Property............................................................................47
ARTICLE VIII NEGATIVE COVENANTS.............................................................................48
8.01 Financial Conditions..............................................................................48
8.02 Liens.............................................................................................48
8.03 Consolidations and Mergers........................................................................50
8.04 Sales of Assets, Etc..............................................................................51
8.05 Change in Nature of Business......................................................................51
8.06 Margin Regulations................................................................................51
ARTICLE IX OBLIGATIONS OF GUARANTORS......................................................................51
9.01 The Guaranty......................................................................................51
9.02 Nature of Liability...............................................................................51
9.03 Unconditional Obligations.........................................................................51
9.04 Independent Obligation............................................................................52
9.05 Waiver of Notices.................................................................................52
9.06 Waiver of Defenses................................................................................53
9.07 Bankruptcy and Related Matters....................................................................54
9.08 No Subrogation....................................................................................55
9.09 Right of Contribution.............................................................................55
9.10 General Limitation on Guaranty....................................................................55
9.11 Covenants of the Guarantors.......................................................................55
ARTICLE X EVENTS OF DEFAULT..............................................................................56
10.01 Events of Default................................................................................56
10.02 Remedies.........................................................................................58
10.03 Notice of Default................................................................................58
10.04 Default Interest.................................................................................58
ARTICLE XI THE ADMINISTRATIVE AGENT.......................................................................59
11.01 Appointment and Authorization....................................................................59
11.02 Delegation of Duties.............................................................................59
11.03 Liability of Administrative Agent................................................................59
11.04 Reliance by Administrative Agent.................................................................60
11.05 Notice of Default................................................................................60
11.06 Credit Decision..................................................................................60
11.07 Indemnification..................................................................................61
11.08 Administrative Agent in Individual Capacity......................................................61
11.09 Successor Administrative Agent...................................................................62
ARTICLE XII THE JOINT BOOKRUNNERS..........................................................................62
12.01 The Joint Bookrunners............................................................................62
12.02 Liability of Joint Bookrunners...................................................................63
12.03 Joint Bookrunners in their respective Individual Capacities......................................63
12.04 Credit Decision..................................................................................63
ARTICLE XIII MISCELLANEOUS..................................................................................64
13.01 Notices..........................................................................................64
13.02 Amendments and Waivers...........................................................................64
13.03 No Waiver; Cumulative Remedies...................................................................65
13.04 Payment of Expenses, Etc.........................................................................65
13.05 Indemnification..................................................................................66
13.06 Successors and Assigns...........................................................................66
13.07 Right of Set-off.................................................................................68
13.08 Confidentiality..................................................................................65
13.09 Use of English Language..........................................................................66
13.10 Governing Law....................................................................................69
13.11 Submission to Jurisdiction.......................................................................69
13.12 Appointment of Agent for Service of Process......................................................70
13.13 Waiver of Sovereign Immunity.....................................................................70
13.14 Judgment Currency................................................................................70
13.15 Counterparts.....................................................................................71
13.16 USA PATRIOT Act..................................................................................71
13.17 Severability.....................................................................................71
13.18 Survival of Agreements and Representations.......................................................71
SCHEDULES
Schedule 1.01(a) -- Commitments
Schedule 1.01(b) -- Lending Offices
Schedule 1.01(c) -- Notice Details
Schedule 5.06 -- Litigation
Schedule 5.10 -- Subsidiaries
Schedule 6.05 -- Litigation
Schedule 8.02(e)(i) -- Liens
Schedule 8.02(e)(ii) -- Liens
EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Notice of Borrowing
Exhibit C -- Form of Notice of Extension/Conversion
Exhibit D -- Form of Assignment and Assumption Agreement
Exhibit E -- Form of Opinion of Special New York Counsel to the Borrower
and the Guarantors
Exhibit F -- Form of Opinion of Mexican Counsel to the Borrower and
the Guarantors
Exhibit G -- Mandatory Cost Formula
CREDIT AGREEMENT
----------------
CREDIT AGREEMENT, dated as of May 31, 2005 among CEMEX, S.A. de C.V., a
sociedad anonima de capital variable organized and existing pursuant to the laws
of the United Mexican States (the "Borrower"), CEMEX MEXICO, S.A. de C.V., a
sociedad anonima de capital variable organized and existing pursuant to the laws
of the United Mexican States, EMPRESAS TOLTECA DE MEXICO, S.A. de C.V., a
sociedad anonima de capital variable organized and existing pursuant to the laws
of the United Mexican States (each a "Guarantor" and together, the
"Guarantors"), the several Lenders party hereto, BARCLAYS BANK PLC, NEW YORK
BRANCH, as Administrative Agent, BARCLAYS CAPITAL, THE INVESTMENT BANKING
DIVISION OF BARCLAYS BANK PLC, as Joint Lead Arranger and Joint Bookrunner and
CITIGROUP GLOBAL MARKETS INC., as Documentation Agent, Joint Lead Arranger and
Joint Bookrunner.
RECITALS
WHEREAS, the Borrower entered into a term credit agreement, dated as of
April 5, 2005 (the "Term Credit Agreement"), among the Borrower, the Guarantors,
the several lenders party thereto, Barclays Bank PLC, as administrative agent,
Barclays Capital, the Investment Banking Division of Barclays Bank PLC, as joint
lead arranger and joint bookrunner and Citigroup Global Markets Inc., as
documentation agent, joint lead arranger and joint bookrunner;
WHEREAS, the Borrower proposes to terminate the Term Credit Agreement
and enter into a new five-year multi-currency revolving credit facility; and
WHEREAS, the Guarantors are willing to guaranty all of the Obligations
of the Borrower.
NOW, THEREFORE, each of the Parties hereto hereby agrees as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Acquired Subsidiary" means any Subsidiary acquired by the
Borrower or any other Subsidiary after the date hereof in an
Acquisition, and any Subsidiaries of such Acquired Subsidiary on the
date of such Acquisition.
"Acquiring Subsidiary" means any Subsidiary of the Borrower or
any one of its Subsidiaries solely for the purpose of participating as
the acquiring party in any Acquisition, and any Subsidiaries of such
Acquiring Subsidiary acquired in such Acquisition.
"Acquisition" means any merger, consolidation, acquisition or
lease of assets, acquisition of securities or business combination or
acquisition, or any two or more of such transactions, if upon the
completion of such transaction or transactions, the Borrower or any
Subsidiary thereof has acquired an interest in any Person who is deemed
to be a Subsidiary under this Agreement and was not a Subsidiary prior
thereto.
"Adjusted Consolidated Net Tangible Assets" means, with
respect to any Person, the total assets of such Person and its
Subsidiaries (less applicable depreciation, amortization and other
valuation reserves), including any write-ups or restatements required
under Mexican GAAP (other than with respect to items referred to in
clause (ii) below), after deducting therefrom (i) all current
liabilities of such Person and its Subsidiaries (excluding the current
portion of long-term debt) and (ii) all goodwill, trade names,
trademarks, licenses, concessions, patents, unamortized debt discount
and expense and other intangibles, all as determined on a consolidated
basis in accordance with Mexican GAAP.
"Administrative Agent" means Barclays Bank PLC, in its
capacity as administrative agent for the Lenders, and its successors in
such capacity.
"Administrative Agent's Payment Office" means the
Administrative Agent's address for payments set forth on the signature
pages hereof or such other address as the Administrative Agent may from
time to time specify to the other Parties hereto pursuant to the terms
of this Agreement.
"Affected Lender" has the meaning specified in Section
3.09(a).
"Affiliate" means, in relation to any Person, a Subsidiary of
that Person or a Holding Company of that Person or any other Subsidiary
of that Holding Company.
"Aggregate Committed Amount" means the aggregate amount of all
of the Commitments.
"Aggregate Exposure" means the Dollar Amount of the aggregate
principal amount of all Loans outstanding.
"Agreement" means this Credit Agreement, as the same may
hereafter be amended, supplemented or otherwise modified from time to
time.
"Applicable Margin" means, at any date, the applicable margin
set forth below based upon the Borrower's Consolidated Net Debt/EBITDA
Ratio (it being understood that measurement of the Consolidated Net
Debt/EBITDA Ratio as of the most recent Measurement Date is sufficient
for this purpose):
Applicable Margin
------------------------------------
Base
Rate LIBOR Euribor
Consolidated Net Debt/EBITDA Ratio Loans Loans Loans
- -------------------------------------------------------------------------------
3.00 to 1 or greater 0.50% 0.50% 0.50%
Less than 3.00 to 1, but greater
than or equal to 2.50 to 1 0.45% 0.45% 0.45%
Less than 2.50 to 1, but greater
than or equal to 2.00 to 1 0.40% 0.40% 0.40%
Less than 2.00 to 1 0.35% 0.35% 0.35%
; provided, however, the initial Applicable margin shall be 0.50%.
"Assignee" has the meaning specified in Section 13.06(b).
"Assignment and Assumption Agreement" means an assignment and
assumption agreement in substantially the form of Exhibit D.
"Available Commitments" means, as of any date, the Aggregate
Committed Amount minus the Aggregate Exposure.
"Average Aggregate Committed Amount" means, for any
Utilization Period, the sum of the Aggregate Committed Amount as of the
end of each day during such Utilization Period, divided by the number
of days in such Utilization Period.
"Average Outstanding Loans" means, for any Utilization Period,
the sum of the aggregate principal amount of Loans outstanding under
this Agreement as of the end of each day during such Utilization
Period, divided by the number of days in such Utilization Period.
"Base Rate" means, for any day, the higher of (a) the Prime
Rate or (b) the Federal Funds Rate plus 1/2% per annum, in each case as
in effect for such day. Any change in the Prime Rate announced by the
Reference Banks shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Base Rate Loan" means any Loan made or maintained at a rate
of interest calculated with reference to the Base Rate.
"Bookrunners" or "Joint Bookrunners" means Barclays Capital,
the Investment Banking Division of Barclays Bank PLC, and Citigroup
Global Markets Inc., in their capacity as joint bookrunners hereunder,
and each of their successors in such capacity.
"Borrower" has the meaning specified in the preamble hereto.
"Borrowing" means the aggregate amount of Loans hereunder to
be made to the Borrower pursuant to Article II on a particular date by
each of the Lenders.
"Borrowing Request" means a Notice of Borrowing.
"Business Day" means any day other than a Saturday or Sunday
or other day on which commercial banks in New York City are authorized
or required by law to close and
(i) (in relation to any date for payment or lending or
purchase of, or the determination of an interest rate or rate of
exchange in relation to, Japanese Yen) a day on which the Tokyo
interbank market is also open for dealings in Japanese Yen; or
(ii) (in relation to any date for payment or lending or
purchase of, or the determination of an interest rate or rate of
exchange in relation to, Sterling) a day on which the London interbank
market is also open for dealings in Sterling; or
(iii) (in relation to any date for payment or lending or
purchase of, or the determination of an interest rate or rate of
exchange in relation to, Euro), any TARGET Day.
"Capital Lease" means, as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified
and accounted for as capital leases on a balance sheet of such Person
under Mexican GAAP and, for the purposes of this Agreement, the amount
of such obligations at any time shall be the capitalized amount thereof
at such time determined in accordance with Mexican GAAP.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designed) of capital stock
of a corporation, any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.
"Commitment" means, with respect to each Lender, the aggregate
principal Dollar Amount set forth opposite the name of such Lender in
Schedule 1.01(a) or in any Assignment and Assumption Agreement, as such
amount may be reduced or increased from time to time in accordance with
the provisions hereof.
"Commitment Fee" has the meaning specified in Section 3.02.
"Commitment Percentage" means, with respect to each Lender, a
fraction (expressed as a decimal) the numerator of which is the
Commitment of such Lender at such time and the denominator of which is
the Aggregate Committed Amount at such time. The initial Commitment
Percentages are set out on Schedule 1.01(a).
"Commitment Period" means the period from and including the
Effective Date to but excluding the earlier of (i) the Termination
Date, or (ii) the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
"Confidential Information" means information that the Borrower
or a Guarantor furnishes to the Administrative Agent, the Joint
Bookrunners or any Lender in a writing designated as confidential, but
does not include any such information that is or becomes generally
available to the public or that is or becomes available to the
Administrative Agent or the Joint Bookrunners or such Lender from a
source other than the Borrower or a Guarantor that is not, to the best
of the Administrative Agent's, the Joint Bookrunners' or such Lender's
knowledge, acting in violation of a confidentiality agreement with the
Borrower or Guarantor or any other Person.
"Consolidated" refers to the consolidation of accounts in
accordance with Mexican GAAP.
"Consolidated Fixed Charges" means, for any period, the sum
(without duplication) of (a) Consolidated Interest Expense for such
period and (b) to the extent not included in (a) above, payments during
such period in respect of the financing costs of financial derivatives
in the form of equity swaps.
"Consolidated Fixed Charge Coverage Ratio" means, for any
period of four consecutive fiscal quarters, the ratio of (a) EBITDA for
such period to (b) Consolidated Fixed Charges for such period.
"Consolidated Interest Expense" means, for any period, the
total gross interest expense of the Borrower and its consolidated
Subsidiaries allocable to such period in accordance with Mexican GAAP.
"Consolidated Net Debt" means, at any date, the sum (without
duplication) of (a) the aggregate amount of all Debt of the Borrower
and its Subsidiaries at such date, plus (b) to the extent not included
in Debt, the aggregate amount of all derivative financing in the form
of equity swaps outstanding at such date (save to the extent cash
collateralized) minus (c) all Temporary Investments of the Borrower and
its Subsidiaries at such date.
"Consolidated Net Debt / EBITDA Ratio" means, the ratio of (a)
Consolidated Net Debt to (b) EBITDA for the period of four consecutive
fiscal quarters immediately preceding, which shall be calculated based
on the most recently available consolidated financial statements of the
Borrower and its Subsidiaries as of such date.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any indenture,
mortgage, deed of trust, loan agreement or other agreement to which
such Person is a party or by which it or any of its property or assets
is bound.
"Credit Party" means any of the Borrower or the Guarantors.
"Debt" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of
such Person as lessee under Capital Leases, (v) all Debt of others
secured by a Lien on any asset of such Person, up to the value of such
asset, as recorded in such Person's most recent balance sheet, (vi) all
obligations of such Person with respect to product invoices incurred in
connection with export financing, and (vii) all obligations of such
Person under repurchase agreements for the stock issued by such Person
or another Person. For the avoidance of doubt, Debt does not include
Derivatives. With respect to the Borrower and its subsidiaries, the
aggregate amount of Debt outstanding shall be adjusted by the Value of
Debt Currency Derivatives solely for the purposes of calculating the
Consolidated Net Debt / EBITDA Ratio. If the Value of Debt Currency
Derivatives is a positive mark-to-market valuation for the Borrower and
its subsidiaries, then Debt shall decrease accordingly, and if the
Value of Debt Currency Derivatives is a negative mark-to-market
valuation for the Borrower and its subsidiaries, then Debt shall
increase by the absolute value thereof.
"Debt Currency Derivatives" means derivatives of the Borrower
and its subsidiaries related to currency entered into for the purposes
of hedging exposures under outstanding Debt of the Borrower and its
subsidiaries, including but not limited to cross-currency swaps and
currency forwards.
"Default" means any condition, event or circumstance which,
with the giving of notice or lapse of time or both, would, unless cured
or waived, become an Event of Default.
"Defaulting Lender" has the meaning specified in Section
2.01(d).
"Derivatives" means any type of derivative obligations,
including but not limited to equity forwards, capital hedges,
cross-currency swaps, currency forwards, interest rate swaps and
swaptions.
"Disbursement Date" means the date on which such Loan is made
by the Lenders.
"Disposition" means, with respect to any property, any sale,
lease, sale and leaseback, assignment, conveyance, transfer or other
disposition thereof. The terms "Dispose" and "Disposed of" shall have
correlative meanings.
"Dollar Amount" shall mean, at any time with respect to any
Loan, (a) with respect to Dollars or an amount denominated in Dollars,
such amount and (b) with respect to an amount of any Foreign Currency
or an amount denominated in a Foreign Currency, the equivalent amount
thereof in Dollars as determined by the Administrative Agent on the
basis of the Spot Rate as of the most recent Revaluation Date for the
purchase of Dollars with such Foreign Currency.
"Dollars", "$" and "U.S.$" each means the lawful currency of
the United States.
"EBITDA" means, for any period, the sum for the Borrower and
its Subsidiaries, determined on a consolidated basis of (a) operating
income (utilidad de operacion), (b) cash interest income and (c)
depreciation and amortization expense, in each case determined in
accordance with Mexican GAAP consistently applied for such period. For
the purposes of calculating EBITDA for any period of four consecutive
fiscal quarters (each, a "Reference Period") pursuant to any
determination of the Consolidated Net Debt / EBITDA Ratio (but not
Consolidated Fixed Charge Coverage Ratio), (i) if at any time during
such Reference Period the Borrowers or any of its Subsidiaries shall
have made any Material Disposition, the EBITDA for such Reference
Period shall be reduced by an amount equal to the EBITDA (if positive)
attributable to the property that is the subject of such Material
Disposition for such Reference Period (but when the Material
Disposition is by way of a lease, income received by the Borrower or
any of its Subsidiaries under such lease shall be included in EBITDA
and (ii) if at any time during such Reference Period the Borrower or
any of its Subsidiaries shall have made any Material Acquisition,
EBITDA for such Reference Period shall be calculated after giving pro
forma effect thereto (including the incurrence or assumption of any
Debt) as if such Material Acquisition had occurred on the first day of
such Reference Period. Additionally, if since the beginning of such
Reference Period any Person that subsequently shall have become a
Subsidiary or was merged or consolidated with the Borrower or any of
its Subsidiaries as a result of a Material Acquisition occurring during
such Reference Period shall have made any Disposition or Acquisition of
property that would have required an adjustment pursuant to clause (i)
or (ii) above if made by the Borrower or any of its Subsidiaries during
such Reference Period, EBITDA for such period shall be calculated after
giving pro forma effect thereto as if such Disposition or Acquisition
had occurred on the first day of such Reference Period.
"Effective Date" has the meaning specified in Section 4.01.
"Environmental Action" means any audit procedure, action,
suit, demand, demand letter, claim, notice of non-compliance or
violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to
any Environmental Law, Environmental Permit or Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or
the environment, including (a) by any Governmental Authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any Governmental Authority or any third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, technical standard (norma
tecnica or norma oficial Mexicana), code, order, judgment, decree or
judicial agency interpretation, policy or guidance relating to
pollution or protection of the environment, health, safety or natural
resources, including those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, that is under common control with the Borrower within the
meaning of Section 4001(a)(14) of ERISA, or is a member of a group that
includes the Borrower and that is treated as a single employer under
Sections 414(b) or (c) of the Code.
"Euro" shall mean the single currency of Participating Member
States.
"Euribor" means, in relation to any Loan in Euro:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the currency or
Interest Period of that Loan) the arithmetic mean of
the rates (rounded upwards to four decimal places) as
supplied to the Administrative Agent at its request
quoted by the Reference Banks to leading banks in the
European interbank market,
as of approximately 11:00 a.m. (New York City time) on the
Quotation Day for the offering of deposits in Euro and for a period comparable
to the Interest Period for that Loan.
"Euribor Business Day" means any day other than a Saturday or
Sunday or other day on which commercial banks in New York City are
authorized or required by law to close that is also a TARGET Day.
"Euribor Loan" means any Loan made or maintained at a rate of
interest calculated with reference to Euribor.
"Event of Default" has the meaning specified in Section 10.01.
"Federal Funds Rate" means, for any relevant day, the
overnight Federal funds rate as published for such day in the Federal
Reserve Statistical Release H.15 (519) or any successor publication,
or, if such rate is not published for any day, the rate for such day
will be the rate set forth in the daily statistical release designated
as the Composite 3:30 p.m. Quotation for U.S. Government Securities, or
any successor publication, published by the Federal Reserve Bank of New
York (including any such successor, the "Composite 3:30 p.m. Quotation"
for such day under the caption "Federal Funds Effective Rate"). If on
any relevant day the appropriate rate for such previous day is not yet
published in either H.15 (519) or the Composite 3:30 p.m. Quotations,
the rate for such day will be the arithmetic mean as determined by the
Administrative Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of three leading brokers of recognized standing of Federal
funds transactions in New York City selected by the Administrative
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Fee Letter" means the fee letter entered into by the Borrower
and the Lenders dated as of April 5, 2005.
"Foreign Currency" means each of (a) Euros, (b) Japanese Yen
and (c) Sterling.
"Foreign Financial Institution" means an institution
registered as a foreign financial institution with the Ministry of
Finance in the Mexican Banking and Financial Institutions, Pensions,
Retirement and Foreign Investment Funds Registry for purposes of
Article 195, Section I of the Mexican Income Tax Law.
"Funding Default" means a default by a Lender pursuant to
Section 2.01(d).
"Funding Losses" has the meaning specified in Section 3.06.
"Governmental Authority" means any branch of power or
government or any state, department or other political subdivision
thereof, or any governmental body, agency, authority (including any
central bank or taxing or environmental authority), any entity or
instrumentality (including any court or tribunal) exercising executive,
legislative, judicial, regulatory, administrative or investigative
functions of or pertaining to government.
"Guarantor" has the meaning specified in the preamble hereto.
"Hazardous Materials" means (a) radioactive materials,
asbestos-containing materials, polychlorinated biphenyls, radon gas and
(b) any other chemicals, materials or substances designated, classified
or regulated as hazardous or toxic or as a pollutant or contaminant
under any applicable Environmental Law.
"Holding Company" means, in relation to a company or a
corporation, any other company or corporation in respect of which it
is a Subsidiary.
"Indemnified Party" has the meaning specified in Section
13.05.
"Interest Payment Date" means (i) with respect to any Base
Rate Loan, the last day of each March, June, September and December,
the date of repayment of such Loan and the Termination Date and (ii)
with respect to any LIBOR Loan, and, if applicable, any Euribor Loan,
the last day of each Interest Period for such Loan, the date of
repayment of principal of such Loan and on the Termination Date. If an
Interest Payment Date falls on a date that is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding
Business Day, except that in the case of LIBOR Loans or, if applicable,
Euribor Loans, where the next succeeding Business Day falls in the next
succeeding calendar month, then on the immediately preceding Business
Day.
"Interest Period" means, with respect to each Borrowing of
LIBOR Loans, and, if applicable, Euribor Loans, the period (i)
commencing (A) on the date of such Borrowing or conversion of Base Rate
Loans into LIBOR Loans and, if applicable, Euribor Loans, or (B) in the
case of the continuation of LIBOR Loans and, if applicable, Euribor
Loans, for a further Interest Period, on the last day of the
immediately preceding Interest Period and (ii) ending one, two, three
or six months thereafter as stated by the Borrower in the applicable
Notice of Borrowing or Notice of Continuation/Conversion; provided,
however, that:
(1) any Interest Period which would otherwise end on a day
which is not a LIBOR Business Day or, if applicable, a Euribor Business
Day, shall, subject to paragraph (3) below, be extended to the next
succeeding LIBOR Business Day or, if applicable, the next succeeding
Euribor Business Day, unless such LIBOR Business Day or, if applicable,
Euribor Business Day, falls in another calendar month, in which case
such Interest Period shall end on the immediately preceding LIBOR
Business Day or, if applicable, Euribor Business Day;
(2) any Interest Period which begins on the last LIBOR
Business Day or, if applicable, Euribor Business Day, of a calendar
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall,
subject to paragraph (3) below, end on the last LIBOR Business Day or,
if applicable, Euribor Business Day, of a calendar month;
(3) any Interest Period which would otherwise end after the
last day of the Commitment Period shall end on the last day of the
Commitment Period; and
(4) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Japanese Yen" means the lawful currency of Japan.
"Joint Bookrunners Fees" has the meaning specified in Section
3.02(b).
"Lender" means each financial institution designated as such
on the signature pages hereof, each Assignee which becomes a Lender
pursuant to Section 13.06(b), each Substitute Lender and each of their
respective successors or assigns.
"Lending Office" means, with respect to any Lender, (a) the
office or offices of such Lender specified as its "Lending Office" or
"Lending Offices" in Schedule 1.01(b) or (b) such other office or
offices of such Lender as it may designate as its Lending Office by
notice to the Borrower and the Administrative Agent.
"LIBOR" means, in relation to any Loan (other than a Loan
denominated in Euros):
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the currency or
Interest Period of that Loan) the arithmetic mean of
the rates (rounded upwards to four decimal places) as
supplied to the Administrative Agent at its request
quoted by the Reference Banks to leading banks in the
London interbank market,
as of approximately 11:00 a.m. (New York City time) on the Quotation
Day for the offering of deposits in the currency of that Loan and for a
period comparable to the Interest Period for that Loan.
"LIBOR Business Day" means any Business Day on which
commercial banks are open in London for the transaction of
international business, including dealings in Dollar deposits in the
international interbank markets.
"LIBOR Loan" means any Loan made or maintained at a rate of
interest calculated with reference to LIBOR.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset. The Borrower or any Subsidiary of the Borrower shall be
deemed to own, subject to a Lien, any asset that it has acquired or
holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention
lease relating to such asset, or any account receivable transferred by
it with recourse (including any such transfer subject to a holdback or
similar arrangement that effectively imposes the risk of collectability
on the transferor).
"Loans" has the meaning specified in Section 2.01(a) hereof.
"Mandatory Cost" means the percentage rate per annum
calculated by the Administrative Agent in accordance with Exhibit G.
"Material Acquisition" any (a) acquisition of property or
series of related acquisitions of property that constitutes assets
comprising all or substantially all of an operating unit, division or
line of business or (b) acquisition of or other investment in the
Capital Stock of any Subsidiary or any Person which becomes a
Subsidiary or is merged or consolidated with the Borrower or any of its
Subsidiaries, in each case, which involves the payment of consideration
by the Borrower and its Subsidiaries in excess of U.S.$25,000,000 (or
the equivalent in other currencies).
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower and its
Subsidiaries taken as a whole, (b) the validity or enforceability of
this Agreement or any of the Notes or the rights and remedies of the
Administrative Agent or any Lender under this Agreement or any of the
Notes or (c) the ability of the Borrower and/or the Guarantors to
perform their Obligations under this Agreement, the Notes, the Fee
Letter, any Notice of Borrowings, any certificates, waivers, or any
other agreement delivered pursuant to this Agreement.
"Material Debt" means Debt (other than the Loans) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more
related or unrelated transactions, in an aggregate principal amount
outstanding exceeding U.S.$50,000,000 (or the equivalent thereof in
other currencies).
"Material Disposition" means any Disposition of property or
series of related Dispositions of property that yields gross proceeds
to the Borrower or any of its Subsidiaries in excess of U.S.$25,000,000
(or the equivalent in other currencies).
"Material Subsidiary" means, at any date, (a) each Subsidiary
of the Borrower (if any) (i) the assets of which, together with those
of its Subsidiaries, on a consolidated basis, without duplication,
constitute 5% or more of the consolidated assets of the Borrower and
its Subsidiaries as of the end of the then most recently ended fiscal
quarter for which quarterly financial statements have been prepared or
(ii) the operating profit of which, together with that of its
Subsidiaries, on a consolidated basis, without duplication, constitutes
5% or more of the consolidated operating profit of the Borrower and its
Subsidiaries for the then most recently ended fiscal quarter for which
quarterly financial statements have been prepared and (b) each
Guarantor.
"Measurement Date" means any of the dates specified in Section
7.14.
"Mexican GAAP" means, generally accepted accounting principles
in Mexico as in effect from time to time, except that for purposes of
Section 8.01, Mexican GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used
in the preparation of the most recent audited financial statements
referred to in Section 7.01. In the event that any change in Mexican
GAAP shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this
Agreement, then the Borrower and the Administrative Agent agree to
enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such change in Mexican GAAP with
the desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such change as if such
change had not been made. Until such time as such an amendment shall
have been executed and delivered by the Borrower, the Administrative
Agent and the Required Lenders, all financial covenants, standards and
terms in this Agreement shall continue to be calculated or construed as
if such change in Mexican GAAP had not occurred.
"Mexico" means the United Mexican States.
"Ministry of Finance" means the Ministry of Finance and
Public Credit of Mexico.
"Notice of Borrowing" has the meaning specified in Section
2.01(c).
"Notice of Extension/Conversion" has the meaning specified in
Section 2.01(e).
"Note" means a promissory note of the Borrower in
substantially the form of Exhibit A, evidencing the obligation of the
Borrower to repay the Loans made by a Lender.
"Obligations" means, (a) with respect to the Borrower, all of
its indebtedness, obligations and liabilities to the Lenders, the Joint
Bookrunners and the Administrative Agent now or in the future existing
under or in connection with the Transaction Documents, whether direct
or indirect, absolute or contingent, due or to become due, and (b) with
respect to each Guarantor, all of its indebtedness, obligations and
liabilities to the Lenders, the Joint Bookrunners and the
Administrative Agent now or in the future existing under or in
connection with the Transaction Documents, in each case whether direct
or indirect, absolute or contingent, due or to become due.
"Obligors" means the Borrower and each Guarantor.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges, imposts, duties,
fees, or similar levies which arise from any payment made hereunder or
under the Notes or from the execution, delivery, registration,
performance or enforcement of, or otherwise with respect to, this
Agreement or any other Transaction Document and which are imposed,
levied, collected or withheld by any Governmental Authority.
"Participant" has the meaning specified in Section 13.06(d).
"Participating Member State" means any member state of the
European Union that adopts or has adopted the euro as its lawful
currency in accordance with legislation of the European Union relating
to Economic and Monetary Union.
"Pension Plan" means a "pension plan", as such term is defined
in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other
than a multiemployer plan as defined in Section 4001(a)(3) of ERISA),
and to which any Credit Party or any of its ERISA Affiliates has any
liability.
"Permitted Liens" has the meaning specified in Section 8.02.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, limited liability company, trust,
unincorporated association, joint venture or other business entity or
Governmental Authority, whether or not having a separate legal
personality.
"Prime Rate" means the average of the rate of interest
publicly announced by each of the Reference Banks from time to time as
its Prime Rate in New York City, the Prime Rate to change as and when
such designated rate changes. The Prime Rate is not intended to be the
lowest rate of interest charged by the Administrative Agent or any
Lender in connection with extensions of credit to debtors of any class,
or generally.
"Process Agent" has the meaning specified in Section 13.12(a).
"Qualified Receivables Transaction" means any transaction or
series of transactions that may be entered into by the Borrower or any
Subsidiary pursuant to which the Borrower or any Subsidiary may sell,
convey or otherwise transfer to a Special Purpose Vehicle (in the case
of a transfer by the Borrower or any other Seller) and any other person
(in the case of a transfer by a Special Purpose Vehicle), or may grant
a security interest in, any Receivables Program Assets (whether now
existing or arising in the future); provided that:
(a) no portion of the indebtedness or any other obligations
(contingent or otherwise) of a Special Purpose Vehicle (i) is
guaranteed by the Borrower or any other Seller or (ii) is recourse to
or obligates the Borrower or any other Seller in any way such that the
requirements for off balance sheet treatment under Financial Accounting
Standards Bulletin 140 are not satisfied; and
(b) the Borrower and the other Sellers do not have any
obligation to maintain or preserve the financial condition of a Special
Purpose Vehicle or cause such entity to achieve certain levels of
operating results.
"Quotation Day" means, in relation to any period in which an
interest rate is to be determined:
(a) (if the currency is Sterling) the first day of that
period;
(b) (if the currency is Euro) two TARGET Days before the
first day of that period; or
(c) (for any other currency) two Business Days before the
first day of that period.
"Receivables" means all rights of the Borrower or any other
Seller to payments (whether constituting accounts, chattel paper,
instruments, general intangibles or otherwise, and including the right
to payment of any interest or finance charges), which rights are
identified in the accounting records of the Borrower or such Seller as
accounts receivable.
"Receivables Documents" means (a) a receivables purchase
agreement, pooling and servicing agreement, credit agreement,
agreements to acquire undivided interests or other agreement to
transfer, or create a security interest in, Receivables Program Assets,
in each case as amended, modified, supplemented or restated and in
effect from time to time entered into by the Borrower, another Seller
and/or a Special Purpose Vehicle, and (b) each other instrument,
agreement and other document entered into by the Borrower, any other
Seller or a Special Purpose Vehicle relating to the transactions
contemplated by the items referred to in clause (a) above, in each case
as amended, modified, supplemented or restated and in effect from time
to time.
"Receivables Program Assets" means (a) all Receivables which
are described as being transferred by the Borrower, another Seller or a
Special Purpose Vehicle pursuant to the Receivables Documents, (b) all
Receivables Related Assets in respect of such Receivables, and (c) all
collections (including recoveries) and other proceeds of the assets
described in the foregoing clauses.
"Receivables Program Obligations" means (a) notes, trust
certificates, undivided interests, partnership interests or other
interests representing the right to be paid a specified principal
amount from the Receivables Program Assets and (b) related obligations
of the Borrower, a Subsidiary of the Borrower or a Special Purpose
Vehicle (including, without limitation, rights in respect of interest
or yield hedging obligations, breach of warranty claims and expense
reimbursement and indemnity provisions).
"Receivables Related Assets" means with respect to any
"Receivables" (i) any rights arising under the documentation governing
or relating to such Receivables (including rights in respect of liens
securing such Receivables), (ii) any proceeds of such Receivables,
(iii) other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.
"Reference Banks" means two banks in the London interbank
market, initially Barclays Bank PLC, and Citibank, N.A..
"Regulation T, U, or X" means Regulation T, U, or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Required Lenders" means, at any time, Lenders (other than
Defaulting Lenders) whose Total Exposures, when aggregated, equal or
exceed 50.01% of the Aggregate Committed Amount (or, if the Commitments
shall have terminated, the Aggregate Exposure) minus the Total Exposure
of any Defaulting Lender at such time.
"Requirement of Law" means, as to any Person, any law,
ordinance, rule, regulation or requirement of any Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" of any Person means the Chief Financial
Officer, the Corporate Planning and Finance Director, the Finance
Director or the Comptroller of such Person.
"Revaluation Date" means each of the following: (a) in
connection with the making of any Loan, the Business Day which is the
earliest of the date such Loan is made or the date the rate is set, as
applicable; (b) in connection with any extension or conversion or
continuation of an existing Loan, the Business Day that is the earlier
of the date such Loan is extended, converted or continued, or the date
the rate is set, as applicable, in connection with any extension,
conversion or continuation; (c) the date of any reduction of the
Aggregate Committed Amount; and (d) such additional dates as the
Administrative Agent or the Required Lenders shall deem necessary.
"Screen Rate" means:
(a) in relation to LIBOR, the British Bankers Association
Interest Settlement Rate for the relevant currency
and period; and
(b) in relation to Euribor, the percentage rate per annum
determined by the Banking Federation of the European
Union for the relevant period,
displayed on the appropriate page of the Reuters screen. If
the agreed page is replaced or service ceases to be available, the
Administrative Agent may specify another page or service displaying the
appropriate rate after consultation with the Borrower and the Lenders.
"Seller" means the Borrower and any Subsidiary or other
affiliate of the Borrower (other than a Subsidiary or affiliate that is
a Special Purpose Vehicle) which is a party to a Receivables Document.
"Special Purpose Vehicle" means a trust, partnership or other
special purpose person established by the Borrower and/or its
Subsidiaries to implement a Qualified Receivables Transaction.
"Spot Rate" means, on any date, with respect to any Foreign
Currency, the rate quoted by the Administrative Agent as the spot rate
for the purchase by the Administrative Agent of such Foreign Currency
with Dollars through its principal foreign exchange trading office at
approximately 11:00 a.m. (New York City time) on the date two Business
Days prior to the date as of which the foreign exchange computation is
made.
"Sterling" means the lawful currency of the United Kingdom.
"Subsidiary" means with respect to any Person, any
corporation, partnership, joint venture, limited liability company,
trust, estate or other entity of which (or in which) more than 50% of
(a) in the case of a corporation, the issued and outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency not
in the control of such Person), (b) in the case of a limited liability
company, partnership or joint venture, the interest in the capital or
profits of such limited liability company, partnership or joint venture
or (c) in the case of a trust or estate, the beneficial interest in
such trust or estate, is at the time directly or indirectly owned or
controlled by (X) such Person, (Y) such Person and one or more of its
other Subsidiaries or (Z) one or more of such Person's other
Subsidiaries. For purposes of determining whether a trust formed in
connection with a Qualified Receivables Transaction is a Subsidiary,
notes, trust certificates, undivided interests, partnership interests
or other interests of the type described in clause (a) of the
definition of Receivables Program Obligations shall be counted as
beneficial interests in such trust.
"Substitute Lender" means a commercial bank or other financial
institution, acceptable to the Borrower, the Lenders and the
Administrative Agent, each in its sole discretion, and approved by the
Joint Bookrunners (including such a bank or financial institution that
is already a Lender hereunder), which assumes all or a portion of the
Commitment of a Lender pursuant to the terms of this Agreement.
"TARGET" means Trans-European Automated Real-time Gross
Settlement Express Transfer payment system.
"TARGET Day" means any day on which TARGET is open for the
settlement of payments in Euro.
"Taxes" means any and all present or future income, stamp,
sales or other taxes, levies, imposts, duties, deductions, fees,
charges or withholdings, and all liabilities with respect thereto
collected, withheld or assessed by any Governmental Authority,
excluding, (a) in the case of each Lender the Administrative Agent, and
any Tax Related Persons, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by its net income or
capital by the jurisdiction (or any political subdivision thereof)
under the laws of which it is organized or maintains a Lending Office
or its principal office or performs its functions as Administrative
Agent or as are imposed on such Lender or the Administrative Agent or
any of their Tax Related Persons (as the case may be) as a result of a
present or former connection between the Lender, the Administrative
Agent, or such Tax Related Person and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision
or taxing authority thereof or therein (other than any such connection
arising solely from the Lender or such Administrative Agent having
executed, delivered or performed its obligations or received a payment
under, or enforced, the Transaction Documents) and (b) any taxes,
levies, imposts, deductions, charges or withholdings to the extent
imposed by reason of any Lender's or Administrative Agent's failure to
(i) register as a Foreign Financial Institution with the Ministry of
Finance and (ii) be a resident (or have a principal office which is a
resident, if such Lender lends through a branch or agency) for tax
purposes of a jurisdiction with which Mexico has in effect a treaty for
the avoidance of double taxation (but only in respect of those taxes
payable in excess of taxes that would have been payable had such Lender
complied with those conditions).
"Tax Related Person" means any Person whose income is
realized through, or determined by reference to, the Administrative
Agent or a Lender[; provided that no Lender shall be deemed a Tax
Related Person of the Administrative Agent, and the Administrative
Agent shall not be deemed a Tax Related Person of any Lender].
"Temporary Investments" means, at any date, all amounts that
would, in conformity with Mexican GAAP consistently applied, be set
forth opposite the caption "cash and cash equivalent" ("efectivo y
equivalentes de efectivo") or "temporary investments" ("inversiones
temporales") on a consolidated balance sheet of the Borrower at such
date.
"Term Credit Agreement" has the meaning specified in the
recitals hereto.
"Termination Date" means the date which is the earliest of (a)
the date five years following the Effective Date, or (b) if no Loans
are outstanding, the date the Commitments are terminated in accordance
with this Agreement.
"Total Exposure" means at any time, as to any Lender, the
amount of its Commitment at such time, or, if the Commitments shall
have terminated, its Total Outstandings at such time.
"Total Outstandings" means at any time, as to any Lender, the
Dollar Amount of the sum of the aggregate outstanding principal amount
of such Lender's Loans.
"Transaction Documents" means a collective reference to this
Credit Agreement, the Notes, any Assignment and Assumption Agreement,
the Fee Letter, and all other related agreements and documents issued
or delivered hereunder or thereunder or pursuant hereto or thereto.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories
and possessions.
"Up-Front Fee" has the meaning specified in Section 3.02(c).
"Utilization" means, for any Utilization Period, the
percentage obtained by dividing the Average Outstanding Loans by the
Average Aggregate Committed Amount.
"Utilization Period" means each calendar quarter, except that
the initial Utilization Period shall commence on the Effective Date and
end on June 30, 2005, and the final Utilization Period shall end on the
Termination Date.
"Value of Debt Currency Derivatives" means, on any given date,
the aggregate mark-to-market value of Debt Currency Derivatives,
expressed as a positive number (if, on a mark-to-market basis, such
aggregate amount reflects a net amount owed to the Borrower and its
subsidiaries) or as a negative number (if, on a mark-to-market basis,
such aggregate amount reflects a net amount owed by the Borrower and
its subsidiaries).
"Welfare Plan" means a "welfare plan", as such term is
defined in Section 3(1) of ERISA.
1.02 Other Definitional Provisions.
(a) The terms "including" and "include" are not limiting and
mean "including but not limited to" and "include but are not limited
to".
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement, and
Article, Section, paragraph, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein are equally
applicable to both the singular and plural forms of such terms.
(d) In this Agreement, in the computation of periods of time
from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days, LIBOR Business Days,
Euribor Business Days or TARGET Days are expressly prescribed.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation
of this Agreement.
1.03 Accounting Terms and Determinations. All accounting and
financing terms not specifically defined herein shall be construed in
accordance with Mexican GAAP.
ARTICLE II
THE LOAN FACILITIES
-------------------
2.01 Revolving Loans.
(a) Commitment. During the Commitment Period, subject to the terms and
conditions hereof, each Lender, severally and not jointly with any other
Lender, agrees to make revolving credit loans in Dollars and/or in Foreign
Currencies (as specified by the Borrower) (the "Loans") to the Borrower from
time to time in an aggregate principal Dollar Amount at any one time
outstanding not to exceed such Lender's Commitment; provided that (i) with
regard to the Lenders collectively, the aggregate principal amount of Loans
outstanding at any one time shall not exceed the Aggregate Committed Amount,
and (ii) with regard to each Lender individually, the aggregate principal
Dollar Amount of such Lender's Commitment Percentage of all the Loans
outstanding at any time shall not exceed the Commitment of such Lender.
Loans may consist of Base Rate Loans, LIBOR Loans, Euribor Loans, or a
combination thereof, as the Borrower may request, and may be repaid, prepaid
and reborrowed in accordance with the provisions hereof; provided that (A)
Loans denominated in Japanese Yen or Sterling shall consist solely of LIBOR
Loans, subject to Section 3.07 and Section 3.09, (B) Loans denominated in
Euro shall consist solely of Euribor Loans, subject to Section 3.07 and
Section 3.09, and (C) if any Loan shall be made on the Effective Date or
within three (3) Business Days thereafter such Loan may be a LIBOR Loan or
Euribor Loan only if the Borrower delivers to the Administrative Agent a
funding indemnity letter in form and substance satisfactory to the
Administrative Agent.
(b) Loans and Borrowings. Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their Commitment Percentage. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(c) Revolving Loan Borrowings.
(i) Requests for Borrowings. (A) To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone,
not later than 12:00 p.m., New York City time, (1) in the case of a request
for a Base Rate Loan denominated in Dollars, on the Business Day prior to
the day the Borrower designates therein as the Disbursement Date, and (2) in
the case of a request for a LIBOR Loan or Euribor Loan, on the fourth LIBOR
Business Day or Euribor Business Day, as applicable, prior to the
Disbursement Date. Each such telephonic Borrowing request shall be
irrevocable and shall be confirmed promptly by hand delivery or facsimile to
the Administrative Agent of a written notice (the "Notice of Borrowing") in
the form attached as Exhibit B approved by the Administrative Agent and
signed by a duly authorized representative of the Borrower. Each such
telephonic request and written Notice of Borrowing shall specify the
following information in compliance with this Section 2.01:
(1) that a Loan is requested;
(2) the requested Disbursement Date, which shall be a
Business Day;
(3) the currency and the aggregate principal amount to
be borrowed; and
(4) whether the Borrowing shall be composed of Base
Rate Loans, LIBOR Loans, Euribor Loans, or a
combination thereof, and if LIBOR Loans or Euribor
Loans are requested, the Interest Period(s)
therefor.
(B) If the Borrower shall fail to specify in any such
Notice of Borrowing (i) an applicable Interest Period in
the case of a LIBOR Loan or Euribor Loan, then such notice
shall be deemed to be a request for an Interest Period of
one (1) month, (ii) the type of Loan requested, then such
notice shall be deemed to be a request for a LIBOR Loan
hereunder, provided, however, that if the notice requests
Euro, then such notice shall be deemed to be a request for
a Euribor Loan hereunder, or (iii) the currency requested,
then such notice shall be deemed to be a request for a
Loan in Dollars.
(C) Not later than 1:00 p.m. New York City time on
the Business Day on which the Notice of Borrowing is
received, the Administrative Agent shall promptly advise
each Lender of the details thereof and shall advise each
Lender of the amount of such Lender's Loan to be made as
part of the requested Borrowing.
(ii) Minimum Amounts. Each Loan shall be in a minimum aggregate
principal Dollar Amount of $5,000,000, in the case of LIBOR Loans or Euribor
Loans, or $1,000,000 (or the remaining Aggregate Committed Amount, if less),
in the case of Base Rate Loans, and integral multiples of $1,000,000 in
excess thereof.
(iii) Exchange Rate. For purposes of determining availability
hereunder, the rate of exchange for any Foreign Currency shall be the Spot
Rate.
(d) Funding of Borrowings. Each Lender shall make each Loan to be made
by it hereunder on the Disbursement Date by wire transfer of immediately
available funds by 1:00 p.m., New York City time, to the account held by the
Administrative Agent for such purpose most recently designated by it by
notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting on the same day the amounts
so received, in like funds, to the account designated by the Borrower in the
applicable Notice of Borrowing (the "Funding Account"). Unless the
Administrative Agent shall have received notice from a Lender, prior to the
time of any Borrowing, that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may, but shall not be required to, assume that such
Lender has made such share available on such date in accordance with Section
2.01(c) and may in its sole discretion, but shall not be required to, in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Lender either does not make its share of the
applicable Borrowing available to the Administrative Agent or delays in
doing so past 4:00 p.m., New York City time, on the Disbursement Date (such
Lender (until it makes such share available) hereinafter referred to as a
"Defaulting Lender"), then the Administrative Agent shall immediately notify
the Borrower of such default. If the Administrative Agent has, in its sole
discretion, made available to the Borrower an amount corresponding to such
Defaulting Lender's share of the Borrowing, then the Defaulting Lender and
the Borrower jointly and severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, on each
day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent,
at:
(i) in the case of the Defaulting Lender, the Federal Funds
Rate; or
(ii) in the case of the Borrower, the interest rate applicable to
Base Rate Loans.
If, with respect to the immediately preceding sentence, the Borrower pays
such amount to the Administrative Agent, then the Defaulting Lender shall
indemnify and hold harmless the Borrower from and against such amount, and
if such Defaulting Lender pays such amount to the Administrative Agent, then
such amount shall constitute such Defaulting Lender's Loan included in such
Borrowing. If the Administrative Agent, in its discretion, does not make
available to the Borrower an amount corresponding to the Defaulting Lender's
share of the Borrowing then (x) the Defaulting Lender shall indemnify and
hold harmless the Borrower from and against such amount as well as any and
all losses, liabilities (including liabilities for penalties), actions,
suits, judgments, demands, costs, and expenses (including reasonable fees
and disbursements for counsel including allocated cost of internal counsel)
resulting from any failure on the part of the Defaulting Lender to provide,
or from any delay in providing, the Administrative Agent with such
Defaulting Lender's pro rata share of the Borrowing, but no Lender shall be
so liable for any such failure on the part of or caused by any other Lender
or the Administrative Agent or the Borrower, and (y) such share of the
applicable Borrowing that was not made available shall (until made
available) be disregarded for purposes of calculating the Commitment Fee
pursuant to Section 3.02 and in the event such share has not been
disregarded for such purposes, any amount paid by the Borrower in respect of
such share shall be reimbursed to the Borrower by the applicable Defaulting
Lender with interest thereon at the Federal Funds Rate for each day from and
including the date such share of the Commitment Fee was paid by the Borrower
to but excluding the date of reimbursement by the Defaulting Lender. The
Administrative Agent, upon notice by the Borrower that such reimbursement is
due from the applicable Defaulting Lender, shall notify such Defaulting
Lender of the amount of the reimbursement due, including interest thereon,
and shall forward such amount to the Borrower upon receipt from the
Defaulting Lender. The Administrative Agent shall not, however, be liable to
the Borrower for any failure by any Defaulting Lender to reimburse the
Borrower for any amounts in respect of such Commitment Fee.
(e) Extension and Conversion. The Borrower shall have the option, on
any Business Day, to extend existing Loans into a subsequent permissible
Interest Period or to convert Loans denominated in Dollars into Loans of
another interest rate type or to convert Loans in Foreign Currencies into
Dollars or to convert Loans in Dollars into Foreign Currencies; provided,
however, that (i) Loans in Foreign Currencies may be converted into Dollars
and Loans in Dollars may be converted into Foreign Currencies only on the
last day of the Interest Period applicable thereto, (ii) except as provided
in Section 3.06, LIBOR Loans and Euribor Loans may be converted into Base
Rate Loans only on the last day of the Interest Period applicable thereto
unless the Borrower agrees to pay all Funding Losses, (iii) LIBOR Loans and
Euribor Loans may be extended, and Base Rate Loans may be converted into
LIBOR Loans or Euribor Loans, only if the conditions in Section 4.02 have
been satisfied, (iv) Loans extended as, or converted into, LIBOR Loans or
Euribor Loans shall be subject to the terms of the definition of "Interest
Period" set forth in Section 1.01 and shall be in such minimum amounts as
provided in Section 2.01(c)(ii), and (v) any request for extension or
conversion of a LIBOR Loan or Euribor Loan that shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of
one month. Each such extension or conversion shall be effected by the
Borrower by giving a written notice (or telephone notice promptly confirmed
in writing) (a "Notice of Extension/Conversion") to the Administrative Agent
prior to 10:00 a.m., New York City time, on the LIBOR Business Day of or the
Euribor Business Day of, as applicable, in the case of the conversion of a
LIBOR Loan or Euribor Loan into a Base Rate Loan, and on the third LIBOR
Business Day prior to or the third Euribor Business Day prior to, as
applicable, in the case of the extension of a LIBOR Loan as, or conversion
of a Base Rate Loan into, a LIBOR Loan or the extension of a Euribor Loan
as, or conversion of a Base Rate Loan into, a Euribor Loan, the date of the
proposed extension or conversion, substantially in the form of Exhibit C
hereto, specifying (A) the date of the proposed extension or conversion, (B)
the Loans to be so extended or converted, (C) the types of Loans into which
such Loans are to be converted, (D) if appropriate, the applicable Interest
Periods with respect thereto, and (E) the currency of such Loans. Each
Notice of Extension/Conversion shall be irrevocable and shall constitute a
representation and warranty by the Borrower of the matters specified in
Sections 4.02(a) through (d). So long as there is no Default or Event of
Default, in the event the Borrower does not request extension or conversion
of any LIBOR Loan or Euribor Loan in accordance with this Section, or any
such conversion or extension is not required by this Section, then such
LIBOR Loan or Euribor Loan shall be continued as a Base Rate Loan at the end
of each Interest Period applicable thereto, until the Borrower selects an
alternate Interest Period or converts such Loans to LIBOR Loans or Euribor
Loans. It is hereby understood and agreed that such failure by the Borrower
to request such extension or conversion resulting in the automatic
conversion of a LIBOR Loan or a Euribor Loan into a Base Rate Loan shall
also constitute a representation and warranty by the Borrower of the matters
specified in Sections 4.02(a) through (d). In the event any LIBOR Loans or
Euribor Loans are not permitted to be converted into another LIBOR Loan or
Euribor Loan hereunder, such LIBOR Loans or Euribor Loans shall
automatically be converted to Base Rate Loans at the end of the applicable
Interest Period with respect thereto. The Administrative Agent shall give
each Lender notice as promptly as practicable of any such proposed extension
or conversion affecting any Loan.
(f) Repayment. The principal amount of all Loans shall be due and
payable in full on the Termination Date in the same currency denomination as
the Loan was made or if different converted into and outstanding.
(g) Voluntary Prepayment. Loans may be repaid in whole or in part
without premium or penalty in the same currency denomination as the Loan was
made or if different converted into and outstanding; provided that (i) Loans
may be prepaid only upon five (5) Business Days' prior written notice to the
Administrative Agent, (ii) prepayments of LIBOR Loans or Euribor Loans must
be accompanied by payment of any Funding Losses under Section 3.06, and
(iii) partial prepayments shall be in minimum principal Dollar Amounts of
$10,000,000.
(h) Mandatory Prepayment. If on any date the Administrative Agent
notifies the Borrower that the Aggregate Exposure (determined as of the most
recent Revaluation Date) shall exceed 103% of the Aggregate Committed
Amount, the Borrower shall as soon as practicable, but in any event no later
than five Business Days after receipt of such notice, prepay the outstanding
principal amount of any Loans owing by the Borrower in an aggregate amount
sufficient to reduce such sum to an amount not to exceed 100% of the
Aggregate Committed Amount on such date together with any interest accrued
to the date of such prepayment on the aggregate principal amount of the
Borrowing prepaid. The Administrative Agent shall give prompt notice of any
prepayment required under this Section 2.01(h) to the Borrower, and shall
provide prompt notice to the Borrower of any such notice of required
prepayment the Administrative Agent receives from any Lender. Any such
prepayment shall be allocated at the Lender's discretion.
(i) Revolving Notes. Each Lender's Commitment Percentage of the Loans
shall be evidenced by a duly executed revolving note in favor of such Lender
in the form of Exhibit A attached hereto.
(j) Maximum Number of LIBOR Loans and Euribor Loans. The Borrower will
be limited to a maximum number of ten (10) LIBOR Loans and Euribor Loans
outstanding at any time. For purposes hereof, LIBOR Loans and Euribor Loans
with separate or different Interest Periods will be considered as separate
LIBOR Loans, or, as applicable, Euribor Loans even if their Interest Periods
expire on the same date.
2.02 Interest.
(a) Base Rate Loans. Each Base Rate Loan shall bear interest at a rate
per annum equal to the Base Rate plus the Applicable Margin.
(b) LIBOR Loans. (i) Each LIBOR Loan (other than LIBOR Loans
denominated in Sterling) shall bear interest at a rate per annum equal to
LIBOR plus the Applicable Margin. (ii) Each LIBOR Loan denominated in
Sterling shall bear interest at a rate per annum equal to LIBOR plus the
Applicable Margin, plus Mandatory Costs, if any.
(c) Euribor Loans. Each Euribor Loan shall bear interest at a rate per
annum equal to Euribor plus the Applicable Margin, plus Mandatory Costs, if
any.
(d) Default Interest. Notwithstanding the foregoing, if any principal
of, or interest on, any Loan or any fee or other amount payable by the
Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration, by mandatory prepayment or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum
equal to (i) in the case of overdue principal of any Loan, 2% plus the rate
otherwise applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to Base Rate Loans as provided
in Section 2.02(a).
(e) Payment of Interest. Accrued interest on each Loan shall be payable
in arrears on each Interest Payment Date for such Loan and upon termination
of the Commitments; provided that (i) in the event of any repayment or
prepayment of any Loan, accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and
(ii) in the event of any conversion of any LIBOR Loan or Euribor Loan prior
to the end of the Interest Period therefore, accrued interest on such Loan
shall be payable on the effective date of such conversion. Interest with
respect to each Loan shall be paid in the currency in which such Loan is
denominated.
(f) Computation. All interest hereunder shall be computed on the basis
of a year of 360 days, except that (i) interest computed by reference to the
Base Rate at times when the Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year) and
(ii) where the interest is to accrue in respect of any amount denominated in
Sterling, interest shall be computed on the basis of a year of 365 days, and
in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Base
Rate, LIBOR or Euribor shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
ARTICLE III
TERMINATION AND REDUCTION OF
COMMITMENTS; FEES, TAXES, PAYMENT PROVISIONS
--------------------------------------------
3.01 Termination or Reduction of Commitments.
(a) Mandatory Termination. The Commitments shall terminate on the
Termination Date.
(b) Voluntary Termination. Upon at least five Business Days' notice to
the Administrative Agent and the Joint Bookrunners, but no sooner than six
months after the Effective Date, the Borrower may terminate the existing
Commitments; provided, however, that the existing Commitments may not be
terminated so long as (i) any Loan is outstanding or (ii) any interest, fee
or expenses remain unpaid.
3.02 Fees.
(a) Commitment Fee. The Borrower agrees to pay to the Administrative
Agent, quarterly in arrears for each Utilization Period, for the account of
the Lenders ratably in accordance with their Commitment Percentage a
commitment fee (the "Commitment Fee") (i) if the Utilization is greater than
or equal to 50%, at the rate of 30% of the Applicable Margin per annum for
the relevant Utilization Period on the average Available Commitments for the
Utilization Period or (ii) if the Utilization is less than 50%, at the rate
of 40% of the Applicable Margin per annum for the relevant Utilization
Period on the average Available Commitments for the Utilization Period. The
Commitment Fee shall accrue from the Effective Date to the Termination Date
and shall be payable in arrears on the last day in each of March, June,
September, and December and on the Termination Date provided that if any day
is not a Business Day, then the Commitment Fee shall be payable on the next
succeeding Business Day.
(b) Joint Bookrunners Fees. The Borrower will pay to the Joint
Bookrunners, for the sole account of the Joint Bookrunners, the arrangement
fees (the "Joint Bookrunners Fees") and other fees in the amounts and at the
times agreed to by the Joint Bookrunners and the Borrower in the Fee Letter.
(c) Up-Front Fee. The Borrower will pay to the Administrative Agent,
for the account of the Lenders, an up-front fee (the "Up-front Fee") as
agreed to by the Borrower and the Joint Bookrunners.
3.03 Computation of Fees. All fees calculated on a per annum basis
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed.
3.04 Taxes.
(a) Any and all payments by the Borrower or a Guarantor, as the case
may be, to any Lender, the Joint Bookrunners or the Administrative Agent
under this Agreement and the other Transaction Documents shall be made free
and clear of, and without deduction or withholding for or on account of, any
Taxes. In addition, the Borrower shall promptly pay all Other Taxes.
(b) Except as otherwise provided in Section 3.04(c), the Borrower and
the Guarantors jointly and severally agree to indemnify and hold harmless
each Lender and the Administrative Agent for the full amount of Taxes or
Other Taxes (without duplication) excluding in each case United States
backup withholding Taxes imposed because of payee underreporting (including
any Taxes or Other Taxes (without duplication) imposed by any jurisdiction
on amounts payable under this Section 3.04) paid by or assessed against any
Lender or the Administrative Agent in respect of any sum payable hereunder
and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted, except to the
extent that such penalties, interest, additions to tax or expenses are
incurred solely as a result of any gross negligence or willful misconduct of
such Lender or Administrative Agent, as the case may be. Payment under this
indemnification shall be made within 30 days after the date any Lender or
the Administrative Agent makes written demand therefor, setting forth in
reasonable detail the basis and calculation of such amounts (such written
demand shall be presumed correct, absent significant error).
(c) If the Borrower or the Guarantors, as the case may be, shall be
required by law to deduct or withhold any Taxes or Other Taxes from or in
respect of any sum payable hereunder to any Lender or the Administrative
Agent, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this
Section 3.04, but excluding in each case United States backup
withholding Taxes imposed because of payee underreporting) such Lender
or the Administrative Agent receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;
provided, that, the Borrower shall not be required to increase any
amounts payable to such Lender or the Administrative Agent to the
extent such increased amounts would be in excess of the amounts that
would have been payable to such Lender or the Administrative Agent had
such Lender or Administrative Agent complied with the requirements of
Section 3.04(f) or to the extent provided in Section 3.04(g);
(ii) the Borrower or the Guarantors, as the case may be, shall
make such deductions and withholdings; and
(iii) the Borrower or the Guarantors, as the case may be, shall
pay the full amount deducted or withheld to the relevant taxing
authority or other authority in accordance with applicable law.
(d) Within 30 days after the date of any payment by the Borrower or the
Guarantors, as the case may be, of Taxes or Other Taxes, the Borrower or the
Guarantors, as the case may be, shall furnish to the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof or
other evidence of payment reasonably satisfactory to the Administrative
Agent.
(e) If the Borrower or the Guarantors, as the case may be, is required
to pay additional amounts to the Administrative Agent or any Lender pursuant
to Section 3.04(c) other than amounts related to the withholding of Mexican
tax at the rate applicable to interest payments received by foreign
financial institutions registered with the Secretaria de Hacienda y Credito
Publico as a Foreign Financial Institution for the purposes of Article 195,
Section I of the Mexican Income Tax law, then the Administrative Agent or
such Lender shall, upon reasonable request by the Borrower or the
Guarantors, use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office, issuing
office, or office for receipt of payments by the Borrower and Guarantors
hereunder, as the case may be, so as to eliminate or reduce the obligation
of the Borrower or the Guarantors, as the case may be, to pay any such
additional amounts which may thereafter accrue or to indemnify the
Administrative Agent or such Lender in the future, if such change in the
reasonable judgment of the Administrative Agent or such Lender is not
otherwise disadvantageous to such Lender.
(f) Each Lender and the Administrative Agent shall, from time to time
at the request of the Borrower or the Administrative Agent (as the case may
be), promptly furnish to the Borrower and the Administrative Agent (as the
case may be), such forms, documents or other information (which shall be
accurate and complete) as may be reasonably required to establish any
available exemption from, or reduction in the amount of, applicable Taxes;
provided, however, that none of any Lender or the Administrative Agent shall
be obliged to disclose information regarding its tax affairs or computations
to the Borrower in connection with this paragraph (f), it being understood
that the identity of any Person shall not be considered for these purposes
as information regarding its tax affairs or computations. Each of the
Borrower and the Administrative Agent shall be entitled to rely on the
accuracy of any such forms, documents or other information furnished to it
by any Person and shall have no obligation to make any additional payment or
indemnify any Person for any Taxes, interest or penalties that would not
have became payable by such Person had such documentation been accurate.
(g) In the case of an assignment, transfer, grant of a participation,
designation of a new Lending Office [or Administrative Agent's Payment
Office or appointment of a successor Administrative Agent], the Borrower and
Guarantors shall not be required to pay or increase any amounts, pursuant to
this Section 3.04 following such event, in excess of the amounts the
Borrower and Guarantors were required to pay or increase immediately prior
to such an event, except to the extent such event occurs pursuant to Section
3.11 or to the extent of increases in such amounts resulting from a change
in applicable law occurring after such event.
(h) If the Administrative Agent or any Lender receives a refund or
credit in respect of Taxes or Other Taxes as to which it has been
indemnified by the Borrower or a Guarantor, as the case may be, pursuant to
Section 3.04(b) and such refund or credit is directly and clearly
attributable to this Agreement, it shall notify the Borrower or such
Guarantor, as the case may be, of the amount of such refund or credit and
shall return to the Borrower or such Guarantor, as the case may be, such
refund or the benefit of such credit; provided, however, that (A) the
Administrative Agent or such Lender, as the case may be, shall not be
obligated to make any effort to obtain such refund or credit or to provide
the Borrower or the Guarantors with any information on or justification for
the arrangement of its tax affairs or otherwise disclose to the Borrower,
the Guarantors or any other Person any information that it considers to be
proprietary or confidential, and (B) the Borrower or such Guarantor, as the
case may be, upon the request of the Administrative Agent or such Lender, as
the case may be, shall return the amount of such refund or the benefit of
such credit to the Administrative Agent or such Lender, as the case may be,
if the Administrative Agent or such Lender, as the case may be, is required
to repay the amount of such refund or the benefit of such credit to the
relevant authorities within six years of the date the Borrower or such
Guarantor, as the case may be, is paid such amount by the Administrative
Agent or such Lender, as the case may be.
(i) The agreements in this Section 3.04 shall survive the termination
of this Credit Agreement and the payment of the Borrower's Obligations.
3.05 General Provisions as to Payments.
(a) All payments to be made by the Borrower or the Guarantors, as the
case may be, shall be made without set-off, counterclaim or other defense.
Except as otherwise expressly provided herein, all payments by the Borrower
shall be made to the Administrative Agent for the account of the Lenders at
the Administrative Agent's Payment Office, and shall be made in Dollars and
in immediately available funds, no later than 3:30 p.m. (New York City time)
on the dates specified herein. The Administrative Agent will promptly
distribute to each Lender its Commitment Percentage (or other applicable
share as expressly provided herein) of each payment in like funds as
received. Any payment received by the Administrative Agent later than 3:30
p.m. (New York City time) shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.
(b) Except and to the extent otherwise specifically provided herein,
whenever any payment to be made hereunder is due on a day which is not a
Business Day, the date for payment thereof shall be extended to the
immediately following Business Day and, if interest is stated to be payable
in respect thereof, interest shall continue to accrue to such immediately
following Business Day.
(c) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, cause
to be distributed to each Lender, as the case may be, on such due date an
amount equal to the amount then due to such Lender. If and to the extent
that the Borrower shall not have made such payment, each Lender shall repay
to the Administrative Agent forthwith on demand such amount distributed to
such Lender together with accrued interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender
repays such amount to the Administrative Agent, at the Federal Funds Rate;
provided, however, that if any amount remains unpaid by any Lender for more
than five Business Days after the Administrative Agent has made a demand for
such amount, such Lender shall, commencing on the day next following such
fifth Business Day, pay interest to the Administrative Agent at a rate per
annum equal to the Federal Funds Rate plus 1%, and, provided further, that
if any such amount remains unpaid by any Lender for more than ten Business
Days, such Lender shall, commencing on the day next following such tenth
Business Day, pay interest to the Administrative Agent at a rate per annum
equal to the Federal Funds Rate plus 2.00%.
(d) Currency of account.
(i) Subject to paragraphs (ii) through (v) below, Dollars are the
currency of account and payment for any sum due from parties under any
Transaction Document.
(ii) A repayment of an Obligation or a part of an Obligation shall
be made in the currency in which that Obligation is denominated on its due
date.
(iii) Each payment of interest shall be made in the currency in
which the sum in respect of which the interest is payable was denominated
when that interest accrued.
(iv) Each payment in respect of costs, expenses or Taxes shall be
made in the currency in which the costs, expenses or Taxes are incurred.
(v) Any amount expressed to be payable in a currency other than
Dollars shall be paid in that other currency.
(e) Change of currency.
Unless otherwise prohibited by law or regulation, if more than
one currency or currency unit are at the same time recognized by the
central bank of any country as the lawful currency of that country, then:
(A) any reference in the Transaction Documents
to, and any Obligations arising under the
Transaction Documents in, the currency of
that country shall be translated into, or
paid in, the currency or currency unit of
that country as agreed by the Administrative
Agent and the Borrower; and
(B) any translation from one currency or
currency unit to another shall be at the
official rate of exchange recognized by the
central bank for the conversion of that
currency or currency unit into the other,
rounded up or down by the Administrative
Agent (acting reasonably).
If a change in any currency of a country occurs, this Agreement will,
to the extent the Administrative Agent and the Borrower deem necessary, be
amended to comply with any generally accepted conventions and market practice in
the relevant interbank market and otherwise to reflect the change in currency.
3.06 Funding Losses. If the Borrower makes any payment of principal
with respect to any LIBOR Loan or Euribor Loan on any day other than the last
day of the Interest Period applicable thereto, or if the Borrower fails to
borrow any LIBOR Loans or Euribor Loans after notice has been given to any
Lender in accordance with Section 2.01 or to convert or continue a Loan as a
LIBOR Loan or Euribor Loan after a Notice of Extension/Conversion has been
delivered by the Borrower pursuant to Section 2.01(e), or if the Borrower fails
to prepay any LIBOR Loans or Euribor Loans after notice has been given pursuant
to Section 2.01, the Borrower shall reimburse each Lender within 15 days after
demand for any resulting loss or expense incurred by it, including any loss
incurred in obtaining, liquidating or reemploying deposits bearing interest by
reference to LIBOR or Euribor from third parties ("Funding Losses"), provided
such Lender shall have delivered to the Borrower a certificate setting forth in
reasonable detail the computations for the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
3.07 Basis for Determining Interest Rate Inadequate or Unfair. If on
or prior to the first day of any Interest Period for any LIBOR Loan or Euribor
Loan:
(a) the Administrative Agent determines that by reason of circumstances
affecting the London interbank market or the European interbank market, as
the case may be, reasonably adequate means do not exist for ascertaining
LIBOR or Euribor applicable to such Interest Period or that deposits in
Dollars (in the applicable amounts) are not being offered in the London
interbank market or the European interbank market, as the case may be, for
such Interest Period, or
(b) the Required Lenders advise the Administrative Agent that LIBOR or
Euribor as determined by the Administrative Agent will not adequately and
fairly reflect the cost to any Lender of making or maintaining its Loan for
such Interest Period,
(c) then the Administrative Agent shall forthwith give notice thereof
to the Borrower and the Lenders. In the event of any such determination or
advice, until the Administrative Agent shall have notified the Borrower and
the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Loan of the affected amount or
Interest Period, or a conversion to or continuation of a Loan of the
affected amount or Interest Period shall be deemed rescinded and such
request shall instead be considered a request for a Base Rate Loan. Each
determination by the Administrative Agent hereunder shall be conclusive
absent manifest error.
3.08 Capital Adequacy.
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule, or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, has or would have the effect of increasing such
Lender's cost of maintaining its Commitment or making or maintaining any Loans
or reducing the rate of return on such Lender's capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, effectiveness,
change, or compliance (taking into consideration such Lender's policies with
respect to capital adequacy), then, upon notice from such Lender to the
Borrower, the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction in amount received. Each determination by any such Lender of amounts
owing under this Section shall, absent manifest error, be conclusive and binding
on the parties hereto. The relevant Lender will, upon request, provide a
certificate in reasonable detail as to the amount of such increased cost or
reduction in amount received and method of calculation.
Upon any Lender's making a claim for compensation under this Section
3.08, (i) such Lender shall use commercially reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction of its Lending
Office or assign its rights and obligations hereunder to another of its offices,
branches or affiliates so as to eliminate or reduce any such additional payment
by the Borrower which may thereafter accrue, if such change is not otherwise
disadvantageous to such Lender, and (ii) the Borrower may replace such Lender in
accordance with Section 3.11.
3.09 Illegality.
(a) Notwithstanding any other provision herein, if the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof occurring after the Effective Date shall make it unlawful for any
Lender to make or maintain any Commitment or any Loan as contemplated by
this Agreement, then such Lender, together with Lenders giving notice under
Section 3.07, shall be an "Affected Lender" and by written notice to the
Borrower and to the Administrative Agent:
(i) such Lender may declare that such Loans will not thereafter
(for the duration of such unlawfulness or impossibility) be made by
such Lender hereunder, whereupon, in the case of any request for a
LIBOR Loan or a Euribor Loan, as to such Lender, such request shall
only be deemed a request for a Base Rate Loan (unless it should also be
illegal for the Affected Lender to provide a Base Rate Loan, in which
case such Loan shall bear interest at a commensurate rate to be agreed
upon by the Administrative Agent and the Affected Lender, and so long
as no Event of Default shall have occurred and be continuing, the
Borrower), unless such declaration shall be subsequently withdrawn;
(ii) such Lender may require that all outstanding LIBOR Loans and
Euribor Loans, made by it be converted to Base Rate Loans, in which
event all such LIBOR Loans and Euribor Loans shall be automatically
converted to Base Rate Loans as of the effective date of such notice as
provided in paragraph (b) below; and
(iii) if it is also illegal for the Affected Lender to make Base
Rate Loans, such Lender may declare all amounts owed to them by the
Borrower to the extent of such illegality to be due and payable;
provided, however, the Borrower has the right, with the consent of the
Administrative Agent to find an additional Lender to purchase the
Affected Lenders' rights and obligations.
In the event any Lender shall exercise its rights under (i) or (ii) above with
respect to any Loans, all payments and prepayments of principal that would
otherwise have been applied to repay the LIBOR Loans or the Euribor Loans that
would have been made by such Lender or the converted LIBOR Loans or the
converted Euribor Loans of such Lender shall instead be applied to repay the
Base Rate Loans made by such Lender in lieu of, or resulting from the
conversion, of such LIBOR Loans or Euribor Loans.
(b) For purposes of this Section 3.09, a notice to the Borrower by any
Lender shall be effective as to each such Loan, if lawful, on the last day
of the Interest Period currently applicable to such Loan; in all other cases
such notice shall be effective on the date of receipt by the Borrower.
3.10 Requirements of Law.
If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Effective Date (or, if later, the
date on which such Lender becomes a Lender):
(a) shall impose, modify, or hold applicable any reserve, special
deposit, compulsory loan, or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans, or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender that is not otherwise included in the determination of
LIBOR or Euribor hereunder; or
(b) shall impose on such Lender any other condition (excluding any tax
of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender reasonably deems to be material, of making,
converting into, continuing, or maintaining LIBOR Loans or Euribor Loans or to
reduce any amount receivable hereunder in respect thereof, then, in any such
case, upon notice delivered to the Borrower from such Lender, through the
Administrative Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable;
provided that, in any such case, the Borrower may elect to convert the LIBOR
Loans and Euribor Loans made by such Lender hereunder to Base Rate Loans by
giving the Administrative Agent at least one (1) Business Day's notice of such
election. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall provide notice thereof to the Borrower,
promptly upon occurrence of such event, but in any case within three (3) days
from the date of such event, through the Administrative Agent, certifying (x)
that one of the events described in this paragraph (a) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the
Administrative Agent, to the Borrower shall be conclusive and binding on the
parties hereto in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. If any Lender becomes aware of a proposed change in any
Requirement of Law that would entitle it to claim any additional amounts
pursuant to this Section it shall promptly, upon the Lender becoming aware of
such event, provide notice to the Borrower through the Administrative Agent.
3.11 Substitute Lenders. If any Lender has demanded compensation (or
if the Borrower is required to increase amounts payable hereunder) pursuant to
Sections 3.04, 3.08, or 3.10 or has exercised its rights pursuant to Section
3.09(a)(iii), and such Lender does not waive its right to future additional
compensation pursuant to Sections 3.04, 3.08 or 3.10, the Borrower shall have
the right (i) to replace such Lender with a Substitute Lender or Substitute
Lenders that shall succeed to the rights of such Lender under this Agreement
upon execution of an Assignment and Assumption Agreement and payment by the
Borrower of the related processing fee of U.S.$3,500 to the Administrative
Agent; or (ii) to remove such Lender, reduce the Commitments by the amount of
the Commitment of such Lender, and adjust the Commitment Percentage of each
Lender such that the percentage of each other Lender shall be increased to
equal the percentage equivalent of a fraction. The numerator of which is the
Commitment of such other Lender and the denominator of which is the Commitments
of the Lenders minus the Commitments of the Lender who demanded payment
pursuant to Sections 3.04, 3.08 or 3.10 or exercised its rights pursuant to
Section 3.09(a)(iii); provided, however, that such Lender shall not be replaced
or removed hereunder until such Lender has been repaid in full all amounts owed
to it pursuant to this Agreement and the other Transaction Documents (including
Sections 3.06 and 3.08) unless any such amount is being contested by the
Borrower in good faith.
3.12 Sharing of Payments, Etc.
(a) If, other than as expressly provided elsewhere herein, any Lender
shall obtain on account of the Obligations owing to it any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its Commitment Percentage of payments on account of
the Obligations obtained by all the Lenders (an "excess payment"), such
Lender shall forthwith (i) notify the Administrative Agent of such fact,
and (ii) purchase from the other Lenders such participations in such
Obligations owing to them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender, such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender's Commitment Percentage (according to the proportion of (A) the
amount of such paying Lender's required repayment to (B) the total amount
so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of demonstrable error) of
participations purchased pursuant to this Section 3.12 and will in each
case notify the Lenders following any such purchases.
(b) If any Lender shall commence any action or proceeding in any court
to enforce its rights hereunder after consultation with the other Lenders
and, as a result thereof or in connection therewith, it shall receive any
excess payment, then such Lender shall not be required to share any portion
of such excess payment with any Lender which has the legal right to, but
does not, join in any such action or proceeding or commence and diligently
prosecute a separate action or proceeding to enforce its rights in another
court.
(c) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 3.12 may exercise all its
rights of set-off with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.01 Conditions to Effectiveness. The obligations of the Lenders under
this Agreement are subject to the satisfaction or waiver of the following
conditions precedent (the date on which all such conditions precedent are
satisfied or waived being the "Effective Date"):
(a) Agreement. The Administrative Agent shall have received
counterparts of this Agreement duly executed by each party hereto and there
shall have been delivered to the Administrative Agent for the account of
each Lender a Note executed by the Borrower.
(b) Opinions of Borrower's and each Guarantor's Counsel. The
Administrative Agent shall have received (i) the opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, New York counsel to the Borrower and the
Guarantors, in substantially the form of Exhibit E, and (ii) the opinion of
Lic. Ramiro G. Villareal Morales, Mexican counsel to the Borrower, in
substantially the form of Exhibit F.
(c) Opinion of Counsel to the Administrative Agent. The Administrative
Agent shall have received (i) a favorable opinion of Ritch, Heather y
Mueller, S.C., special Mexican counsel to the Administrative Agent and the
Lenders, and (ii) the opinion of Sullivan & Cromwell LLP, New York counsel
to the Lenders.
(d) Governmental Approvals. The Administrative Agent shall have
received certified copies of any and all necessary approvals,
authorizations, or consents of, or notices to, or registrations with any
Governmental Authority required for the Borrower and each Guarantor to
enter into, or perform its obligations under, the Transaction Documents.
(e) Organizational Documents of the Borrower and the Guarantors. The
Administrative Agent shall have received certified copies of (i) the acta
constitutiva and estatutos sociales in effect on the Effective Date of the
Borrower and each Guarantor, (ii) the powers-of-attorney of each Person
executing any Transaction Document on behalf of the Borrower and each
Guarantor, together with specimen signatures of such Person and (iii) all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the authorization for the execution,
delivery and performance of each such Transaction Document and the
transactions contemplated hereby and thereby. All certificates shall state
that the resolutions or other information referred to in such certificates
have not been amended, modified, revoked or rescinded as of the date of
such certificates (which shall not be earlier than five Business Days
before the Effective Date).
(f) Agent for Service of Process. The Administrative Agent shall have
received a power of attorney, notarized under Mexican law, granted by the
Borrower and each Guarantor to the Process Agent in respect of the
Transaction Documents together with evidence that the Process Agent has
accepted its appointment as Process Agent pursuant to Section 13.12.
(g) Fees and Expenses. The Borrower shall have paid all fees and
expenses owing to the Lenders, the Joint Bookrunners and the Administrative
Agent to the extent of and payable on or before the Effective Date of the
Agreement, and all other fees and expenses owing hereunder and under the
Fee Letter to the extent due and payable on or before the Effective Date of
the Agreement.
(h) No Default. No Default or Event of Default shall have occurred and
be continuing either prior to or after giving effect to the transactions
contemplated on the Effective Date, and the Borrower and each Guarantor
shall have provided a certificate from a Responsible Officer of the
Borrower to such effect to the Administrative Agent.
(i) Representations and Warranties. The representations and warranties
of the Borrower and of each Guarantor contained in this Agreement and each
other Transaction Document shall be true on and as of the Effective Date,
and the Borrower and each Guarantor shall have provided a certificate to
such effect to the Administrative Agent.
(j) No Material Adverse Effect. No Material Adverse Effect shall have
occurred since December 31, 2004 and there shall have occurred no
circumstance and/or event of a financial, political or economic nature in
Mexico that has a reasonable likelihood of having a material adverse effect
on the ability of the Borrower or the Guarantors to perform their
obligations under this Agreement and the other Transaction Documents; for
the avoidance of doubt, the fact that the Borrower has acquired the shares
of RMC Group p.l.c. shall not itself be deemed to have been a Material
Adverse Effect.
(k) Other Documents. The Administrative Agent shall have received such
other certificates, powers of attorney and other documents and undertakings
relating to the authority for, and the execution, delivery and validity of,
the Transaction Documents, as may be reasonably requested by the
Administrative Agent or any Lender through the Administrative Agent.
(l) Fees, Costs and Expenses under the Term Credit Agreement. The
Borrower shall have paid all accrued and unpaid fees payable under the Term
Credit Agreement to the extent due and payable on or before the Effective
Date of this Agreement.
(m) Term Credit Agreement. The Term Credit Agreement shall have been
cancelled or terminated in accordance with its respective terms; any
promissory notes issued thereunder shall have been cancelled or returned to
the Borrower; and all outstanding indebtedness for money borrowed under the
Term Credit Agreement shall have been, or will be simultaneously with the
Borrowings hereunder, repaid in full. The parties hereto agree that a
Notice of Borrowing may be given under this Agreement simultaneously to
repay all outstanding obligations under the Term Credit Agreement.
4.02 Conditions Precedent to Borrowings and Continuation or Conversion
of the Loans. The obligation of any Lender to make a Loan on the occasion
of any Borrowing or to continue or convert any Loan is subject to the
satisfaction of the following conditions:
(a) Notices. In the case of Borrowings, continuance or conversion of
Loans, the Administrative Agent shall have received a Notice of Borrowing
or a Notice of Extension/Conversion as required by Section 2.01(c) or
2.01(e), respectively;
(b) Availability. Immediately after such Borrowing or the continuation
or conversion of any Loan, the Total Outstandings for such Lender shall not
exceed the Commitment of such Lender;
(c) No Default. Immediately before and after giving effect to such
Borrowing or the continuation or conversion of any Borrowing, no Default or
Event of Default shall have occurred and be continuing and such Borrowing
or continuation or conversion of any Loan will not cause or result in a
Default or Event of Default; and
(d) Representations and Warranties. The representations and warranties
of the Borrower contained in this Agreement and in each other Transaction
Document and of each Guarantor contained in this Agreement shall be true
and correct in all material respects on and as of the date of any Borrowing
or continuation or conversion of any Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
The Borrower represents and warrants that:
5.01 Corporate Existence and Power. .
(a) The Borrower is a corporation (sociedad anonima de capital
variable) duly incorporated, validly existing and in good standing under
the laws of Mexico and has all requisite corporate power and authority
(including all governmental licenses, permits and other approvals except
for such licenses, permits and approvals the absence of which will not have
a Material Adverse Effect) to own its assets and carry on its business as
now conducted and as proposed to be conducted.
(b) All of the outstanding stock of the Borrower has been validly
issued and is fully paid and non-assessable.
5.02 Power and Authority; Enforceable Obligations.
(a) The execution, delivery and performance by the Borrower of each
Transaction Document to which it is or will be a party, and the
consummation of the transactions contemplated hereby and thereby, are
within the Borrower's corporate powers and have been duly authorized by all
necessary corporate action pursuant to the estatutos sociales of the
Borrower.
(b) This Agreement and the other Transaction Documents to which the
Borrower is a party have been duly executed and delivered by the Borrower
and constitute the legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable concurso mercantil, bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or general equity principles.
5.03 Compliance with Law and Other Instruments. The execution,
delivery of and performance under this Agreement and each of the other
Transaction Documents to which the Borrower is a party and the consummation of
the transactions herein or therein contemplated, and compliance with the terms
and provisions hereof and thereof, do not and will not (a) conflict with, or
result in a breach or violation of, or constitute a default under, or result in
the creation or imposition of any Lien upon the assets of the Borrower pursuant
to, any Contractual Obligation of the Borrower or (b) result in any violation
of the estatutos sociales of the Borrower or any provision of any Requirement
of Law applicable to the Borrower.
5.04 Consents/Approvals. No order, permission, consent, approval,
license, authorization, registration or validation of, or notice to or filing
with, or exemption by, any Governmental Authority or third party is required to
authorize, or is required in connection with, the execution, delivery and
performance by the Borrower of this Agreement and the other Transaction
Documents to which the Borrower is a party or the taking of any action
contemplated hereby or by any other Transaction Document.
5.05 Financial Information. The consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 2004, and the related
consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion of KPMG
Cardenas Dosal, S.C., independent public accountants, and the consolidated
balance sheet of the Borrower and its Subsidiaries as at March 31, 2005, and
the related consolidated statements of income and cash flows of the Borrower
and its Subsidiaries for the three months then ended, duly certified by the
chief financial officer of the Borrower, copies of which have been furnished to
each Lender, fairly present, subject, in the case of said balance sheet as at
March 31, 2005, and said statements of income and cash flows for the three
months then ended, to year-end audit adjustments, the consolidated financial
condition of the Borrower and its Subsidiaries as at such dates and the
consolidated results of the operations of the Borrower and its Subsidiaries for
the periods ended on such dates, all in accordance with Mexican GAAP,
consistently applied.
5.06 Litigation. Except as set forth in Schedule 5.06, there is no
pending or threatened action, suit, investigation, litigation or proceeding,
including any Environmental Action, affecting the Borrower or any of its
Subsidiaries before any court, Governmental Authority or arbitrator that (a)
would be reasonably likely to have a Material Adverse Effect or (b) purports to
affect the legality, validity or enforceability of any Transaction Document or
the consummation of the transactions contemplated thereby, and there has been
no adverse change in the status, or financial effect on the Borrower or any of
its Subsidiaries, of the litigation described in Schedule 5.06.
5.07 No Immunity. The Borrower is subject to civil and commercial law
with respect to its obligations under this Agreement and each other Transaction
Document to which it is a party and the execution, delivery and performance of
this Agreement or any such other Transaction Document by the Borrower
constitute private and commercial acts rather than public or governmental acts.
Under the laws of Mexico neither the Borrower nor any of its property has any
immunity from jurisdiction of any court or any legal process (whether through
service or notice, attachment prior to judgment or attachment in aid of
execution).
5.08 Governmental Regulations. The Borrower is not, and is not
controlled by, (a) an "investment company" within the meaning of the United
States Investment Company Act of 1940, as amended or (b) a "holding company",
or of a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
5.09 Direct Obligations; Pari Passu; Liens.
(a) (i) This Agreement constitutes a direct, unconditional
unsubordinated and unsecured obligation of the Borrower, and (ii) the
Loans, when made, will constitute direct, unconditional unsubordinated and
unsecured obligations of the Borrower.
(b) The obligations of the Borrower under this Agreement and the Loans
rank and will rank in priority of payment at least pari passu with all
other senior unsecured Debt of the Borrower.
(c) There are no Liens on the property of the Borrower or any of its
Subsidiaries other than Permitted Liens.
5.10 Subsidiaries. As of March 31, 2005, all Material Subsidiaries of
the Borrower are listed on Schedule 5.10, without giving effect to the
acquisition of RMC Group p.l.c.
5.11 Ownership of Property. (a) Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, each of the Borrower
and its Subsidiaries has title in fee simple to, or a valid leasehold interest
in, all its real property, and good title to, or a valid leasehold interest in,
all its other property, and none of such property is subject to any Lien except
Permitted Liens and (b) each Credit Party maintains insurance as required by
Section 7.05.
5.12 No Recordation Necessary.
(a) This Agreement and the Notes are in proper legal form under the
law of Mexico for the enforcement thereof against the Borrower under the
law of Mexico. To ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement and each other Transaction
Document in Mexico, it is not necessary that this Agreement or any other
Transaction Document be filed or recorded with any Governmental Authority
in Mexico or that any stamp or similar tax be paid on or in respect of this
Agreement or any other document to be furnished under this Agreement,
unless such stamp or similar taxes have been paid by the Borrower;
provided, however, that in the event any legal proceedings are brought in
the courts of Mexico, an official Spanish translation of the documents
required in such proceedings, including this Agreement, would have to be
approved by the court after the defendant is given an opportunity to be
heard with respect to the accuracy of the translation, and proceedings
would thereafter be based upon the translated documents.
(b) It is not necessary (i) in order for the Administrative Agent or
any Lender to enforce any rights or remedies under the Transaction
Documents or (ii) solely by reason of the execution, delivery and
performance of this Agreement by the Administrative Agent or any Lender,
that the Administrative Agent or such Lender be licensed or qualified with
any Mexican Governmental Authority or be entitled to carry on business in
Mexico.
5.13 Taxes.
(a) Each Obligor has filed all material tax returns which are required
to be filed by it and has paid all taxes due pursuant to such returns or
pursuant to any material assessment received by the Borrower, except where
the same may be contested in good faith by appropriate proceedings and as
to which such Obligor maintains reserves to the extent it is required to do
so by law or pursuant to Mexican GAAP. The charges, accruals and reserves
on the books of each Obligor in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
(b) Except for tax imposed by way of withholding on interest, fees and
commissions remitted from Mexico, there is no tax (other than taxes on, or
measured by, income or profits), levy, impost, deduction, charge or
withholding imposed, levied, charged, assessed or made by or in Mexico or
any political subdivision or taxing authority thereof or therein either (i)
on or by virtue of the execution or delivery of this Agreement or any of
the other Transaction Documents or (ii) on any payment to be made by the
Borrower pursuant to this Agreement or any of the other Transaction
Documents. The Borrower and each Guarantor is permitted to pay any
additional amounts payable pursuant to Section 3.04.
5.14 Compliance with Laws. The Borrower and its Subsidiaries are in
compliance in all material respects with all applicable Requirements of Law
(including with respect to the licenses, certificates, permits, franchises, and
other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses,
antitrust laws or Environmental Laws and the rules and regulations and laws
with respect to social security, workers' housing funds, and pension funds
obligations), except where the failure to so comply would not have a Material
Adverse Effect.
5.15 Absence of Default. No Default or Event of Default has occurred
and is continuing.
5.16 Full Disclosure. All information heretofore furnished by the
Borrower to the Administrative Agent, the Joint Bookrunners or any Lender for
purposes of or in connection with this Agreement or any transaction
contemplated hereby (other than projections and other "forward-looking"
information that have been prepared on a reasonable basis and in good faith by
the Borrower) is, and all such information hereafter furnished by the Borrower
to the Administrative Agent, the Joint Bookrunners or any Lender will be, true
and accurate in all material respects on the date as of which such information
is stated or certified and does not omit to state any material fact necessary
in order to make the statements contained herein or therein, taken as a whole,
not misleading. The Borrower has disclosed to the Lenders in writing any and
all facts which may have a Material Adverse Effect.
5.17 Choice of Law; Submission to Jurisdiction and Waiver of Sovereign
Immunity. In any action or proceeding involving the Borrower arising out of or
relating to this Agreement in any Mexican court or tribunal, any Lender, the
Joint Bookrunners and the Administrative Agent would be entitled to the
recognition and effectiveness of the choice of law, submission to jurisdiction
and waiver of sovereign immunity provisions of Sections 13.10, 13.11 and 13.13.
5.18 Aggregate Exposure. The Aggregate Exposure does not exceed the
Aggregate Committed Amount.
5.19 Pension and Welfare Plans. During the consecutive twelve-month
period prior to the date of the execution and delivery of this Agreement and
prior to the date of any Borrowing hereunder, no steps have been taken to
terminate any Pension Plan, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which would reasonably be expected to result in the
incurrence by any Credit Party, any of its Subsidiaries, or any its ERISA
Affiliates of any material liability (other than liabilities incurred in the
ordinary course of maintaining the Pension Plan), fine or penalty. No Credit
Party, nor any of its Subsidiaries, has any contingent liability with respect
to any post-retirement benefit under a Welfare Plan which would reasonably be
expected to have a Material Adverse Effect, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
5.20 Environmental Matters.
Except as would not have or be reasonably expected to have a Material
Adverse Effect:
(a) Each of the properties owned or leased by a Credit Party or any of
its Subsidiaries (the "Real Properties") and all operations at the Real
Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Real
Properties or the businesses operated by the Credit Parties or any of their
Subsidiaries (the "Businesses"), and there are no conditions relating to
the Businesses or Real Properties that would reasonably be expected to give
rise to liability under any applicable Environmental Laws.
(b) No Credit Party has received any written notice of, or inquiry
from any Governmental Authority regarding, any violation, alleged
violation, non-compliance or liability regarding Hazardous Materials or
compliance with Environmental Laws with regard to any of the Real
Properties or the Businesses, nor, to the knowledge of a Credit Party or
any of its Subsidiaries, is any such notice being threatened.
(c) Hazardous Materials have not been transported or disposed of from
the Real Properties, or generated, treated, stored or disposed of at, on or
under any of the Real Properties or any other location, in each case by, or
on behalf or with the permission of, a Credit Party or any of its
Subsidiaries in a manner that would give rise to liability under any
applicable Environmental Laws.
(d) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of a Credit Party or any of its Subsidiaries,
threatened, under any Environmental Law to which a Credit Party or any of
its Subsidiaries is or will be named as a party, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to a Credit Party or any of its
Subsidiaries, the Real Properties or the Businesses.
(e) There has been no release (including disposal) or to the
Borrower's knowledge, threat of release of Hazardous Materials at or from
the Real Properties, or arising from or related to the operations of a
Credit Party or any of its Subsidiaries in connection with the Real
Properties or otherwise in connection with the Businesses where such
release constituted a violation of, or would give rise to liability under,
any applicable Environmental Laws.
(f) None of the Real Properties contains any Hazardous Materials at,
on or under the Real Properties in amounts or concentrations that, if
released, constitute a violation of, or could give rise to liability under,
Environmental Laws.
(g) No Credit Party, nor any of its Subsidiaries, has assumed any
liability of any Person (other than another Credit Party or one of its
Subsidiaries) under any Environmental Law.
(h) This Section 5.20 constitutes the only representations and
warranties of the Credit Parties with respect to any Environmental Law or
Hazardous Substance.
5.21 Margin Regulations. No part of the proceeds of the Loans
hereunder will be used, directly or indirectly, for the purpose of purchasing
or carrying any "margin stock" within the meaning of Regulation U, or for the
purpose of purchasing or carrying or trading in any securities. If requested by
any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U. No indebtedness being reduced or retired out of the proceeds of the Loans
hereunder was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or any "margin security" within
the meaning of Regulation T. "Margin stock" within the meaning of Regulation U
does not constitute more than 25% of the value of the consolidated assets of
the Borrower and its Subsidiaries. Neither the execution and delivery hereof by
the Borrower, nor the performance by it of any of the transactions contemplated
by this Agreement (including the direct or indirect use of the proceeds of the
Loans) will violate or result in a violation of the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, or regulations
issued pursuant thereto, or Regulation T, U, or X.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
------------------------------------------------
Each of the Guarantors separately represents and warrants that:
6.01 Corporate Existence and Power.
(a) Such Guarantor is a corporation (sociedad anonima de capital
variable) duly incorporated, validly existing and in good standing under the
laws of Mexico and has all requisite corporate power and authority
(including all governmental licenses, permits and other approvals except for
such licenses, permits and approvals the absence of which will not have a
Material Adverse Effect) to own its assets and carry on its business as now
conducted and as proposed to be conducted.
(b) All of the outstanding stock of such Guarantor has been validly
issued and is fully paid and non-accessible.
6.02 Power and Authority; Enforceable Obligations.
(a) The execution, delivery and performance by such Guarantor of each
Transaction Document to which it is or will be a party, and the consummation
of the transactions contemplated hereby and thereby, are within such
Guarantor's corporate powers and have been duly authorized by all necessary
corporate action pursuant to the estatutos sociales of such Guarantor.
(b) This Agreement and the other Transaction Documents to which such
Guarantor is a party have been duly executed and delivered by such Guarantor
and constitute legal, valid and binding obligations of such Guarantor
enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable concurso mercantil, bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or general equity principals.
6.03 Compliance with Law and Other Instruments. The execution,
delivery and performance of this Agreement and any of the other Transaction
Documents to which such Guarantor is a party and the consummation of the
transactions herein or therein contemplated, and compliance with the terms and
provisions hereof and thereof, do not and will not (a) conflict with, or result
in a breach or violation of, or constitute a default under, or result in the
creation or imposition of any Lien upon the assets of such Guarantor pursuant
to, any Contractual Obligation of such Guarantor or (b) result in any violation
of the estatutos sociales of such Guarantor or any provision of any Requirement
of Law applicable to such Guarantor.
6.04 Consents/Approvals. No order, permission, consent, approval,
license, authorization, registration or validation of, or notice to or filing
with, or exemption by, any Governmental Authority or third party is required to
authorize, or is required in connection with, the execution, delivery and
performance by such Guarantor of this Agreement and the other Transaction
Documents to which such Guarantor is a party or the taking of any action
contemplated hereby or by any other Transaction Document.
6.05 Litigation; Material Adverse Effect. Except as set forth in
Schedule 6.05, there is no pending or threatened action, suit, investigation,
litigation or proceeding, including any Environmental Action, affecting the
Borrower or any of its Subsidiaries before any court, Governmental Authority or
arbitrator that (i) would be reasonably likely to have a Material Adverse
Effect or (ii) purports to affect the legality, validity or enforceability of
any Transaction Document or the consummation of the transactions contemplated
thereby, and there has been no adverse change in the status, or financial
effect on the Borrower or any of its Subsidiaries, of the litigation described
in Schedule 6.05.
6.06 No Immunity. Such Guarantor is subject to civil and commercial
law with respect to its obligations under this Agreement and each other
Transaction Document to which it is a party and the execution, delivery and
performance of this Agreement or any such other Transaction Document by such
Guarantor constitute private and commercial acts rather than public or
governmental acts. Under the laws of Mexico neither such Guarantor nor any of
its property has any immunity from jurisdiction of any court or any legal
process (whether through service or notice, attachment prior to judgment or
attachment in aid of execution).
6.07 Governmental Regulations. Such Guarantor is not, and is not
controlled by, (a) an "investment company" within the meaning of the United
States Investment Company Act of 1940, as amended or (b) a "holding company",
or a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
6.08 Direct Obligations; Pari Passu.
(a) This Agreement constitutes a direct, unconditional unsubordinated and
unsecured obligation of such Guarantor.
(b) The obligations of such Guarantor under this Agreement rank and will
rank in priority of payment at least pari passu with all other senior
unsecured Debt of such Guarantor.
6.09 No Recordation Necessary. This Agreement is in proper legal form
under the law of Mexico for the enforcement thereof against such Guarantor
under the law of Mexico. To ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement and each other Transaction Document
in Mexico, it is not necessary that this Agreement or any other Transaction
Document be filed or recorded with any Governmental Authority in Mexico or that
any stamp or similar tax be paid on or in respect of this Agreement or any
other document to be furnished under this Agreement unless such stamp or
similar taxes have been paid by the Borrower or the Guarantors; provided,
however, that in the event any legal proceedings are brought in the courts of
Mexico, an official Spanish translation of the documents required in such
proceedings, including this Agreement, would have to be approved by the court
after the defendant is given an opportunity to be heard with respect to the
accuracy of the translation, and proceedings would thereafter be based upon the
translated documents.
6.10 Choice of Law; Submission to Jurisdiction and Waiver of Sovereign
Immunity. In any action or proceeding involving such Guarantor arising out of
or relating to this Agreement in any Mexican court or tribunal, the Lenders,
the Joint Bookrunners and the Administrative Agent would be entitled to the
recognition and effectiveness of the choice of law, submission to jurisdiction
and waiver of sovereign immunity provisions of Sections 13.10, 13.11 and 13.13.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that for so long as any Obligation
under this Agreement or any other Transaction Document remains unpaid or any
Lender has any Commitment hereunder:
7.01 Financial Reports and Other Information. The Borrower will
deliver to the Administrative Agent (with a copy for each Lender):
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a copy of the annual audit report
for such year for the Borrower and its Subsidiaries containing consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries, as of
the end of such fiscal year and consolidated statements of income and cash
flows of the Borrower and its Subsidiaries, for such fiscal year, in each
case accompanied by an opinion acceptable to the Required Lenders by KPMG
Cardenas Dosal, S.C. or other independent public accountants of recognized
standing acceptable to the Required Lenders, together with (i) a certificate
of such accounting firm to the Lenders stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries, which
audit was conducted by such accounting firm in accordance with Mexican GAAP,
such accounting firm has obtained no knowledge that a Default or Event of
Default has occurred and is continuing, or if, in the opinion of such
accounting firm a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and (ii) a certificate of a
Responsible Officer of the Borrower, stating that no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof and the
action that the Borrower has taken and proposes to take with respect
thereto; provided that in the event of any change in the Mexican GAAP used
in the preparation of such financial statements, the Borrower shall also
provide, for informational purposes only, a statement of reconciliation
conforming such financial statements to Mexican GAAP consistent with those
applied in the preparation of the financial statements referred to in
Section 5.05 and provided further that all such documents will be prepared
in English; and
(b) as soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Borrower,
consolidated balance sheets of the Borrower and its Subsidiaries, as of the
end of such quarter and consolidated statements of income and cash flows of
the Borrower and its Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, duly
certified (subject to year-end audit adjustments) by any Responsible Officer
of the Borrower as having been prepared in accordance with Mexican GAAP and
together with a certificate of a Responsible Officer of the Borrower, as to
compliance with the terms of this Agreement and stating that no Default or
Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof
and the action that the Borrower has taken and proposes to take with respect
thereto; provided that in the event of any change in the Mexican GAAP used
in the preparation of such financial statements, the Borrower shall also
provide, for informational purposes only, a statement of reconciliation
conforming such financial statements to Mexican GAAP consistent with those
applied in the preparation of the financial statements referred to in
Section 5.05 and provided further that all such documents will be prepared
in English; and
(c) Together with the financials delivered pursuant to Section 7.01(b)
with respect to the fiscal quarter ended June 30, 2005 only, a schedule of
all Material Subsidiaries of the Borrower, after giving effect to the
acquisition of RMC Group p.l.c.
7.02 Notice of Default and Litigation. The Borrower will furnish to
the Administrative Agent (and the Administrative Agent will notify each
Lender):
(a) as soon as practicable and in any event within five days after the
occurrence of each Default or Event of Default continuing on the date of
such statement, a statement of the chief financial officer of the Borrower
setting forth details of such Default or Event of Default and the action
that the Borrower has taken and proposes to take with respect thereto; and
(b) promptly after the commencement thereof, notice of all litigation,
actions, investigations and proceedings before any court, Governmental
Authority or arbitrator affecting the Borrower or any of its Subsidiaries of
the type described in Section 5.06 or the receipt of written notice by the
Borrower or any of its subsidiaries of potential liability or responsibility
for violation, or alleged violation of any federal, state or local law, rule
or regulation (including Environmental Laws) the violation of which could
reasonably be expected to have a Material Adverse Effect.
7.03 Compliance with Laws and Contractual Obligations, Etc. The
Borrower will comply, and cause each of its Subsidiaries to comply, in all
material respects, with all applicable Requirements of Law (including with
respect to the licenses, approvals, certificates, permits, franchises, notices,
registrations and other governmental authorizations necessary to the ownership
of its respective properties or to the conduct of its respective business,
antitrust laws or Environmental Laws and laws with respect to social security
and pension funds obligations) and all material Contractual Obligations, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
7.04 Payment of Obligations. The Borrower will pay and discharge, and
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges or
levies assessed, charged or imposed upon it or upon its property and (b) all
lawful claims that, if unpaid, might by law become a Lien upon its property,
except where the failure to make such payments or effect such discharges could
not reasonably be expected to have a Material Adverse Effect; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained, unless
and until any Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
7.05 Maintenance of Insurance. The Borrower will maintain, and cause
each of its Subsidiaries to maintain, insurance with reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies of established reputation engaged in similar businesses
and owning similar properties in the same general areas in which the Borrower
or such Subsidiary operates.
7.06 Conduct of Business and Preservation of Corporate Existence. The
Borrower will continue to engage in business of the same general type as now
conducted by the Borrower and will preserve and maintain, and cause each of its
Material Subsidiaries to preserve and maintain, its corporate existence, rights
(charter and statutory), licenses, consents, permits, notices or approvals and
franchises deemed material to its business; provided that neither the Borrower
nor any of its Subsidiaries shall be required to maintain its corporate
existence in connection with a merger or consolidation in compliance with
Section 8.03; and provided, further that neither the Borrower nor any of its
Subsidiaries shall be required to preserve any right or franchise if the
Borrower or any such Subsidiary shall in its good faith judgment, determine
that the preservation thereof is no longer in the best interests of the
Borrower or such Subsidiary, as the case may be, and that the loss thereof
could not reasonably be expected to have a Material Adverse Effect.
7.07 Books and Records. The Borrower will keep, and cause each of its
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with Mexican
GAAP, consistently applied.
7.08 Maintenance of Properties, Etc. The Borrower will:
(a) maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties that are used or useful in the
conduct of its business in good working order and condition, ordinary wear
and tear excepted, and
(b) maintain, preserve and protect all intellectual property and all
necessary governmental and third party approvals, franchises, licenses and
permits, material to the business of the Borrower or its Subsidiaries,
provided neither paragraph (a) nor this paragraph (b) shall prevent the
Borrower or any of its Subsidiaries from discontinuing the operation and
maintenance of any of its properties or allowing to lapse certain approvals,
licenses or permits which discontinuance is desirable in the conduct of its
business and which discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.09 Use of Proceeds. The Borrower will use the proceeds of all Loans
made hereunder for general corporate purposes (including the repayment of
existing indebtedness).
7.10 Aggregate Exposure. The Borrower will ensure that at no time
shall the Aggregate Exposure of the Lenders exceed the Aggregate Committed
Amount then in effect.
7.11 Pari Passu Ranking. The Borrower will ensure that at all times
the Obligations of the Borrower and each of the Guarantors under the
Transaction Documents constitute unconditional general obligations of such
Obligor ranking in priority of payment at least pari passu with all other
senior unsecured, unsubordinated Debt of such Obligor.
7.12 Transactions with Affiliates. The Borrower will conduct, and
cause each of its Subsidiaries to conduct, all transactions otherwise permitted
under this Agreement with any of its Affiliates on terms that are commercially
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
7.13 Maintenance of Governmental Approvals. The Borrower will maintain
in full force and effect at all times all approvals of and filings with any
Governmental Authority or third Party required under applicable law for the
conduct of its business (including, without limitation, antitrust laws or
Environmental Laws) and the performance of the Obligors' obligations hereunder
and under the other Transaction Documents by the Borrower and/or the
Guarantors, as applicable, and for the validity or enforceability hereof and
thereof, except where failure to maintain any such approvals or filings could
not reasonably be expected to have a Material Adverse Effect.
7.14 Measurement Date. The Borrower shall provide to the
Administrative Agent a certificate of a Responsible Officer detailing the
latest twelve month total Consolidated Net Debt/EBITDA Ratio as soon as
practicable, but in no event later than five Business Days after the
consolidated financial statements of the Borrower and its Subsidiaries are
delivered pursuant to Section 7.01 (each such date a "Measurement Date").
7.15 Inspection of Property. At any reasonable time during normal
business hours and from time to time with at least ten Business Days prior
notice, or at any time if a Default or Event of Default shall have occurred and
be continuing, permit the Administrative Agent or any of the Lenders or any
agents or representatives thereof to examine and make abstracts from the
records and books of account of, and visit the properties of, each of the
Borrower or the Guarantors, and to discuss the affairs, finances and accounts
of the Borrower or such Guarantor with any of its officers or directors and
with its independent certified public accountants. All expenses associated with
such inspection shall be borne by the inspecting Lenders; provided that if a
Default or an Event of Default shall have occurred and be continuing, any
expenses associated with such inspection shall be borne jointly and severally
by the Borrower and the Guarantors.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that for so long as any Obligation
under this Agreement or any other Transaction Document remains unpaid or any
Lender has any Commitment hereunder:
8.01 Financial Conditions.
(a) The Borrower shall not permit the Consolidated Net Debt / EBITDA
Ratio at any time to exceed 3.5 to 1.
(b) The Borrower shall not permit the Consolidated Fixed Charge
Coverage Ratio for any period of four consecutive fiscal quarters to be less
than 2.5 to 1.
(c) Concurrently with the delivery by the Borrower of any financial
statements pursuant to Section 7.01, the Borrower shall deliver to the
Administrative Agent (with a copy to each Lender) a certificate from a
Responsible Officer containing all information and calculations necessary
for determining compliance by the Borrower with Sections 8.01 (a) and (b)
above.
8.02 Liens. The Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of the Borrower or
any Subsidiary, whether now owned or held or hereafter acquired, other than the
following Liens ("Permitted Liens"):
(a) Liens for taxes, assessments and other governmental charges the
payment of which is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted and for which adequate reserves
or other appropriate provision, if any, as shall be required by Mexican GAAP
shall have been made;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
sums not yet due or the payment of which is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and for
which such reserves or other appropriate provision, if any, as shall be
required by Mexican GAAP shall have been made;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(d) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
(e) Liens existing on the date of this Agreement (other than liens
with respect to the acquisition of RMC Group p.l.c.) that are described in
Schedule 8.02(e)(i) hereto and liens existing as of March 31, 2005
(including liens with respect to the acquisition of RMC Group p.l.c.) that
are described in Schedule 8.02(e)(ii) hereto;
(f) any Lien on property acquired by the Borrower after the date
hereof that was existing on the date of acquisition of such property;
provided that such Lien was not incurred in anticipation of such
acquisition, and any Lien created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part of the
purchase price, of property acquired by the Borrower or any of its
Subsidiaries after the date hereof; provided, further, that (A) any such
Lien permitted pursuant to this clause (f) shall be confined solely to the
item or items of property so acquired (including, in the case of any
Acquisition of a corporation through the acquisition of 51% or more of the
voting stock of such corporation, the stock and assets of any Acquired
Subsidiary or Acquiring Subsidiary) and, if required by the terms of the
instrument originally creating such Lien, other property which is an
improvement to, or is acquired for specific use with, such acquired
property; and (B) if applicable, any such Lien shall be created within nine
months after, in the case of property, its acquisition, or, in the case of
improvements, their completion;
(g) any Lien renewing, extending or refunding any Lien permitted by
clause (f) above; provided that the principal amount of Debt secured by such
Lien immediately prior thereto is not increased or the maturity thereof
reduced and such Lien is not extended to other property;
(h) any Liens created on shares of capital stock of the Borrower or
any of its Subsidiaries solely as a result of the deposit or transfer of
such shares into a trust or a special purpose vehicle (including any entity
with legal personality) of which such shares constitute the sole assets;
provided that (A) any shares of Subsidiary stock held in such trust,
corporation or entity could be sold by the Borrower; and (B) proceeds from
the deposit or transfer of such shares into such trust, corporation or
entity and from any transfer of or distributions in respect of the
Borrower's or any Subsidiary's interest in such trust, corporation or entity
are applied as provided under Section 8.04; and provided, further that such
Liens may not secure Debt of the Borrower or any Subsidiary (unless
permitted under another clause of this Section 8.02);
(i) any Liens on securities securing repurchase obligations in respect
of such securities;
(j) any Liens in respect of any Receivables Program Assets which are
or may be sold or transferred pursuant to a Qualified Receivables
Transaction; and
(k) in addition to the Liens permitted by the foregoing clauses (a)
through (j), Liens securing Debt of the Borrower and its Subsidiaries (taken
as a whole) not in excess of 5% of the Adjusted Consolidated Net Tangible
Assets of the Borrower and its Subsidiaries;
unless, in each case, the Borrower has made or caused to be made effective
provision whereby the Obligations hereunder are secured equally and ratably
with, or prior to, the Debt secured by such Liens (other than Permitted Liens)
for so long as such Debt is so secured.
8.03 Consolidations and Mergers. None of the Guarantors nor the
Borrower shall, in one or more related transactions, (x) consolidate with or
merge into any other Person or permit any other Person to merge into it or (y),
directly or indirectly, transfer, convey, sell, lease or otherwise dispose of
all or substantially all of its properties or assets to any Person, unless,
with respect to any transaction described in clause (x) or (y), immediately
after giving effect to such transaction:
(a) the Person formed by any such consolidation or merger, if it is
not the Borrower or such Guarantor, or the Person that acquires by transfer,
conveyance, sale, lease or other disposition all or substantially all of the
properties and assets of the Borrower or such Guarantor (any such Person, a
"Successor") (i) shall be a corporation organized and validly existing under
the laws of its place of incorporation, which in the case of a Successor to
the Borrower shall be Mexico, the United States, Canada, France, Belgium,
Germany, Italy, Luxembourg, the Netherlands, Portugal, Spain, Switzerland or
the United Kingdom, or any political subdivision thereof, (ii) in the case
of a Successor to the Borrower, shall expressly assume, pursuant to a
written agreement in form and substance satisfactory to the Required
Lenders, the Obligations of the Borrower pursuant to this Agreement and the
performance of every covenant on part of the Borrower to be performed and
observed and (iii) in the case of a Successor to any Guarantor, shall
expressly assume, pursuant to a written agreement in form and substance
satisfactory to the Required Lenders, the performance of every covenant of
this Agreement on part of such Guarantor to be performed and observed;
(b) in the case of any such transaction involving the Borrower or any
Guarantor, the Borrower or such Guarantor, or the Successor of any thereof,
as the case may be, shall expressly agree to indemnify each Lender and the
Administrative Agent against any tax, levy, assessment or governmental
charge payable by withholding or deduction thereafter imposed on such Lender
and/or the Administrative Agent solely as a consequence of such transaction
with respect to payments under the Transaction Documents;
(c) immediately after giving effect to such transaction, including for
purposes of this clause (c) the substitution of any Successor to the
Borrower for the Borrower or the substitution of any Successor to a
Guarantor for such Guarantor and treating any Debt or Lien incurred by the
Borrower or any Successor to the Borrower, or by a Guarantor of the Borrower
or any Successor to such Guarantor, as a result of such transactions as
having been incurred at the time of such transaction, no Default or Event of
Default shall have occurred and be continuing; and
(d) the Borrower shall have delivered to the Administrative Agent an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a written
agreement is required in connection with such transaction, such written
agreement comply with the relevant provisions of this Article VIII and that
all conditions precedent provided for in this Agreement relating to such
transaction have been complied with.
8.04 Sales of Assets, Etc. The Borrower will not, and will not permit
any of its Material Subsidiaries to, sell, lease or otherwise dispose of any of
its assets (including the capital stock of any Subsidiary), other than (a)
inventory, trade receivables and assets surplus to the needs of the business of
the Borrower or any Subsidiary sold in the ordinary course of business and (b)
assets not used, usable or held for use in connection with cement operations
and related operations, unless the proceeds of the sale of such assets are
retained by the Borrower or such Subsidiary, as the case may be, and, as
promptly as practicable after such sale (but in any event within 180 days of
such sale), the proceeds are applied to (i) expenditures for property, plant
and equipment usable in the cement industry or related industries; (ii) the
repayment of senior Debt of the Borrower or any of its Subsidiaries, whether
secured or unsecured; or (iii) investments in companies engaged in the cement
industry or related industries.
8.05 Change in Nature of Business. The Borrower shall not make, or
permit any of its Material Subsidiaries to make, any material change in the
nature of its business as carried on at the date hereof.
8.06 Margin Regulations. The Borrower shall not use any part of the
proceeds of the Loans for any purpose which would result in any violation
(whether by the Borrower, the Administrative Agent or the Lenders) of
Regulation T, U or X of the Federal Reserve Board or to extend credit to others
for any such purpose. The Borrower shall not engage in, or maintain as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying any margin stock (as defined in such regulations).
ARTICLE IX
OBLIGATIONS OF GUARANTORS
-------------------------
9.01 The Guaranty. Each of the Guarantors jointly and severally hereby
unconditionally and irrevocably guarantees (as a primary obligor and not merely
as surety) payment in full as provided herein of all Obligations payable by the
Borrower to each Lender, the Administrative Agent and the Joint Bookrunners
under this Agreement and the other Transaction Documents and the Fee Letter, as
and when such amounts become payable (whether at stated maturity, by
acceleration or otherwise).
9.02 Nature of Liability. The obligations of the Guarantors hereunder
are guarantees of payment and shall remain in full force and effect until all
Obligations of the Borrower have been validly, finally and irrevocably paid in
full and all Commitments have been terminated, and shall not be affected in any
way by the absence of any action to obtain such amounts from the Borrower or by
any variation, extension, waiver, compromise or release of any or all
Obligations from time to time therefor. Each Guarantor waives all requirements
as to promptness, diligence, presentment, demand for payment, protest and
notice of any kind with respect to this Agreement and the other Transaction
Documents.
9.03 Unconditional Obligations. Notwithstanding any contrary
principles under the laws of any jurisdiction other than the State of New York,
the obligations of each of the Guarantors hereunder shall be unconditional,
irrevocable and absolute and, without limiting the generality of the foregoing,
shall not be impaired, terminated, released, discharged or otherwise affected
by the following:
(a) the existence of any claim, set-off or other right which either of
the Guarantors may have at any time against the Borrower, the Administrative
Agent, any Lenders or any other Person, whether in connection with this
transaction or with any unrelated transaction;
(b) any invalidity or unenforceability of this Agreement or any other
Transaction Document relating to or against the Borrower or either of the
Guarantors for any reason;
(c) any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower of any amount payable by the Borrower
under this Agreement or any of the other Transaction Documents or the
payment, observance, fulfillment or performance of any other Obligations;
(d) any change in the name, purposes, business, capital stock
(including the ownership thereof) or constitution of the Borrower;
(e) any amendment, waiver or modification of any Transaction Document
in accordance with the terms hereof and thereof; or
(f) any other act or omission to act or delay of any kind by the
Borrower, the Administrative Agent, the Lenders or any other Person or any
other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge of or defense to either of the Guarantors' obligations
hereunder.
9.04 Independent Obligation. The obligations of each of the Guarantors
hereunder are independent of the Borrower's obligations under the Transaction
Documents and of any guaranty or security that may be obtained for the
Obligations. The Administrative Agent and the Lenders may neglect or forbear to
enforce payment hereunder, under any Transaction Document or under any guaranty
or security, without in any way affecting or impairing the liability of each
Guarantor hereunder. The Administrative Agent or the Lenders shall not be
obligated to exhaust recourse or take any other action against the Borrower or
under any agreement to purchase or security which the Administrative Agent or
the Lenders may hold before being entitled to payment from the Guarantors of
the obligations hereunder or proceed against or have resort to any balance of
any deposit account or credit on the books of the Administrative Agent or the
Lenders in favor of the Borrower or each of the Guarantors. Without limiting
the generality of the foregoing, the Administrative Agent or the Lenders shall
have the right to bring suit directly against either of the Guarantors, either
prior or subsequent to or concurrently with any lawsuit against, or without
bringing suit against, the Borrower and/or the other Guarantor.
9.05 Waiver of Notices. Each of the Guarantors hereby waives notice of
acceptance of this ARTICLE IX and notice of any liability to which it may
apply, and waives presentment, demand for payment, protest, notice of dishonor
or nonpayment of any such liability, suit or the taking of other action by the
Administrative Agent or the Lenders against, and any other notice, to the
Guarantors.
9.06 Waiver of Defenses. To the extent permitted by New York law and
notwithstanding any contrary principles under the laws of any other
jurisdiction, each of the Guarantors hereby waives any and all defenses to
which it may be entitled, whether at common law, in equity or by statute which
limits the liability of, or exonerates, guarantors or which may conflict with
the terms of this ARTICLE IX, including failure of consideration, breach of
warranty, statute of frauds, merger or consolidation of the Borrower, statute
of limitations, accord and satisfaction and usury. Without limiting the
generality of the foregoing, each of the Guarantors consents that, without
notice to such Guarantor and without the necessity for any additional
endorsement or consent by such Guarantor, and without impairing or affecting in
any way the liability of such Guarantor hereunder, the Administrative Agent and
the Lenders may at any time and from time to time, upon or without any terms or
conditions and in whole or in part, (a) change the manner, place or terms of
payment of, and/or change or extend the time or payment of, renew or alter, any
of the Obligations, any security therefor, or any liability incurred directly
or indirectly in respect thereof, and this ARTICLE IX shall apply to the
Obligations as so changed, extended, renewed or altered; (b) exercise or
refrain from exercising any right against the Borrower or others (including the
Guarantors) or otherwise act or refrain from acting, (c) settle or compromise
any of the Obligations, any security therefor or any liability (including any
of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to the
payment of any such liability (whether due or not) of the Borrower to creditors
of the Borrower other than the Administrative Agent and the Lenders and the
Guarantors, (d) apply any sums by whomsoever paid or howsoever realized, other
than payments of the Guarantors of the Obligations, to any liability or
liabilities of the Borrower under the Transaction Documents or any instruments
or agreements referred to herein or therein, to the Administrative Agent and
the Lenders regardless of which of such liability or liabilities of the
Borrower under the Transaction Documents or any instruments or agreements
referred to herein or therein remain unpaid; (e) consent to or waive any breach
of, or any act, omission or default under the Obligations or any of the
instruments or agreements referred to in this Agreement and the other
Transaction Documents, or otherwise amend, modify or supplement the Obligations
or any of such instruments or agreements, including the Transaction Documents;
and/or (f) request or accept other support of the Obligations or take and hold
any security for the payment of the Obligations or the obligations of the
Guarantors under this ARTICLE IX, or allow the release, impairment, surrender,
exchange, substitution, compromise, settlement, rescission or subordination
thereof. Furthermore, each of the Guarantors hereby waives to the extent
permitted by law any right to which it may be entitled to under Articles 2830,
2836, 2842, 2845, 2846, 2848 and 2849 of the Mexican Federal Civil Code and
related Articles contained in the Civil Codes of the States in Mexico. The
Guarantors further expressly waive the benefits of order, excusion y division
contained in Articles 2814, 2815, 2817, 2818, 2820, 2821, 2822, 2823, 2837,
2838, 2840, 2841 and other related Articles of the Mexican Federal Civil Code
and related Articles contained in other Civil Codes of the States of Mexico.
The Guarantors hereby represent that the terms of each such provision of each
such civil code are known in form and substance to each such Guarantor.
9.07 Bankruptcy and Related Matters.
(a) So long as any of the Obligations remain outstanding, each of the
Guarantors shall not, without the prior written consent of the
Administrative Agent (acting with the consent of the Required Lenders),
commence or join with any other Person in commencing any bankruptcy,
liquidation, reorganization, concurso mercantil or insolvency proceedings
of, or against, the Borrower.
(b) If acceleration of the time for payment of any amount payable by
the Borrower under this Agreement or the Notes is stayed upon the
insolvency, bankruptcy, reorganization, concurso mercantil or any similar
event of the Borrower or otherwise, all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable
by the Guarantors hereunder forthwith on demand by the Administrative Agent
made at the request of the Lenders.
(c) The obligations of each of the Guarantors under this ARTICLE IX
shall not be reduced, limited, impaired, discharged, deferred, suspended or
terminated by any proceeding or action, voluntary or involuntary, involving
the bankruptcy, insolvency, concurso mercantil, receivership,
reorganization, marshalling of assets, assignment for the benefit of
creditors, readjustment, liquidation or arrangement of the Borrower or
similar proceedings or actions or by any defense which the Borrower may have
by reason of the order, decree or decision of any court or administrative
body resulting from any such proceeding or action. Without limiting the
generality of the foregoing, the Guarantors' liability shall extend to all
amounts and obligations that constitute the Obligations and would be owed by
the Borrower but for the fact that they are unenforceable or not allowable
due to the existence of any such proceeding or action.
(d) Each of the Guarantors acknowledges and agrees that any interest
on any portion of the Obligations which accrues after the commencement of
any proceeding or action referred to above in Section 9.07(c) (or, if
interest on any portion of the Obligations ceases to accrue by operation of
law by reason of the commencement of said proceeding or action, such
interest as would have accrued on such portion of the Obligations if said
proceedings or actions had not been commenced) shall be included in the
Obligations, it being the intention of the Guarantors, the Administrative
Agent, and the Lenders that the Obligations which are to be guaranteed by
the Guarantors pursuant to this ARTICLE IX shall be determined without
regard to any rule of law or order which may relieve the Borrower of any
portion of such Obligations. The Guarantors will take no action to prevent
any trustee in bankruptcy, receiver, debtor in possession, assignee for the
benefit of creditors or similar person from paying the Administrative Agent,
or allowing the claim of the Administrative Agent, for the benefit of the
Administrative Agent, and the Lenders, in respect of any such interest
accruing after the date of which such proceeding is commenced, except to the
extent any such interest shall already have been paid by the Guarantors.
(e) Notwithstanding anything to the contrary contained herein, if all
or any portion of the Obligations are paid by or on behalf of the Borrower,
the obligations of the Guarantors hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event
that all or any part of such payment(s) are rescinded or recovered, directly
or indirectly, from the Administrative Agent and/or the Lenders as a
preference, preferential transfer, fraudulent transfer or otherwise, and any
such payments which are so rescinded or recovered shall constitute
Obligations for all purposes under this ARTICLE IX, to the extent permitted
by applicable law.
9.08 No Subrogation. Notwithstanding any payment or payments made by
any of the Guarantors hereunder or any set-off or application of funds of any
of the Guarantors by the Administrative Agent or any Lender, no Guarantor shall
be entitled to be subrogated to any of the rights of the Administrative Agent
or any Lender against the Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by the Administrative Agent or
any Lender for the payment of the Obligations, nor shall any Guarantor seek or
be entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower
on account of the Obligations shall have been indefeasibly paid in full in
cash. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
indefeasibly paid in full in cash, such amount shall be held by such Guarantor
in trust for the Administrative Agent and the Lenders, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor,
be turned over to the Administrative Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Administrative Agent may determine.
9.09 Right of Contribution. Subject to Section 9.08, each Guarantor
hereby agrees that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor shall be
entitled to seek and receive contribution from and against any other Guarantor
hereunder who has not paid its proportionate share of such payment. The
provisions of this Section 9.09 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent, the Joint Bookrunners
and the Lenders, and each Guarantor shall remain liable to the Administrative
Agent, the Joint Bookrunners and the Lenders for the full amount guaranteed by
such Guarantor hereunder.
9.10 General Limitation on Guaranty. In any action or proceeding
involving any applicable corporate law, or any applicable bankruptcy,
insolvency, reorganization, concurso mercantil or other law affecting the
rights of creditors generally, if the obligations of any Guarantor under this
Section 9.10 would otherwise, taking into account the provisions of Section
9.09, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 9.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Guarantor, any Lender, the Administrative Agent or any other
Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
9.11 Covenants of the Guarantors. Each Guarantor hereby covenants and
agrees that, so long as any Obligations under this Agreement and any other
Transaction Document remains unpaid or any Lender has any Commitment hereunder,
it shall comply with the covenants contained or incorporated by reference in
this Agreement to the extent applicable to it as a Subsidiary of the Borrower.
ARTICLE X
EVENTS OF DEFAULT
-----------------
10.01 Events of Default. The following specified events shall
constitute "Events of Default" for the purposes of this Agreement:
(a) Payment Defaults. The Borrower shall (i) fail to pay any principal
of any Loan when due in accordance with the terms hereof or (ii) fail to pay
any interest on any Loan, any fee or any other amount payable under this
Agreement or any Note within three Business Days after the same becomes due
and payable; or
(b) Representation and Warranties. Any representation or warranty made
by the Borrower herein or in any other Transaction Document or made by
either Guarantor herein or which is contained in any certificate, document
or financial or other statement furnished at any time under or in connection
with this Agreement or any other Transaction Document, as applicable, shall
prove to have been incorrect in any material respect on or as of the date
made if such failure shall remain unremedied for 30 days after the earlier
of the date on which (i) the chief financial officer of the Borrower or such
Guarantor, as the case may be, becomes aware of such incorrectness or (ii)
written notice thereof shall have been given to the Borrower by the
Administrative Agent; or
(c) Specific Defaults. The Borrower or a Guarantor, as applicable,
shall fail to perform or observe any term, covenant or agreement contained
in Section 7.01, 7.02(a), 7.06 (with respect to the Borrower's and each
Guarantor's existence only), 7.11 or 7.15 or ARTICLE VIII; or
(d) Other Defaults. The Borrower or a Guarantor, as applicable, shall
fail to perform or observe any term, covenant or agreement contained in this
Agreement, the Notes, the Fee Letter, any Notice of Borrowings, any
certificates, waivers, or any other agreement delivered pursuant to this
Agreement (other than as provided in paragraphs (a) and (c) above) and such
failure shall continue unremedied for a period of 30 days after the earlier
of the date on which (i) the chief financial officer of the Borrower becomes
aware of such failure or (ii) written notice thereof shall have been given
to the Borrower by the Administrative Agent at the request of any Lender; or
(e) Defaults under Other Agreements. The occurrence of a default or
event of default under any indenture, agreement or instrument relating to
any Material Debt of the Borrower or any of its Subsidiaries, and (unless
any principal amount of such Material Debt is otherwise due and payable)
such default or event of default results in the acceleration of the maturity
of any principal amount of such Material Debt prior to the date on which it
would otherwise become due and payable; or
(f) Voluntary Bankruptcy. The Borrower or any Material Subsidiary
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization, concurso mercantil or other relief with respect to itself or
its debts under any bankruptcy, insolvency, reorganization or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action to
authorize any of the foregoing or the equivalent thereof under Mexican law
(including the Ley de Concursos Mercantiles); or
(g) Involuntary Bankruptcy. An involuntary case or other proceeding
shall be commenced against the Borrower or any Material Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency, concurso mercantil or other similar law
now or hereafter in effect (including but not limited to the Ley de
Concursos Mercantiles) or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 consecutive days; or an
order for relief shall be entered against the Borrower or any Material
Subsidiaries under any bankruptcy, insolvency suspension de pagos or other
similar law as now or hereafter in effect; or
(h) Monetary Judgment. A final judgment or judgments or order or
orders not subject to further appeal for the payment of money in an
aggregate amount in excess of U.S.$50,000,000 shall be rendered against the
Borrower and/or any of its one or more Subsidiaries of the Borrower that are
neither discharged nor bonded in full within 30 days thereafter; or
(i) Pari Passu. The Obligations of the Borrower under this Agreement
or of any Guarantor under this Agreement shall fail to rank at least pari
passu with all other senior unsecured Debt of the Borrower or such
Guarantor, as the case may be; or
(j) Validity of Agreement. The Borrower shall contest the validity or
enforceability of any Transaction Document or shall deny generally the
liability of the Borrower under any Transaction Documents or either
Guarantor shall contest the validity of or the enforceability of their
guarantee hereunder or any obligation of either Guarantor under ARTICLE IX
hereof shall not be (or is claimed by either Guarantor not to be) in full
force and effect;
(k) Governmental Authority. Any governmental or other consent,
license, approval, permit or authorization which is now or may in the future
be necessary or appropriate under any applicable Requirement of Law for the
execution, delivery, or performance by the Borrower or either Guarantor of
any Transaction Document to which it is a party or to make such Transaction
Document legal, valid, enforceable and admissible in evidence shall not be
obtained or shall be withdrawn, revoked or modified or shall cease to be in
full force and effect or shall be modified in any manner that would have an
adverse effect on the rights or remedies of the Administrative Agent or the
Lenders; or
(l) Expropriation, Etc. Any Governmental Authority shall condemn,
nationalize, seize or otherwise expropriate all or any substantial portion
of the property of, or capital stock issued or owned by, the Borrower or
either Guarantor or take any action that would prevent the Borrower or
either Guarantor from performing its obligations under this Agreement, the
Notes, the Fee Letter, any Notice of Borrowings, any certificates, waivers,
or any other agreement delivered pursuant to this Agreement; or
(m) Moratorium; Availability of Foreign Exchange. A moratorium shall
be agreed or declared in respect of any Debt of the Borrower or either
Guarantor or any restriction or requirement not in effect on the date hereof
shall be imposed, whether by legislative enactment, decree, regulation,
order or otherwise, which limits the availability or the transfer of foreign
exchange by the Borrower or either Guarantor for the purpose of performing
any material obligation under this Agreement, the Notes, the Fee Letter, any
Notice of Borrowings, any certificates, waivers, or any other agreement
delivered pursuant to this Agreement; or
(n) Change of Ownership or Control. The beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) of 20% or
more in voting power of the outstanding voting stock of the Borrower or
either Guarantor is acquired by any Person; provided that the acquisition of
beneficial ownership of capital stock of the Borrower or either Guarantor by
Lorenzo H. Zambrano or any member of his immediate family shall not
constitute an Event of Default.
10.02 Remedies. If any Event of Default has occurred and is
continuing, the Administrative Agent shall, at the request of, or may, with the
consent of, the Required Lenders:
terminate the Commitments and/or declare by notice to the Borrower the
principal amount of all outstanding Loans to be forthwith due and payable,
whereupon such principal amount, together with accrued interest thereon and
any fees and all other Obligations accrued hereunder, shall become
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived; provided,
however, that in the case of any Event of Default specified in Section
10.01(f) or (g), without notice or any other act by the Lenders, the
Commitments shall be automatically terminated and the Loans (together with
accrued interest thereon) and all other Obligations of the Borrower
hereunder shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived
by the Borrower;
10.03 Notice of Default. The Administrative Agent shall give notice to
the Borrower of any event occurring under Section 10.01(a), (b), (c) or (d)
promptly upon being requested to do so by any Lender and shall thereupon notify
all the Lenders thereof.
10.04 Default Interest. In the event of default by the Borrower in the
payment on the due date of any sum due under this Agreement, the Borrower shall
pay interest on demand on such sum from the date of such default to the day of
actual receipt of such sum by the Administrative Agent (as well after as before
judgment) at the rate specified in Section 2.02(d). So long as the default
continues, the default interest rate shall be recalculated on the same basis at
intervals of such duration as the Administrative Agent may select, provided
that the amount of unpaid interest at the above rate accruing during the
preceding period (or such longer period as may be the shortest period permitted
by applicable law for the capitalization of interest) shall be added to the
amount in respect of which the Borrower is in default.
ARTICLE XI
THE ADMINISTRATIVE AGENT
------------------------
11.01 Appointment and Authorization. Each Lender hereby irrevocably
designates and appoints Barclays Bank PLC as the Administrative Agent of such
Lender under this Agreement, and each Lender hereby irrevocably authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and each other Transaction Document and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent
by the terms of this Agreement or any other Transaction Document, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Transaction Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Transaction Document or otherwise exist against the Administrative Agent.
11.02 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement or any other Transaction Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
11.03 Liability of Administrative Agent. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (a) liable for any action taken or omitted to be taken
by it or any such Person under or in connection with this Agreement or any
other Transaction Document or the transactions contemplated hereby (except for
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by the Borrower, the Guarantors or any officer
thereof contained in this Agreement or in any other Transaction Document, or in
any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Transaction Document, or for the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Transaction Document, or for any failure of the Borrower, the
Guarantors or any other party to any Transaction Document to perform its
obligations hereunder or thereunder. Except as otherwise expressly stated
herein, the Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other
Transaction Document, or to inspect the properties, books or records of the
Borrower or the Guarantors.
11.04 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or teletype
message, statement, order or other document or telephone conversation
believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this
Agreement or any other Transaction Document unless it shall first receive
such advice or concurrence of the Required Lenders as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred
by it by reason of failing to take, taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other
Transaction Document in accordance with a request or consent of the Required
Lenders (or when expressly required hereby, all the Lenders) and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Lender that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter sent by the Administrative
Agent to such Lender for consent, approval, acceptance or satisfaction on or
before the Effective Date.
11.05 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default (except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Lenders) unless the Administrative Agent shall have received written notice
from a Lender or the Borrower referring to this Agreement and describing such
Default or Event of Default and stating that such notice is a "Notice of
Default". The Administrative Agent shall promptly notify the Lenders of its
receipt of any such notice. The Administrative Agent shall take such action
with respect to such Default or Event of Default as may be requested by the
Required Lenders; provided, however, that unless and until the Administrative
Agent has received any such request, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in
the best interest of the Lenders.
11.06 Credit Decision. Each Lender expressly acknowledges that neither
the Administrative Agent nor any of its Affiliates, officers, directors,
employees, agents or attorneys-in-fact has made any representation or warranty
to it, and that no act by the Administrative Agent hereafter taken, including
any review of the affairs of the Borrower, the Guarantors, or any of their
Affiliates, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender acknowledges to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower, the Guarantors, and their
Affiliates and all applicable Lender regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Transaction Documents, and
to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower or the Guarantors. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower or the Guarantors which may come
into the possession of the Administrative Agent or any of its Affiliates,
officers, directors, employees, agents or attorneys-in-fact.
11.07 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders agree to indemnify upon demand the
Administrative Agent and its Affiliates, directors, officers, agents and
employees (to the extent not reimbursed by the Borrower and without limiting
the obligation of the Borrower to do so), ratably according to the respective
amounts of their Commitment Percentages in effect on the date the cause for
indemnification arose, from and against any and all claims, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including at any time following the payment of the Obligations or the
Termination Date) be imposed on, incurred by or asserted against the
Administrative Agent (or any of its Affiliates, directors, officers, agents and
employees) in any way relating to or arising out of this Agreement or any other
Transaction Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing;
provided, however, that no Lender shall be liable for the payment of any
portion of such claims, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent it
results from the gross negligence or willful misconduct of the Administrative
Agent or its Affiliates, directors, officers, agents or employees. Without
limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any reasonable and documented costs
or out-of-pocket expenses (including legal fees) incurred by the Administrative
Agent in connection with the preparation, execution, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Transaction Document, or any document contemplated by or referred to
herein, to the extent that the Administrative Agent is not reimbursed for such
expenses by or on behalf of the Borrower.
11.08 Administrative Agent in Individual Capacity. Barclays Bank PLC
may make loans to, issue letters of credit for the account of, accept deposits
from and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Borrower, the Guarantors or any of
their Affiliates as though Barclays Bank PLC were not the Administrative Agent
hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, Barclays Bank PLC or its
Affiliates may receive information regarding the Borrower, the Guarantors and
their Affiliates (including information that may be subject to confidentiality
obligations in favor of the Borrower or the Guarantors) and acknowledge that
the Administrative Agent shall be under no obligation to provide such
information to them. With respect to the Obligations, Barclays Bank PLC shall
have the same rights and powers under this Agreement as any other Lender and
may exercise the same as though it were not the Administrative Agent, and the
terms "Lender" and "Lenders" include Barclays Bank PLC in its individual
capacity.
11.09 Successor Administrative Agent. The Administrative Agent may,
and at the request of the Required Lenders shall, resign as Administrative
Agent upon 30 days' notice to the Lenders and the Borrower. If the
Administrative Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
appointment shall be subject to the approval of the Borrower, such approval not
to be unreasonably withheld (unless a Default or Event of Default shall have
occurred and be continuing, in which case such approval shall not be required).
If no successor agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Lenders and the Borrower, a successor agent from
among the Lenders. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor agent effective upon its appointment, and the
retiring Administrative Agent's rights, powers and duties as Administrative
Agent shall be terminated, without any other or further act on the part of such
retiring Administrative Agent. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this ARTICLE
XI and Sections 13.04 and 13.05 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor Administrative Agent has accepted the appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and either
the Borrower or the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least U.S.$400,000,000.
ARTICLE XII
THE JOINT BOOKRUNNERS
---------------------
12.01 The Joint Bookrunners. The Borrower hereby confirms the
designation of Barclays Capital, the Investment Banking Division of Barclays
Bank PLC, and Citigroup Global Markets Inc., as arrangers and Joint Bookrunners
for this revolving credit facility. The Joint Bookrunners assume no
responsibility or obligation hereunder for servicing, enforcement or collection
of the Obligations, or any duties as agent for the Lenders. The title "Joint
Bookrunner" or "Book-runner" implies no fiduciary responsibility on the part of
the Joint Bookrunners to the Administrative Agent, or the Lenders and the use
of either such title does not impose on the Joint Bookrunners any duties or
obligations under this Agreement except as may be expressly set forth herein.
12.02 Liability of Joint Bookrunners. Neither the Joint Bookrunners
nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by them or any such Person under or in connection
with this Agreement or any other Transaction Document (except for such Joint
Bookrunner's own gross negligence or willful misconduct), or (b) responsible in
any manner to any Lender for any recital, statement, representation or warranty
made by the Borrower or any officer thereof, contained in this Agreement or in
any other Transaction Document, or in any certificate, report, statement or
other document referred to or provided for in, or received by the Arrangers
under or in connection with, this Agreement or any other Transaction Document
or for the validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Transaction Document or for any failure of the
Borrower or any other party to any other Transaction Document to perform its
obligations hereunder or thereunder. Except as otherwise expressly stated
herein, the Joint Bookrunners shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other
Transaction Document, or to inspect the properties, books or records of the
Borrower.
12.03 Joint Bookrunners in their respective Individual Capacities.
Each of Barclays Capital, the Investment Banking Division of Barclays Bank PLC
and its Affiliates, and Citigroup Global Markets Inc. and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of
business with the Borrower or any of its Affiliates as though they were not the
Joint Bookrunners hereunder.
12.04 Credit Decision. Each Lender expressly acknowledges that neither
the Joint Bookrunners nor any of their respective Affiliates, officers,
directors, employees, agents or attorneys-in-fact have made any representation
or warranty to it, and that no act by the Joint Bookrunners hereafter taken,
including any review of the affairs of the Borrower or the Guarantors, shall be
deemed to constitute any representation or warranty by the Joint Bookrunners to
any Lender. Each Lender acknowledges to the Joint Bookrunners that it has,
independently and without reliance upon the Joint Bookrunners, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower or
the Guarantors and their Affiliates and made its own decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Joint Bookrunners, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Transaction Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower or the Guarantors. The Joint Bookrunners shall
not have any duty or responsibility to provide any Lender with any information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the
possession of the Joint Bookrunners or any of their respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Notices.
(a) Except as otherwise expressly provided herein, all notices,
requests, demands or other communications to or upon any party hereunder
shall be in writing (including facsimile transmission) and shall be sent by
an overnight courier service, transmitted by facsimile or delivered by hand
to such party: (i) in the case of the Borrower, the Guarantors, the Joint
Bookrunners or the Administrative Agent, at its address or facsimile number
set forth on Schedule 1.01(c) or at such other address or facsimile number
as such party may designate by notice to the other parties hereto and (ii)
in the case of any Lender, at its address or facsimile number set forth in
Schedule 1.01(b) or at such other address or facsimile number as such Lender
may designate by notice to the Borrower, the Joint Bookrunners and the
Administrative Agent.
(b) Unless otherwise expressly provided for herein, each such notice,
request, demand or other communication shall be effective (i) if sent by
overnight courier service or delivered by hand, upon delivery, (ii) if given
by facsimile, when transmitted to the facsimile number specified pursuant to
paragraph (a) above and confirmation of receipt of a legible copy thereof is
received, or (iii) if given by any other means, when delivered at the
address specified pursuant to paragraph (a) above; provided, however, that
notices to the Administrative Agent under ARTICLE II, III, IV or XI shall
not be effective until received.
13.02 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Borrower or any
Guarantor from the terms of this Agreement, shall in any event be effective
unless the same shall be in writing, consented to by the Borrower or the
applicable Guarantors, as the case may be, and acknowledged by the
Administrative Agent (which shall be a purely ministerial action), and signed
or consented to by the Required Lenders, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or
consent shall:
(a) (i) except as specifically provided herein, increase or decrease
the Commitment of any Lender;
(ii) extend the maturity of any of the Obligations, extend the
time of payment of interest thereon, or extend the Termination Date;
(iii) forgive any Obligation, reduce the principal amount of the
Obligations, reduce the rate of interest thereon, reduce the amount or
change the method of calculation of any Fee hereunder, or change the
provisions of Section 3.05(a);
in each case without the consent of the Borrower and each Lender directly
affected thereby;
(b) (i) amend, modify or waive any provision of this Section 13.02;
(ii) change the percentage specified in the definition of
Required Lenders or the number of Lenders which shall be required for
the Lenders or any of them to take any action under this Agreement; or
(iii) amend, modify or waive any provision of Section 4.01; or
(iv) amend, modify or waive any provision of Section 13.06;
in each case without the consent of the Borrower and all the Lenders;
(c) amend, modify or waive any provision of ARTICLE XI without the
written consent of the Administrative Agent; and
(d) amend, modify or waive any provision of ARTICLE XII without the
consent of the Joint Bookrunners.
13.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under any other Transaction
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
13.04 Payment of Expenses, Etc. The Borrower agrees to pay on demand
(a) all reasonable and documented out-of-pocket costs and expenses
(including reasonable legal fees and disbursements of special Mexican and
New York counsel to the Administrative Agent), syndication (including
printing, distribution and bank meetings), travel, telephone and duplication
expenses and other reasonable and documented costs and out of- pocket
expenses in connection with the arrangement, documentation, negotiation and
closing of the Transactions Documents, subject to the maximum amount set
forth in a letter agreement between the Borrower and the Joint Bookrunners;
(b) all reasonable and documented out-of-pocket costs and expenses
incurred by the Administrative Agent in connection with any amendment to,
waiver of, or consent to any Transaction Document or the transactions
contemplated hereby, including the reasonable fees and reasonable and
documented out-of-pocket expenses of special Mexican and New York counsel to
the Administrative Agent; and
(c) all reasonable and documented, out-of-pocket costs and expenses
incurred by the Administrative Agent or any Lender in connection with the
enforcement of and/or preservation of any rights under this Agreement or any
other Transaction Document (whether through negotiations, legal proceedings
or otherwise), including the reasonable fees and reasonable and documented
out-of-pocket expenses of special Mexican and New York counsel to the
Administrative Agent and such Lender.
13.05 Indemnification. The Borrower agrees to indemnify and hold
harmless the Joint Bookrunners, the Administrative Agent and each Lender and
each of their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including reasonable fees and
expenses of counsel and the allocated cost of in-house counsel), but excluding
taxes that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of
(including in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (a) the Transaction
Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans or (b) or any Environmental Action
relating in any way to the Borrower or any of its Subsidiaries, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 13.05 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated. The Borrower and each
Guarantor also agrees not to assert any claim against the Joint Bookrunners,
the Administrative Agent, any Lender, any of their Affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to the Transaction Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Transaction Documents. Neither the Joint Bookrunner, the Administrative
Agent, nor any Lender shall be deemed to have any fiduciary relationship with
the Borrower or any Guarantor.
13.06 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon the
Borrower, the Guarantors, their successors and assigns and shall inure to
the benefit of the Joint Bookrunners, the Administrative Agent and the
Lenders and their respective successors and assigns, except that the
Borrower and the Guarantors may not assign or otherwise transfer any of
their rights or obligations under this Agreement without the prior written
consent of all Lenders except pursuant to the terms of this Agreement.
(b) Any Lender may at any time, and any Lender, if demanded by the
Borrower pursuant to Section 2.01(d) or Section 3.09 upon at least five
Business Days' notice to such Lender and the Administrative Agent, shall,
assign to one or more commercial banks either (i) registered as a Foreign
Financial Institution and a resident (or having its principal office as a
resident, if lending through a branch or agency) for tax purposes in a
jurisdiction that is a party to an income tax treaty to avoid double
taxation with Mexico on the date of such assignment, qualified to receive
the benefits of said treaty or (ii) organized and existing under the laws of
Mexico on the date of such assignment (each an "Assignee") all, or a
proportionate part of all, of its Commitment and its rights and obligations
under this Agreement and the Notes, and such Assignee shall assume such
rights and obligations, pursuant to an Assignment and Assumption Agreement
executed by such Assignee and such transferor Lender, with (and subject to)
the subscribed consent of the Borrower and the Administrative Agent (which
consents shall not be unreasonably withheld or delayed, and if a Default or
Event of Default has occurred and is continuing, the consent of the Borrower
shall not be required); provided, however, that if an Assignee is an
Affiliate of such transferor Lender, which Affiliate is registered as a
Foreign Financial Institution and meets the tax residence and qualification
requirements of clause (ii) above and, at the time of such assignment, the
additional amounts payable with respect to Taxes to such Assignee will not
exceed such amounts payable to the transferor Lender, no such consent shall
be required; and provided further that, in the case of an assignment of only
part of such rights and obligations, the Assignee shall acquire a Total
Exposure of not less than U.S.$3,000,000 and integral multiples of
U.S.$1,000,000 in excess thereof. Upon execution and delivery of an
Assignment and Assumption Agreement and payment by the Assignee to the
transferor Lender of an amount equal to the purchase price agreed between
such transferor Lender and such Assignee, such Assignee shall be a Lender
party to this Agreement and shall have all the rights and obligations of a
Lender with a Commitment as set forth in such instrument of assumption (in
addition to any Commitment previously held by it), and the transferor Lender
shall be released from its obligations hereunder to a corresponding extent
(except to the extent the same arose prior to the assignment), and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this paragraph (b), the
transferor Lender, the Administrative Agent and the Borrower shall make
appropriate arrangements so that a new Note is issued to the Assignee at the
expense of the Assignee. In connection with any such assignment (other than
a transfer by a Lender to one of its Affiliates), the transferor Lender (or
in the case of Section 3.10, the Borrower), without prejudice to any claims
the Borrower may have against any Defaulting Lender, shall pay to the
Administrative Agent an administrative fee for processing such assignment in
the amount of U.S.$3,500.
(c) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank of the United States in
accordance with applicable law and without compliance with the foregoing
provisions of this Section 13.06; provided, however, that such pledge or
assignment shall not release such Lender from its obligations hereunder.
(d) Any Lender may, without any consent of the Borrower, the
Administrative Agent or any other third party at any time grant to one or
more banks or other institutions (i) registered as a Foreign Financial
Institution and (ii) resident (or having its principal office as a resident,
if lending through a branch or agency) for tax purposes in a jurisdiction
that is a party to an income tax treaty to avoid double taxation with Mexico
on the date of such assignment and qualified to receive the benefits of said
treaty and having (at the time such Lender or financial institution becomes
a Participant) a withholding tax rate under such treaty applicable to
payments hereunder no higher than that applicable to payments to such Lender
(each a "Participant") participating interests in its Commitment or any or
all of its Loans. In the event of any such grant by a Lender of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Lender shall remain responsible
for the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrower
hereunder, including the right to approve any amendment, modification or
waiver of any provision of this Agreement; provided, however, that such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement extending the maturity
of any Obligation in respect of which the participation was granted, or
reducing the rate or extending the time for payment of interest thereon or
reducing the principal thereof, or reducing the amount or basis of
calculation of any fees to accrue in respect of the participation, without
the consent of the Participant. The Borrower agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled to
the benefits of Sections 3.04, 3.06 and 3.10 with respect to its
participating interest as if it were a Lender named herein; provided,
however, that the Borrower shall not be required to pay any greater amounts
pursuant to such Sections than it would have been required to pay but for
the sale to such Participant of such Participant's participation interest.
An assignment or other transfer which is not permitted by paragraph (b) or
(c) above shall be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with this paragraph
(d).
(e) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 13.06,
disclose to the Assignee or Participant or proposed Assignee or Participant,
any information relating to the Borrower furnished to such Lender by or on
behalf of the Borrower; provided that, prior to any such disclosure, the
Assignee or Participant or proposed Assignee or Participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender.
13.07 Right of Set-off. In addition to any rights and remedies of the
Lenders provided by law, each such Lender shall have the right, without prior
notice to the Borrower or the Guarantors, any such notice being expressly
waived by the Borrower and the Guarantors to the extent permitted by applicable
law, upon any amount becoming due and payable by the Borrower or the Guarantors
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured, at
any time held or owing by such Lender, or any branch or agency thereof to or
for the credit or the account of the Borrower or the Guarantors. Each Lender
agrees promptly to notify the Borrower, or such Guarantor, as the case may be,
and the Administrative Agent after any such set-off and application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
13.08 Confidentiality. Neither the Administrative Agent nor any Lender
shall disclose any Confidential Information to any other Person without the
prior written consent of the Borrower, other than (a) to the Administrative
Agent's, or such Lender's Affiliates and their officers, directors, employees,
agents and advisors and, as contemplated by Section 13.06(e), to actual or
prospective Assignees and Participants, and then only on a confidential basis,
(b) as required by any law, rule or regulation (including as may be required in
connection with an audit by the Administrative Agent's, or such Lender's
independent auditors, and as may be required by any self-regulating
organizations) or as may be required by or necessary in connection with any
judicial process and (c) as requested by any state, federal or foreign
authority or examiner regulating banks or banking.
13.09 Use of English Language. All certificates, reports, notices and
other documents and communications given or delivered pursuant to this
Agreement shall be in the English language (other than the documents required
to be provided pursuant to Section 4.01(e)(iii), Section 7.01 and Section 7.02
which shall be in the English language or in the Spanish language accompanied
by an English translation or summary). Except in the case of the laws of, or
official communications of, Mexico, the English language version of any such
document shall control the meaning of the matters set forth therein.
13.10 GOVERNING LAW. THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
13.11 Submission to Jurisdiction
(a) Each of the parties hereto hereby irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
located in the Borough of Manhattan in New York City and any appellate court
thereof for purposes of any suit, legal action or proceeding arising out of
or relating to this Agreement, any other Transaction Document or the
transactions contemplated hereby, and each of the parties hereto hereby
irrevocably agrees that all claims in respect of such suit, action or
proceeding may be heard and determined in such federal or New York State
court and, with respect to the Borrower and the Guarantors, as well as in
the competent court of their own corporate domicile.
(b) Each of the parties hereto hereby irrevocably waives, to the
fullest extent it may effectively do so, any objection that it may now or
hereafter have to the laying of venue of any such suit, action or proceeding
in any such federal or New York State court and irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of any such suit, action or proceeding.
(c) Each of the parties hereto irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over it.
(d) Each of the parties hereto agrees, to the fullest extent it may
effectively do so under applicable law, that a final judgment in any suit,
action or proceeding of the nature referred to in paragraph (a) above
brought in any such court shall be conclusive and binding upon such party
and may be enforced in other jurisdictions by suit on the judgment or in any
manner provided by law.
(e) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE ACTIONS OF ANY ARRANGER, THE ADMINISTRATIVE AGENT OR ANY
LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
13.12 Appointment of Agent for Service of Process.
(a) The Borrower and each Guarantor hereby irrevocably appoints CT
Corporation System, with an office on the date hereof at 111 Eighth Avenue,
13th Floor, New York, New York 10011, as its agent (the "Process Agent") to
receive on behalf of itself and its property, service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding brought in any New York State or federal court sitting
in New York City. Such service may be made by delivering a copy of such
process to the Borrower or any Guarantor, as the case may be, in care of the
Process Agent at its address specified above, and the Borrower and each
Guarantor, as the case may be, hereby authorizes and directs the Process
Agent to accept such service on its behalf. The appointment of the Process
Agent shall be irrevocable until the appointment of a successor Process
Agent. The Borrower and each Guarantor, further agrees to promptly appoint a
successor Process Agent in New York City prior to the termination for any
reason of the appointment of the initial Process Agent.
(b) Nothing in Section 13.11 or in this Section 13.12 shall affect the
right of any party hereto to serve process in any manner permitted by law or
limit any right that any party hereto may have to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other jurisdiction.
13.13 Waiver of Sovereign Immunity. To the extent that the Borrower or
a Guarantor has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, or otherwise) with respect
to itself or its property, the Borrower or the Guarantor, as the case may be,
hereby irrevocably waives such immunity in respect of its obligations hereunder
to the extent permitted by applicable law. Without limiting the generality of
the foregoing, the Borrower and each Guarantor agrees that the waivers set
forth in this Section 13.13 shall have force and effect to the fullest extent
permitted under the Foreign Sovereign Immunities Act of 1976 of the United
States and are intended to be irrevocable for purposes of such Act.
13.14 Judgment Currency.
(a) All payments made under this Agreement and the other Transaction
Documents shall be made in Dollars unless specified otherwise herein. If for
the purposes of obtaining judgment in any court it is necessary to convert a
sum due from the Borrower in one currency ("Currency X") into another
currency ("Currency Y"), the parties hereto agree to the fullest extent that
they may legally and effectively do so that the rate of exchange used shall
be that at which in accordance with normal banking procedures (based on
quotations from four major dealers in the relevant market) the
Administrative Agent or each Lender, as the case may be, could purchase
Currency X with Currency Y at or about 11:00 a.m. (New York City time) on
the Business Day preceding that on which final judgment is given.
(b) The Obligations in respect of any sum due to any Lender or the
Administrative Agent hereunder or under any other Transaction Document
shall, to the extent permitted by applicable law notwithstanding any
judgment expressed in a currency other than the applicable Currency X, be
discharged only to the extent that on the Business Day following receipt by
such Lender or the Administrative Agent of any sum adjudged to be so due in
Currency Y such Lender or the Administrative Agent may in accordance with
normal banking procedures purchase Currency X with Currency Y. If the amount
of Currency X so purchased is less than the sum originally due to such
Lender or the Administrative Agent, the Borrower and each of the Guarantors
agree, to the fullest extent it may legally do so, as a separate obligation
and notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent against such resulting loss.
13.15 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile shall
be effective as delivery of a manually executed counterpart of this Agreement.
13.16 USA PATRIOT Act. The Lenders, to the extent that they are
subject to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "Act"), hereby notify the Borrower
that pursuant to the requirements of the Act, it is required to obtain, verify
and record information that identifies the Borrower, which information includes
the name and address of the Borrower and other information that will allow the
Lenders to identify the Borrower in accordance with the Act.
13.17 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction, and the remaining
portion of such provision and all other remaining provisions hereof will be
construed to render them enforceable to the fullest extent permitted by law.
13.18 Survival of Agreements and Representations.
(a) All representations and warranties made herein or in any other
Transaction Document shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(b) The covenants and agreements contained in Sections 3.04, 3.05,
3.06, 3.07, 3.08, 13.04, 13.05, 13.08, 13.09, 13.11, 13.12 and 13.14, and
the obligations of the Lenders under Section 11.07, shall survive the
termination of the Commitments and the payment of all Obligations and, in
the case of any Lender that may assign any interest in its Commitment or
obligations hereunder, with respect to matters occurring before such
assignment, shall survive the making of such assignment to the extent any
claim arising thereunder relates to any period prior to such assignment,
notwithstanding that such assigning Lender may cease to be a "Lender"
hereunder.
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31, 2005.
CEMEX, S.A. DE C.V.,
as Borrower
By /s/ Hector Vela
---------------------------------------------
Name: Hector Vela
Title: Attorney-in-fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
CEMEX MEXICO, S.A. DE C.V.,
as Guarantor
By /s/ Hector Vela
---------------------------------------------
Name: Hector Vela
Title: Attorney-in-fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.,
as Guarantor
By /s/ Hector Vela
---------------------------------------------
Name: Hector Vela
Title: Attorney-in-fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF
BARCLAYS BANK PLC,
as Joint Lead Arranger and Joint Bookrunner
By /s/ Vidal H. Ramirez
---------------------------------------------
Name: Vidal H. Ramirez
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
CITIGROUP GLOBAL MARKETS INC., as Documentation
Agent, Joint Lead Arranger and Joint Bookrunner
By /s/ Carlos A. Corona
---------------------------------------------
Name: Carlos A. Corona
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
CITIBANK, N.A. NASSAU, BAHAMAS BRANCH
as a Lender
By /s/ Leslie Munroe
---------------------------------------------
Name: Leslie Munroe
Title: Attorney-in-fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BARCLAYS BANK PLC, NEW YORK BRANCH,
as Administrative Agent and Lender
By /s/ Vidal H. Ramirez
---------------------------------------------
Name: Vidal H. Ramirez
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BANCO SANTANDER CENTRAL HISPANO, S.A., NEW YORK
BRANCH,
as a Lender
By /s/ Ruben Perez-Romo
---------------------------------------------
Name: Ruben Perez-Romo
Title: Vice President
Global Corporate Banking
By /s/ Dom J. Rodriguez
---------------------------------------------
Name: Dom J. Rodriguez
Title: Vice President - Relationship
Manager
Global Corporate Banking
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
THE BANK OF NOVA SCOTIA
as a Lender
By /s/ Tim Lorimer
---------------------------------------------
Name: Tim Lorimer
Title: Vice President, International
Corporate and Commercial Banking
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A. - NEW YORK
BRANCH
as a Lender
By /s/ Jay Levit
---------------------------------------------
Name: Jay Levit
Title: Vice President
By /s/ John Martini
---------------------------------------------
Name: John Martini
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BNP PARIBAS PANAMA BRANCH,
as a Lender
By /s/ Raul Ardito-Barletta
---------------------------------------------
Name: Raul Ardito-Barletta
Title: Executive Vice President
BNP PARIBAS PANAMA BRANCH,
as a Lender
By /s/ Nair Gonzalez
---------------------------------------------
Name: Nair Gonzalez
Title: Senior Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
CALYON NEW YORK BRANCH,
as a lender
By /s/ Pierre Debray
---------------------------------------------
Name: Pierre Debray
Title: Managing Director
By /s/ David Rigaud
---------------------------------------------
Name: David Rigaud
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
ING BANK N.V., acting through its Curacao branch,
as a lender
By /s/ Zulia, A.C.
---------------------------------------------
Name: Zulia, A.C.
Title: Senior Management Transaction
Processing
By /s/ Felipa-Ventura, A.A.
---------------------------------------------
Name: Felipa-Ventura, A.A.
Title: Manager Credit Administration
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
WACHOVIA BANK, NATIONAL ASSOCIATION
as a lender
By /s/ Kathleen H. Reedy
---------------------------------------------
Name: Kathleen H. Reedy
Title: Managing Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
FORTIS BANK S.A./N.V., Connecticut Branch
as a lender
By /s/ Douglas Riahi
---------------------------------------------
Name: Douglas Riahi
Title: Managing Director
By /s/ Steven Silverstein
---------------------------------------------
Name: Steven Silverstein
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
HSBC BANK PLC SURCUSAL EN ESPANA,
as a lender
By /s/ Illegible
---------------------------------------------
Name: Illegible
Title: Illegible
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
THE ROYAL BANK OF SCOTLAND PLC,
as a lender
By /s/ Inaki Basterreche
---------------------------------------------
Name: Inaki Basterreche
Title: Senior Director
By /s/ Antonio Casteleiro
---------------------------------------------
Name: Antonio Casteleiro
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
SOCIETE GENERALE,
as a lender
By /s/ Alejandro Garcia
---------------------------------------------
Name: Alejandro Garcia
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BANK OF AMERICA, N.A.,
as a lender
By /s/ Mauricio Rebolledo
---------------------------------------------
Name: Mauricio Rebolledo
Title: Managing Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
The BANK OF TOKYO-MITSUBISHI, LTD.,
as a lender
By /s/ Pamela D. Price
---------------------------------------------
Name: Pamela D. Price
Title: Vice President & Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
JPMORGAN CHASE BANK, N.A.
as a lender
By /s/ Linda M. Meyer
---------------------------------------------
Name: Linda M. Meyer
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
SANPAOLO IMI S.P.A.
as a lender
By /s/ Joshua Koenig
---------------------------------------------
Name: Joshua Koenig
Title: Vice President
By /s/ Renato Carducci
---------------------------------------------
Name: Renato Carducci
Title: General Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BANCA MONTE DEI PASCHI DI SIENA S.P.A.
as a lender
By /s/ Romeo C. Cella
---------------------------------------------
Name: Romeo C. Cella
Title: Senior Vice President & General
Manager
By /s/ Brian R. Landy
---------------------------------------------
Name: Brian R. Landy
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
CAJA MADRID MIAMI AGENCY,
as a lender
By /s/ Javier Guzman
---------------------------------------------
Name: Javier Guzman
Title: Deputy General Manager
By /s/ Gema Gamez
---------------------------------------------
Name: Gema Gamez
Title: Head of Capital Markets
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
COMERICA BANK,
as a lender
By /s/ Juan Carlos Sanchez
---------------------------------------------
Name: Juan Carlos Sanchez
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
KBC BANK N.V. NEW YORK BRANCH,
as a lender
By /s/ Stefano Snozzi
---------------------------------------------
Name: Stefano Snozzi
Title: First Vice President
By /s/ Robert Snauffer
---------------------------------------------
Name: Robert Snauffer
Title: First Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
MORGAN STANLEY BANK
as a lender
By /s/ Daniel Twenge
---------------------------------------------
Name: Daniel Twenge
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF MAY 31,
2005.
BAYERISCHE LANDESBANK
as a lender
By /s/ Illegible
---------------------------------------------
Name: Illegible
Title: Illegible
By /s/ Donna M. Quilty
---------------------------------------------
Name: Donna M. Quilty
Title: Vice President
EXHIBIT G
TO CREDIT AGREEMENT
Mandatory Cost Formula
1. The Mandatory Cost is an addition to the interest rate to compensate
Lenders for the cost of compliance with (a) the requirements of the Bank of
England and/or the Financial Services Authority (or, in either case, any other
authority which replaces all or any of its functions) or (b) the requirements of
the European Central Bank.
2. For the purposes of this Exhibit G:
"Additional Cost Rate" has the meaning provided in paragraph 3 below;
"Eligible Liabilities" has the meaning provided from time to time under
or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the
Bank of England;
"Fees Rules" means the rules on periodic fees contained in the FSA
Supervision Manual or such other law or regulation as may be in force from time
to time in respect of the payment of fees for the acceptance of deposits;
"Fee Tariffs" means the fee tariffs specified in the Fees Rules under
the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated
fee required pursuant to the Fees Rules but taking into account any applicable
discount rate);
"Special Deposits" has the meaning given to it from time to time under
or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the
Bank of England; and
"Tariff Base" has the meaning given to it in, and will be calculated in
accordance with, the Fees Rules.
3. On the first day of each Interest Period (or as soon as possible
thereafter) the Administrative Agent shall calculate, as a percentage rate, a
rate (the "Additional Cost Rate") for each Lender, in accordance with the
paragraphs set out below. The Mandatory Cost will be calculated by the
Administrative Agent as a weighted average of the Lenders' Additional Cost Rates
(weighted in proportion to the percentage participation of each Lender in the
relevant Loan) and will be expressed as a percentage rate per annum.
4. The Additional Cost Rate for any Lender lending from a Lending
Office in a Participating Member State will be the percentage notified by that
Lender to the Administrative Agent. This percentage will be certified by that
Lender in its notice to the Administrative Agent to be its reasonable
determination of the cost (expressed as a percentage of that Lender's
participation in all Loans made from that Lending Office) of complying with the
minimum reserve requirements of the European Central Bank in respect of loans
made from that Lending Office.
5. The Additional Cost Rate for any Lender lending from a Lending
Office in the United Kingdom will be calculated by the Administrative Agent as
follows:
in relation to a Loan denominated in Sterling:
AB+C(B-D)+E x 0.01
------------------ percent per annum
100 - (A+C)
in relation to a Loan in any currency other than Sterling:
E x 0.01
----------- percent per annum
300
Where:
A is the percentage of Eligible Liabilities (assuming these to
be in excess of any stated minimum) which that Lender is from
time to time required to maintain as an interest free cash
ratio deposit with the Bank of England to comply with cash
ratio requirements.
B is the percentage rate of interest (excluding the Applicable
Margin and the Mandatory Cost and, if the Loan is an Unpaid
Sum, the additional rate of interest specified in paragraph
(a) of Section 2.10 (Default Interest)) payable for the
relevant Interest Period on the Loan.
C is the percentage (if any) of Eligible Liabilities which that
Lender is required from time to time to maintain as interest
bearing Special Deposits with the Bank of England.
D is the percentage rate per annum payable by the Bank of
England to the Administrative Agent on interest bearing
Special Deposits.
E is designed to compensate Lenders for amounts payable under
the Fees Rules and is calculated by the Administrative Agent
as being the average of the most recent rates of charge
supplied by the Reference Banks to the Administrative Agent
pursuant to paragraph 7 below and expressed in pounds per
(pound)1,000,000.
6. In application of the above formula, A, B, C and D will be included in the
formula as percentages (i.e. 5 per cent. will be included in the formula as 5
and not as 0.05). A negative result obtained by subtracting D from B shall be
taken as zero. The resulting figures shall be rounded to four decimal places.
7. If requested by the Administrative Agent, each Reference Bank shall, as
soon as practicable after publication by the Financial Services Authority,
supply to the Administrative Agent, the rate of charge payable by that
Reference Bank to the Financial Services Authority pursuant to the Fees Rules
in respect of the relevant financial year of the Financial Services Authority
(calculated for this purpose by that Reference Bank as being the average of the
Fee Tariffs applicable to that Reference Bank for that financial year) and
expressed in pounds per Sterling 1,000,000 of the Tariff Base of that Reference
Bank.
8. Each Lender shall supply any information required by the Administrative
Agent for the purpose of calculating its Additional Cost Rate. In particular,
but without limitation, each Lender shall supply the following information on
or prior to the date on which it becomes a Lender:
the jurisdiction of its Lending Office; and
any other information that the Administrative Agent may reasonably require for
such purpose.
Each Lender shall promptly notify the Administrative Agent of any
change to the information provided by it pursuant to this paragraph.
9. The percentages of each Lender for the purpose of A and C above and the
rates of charge of each Reference Bank for the purpose of E above shall be
determined by the Administrative Agent based upon the information supplied to
it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a
Lender notifies the Administrative Agent to the contrary, each Lender's
obligations in relation to cash ratio deposits and Special Deposits are the
same as those of a typical Lender from its jurisdiction of incorporation with a
Lending Office in the same jurisdiction as its Lending Office.
10. The Administrative Agent shall have no liability to any person if such
determination results in an Additional Cost Rate which over or under
compensates any Lender and shall be entitled to assume that the information
provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8
above is true and correct in all respects.
11. The Administrative Agent shall distribute the additional amounts received
as a result of the Mandatory Cost to the Lenders on the basis of the Additional
Cost Rate for each Lender based on the information provided by each Lender and
each Reference Bank pursuant to paragraphs 3, 7 and 8 above.
12. Any determination by the Administrative Agent pursuant to this Exhibit G
in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any
amount payable to a Lender shall, in the absence of manifest error, be
conclusive and binding on all Parties.
13. The Administrative Agent may from time to time, after consultation with
the Borrower and the Lenders, determine and notify to all parties to the
Agreement any amendments which are required to be made to this Exhibit G in
order to comply with any change in law, regulation or any requirements from
time to time imposed by the Bank of England, the Financial Services Authority
or the European Central Bank (or, in any case, any other authority which
replaces all or any of its functions) and any such determination shall, in the
absence of manifest error, be conclusive and binding on all parties to the
Agreement.
Exhibit 4.15
EXECUTION VERSION
US$700,000,000
FACILITIES AGREEMENT
dated 27 June 2005
for
NEW SUNWARD HOLDING B.V.
as Borrower
CEMEX, S.A. DE C.V., CEMEX MEXICO,
S.A. DE C.V. and
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
as Guarantors
arranged by
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
BNP PARIBAS
and
CITIGROUP GLOBAL MARKETS, INC.
with
CITIBANK, N.A.
acting as Agent
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TERM AND REVOLVING FACILITIES AGREEMENT
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CONTENTS
Clause Page
1. Definitions And Interpretation..........................................4
2. The Facilities.........................................................27
3. Purpose................................................................27
4. Conditions Of Utilisation..............................................27
5. Utilisation............................................................30
6. Optional Currencies....................................................31
7. Repayment..............................................................32
8. Prepayment And Cancellation............................................32
9. Interest...............................................................35
10. Interest Periods.......................................................36
11. Changes To The Calculation Of Interest.................................37
12. Fees...................................................................38
13. Tax Gross Up And Indemnities..........................................39
14. Increased Costs........................................................41
15. Other Indemnities......................................................42
16. Mitigation By The Lenders..............................................43
17. Costs And Expenses.....................................................44
18. Guarantee And Indemnity................................................45
19. Representations........................................................48
20. Information Undertakings...............................................55
21. General Undertakings...................................................59
22. Events Of Default......................................................67
23. Changes To The Lenders.................................................71
24. Changes To The Obligors................................................75
25. Role Of The Agent And The Arranger.....................................77
26. Conduct Of Business By The Finance Parties.............................82
27. Sharing Among The Finance Parties......................................82
28. Payment Mechanics......................................................85
29. Set-Off................................................................87
30. Notices................................................................87
31. Calculations And Certificates..........................................91
32. Partial Invalidity.....................................................91
33. Remedies And Waivers...................................................91
34. Amendments And Waivers.................................................92
35. Counterparts...........................................................92
36. Governing Law..........................................................93
37. Enforcement............................................................93
38. Waiver Of Sovereign Immunity...........................................93
SCHEDULE 1 THE ORIGINAL PARTIES...............................................95
Part I The Original Obligors.......................................95
Part II The Original Lenders........................................97
SCHEDULE 2 CONDITIONS PRECEDENT...............................................98
Part I Conditions Precedent To Initial Utilisation.................98
Part II Conditions Precedent Required To Be Delivered By An
Additional Guarantor.......................................100
SCHEDULE 3 REQUESTS 102
Part I Utilisation Request............................................102
Part II Selection Notice..............................................104
SCHEDULE 4 MANDATORY COST FORMULAE...........................................105
SCHEDULE 5 FORM OF TRANSFER CERTIFICATE......................................108
SCHEDULE 6 FORM OF COMPLIANCE CERTIFICATE....................................110
SCHEDULE 7 FORM OF LMA CONFIDENTIALITY UNDERTAKING...........................111
SCHEDULE 8 TIMETABLE 117
SCHEDULE 9 FORM OF ACCESSION LETTER..........................................118
SCHEDULE 10 PERMITTED LIENS..................................................119
SCHEDULE 11 LITIGATION.......................................................122
SCHEDULE 12 MATERIAL SUBSIDIARIES............................................130
SCHEDULE 13 PROMISSORY NOTES.................................................131
PART I FORM OF FACILITY A NOTE....................................131
PART II FORM OF FACILITY B NOTE....................................135
THIS TERM AND REVOLVING FACILITIES AGREEMENT is dated 27 June 2005 and made
between:
(1) NEW SUNWARD HOLDING B.V. (the "Borrower");
(2) THE COMPANIES listed in Part IB of Schedule 1 (The Original Obligors)
as original guarantors (the " Original Guarantors");
(3) BANCO BILBAO VIZCAYA ARGENTARIA, S.A., BNP PARIBAS AND CITIGROUP GLOBAL
MARKETS, INC. as mandated lead arrangers and joint bookrunners (whether
acting individually or together the "Arranger");
(4) THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1 (The
Original Lenders) as lenders (the "Original Lenders"); and
(5) CITIBANK, N.A., acting through its Delaware Branch, as agent of the
other Finance Parties (the "Agent").
IT IS AGREED as follows:
SECTION 1
INTERPRETATION
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
"Accession Letter" means a document substantially in the form set out
in Schedule 9 (Form of Accession Letter).
"Acquired Subsidiary" means any Subsidiary acquired by any Obligor or
by any Subsidiary of any Obligor after the date hereof in an
Acquisition, and any Subsidiaries of such Acquired Subsidiary on the
date of such Acquisition.
"Acquiring Subsidiary" means any Subsidiary formed by any Obligor or by
a Subsidiary of any Obligor solely for the purpose of participating as
the acquiring party in any Acquisition, and any Subsidiaries of such
Acquiring Subsidiary acquired in such Acquisition.
"Acquisition" means any merger, consolidation, acquisition or lease of
assets, acquisition of securities or business combination or
acquisition, or any two or more of such transactions, if upon the
completion of such transaction or transactions, any Obligor or any
Subsidiary thereof has acquired an interest in any Person who is deemed
to be a Subsidiary under this Agreement and was not a Subsidiary prior
thereto.
"Additional Cost Rate" has the meaning given to it in Schedule 4
(Mandatory Cost Formulae).
"Additional Guarantor" means a company which becomes an Additional
Guarantor in accordance with Clause 24 (Changes to the Obligors).
"Adjusted Consolidated Net Tangible Assets" means, with respect to any
Person, the total assets of such Person and its Subsidiaries (less
applicable depreciation, amortisation and other valuation reserves),
including any write-ups or restatements required under Applicable GAAP
(other than with respect to items referred to in clause (b) below),
minus (a) all current liabilities of such Person and its Subsidiaries
(excluding the current portion of long-term debt) and (b) all goodwill,
trade names, trademarks, licenses, concessions, patents, un-amortised
debt discount and expense and other intangibles, all as determined on a
consolidated basis in accordance with Applicable GAAP.
"Affiliate" means, in relation to any person, a Subsidiary of that
person or a Holding Company of that person or any other Subsidiary of
that Holding Company.
"Agency Fee Letter" means the dated 25 May 2005 between Citigroup
Global Markets, Inc., the Agent, the Borrower and Cemex Parent setting
out certain of the fees referred to in Clause 12.2 (Agency fee).
"Agent's Spot Rate of Exchange" means the Agent's spot rate of exchange
for the purchase of the relevant currency with the Base Currency in the
London foreign exchange market as of 11:00 a.m. London time on a
particular day.
"Applicable GAAP" means, with respect to any Person, Mexican GAAP or
other generally accepted accounting principles required to be applied
to such Person in the jurisdiction of its incorporation or organisation
and used in preparing such Person's financial statements.
"Authorisation" means an authorisation, consent, approval, resolution,
licence, exemption, filing, notarisation or registration.
"Authorised Signatory" means, in relation to any Obligor, any person
who is duly authorised and in respect of whom the Agent has received a
certificate signed by a director or another Authorised Signatory of
such Obligor setting out the name and signature of such person and
confirming such person's authority to act.
"Availability Period" means the period from and including the date of
this Agreement to and including:
(a) in respect of Facility A, the date falling 10 Business Days
after the date of this Agreement; and
(b) in respect of Facility B, the day which falls one month before
the Termination Date relating to Facility B.
"Available Commitment" means, in relation to a Facility, a Lender's
Commitment under that Facility minus:
(a) the Base Currency Amount of its participation in any
outstanding Utilisations under that Facility; and
(b) in relation to any proposed Utilisation, the Base Currency
Amount of its participation in any other Utilisations that are
due to be made under that Facility on or before the proposed
Utilisation Date,
other than, in relation to any proposed Utilisation under Facility B
only, any participation in Facility B Loans which are due to be repaid
or prepaid on or before the proposed Utilisation Date.
"Available Facility" means, in relation to a Facility, the aggregate
for the time being of each Lender's Available Commitment in respect of
that Facility.
"Base Currency" means US dollars.
"Base Currency Amount" means in relation to a Utilisation, the amount
specified in the Utilisation Request delivered by the Borrower for that
Utilisation (or, if the amount requested is not denominated in the Base
Currency, that amount converted into the Base Currency at the Agent's
Spot Rate of Exchange on the date which is three Business Days before
the Utilisation Date) as adjusted to reflect any repayment, prepayment,
consolidation or division of a Utilisation.
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Break Costs" means the amount (if any) by which:
(a) the interest (excluding the applicable Margin) which a Lender
should have received for the period from the date of receipt
of all or any part of its participation in a Loan or Unpaid
Sum to the last day of the current Interest Period in respect
of that Loan or Unpaid Sum, had the principal amount or Unpaid
Sum received been paid on the last day of that Interest
Period;
exceeds:
(b) the amount which that Lender would be able to obtain by
placing an amount equal to the principal amount or Unpaid Sum
received by it on deposit with a leading bank in the Relevant
Interbank Market for a period starting on the day of receipt
or recovery if a Business Day and if received or recovered
before 2 pm London time (or, if not, on the Business Day
following receipt or recovery) and ending on the last day of
the current Interest Period.
"Business Day" means a day (other than a Saturday or Sunday) on which
banks are open for general business in Amsterdam and New York, and:
(a) (in relation to any date for payment or lending or purchase
of, or the determination of an interest rate or rate of
exchange in relation to, a currency other than euro) London
and the principal financial centre of the country of that
currency; or
(b) (in relation to any date for payment or lending or purchase
of, or the determination of an interest rate or rate of
exchange in relation to, euro) any TARGET Day.
"Capital Lease" means, as to any Person, the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted
for as capital leases on a balance sheet of such Person under
Applicable GAAP and, for the purposes of this Agreement, the amount of
such obligations at any time shall be the capitalised amount thereof at
such time determined in accordance with Applicable GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
"Cemex Parent" means CEMEX, S.A. de C.V., a company (sociedad anonima
de capital variable) incorporated in Mexico.
"Cemex Spain" means Cemex Espana, S.A., a company (sociedad anonima)
incorporated under the laws of Spain, No. Hoja-Registro Mercantil,
Madrid: M -156542, NIF A46/004214.
"Commitment" means a Facility A Commitment and/or Facility B
Commitment.
"Compliance Certificate" means a certificate substantially in the form
set out in Schedule 6 (Form of Compliance Certificate).
"Confidentiality Undertaking" means a confidentiality undertaking
substantially in a recommended form of the LMA as set out in Schedule 7
(Form of LMA Confidentiality Undertaking) or in any other form agreed
between the Borrower and the Agent.
"Consolidated Fixed Charge Coverage Ratio" means, for any Relevant
Period, the ratio of (a) EBITDA for such period to (b) Consolidated
Fixed Charges for such period.
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for any Relevant
Period, and (b) to the extent not included in (a) above, payments
during such periods in respect of the financing costs of financial
derivatives in the form of equity swaps.
"Consolidated Interest Expense" means, for any period, the total gross
interest expense of Cemex Parent and its consolidated Subsidiaries
allocable to such period in accordance with Mexican GAAP.
"Consolidated Leverage Ratio" means, at any time during any fiscal
quarter, the ratio of (a) Consolidated Net Debt at such time to (b)
EBITDA for the Relevant Period immediately preceding such fiscal
quarter, which shall be calculated based on the most recently available
consolidated financial statements of Cemex Parent and its Subsidiaries
at such date.
"Consolidated Net Debt" means, at any date, the sum (without
duplication) of (a) the aggregate amount of all Debt of Cemex Parent
and its Subsidiaries at such date, plus (b) to the extent not included
in Debt, the aggregate amount of all derivative financing in the form
of equity swaps outstanding at such date (save to the extent cash
collateralised), minus (c) all Temporary Investments of Cemex Parent
and its Subsidiaries at such date.
"Contractual Obligation" as to any Person, any provision of any
security issued or guaranteed by such Person or of any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Person is a party or by which it or any of its
property is bound.
"CTW" means Cemex Trademarks Ltd., a commercial company organised and
existing under the laws of Switzerland.
"Debt" means, as to any Person at any time, without duplication:
(a) all obligations of such Person for borrowed money;
(b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(c) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable
arising in the ordinary course of business;
(d) all obligations of such Person as lessee under Capital Leases;
(e) all Debt of others secured by a Lien on any asset or property
of such Person, up to the value of such asset, as recorded in
such Person's most recent balance sheet;
(f) all obligations of such Person with respect to product
invoices incurred in connection with export financing; and
(g) all obligations of such Person under repurchase agreements for
the stock issued by such Person or another Person;
For the avoidance of doubt, this definition of Debt does not include
Derivatives. With respect to the Cemex Parent and its Subsidiaries, the
aggregate amount of Debt outstanding shall be adjusted by the Value of
Debt Currency Derivatives solely for the purposes of calculating the
Consolidated Leverage Ratio. If the Value of Debt Currency Derivatives
is a positive mark-to-market valuation for Cemex Parent and its
Subsidiaries, then Debt shall decrease accordingly, and if the Value of
Debt Currency Derivatives is a negative mark-to-market valuation for
Cemex Parent and its subsidiaries, then Debt shall increase by the
absolute value thereof.
"Debt Currency Derivatives" means derivatives of the Cemex Parent and
its Subsidiaries related to currency entered into for the purposes of
hedging exposures under outstanding Debt of the Cemex Parent and its
Subsidiaries, including, but not limited to, cross-currency swaps and
currency forwards.
"Default" means an Event of Default or any event or circumstance
specified in Clause 22 (Events of Default) which would (with the expiry
of a grace period, the giving of notice, the making of any
determination under the Finance Documents or any combination of any of
the foregoing) be an Event of Default.
"Derivatives" means any type of derivative obligations, including,
without limitation, equity forwards, capital hedges, cross-currency
swaps, currency forwards, interest rate swaps and swaptions.
"Disposition" means, with respect to any property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof. The terms "Dispose" and "Disposed of" shall have
correlative meanings.
"Dutch Banking Act" means the Dutch Act of the Supervision of Credit
System of 1992 (Wet toezicht kredietwezen 1992), as amended or
re-enacted from time to time.
"Dutch Central Bank" means the central bank of The Netherlands (De
Nederlandsche Bank).
"Dutch Exemption Regulation" means the Exemption Regulation of the
Dutch Minister of Finance of 26 June 2002 (Vrijstellingsregeling Wtk
1992), as amended or re-enacted from time to time.
"Dutch Policy Guidelines" means the Dutch Central Bank's policy
guidelines of 2 January 2005 issued in relation to the Dutch Exemption
Regulation (beleidsregel kernbegrippen markttoetreding en handhaving
Wtk 1992), as amended or restated from time to time.
"EBITDA" means, for any period, the sum for Cemex Parent and its
Subsidiaries, determined on a consolidated basis of (a) operating
income (utilidad de operacion), (b) cash interest income and (c)
depreciation and amortisation expense, in each case determined in
accordance with Mexican GAAP consistently applied for such period. For
the purposes of calculating EBITDA for any Relevant Period pursuant to
any determination of Consolidated Leverage Ratio (but not Consolidated
Fixed Charge Coverage Ratio), (i) if, at any time during such Relevant
Period, Cemex Parent or any of its Subsidiaries shall have made any
Material Disposition, the EBITDA for such Relevant Period shall be
reduced by an amount equal to the EBITDA (if positive) attributable to
the property that is the subject of such Material Disposition for such
Relevant Period (but when the Material Disposition is by way of a
lease, income received by the Borrower or any of its Subsidiaries under
such lease shall be included in the EBITDA) and (ii) if, at any time
during such Relevant Period, Cemex Parent or any of its Subsidiaries
shall have made any Material Acquisition, the EBITDA for such Relevant
Period shall be calculated after giving pro forma effect thereto
(including the incurrence or assumption of any Debt) as if such
Material Acquisition had occurred on the first day of such Relevant
Period. Additionally, if since the beginning of such Relevant Period
any Person that subsequently shall have become a Subsidiary of Cemex
Parent or was merged or consolidated with Cemex Parent or any of its
Subsidiaries as a result of a Material Acquisition occurring during
such Relevant Period shall have made any Disposition or Acquisition of
property that would have required an adjustment pursuant to clause (i)
or (ii) above if made by Cemex Parent or any of its Subsidiaries during
such Relevant Period, the EBITDA for such period shall be calculated
after giving pro forma effect thereto as if such Disposition or
Acquisition had occurred on the first day of such Relevant Period.
"Environmental Action" means any audit procedure, action, suit, demand,
demand letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including (a) by any Governmental Authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any Governmental Authority or any third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, technical standard (norma tecnica or
norma oficial Mexicana), code, order, judgment, decree or judicial
agency interpretation, policy or guidance relating to pollution or
protection of the environment, health, safety or natural resources,
including those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous
Materials.
"Environmental Permit" means any permit, approval, identification
number, licence or other authorization required under any Environmental
Law.
"EURIBOR" means, in relation to any Loan in euro:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the Interest Period of
that Loan) the arithmetic mean of the rates (rounded upwards
to four decimal places) as supplied to the Agent at its
request quoted by the Reference Banks to leading banks in the
European interbank market,
as of 11.00 a.m. (Brussels time) on the Quotation Day for the offering
of deposits in euro for a period comparable to the Interest Period of
the relevant Loan.
"Event of Default" means any event or circumstance specified as such in
Clause 22 (Events of Default).
"Exchange Act" means the U.S. Securities Exchange Act of 1943, as
amended.
"Existing NSH Facility Agreement" means the US$1,150,000,000 term loan
agreement dated October 15, 2003 and made between, amongst others, the
Borrower as borrower, the Guarantors as guarantors and Citibank N.A. as
administration agent.
"Facility" means Facility A or Facility B.
"Facility A" means the multicurrency term loan facility made available
under this Agreement as described in paragraph (a) of Clause 2.1 (The
Facilities).
"Facility A Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility A
Commitment" in Part II of Schedule 1 (The Original Lenders)
and the amount of any other Facility A Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility A Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility A Loan" means a loan made or to be made under Facility A or
the principal amount outstanding for the time being of that loan.
"Facility A Note" means a promissory note of the Borrower substantially
in the form of Part I of Schedule 13 (Form of Facility A Note) relating
to amounts to be drawn under Facility A and reflecting the terms of
this Agreement.
"Facility A Repayment Date" means the day falling 24 Months after the
date of this Agreement.
"Facility B" means the multicurrency revolving loan facility made
available under this Agreement as described in paragraph (b) of Clause
2.1 (The Facilities).
"Facility B Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility B
Commitment" in Part II of Schedule 1 (The Original Lenders)
and the amount of any other Facility B Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility B Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility B Loan" means a loan made or to be made under Facility B or
the principal amount outstanding for the time being of that loan.
"Facility B Note" means a promissory note of the Borrower substantially
in the form of Part II of Schedule 13 (Form of Facility B Note)
relating to amounts to be drawn under Facility B and reflecting the
terms of this Agreement.
"Facility Office" means the office or offices notified by a Lender to
the Agent in writing on or before the date it becomes a Lender (or,
following that date, by not less than five Business Days' written
notice) as the office or offices through which it will perform its
obligations under this Agreement.
"FAS 140" means Financial Accounting Standards Board Statement No. 140
or any Statement replacing the same, in each case as amended, modified
or supplemented from time to time.
"Fee Letter" means the fee letter dated 25 May 2005 between the
Arrangers, the Borrower and Cemex Parent setting out certain of the
fees referred to in Clause 12 (Fees).
"Finance Document" means this Agreement, any Note, any Accession
Letter, the Fee Letter, the Agency Fee Letter and any other document
designated as a "Finance Document" by the Agent and the Borrower.
"Finance Party" means the Agent, the Arranger or a Lender.
"First Utilisation Date" means the date on which the first Utilisation
is made under this Agreement.
"Governmental Authority" means any branch of power or government or any
state, department or other political subdivision thereof, or any
governmental body, agency, authority (including any central bank or
taxing or environmental authority), any entity or instrumentality
(including any court or tribunal) exercising executive, legislative,
judicial, regulatory, administrative or investigative functions of or
pertaining to government.
"Group" means the Borrower and each of its Subsidiaries for the time
being.
"Guarantors" means the Original Guarantors and any Additional Guarantor
other than any such Original Guarantor or Additional Guarantor which
has ceased to be a Guarantor pursuant to Clause 24.3 (Resignation of
Guarantor) and has not subsequently become an Additional Guarantor
pursuant to Clause 24.2 (Additional Guarantors) and "Guarantor" means
any of them.
"Hazardous Materials" means (a) radioactive materials,
asbestos-containing materials, polychlorinated biphenyls, radon gas and
(b) any other chemicals, materials or substances designated, classified
or regulated as hazardous or toxic or as a pollutant or contaminant
under any applicable Environmental Law.
"Holding Company" means, in relation to a company or corporation, any
other company or corporation in respect of which it is a Subsidiary.
"Intellectual Property" means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under Mexican, multinational or foreign laws or otherwise,
including copyrights, copyright licences, patents, patent licences,
trademarks, trademark licences, technology, know-how and processes,
trade secrets, any applications associated with the foregoing, and all
rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"Interest Period" means, in relation to a Loan, each period determined
in accordance with Clause 10 (Interest Periods) and, in relation to an
Unpaid Sum, each period determined in accordance with Clause 9.3
(Default interest).
"International Accounting Standards" means the accounting standards
approved by the International Accounting Standards Board from time to
time.
"Lender" means:
(a) any Original Lender; and
(b) any bank, financial institution, securitisation trust or fund
or other entity which has become a Party in accordance with
Clause 23 (Changes to the Lenders),
which in each case has not ceased to be a Party in accordance with the
terms of this Agreement.
"LIBOR" means, in relation to any Loan:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the currency or Interest
Period of that Loan) the arithmetic mean of the rates (rounded
upwards to four decimal places) as supplied to the Agent at
its request quoted by the Reference Banks to leading banks in
the London interbank market,
as of 11.00 a.m. (New York time) on the Quotation Day for the offering
of deposits in the currency of that Loan and for a period comparable to
the Interest Period for that Loan.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. Any member of the Group shall be deemed to own, subject to a
Lien, any asset which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset, or any
account receivable transferred by it with recourse (including any such
transfer subject to a hold back or similar arrangement that effectively
imposes the risk of collectability on the transferor).
"LMA" means the Loan Market Association.
"Loan" means a Facility A Loan or a Facility B Loan.
"Majority Lenders" means:
(a) if there are no Loans then outstanding, a Lender or Lenders
whose Commitments aggregate more than 51% of the Total
Commitments (or, if the Total Commitments have been reduced to
zero, aggregated more than 51% of the Total Commitments
immediately prior to the reduction); or
(b) at any other time, a Lender or Lenders whose undrawn
Commitments and participations in the Loans then outstanding
aggregate more than 51% of all the undrawn Commitments and
Loans then outstanding. "Mandatory Cost" means the percentage
rate per annum calculated in accordance with Schedule 4
(Mandatory Cost Formulae).
"Margin" means in relation to any Loan the percentage rate per annum
determined pursuant to the table set out below:
------------------------- ------------------------
Facility Margin % p.a.
------------------------- ------------------------
Facility A 0.35
------------------------- ------------------------
Facility B 0.425
------------------------- ------------------------
(a) in relation to any Unpaid Sum the percentage rate per annum
specified above applicable to the Facility in relation to
which that Unpaid Sum arises or if such Unpaid Sum does not
arise in relation to a particular Facility, the rate per annum
specified above applicable to the Facility to which the Agent
reasonably determines the Unpaid Sum most closely relates, or
if none, the highest rate per annum specified above,
but if:
(i) no Default has occurred and is continuing; and
(ii) for Cemex Parent and its Subsidiaries, the Consolidated
Leverage Ratio in respect of the most recently completed
Relevant Period is within a range set out below,
then the Margin for each Loan under each Facility (and for any Unpaid
Sum related to that Facility) will be the percentage rate per annum set
out below opposite that range:
------------------------------------ ----------------------------------
Consolidated Leverage Ratio Margin
% p.a.
------------------------------------ ----------------------------------
Facility A Facility B
------------------------------------ ---------------- -----------------
Greater than or equal to 3.0:1 0.35 0.425
------------------------------------ ---------------- -----------------
Less than 3.0:1 but greater than 0.30 0.375
or equal to 2.5:1
------------------------------------ ---------------- -----------------
Less than 2.5:1 but greater than 0.25 0.325
or equal to 2.0:1
------------------------------------ ---------------- -----------------
Less than 2.0:1 0.20 0.275
------------------------------------ ---------------- -----------------
However any increase or decrease in the Margin shall take effect on the
date (the "reset date") which is the first day of the next Interest
Period for that Loan following receipt by the Agent of the Compliance
Certificate for that Relevant Period pursuant to Clause 20.2
(Compliance Certificate) and in the case of a then current Interest
Period will apply to the whole of such Interest Period unless any
payments of interest have already been made in which case any
adjustments to the Margin will apply only from the date of such
payment.
"Material Acquisition" means any (a) acquisition of property or series
of related acquisitions of property that constitutes assets comprising
all or substantially all of an operating unit, division or line of
business or (b) acquisition of or other investment in the Capital Stock
of any Subsidiary of Cemex Parent or any Person which becomes a
Subsidiary of Cemex Parent or is merged or consolidated with any member
of the Group, in each case, which involves the payment of aggregate
consideration by any one or more members of the Group in excess of
US$25,000,000 (or the equivalent thereof in other currencies).
"Material Adverse Effect" means a material adverse effect on:
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Group taken as a
whole;
(b) the validity or enforceability of this Agreement or any of the
Notes or the rights and remedies of any Finance Party under
the Finance Documents; or
(c) the ability of any Obligor to perform its obligations under
Finance Documents.
"Material Debt" means Debt (other than the Loans) of Cemex Parent
and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal amount outstanding
exceeding US$50,000,000 (or the equivalent thereof in other
currencies).
"Material Disposition" means any Disposition of property or series of
related Dispositions of property that yields gross proceeds to any one
or more members of the Group in excess of US$50,000,000 (or the
equivalent thereof in other currencies).
"Material Subsidiary" means, at any date:
(a) Cemex Spain, each Trademark Company and each Obligor that is a
Subsidiary of Cemex Parent; and
(b) each other Subsidiary of any Obligor (if any) (i) the assets
of which, together with those of its Subsidiaries, on a
consolidated basis, without duplication, constitute five per
cent. or more of the consolidated assets of Cemex Parent and
its Subsidiaries as of the end of the then most recently ended
fiscal quarter or (ii) the operating profit of which, together
with that of its Subsidiaries, on a consolidated basis without
duplication, constitutes five per cent. or more of the
consolidated operating profits of Cemex Parent and its
Subsidiaries for the then most recently ended fiscal quarter
for which quarterly financial statements have been prepared.
"Mexican GAAP" means generally accepted accounting principles in Mexico
as in effect from time to time, except that for purposes of Clause
21.13 (Financial condition covenants), Mexican GAAP shall be determined
on the basis of such principles in effect as of the date of, and
applied in the preparation of, the audited financial statements of
Cemex Parent and its consolidated Subsidiaries as of and for the year
ended 31 December 2004. In the event that any change in Mexican GAAP
shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this
Agreement, then the Borrower and the Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as
to equitably reflect such change in Mexican GAAP with the desired
result that the criteria for evaluating the financial condition of
Cemex Parent and its consolidated Subsidiaries shall be the same after
such change as if such change had not been made. Until such time an
amendment shall have been executed and delivered by the Borrower, the
Administrative Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated
or construed as if such change in Mexican GAAP had not occurred.
"Mexico" means the United Mexican States.
"Month" means a period starting on one day in a calendar month and
ending on the numerically corresponding day in the next calendar month,
except that:
(a) if the numerically corresponding day is not a Business Day,
that period shall end on the next Business Day in that
calendar month in which that period is to end if there is one,
or if there is not, on the immediately preceding Business Day;
and
(b) if there is no numerically corresponding day in the calendar
month in which that period is to end, that period shall end on
the last Business Day in that calendar month.
The above rules will only apply to the last Month of any period.
"Monthly" shall be construed accordingly.
"New Lender" has the meaning set out in Clause 23.1 (Assignments and
transfers by the Lenders).
"Note" means a Facility A Note or a Facility B Note as the case may be.
"Obligations" means:
(a) as to the Borrower, all of its indebtedness, obligations and
liabilities of the Borrower to the Lenders and the Agent now
or in the future existing under or in connection with the
Finance Documents, whether direct or indirect, absolute or
contingent, due or to become due; and
(b) as to each Guarantor, all of its indebtedness, obligations and
liabilities of such Guarantor to the Lenders and the Agent now
or in the future existing under or in connection with the
Finance Documents, in each case, whether direct or indirect,
absolute or contingent, due or to become due.
"Obligors" means the Borrower and the Guarantors and "Obligor" means
any of them.
"Off-Balance-Sheet Transaction" means any financing transaction of any
Person not reflected as Debt on the balance sheet of such Person, but
being structured in a way that may result in payment obligations by
such Person.
"Optional Currency" means a currency (other than the Base Currency)
which complies with the conditions set out in Clause 4.3 (Conditions
relating to Optional Currencies).
"Original Financial Statements" means:
(a) in relation to the Borrower, its audited unconsolidated
financial statements for its financial year ended 31 December
2004;
(b) in relation to each Guarantor, its respective audited
unconsolidated (and, to the extent available, its audited
consolidated) financial statements for its financial year
ended 31 December 2004 (if available); and
(c) in relation to any other Obligor, its most recent audited
financial statements prior to its becoming a Party.
"Participating Member State" means any member state of the European
Union that adopts or has adopted the euro as its lawful currency in
accordance with legislation of the European Union relating to Economic
and Monetary Union.
"Party" means a party to this Agreement.
"Permitted Lien" has the meaning given to that term in Clause 21.14
(Liens).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or other business entity, or
Governmental Authority, whether or not having a separate legal
personality.
"Process Agent" means Cemex UK Limited of Cemex House, Coldharbour
Lane, Thorpe, Egham, Surrey TW20 8TO, Fax: (+44) 01932 568933, Attn:
The Secretary.
"Professional Market Party" means a professional market party
(professionele marktpartij) as defined from time to time under the
Dutch Exemption Regulation. As of the date hereof, only the following
are Professional Market Parties:
(a) banks, insurance companies, securities firms, investment
institutions and pension funds that are (i) supervised or
licensed under Dutch law or (ii) established and acting under
supervision in a European Union member state (other than The
Netherlands), Hungary, Monaco, Poland, Puerto Rico, Saudi
Arabia, Slovakia, Czech Republic, Turkey, South Korea, the
United States, Japan, Australia, Canada, Mexico, New Zealand
or Switzerland;
(b) investment institutions that offer their participation rights
exclusively to professional market parties and are not
required to be supervised or licensed under Dutch law;
(c) the State of The Netherlands, the Dutch Central Bank, a
foreign central government body, a foreign central bank, Dutch
regional and local governments and comparable foreign
de-centralised government bodies, international treaty
organisations and supranational organisations;
(d) enterprises or entities with total assets of at least
(euro)500,000,000 (or the equivalent thereof in other
currencies) as per the balance sheet of such entity as of the
year-end preceding the date of the making of, or acceptance of
an assignment of (as the case may be), any Loan hereunder;
(e) enterprises, entities or individuals with net assets (eigen
vermogen) within the meaning of the Dutch Exemption Regulation
of at least (euro)10,000,000 (or the equivalent thereof in
other currencies) as of the year-end preceding the date of the
making of, or acceptance of an assignment of (as the case may
be), any Loan hereunder and who or which have been active in
the financial markets on average twice a month over a period
of at least two consecutive years preceding such date;
(f) subsidiaries of the entities referred to under paragraph (a)
above, provided that such subsidiaries are subject to
supervision; and
(g) an enterprise or institution that has a rating from or that
issues securities having a rating from a rating agency
recognised for such purposes by the Dutch Central Bank.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by any member of the Group
pursuant to which such member of the Group may sell, convey or
otherwise transfer to a Special Purpose Vehicle (in the case of a
transfer by Cemex Parent or any other Seller) and any other Person (in
the case of a transfer by a Special Purpose Vehicle), or may grant a
security interest in, any Receivables Program Assets (whether now
existing or arising in the future); provided that:
(a) no portion of the indebtedness or any other obligations
(contingent or otherwise) of a Special Purpose Vehicle (i) is
guaranteed by Cemex Parent or any other Seller or (ii) is
recourse to or obligates Cemex Parent or any other Seller in
any way such that the requirements for off balance sheet
treatment under FAS 140 are not satisfied; and
(b) Cemex Parent and the other Sellers do not have any obligation
to maintain or preserve the financial condition of a Special
Purpose Vehicle or cause such entity to achieve certain levels
of operating results.
"Quotation Day" means, in relation to any period for which an interest
rate is to be determined:
(a) (if the currency is sterling) one Business Day before the
first day of that period;
(b) (if the currency is euro) two TARGET Days before the first day
of that period; or
(c) (for any other currency) two Business Days before the first
day of that period,
unless market practice differs in the Relevant Interbank Market for a
currency, in which case the Quotation Day for that currency will be
determined by the Agent in accordance with market practice in the
Relevant Interbank Market (and if quotations would normally be given by
leading banks in the Relevant Interbank Market on more than one day,
the Quotation Day will be the last of those days).
"Receivables" means all rights of Cemex Parent or any other Seller to
payments (whether constituting accounts, chattel paper, instruments,
general intangibles or otherwise, and including the right to payment of
any interest or finance charges), which rights are identified in the
accounting records of Cemex Parent or such Seller as accounts
receivable.
"Receivables Documents" means:
(a) a receivables purchase agreement, pooling and servicing
agreement, credit agreement, agreements to acquire undivided
interests in or other agreement to transfer, or create a
security interest in, Receivables Program Assets, in each case
as amended, modified, supplemented or restated and in effect
from time to time entered into by Cemex Parent, another Seller
and/or a Special Purpose Vehicle, and
(b) each other instrument, agreement and other document entered
into by Cemex Parent, any other Seller or a Special Purpose
Vehicle relating to the transactions contemplated by the items
referred to in clause (a) above, in each case as amended,
modified, supplemented or restated and in effect from time to
time.
"Receivables Program Assets" means:
(a) all Receivables which are described as being transferred by
Cemex Parent, another Seller or a Special Purpose Vehicle
pursuant to the Receivables Documents;
(b) all Receivables Related Assets in respect of such Receivables;
and
(c) all collections (including recoveries) and other proceeds of
the assets described in the foregoing clauses.
"Receivables Program Obligations" means:
(a) notes, trust certificates, undivided interests, partnership
interests or other interests representing the right to be paid
a specified principal amount from the Receivables Program
Assets; and
(b) related obligations of Cemex Parent, a Subsidiary of Cemex
Parent or a Special Purpose Vehicle (including, without
limitation, rights in respect of interest or yield hedging
obligations, breach of warranty or covenant claims and expense
reimbursement and indemnity provisions).
"Receivables Related Assets" means with respect to any Receivables:
(a) any rights arising under the documentation governing or
relating to such Receivables (including rights in respect of
Liens securing such Receivables);
(b) any proceeds of such Receivables; and
(c) other assets which are customarily transferred or in respect
of which security interests are customarily granted in
connection with asset securitisation transactions involving
accounts receivable.
"Reference Banks" means, the principal London offices of Citibank N.A.,
BNP Paribas and Banco Bilbao Vizcaya Argentaria, S.A.or such other
banks as may be appointed by the Agent in consultation with the
Borrower.
"Regulation T, U or X" means Regulation T, U or X, respectively, of the
Board as in effect from time to time and any successor to all or a
portion thereof.
"Relevant Interbank Market" means, in relation to euro, the European
interbank market, and, in relation to any other currency, the London
interbank market.
"Relevant Period" means the last four consecutive fiscal quarters of
Cemex Parent and its Subsidiaries.
"Repeating Representations" means each of the representations set out
in Clauses 19.1 (Corporate Existence and Power) to Clause 19.4
(Consents/Approvals), Clause 19.8 (Direct Obligations: Pari Passu) to
Clause 19.11 (No default) and Clause 19.13 (Financial
statements/condition).
"Requirement of Law" means, as to any Person, any law, ordinance, rule,
regulation or requirement of any Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Restricted Payments" has the meaning given to that term in Clause
21.17 (Restricted Payments).
"Restricted Subsidiary" means at any time, any of:
(a) Cemex Mexico, S.A. de C.V.;
(b) Empresas Tolteca de Mexico, S.A. de C.V.;
(c) any Trademark Company;
(d) any Material Subsidiary of Cemex Parent that, as of the date
hereof, (i) is incorporated or organised in Mexico, (ii) has
its principal place of business in Mexico or (iii) conducts a
majority of its business or holds a majority of its assets in
Mexico; and
any Subsidiary of Cemex Parent that at such time owns or operates any
portion, beyond a de minimis amount, of the assets owned or operated as
of the date hereof by the Persons described in clauses (a) through (d).
"Revaluation Date" means each of the following: (a) in connection with
the making of any Loan, each Quotation Date relating to that Loan; (b)
the date of on which any prepayment is made pursuant to Clause 8.6
(Mandatory prepayment) and (c) such additional dates as the Agent or
the relevant Lender shall deem necessary.
"Rollover Loan" means one or more Facility B Loans:
(a) made or to be made on the same day that a maturing Facility B
Loan is due to be repaid;
(b) the aggregate amount of which is equal to or less than the
maturing Facility B Loan;
(c) in the same currency as the maturing Facility B Loan (unless
it arose as a result of the operation of Clause 6.2
(Unavailability of a currency)); and
(d) made or to be made for the purpose of refinancing a maturing
Facility B Loan.
"Screen Rate" means:
(a) in relation to LIBOR, the British Bankers' Association
Interest Settlement Rate for the relevant currency and period;
and
(b) in relation to EURIBOR, the percentage rate per annum
determined by the Banking Federation of the European Union for
the relevant period,
displayed on the appropriate page of the Reuters screen. If the agreed
page is replaced or service ceases to be available, the Agent may
specify another page or service displaying the appropriate rate after
consultation with the Borrower and the Lenders.
"SEC" means the U.S. Securities and Exchange Commission, any successor
thereto and any analogous Governmental Authority.
"Selection Notice" means a notice substantially in the form set out in
Part II of Schedule 3 (Selection Notice) given in accordance with
Clause 10 (Interest Periods) in relation to Facility A.
"Seller" means Cemex Parent or any Subsidiary of Cemex Parent or other
Affiliate of Cemex Parent (other than a Subsidiary or Affiliate that is
a Special Purpose Vehicle) which is a party to a Receivables Document.
"Special Purpose Vehicle" means a trust, partnership or other special
purpose Person established by any member of the Group to implement a
Qualified Receivables Transaction.
"Specified Time" means a time determined in accordance with Schedule 8
(Timetables).
"Subsidiary" means with respect to any Person, any corporation,
partnership, joint venture, limited liability company, trust, estate or
other entity of which (or in which) more than 50% of:
(a) in the case of a corporation, the issued and outstanding
capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power
upon the occurrence of any contingency not in the control of
such Person);
(b) in the case of a limited liability company, partnership or
joint venture, the interest in the capital or profits of such
limited liability company, partnership or joint venture; or
(c) in the case of a trust or estate, the beneficial interest in
such trust or estate, is at the time directly or indirectly
owned or controlled by (i) such Person, (ii) such Person and
one or more of its other Subsidiaries or (iii) one or more of
such Person's other Subsidiaries. For purposes of determining
whether a trust formed in connection with a Qualified
Receivables Transaction is a Subsidiary, notes, trust
certificates, undivided interests, partnership interests or
other interests of the type described in clause (a) of the
definition of Receivables Program Obligations shall be counted
as beneficial interests in such trust.
"TARGET" means Trans-European Automated Real-time Gross Settlement
Express Transfer payment system.
"TARGET Day" means any day on which TARGET is open for the settlement
of payments in euro.
"Tax" means any tax, levy, impost, duty or other charge or withholding
of a similar nature (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any of the
same).
"Taxes Act" means the Income and Corporation Taxes Act 1988.
"Temporary Investments" means, at any date, all amounts that would, in
conformity with Mexican GAAP consistently applied, be set forth
opposite the captions "cash and cash equivalents" ("efectivo y
equivalentes de efectivo") and/or "temporary investments" ("inversiones
temporales") on the consolidated balance sheet of Cemex Parent at such
date.
"Termination Date" means:
(a) in relation to Facility A, the day which is 24 Months after
the date of this Agreement;
(b) in relation to Facility B, the day which is 48 Months after
the date of this Agreement,
or, in each case, if such day would not be a Business Day, the first
succeeding Business Day, unless such day would fall into the next
month, in which case the immediately preceding Business Day.
"Total Commitments" means the aggregate of the Total Facility A
Commitments, the Total Facility B Commitments.
"Total Facility A Commitments" means the aggregate of the Facility A
Commitments, being US$250,000,000 at the date of this Agreement.
"Total Facility B Commitments" means the aggregate of the Facility B
Commitments, being US$250,000,000 at the date of this Agreement.
"Total Borrowings" means, without duplication, in respect of any
Person, the amount of all Debt of such Person plus the aggregate amount
of all payment obligations, contingent or otherwise, of such Person in
respect of Off-Balance-Sheet Transactions entered into by such Person.
"Total Net Worth of Cemex Spain" means, at any date, the shareholders'
equity of Cemex Spain and its Subsidiaries (including minority
interests) at such date, in accordance with Spanish GAAP.
"Trademark Companies" means collectively, CTW and any other Person at
any time conducting business or servicing a purpose similar to the
business and purposes of CTW as of the date hereof, with respect to
Intellectual Property owned or held under license by CTW as of the date
hereof, and any of their Successors or transferees in the event of a
merger or consolidation of any such Person or the transfer, conveyance,
sale, lease or other disposition of all or substantially all of its
properties or assets in accordance with Clause 21.15 (Consolidations
and mergers).
"Transfer Certificate" means a certificate substantially in the form
set out in Schedule 5 (Form of Transfer Certificate) or any other form
agreed between the Agent and the Borrower.
"Transfer Date" means, in relation to a transfer, the later of:
(a) the proposed Transfer Date specified in the Transfer
Certificate; and
(b) the date on which the Agent executes the Transfer Certificate.
"Unpaid Sum" means any sum due and payable but unpaid by an Obligor
under the Finance Documents.
"U.S.", "US" or "United States" means the United States of America.
"Utilisation" means a utilisation of a Facility.
"Utilisation Date" means the date of a Utilisation, being the date on
which the relevant Loan is to be made.
"Utilisation Request" means a notice substantially in the form set out
in Part I of Schedule 3 (Utilisation Request).
"Value of Debt Currency Derivatives" means, on any given date, the
aggregate mark-to-market value of Debt Currency Derivatives, expressed
as a positive number (if, on a mark-to-market basis, such aggregate
amount reflects a net amount owed to Cemex Parent and its Subsidiaries)
or as a negative number (if, on a mark-to-market basis, such aggregate
amount reflects a net amount owed by Cemex Parent and its
Subsidiaries).
"VAT" means value added tax as provided for in the Value Added Tax Act
1994 and any other tax of a similar nature.
"Verifiable Professional Market Party" means a Professional Market
Party whose status as such may be determined on the basis of:
(a) its entry in a public register (including on-line registers
available on the internet) of the Dutch Central Bank;
(b) its rating as provided by a rating agency recognised for such
purposes by the Dutch Central Bank and as it appears from any
public register and/or written statement of such rating
agency;
(c) its balance sheet, as confirmed by an auditor's statement
showing a value of its assets as per the last day of the
preceding calendar year of at least (euro)500,000,000 (or such
other amount and/or at such other time as may be required
pursuant to the Dutch Exemption Regulation); or
(d) its entry in a public register published by a regulatory
(other than the Dutch Central Bank) of a country as referred
to in Section 1(e)(11) of the Dutch Exemption Regulation,
exercising supervision over the Professional Market Party.
1.2 Construction
(a) Unless a contrary indication appears any reference in this
Agreement to:
(i) the "Agent", the "Arranger", any "Finance Party", any
"Lender", any "Obligor" or any "Party" shall be
construed so as to include its successors in title,
permitted assigns and permitted transferees;
(ii) a document in "agreed form" is a document which is
initialled by or on behalf of the Borrower and the
Agent or the Arranger;
(iii) "assets" includes present and future properties,
revenues and rights of every description;
(iv) the "European interbank market" means the interbank
market for euro operating in Participating Member
States;
(v) a "Finance Document" or any other agreement or
instrument is a reference to that Finance Document or
other agreement or instrument as amended or novated;
(vi) "indebtedness" includes any obligation (whether
incurred as principal or as surety) for the payment
or repayment of money, whether present or future,
actual or contingent;
(vii) a "participation" of a Lender in a Loan, means the
amount of such Loan which such Lender has made or is
to make available and thereafter that part of the
Loan which is owed to such Lender;
(viii) a "regulation" includes any regulation, rule,
official directive, request or guideline (whether or
not having the force of law but, if not having the
force of law, with which persons who are subject
thereto are accustomed to comply) of any
governmental, intergovernmental or supranational
body, agency, department or regulatory,
self-regulatory or other authority or organisation;
(ix) the "winding-up", "dissolution", "administration" or
"reorganisation" of a company or corporation shall be
construed so as to include any equivalent or
analogous proceedings (such as, in Spain, suspension
de pagos, quiebra, concurso or any other situacion
concursal and, in The Netherlands faillissement and
surseance van betaling) under the laws and
regulations of the jurisdiction in which such company
or corporation is incorporated or any jurisdiction in
which such company or corporation carries on business
including the seeking of liquidation, winding-up,
reorganisation, bankruptcy, dissolution,
administration, arrangement, adjustment, protection
or relief of debtors;
(x) a provision of law is a reference to that provision
as amended or re-enacted without material
modification;
(xi) a time of day is a reference to New York City time;
and
(xii) a reference to a clause, paragraph or schedule,
unless the context otherwise requires, is a reference
to a clause, a paragraph of or a schedule to this
Agreement.
(b) Section, Clause and Schedule headings are for ease of
reference only.
(c) Unless a contrary indication appears, a term used in any other
Finance Document or in any notice given under or in connection
with any Finance Document has the same meaning in that Finance
Document or notice as in this Agreement.
(d) A Default (including an Event of Default) is "continuing" if
it has not been remedied or waived but, for the avoidance of
doubt, no breach of any of the financial covenants set out in
Clause 21.13 (Financial condition covenants) shall be capable
of being or be deemed to be remedied by virtue of the fact
that upon any subsequent testing of such covenants pursuant to
Clause 21.13 (Financial condition covenants), there is no
breach thereof.
(e) As used herein and in the other Finance Documents and any
certificate or other document made or delivered pursuant
hereto or thereto, (i) accounting terms relating to any member
of the Group not defined in Clause 1.1 (Definitions) and
accounting terms partly defined in Clause 1.1 (Definitions),
to the extent not defined, shall have the respective meanings
given to them under the Applicable GAAP, (ii) the words
"include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation", (iii) the word
"incur" shall be construed to mean incur, create, issue,
assume or otherwise become liable in respect of (and the words
"incurred" and "incurrence" shall have correlative meanings),
(iv) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash,
Capital Stock, securities, revenues, accounts, leasehold
interests and rights, and (v) reference to agreements or other
Contractual Obligations shall, unless otherwise specified, be
deemed to refer to such agreements or Contractual Obligations
as amended, supplemented, restated or otherwise modified form
time to time.
(f) In this Agreement, whenever pro forma effect is to be given to
any Material Acquisition or Material Disposition by any member
of the Group for purposes of including or excluding (as the
case may be) the amount of income or earnings or other amounts
relating thereto in any calculation under the definition of
EBITDA, the pro forma calculations will be determined in good
faith by a responsible financial or accounting officer of the
Borrower; provided that such pro forma calculations shall not
include any pro forma expense or cost reductions except to the
extent calculated on a basis consistent with Regulation S-X
under the U.S. Securities Act of 1933, as amended.
1.3 Currency Symbols and Definitions
"(pound)" and "sterling" denote the lawful currency of the United
Kingdom, "(euro)", "EUR" and "euro" mean the single currency unit of
the Participating Member States, "JPY" and "yen" denote the lawful
currency of Japan and "US$", "$" and "dollars" denote the lawful
currency of the United States of America.
1.4 Third party rights
(a) Unless expressly provided to the contrary in a Finance
Document a person who is not a Party has no right under the
Contracts (Rights of Third Parties) Act 1999 (the "Third
Parties Act") to enforce or enjoy the benefit of any term of
any Finance Document.
(b) Notwithstanding any term of any Finance Document, the consent
of any person who is not a Party is not required to rescind or
vary any Finance Document at any time.
SECTION 2
THE FACILITIES
2. THE FACILITIES
2.1 The Facilities
Subject to the terms and conditions of this Agreement, the Lenders make
available to the Borrower:
(a) a two year multicurrency term loan facility in an aggregate
amount equal to the Total Facility A Commitments; and
(b) a four year multicurrency revolving loan facility in an
aggregate amount equal to the Total Facility B Commitments.
2.2 Finance Parties' rights and obligations
(a) The obligations of each Finance Party under the Finance
Documents are several. Failure by a Finance Party to perform
its obligations under the Finance Documents does not affect
the obligations of any other Party under the Finance
Documents. No Finance Party is responsible for the obligations
of any other Finance Party under the Finance Documents.
(b) Except as otherwise stated in the Finance Documents, the
rights of each Finance Party under or in connection with the
Finance Documents are separate and independent rights and any
debt arising under the Finance Documents to a Finance Party
from an Obligor shall be a separate and independent debt.
(c) A Finance Party may, except as otherwise stated in the Finance
Documents, separately enforce its rights under the Finance
Documents.
3. PURPOSE
3.1 Purpose
The Borrower shall apply all amounts borrowed by it under each Facility
towards:
(a) repayment of all amounts due and payable under the Existing
NSH Facility Agreement on the First Utilisation Date;
(b) repayment of Debt of the Borrower; and
(c) its general corporate purposes.
3.2 Monitoring
No Finance Party is bound to monitor or verify the application of any
amount borrowed pursuant to this Agreement.
4. CONDITIONS OF UTILISATION
4.1 Initial conditions precedent
The Borrower may not deliver the first Utilisation Request unless the
Agent has received all of the documents and other evidence listed in
Part I of Schedule 2 (Conditions Precedent to Initial Utilisation). The
Agent shall notify the Borrower and the Lenders promptly upon being so
satisfied.
4.2 Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 (Lenders'
participation) if on the date of the Utilisation Request and on the
proposed Utilisation Date:
(a) in the case of a Rollover Loan, no Event of Default is
continuing or would result from the proposed Loan and, in the
case of any other Utilisation, no Default is continuing or
would result from the proposed Utilisation; and
(b) the Repeating Representations which are or which are deemed to
be made or repeated by each Obligor on such date pursuant to
Clause 19.27 (Repetition) are true in all material respects.
The Lenders will only be obliged to comply with Clause 28.9 (Change of
currency) if, on the first day of an Interest Period, no Default is
continuing or would result from the change of currency and the
Repeating Representations to be made by each Obligor are true in all
material respects.
4.3 Conditions relating to Optional Currencies
(a) A currency will constitute an Optional Currency in relation to
a Utilisation if:
(i) it is readily available in the amount required and
freely convertible into the Base Currency in the
Relevant Interbank Market on the Quotation Day and
the Utilisation Date for that Utilisation; and
(ii) it is sterling, euro or yen or has been approved by
the Agent (acting on the instructions of all the
Lenders) on or prior to receipt by the Agent of the
relevant Utilisation Request for that Utilisation.
(b) The Lenders will only be obliged to comply with Clause 28.9
(Change of currency) if, on the first day of an Interest
Period, no Default is continuing or would result from the
change of currency and the Repeating Representations to be
made by each Obligor are true in all material respects.
(c) If the Agent has received a written request from the Borrower
for a currency to be approved under paragraph (a)(ii) above,
the Agent will confirm to the Borrower by the Specified Time:
(i) whether or not the Lenders have granted their
approval; and
(ii) if approval has been granted, the minimum amount
(and, if required, integral multiples) for any
subsequent Utilisation in that currency.
4.4 Maximum number of Loans
The Borrower may not deliver a Utilisation Request if as a result of
the proposed Utilisation:
(a) 2 or more Facility A Loans would be outstanding; or
(b) 7 or more Facility B Loans would be outstanding.
4.5 Promissory Notes
Each Loan made by each Lender shall be evidenced by a Facility A Note
or Facility B Note, as the case may be, executed by the Borrower and
each Guarantor, as "avalista," and representing the obligation of the
Borrower to pay to such Lender the unpaid principal amount of such
Loan, plus interest thereon as provided in Clause 9 (Interest). No
Lender shall, in connection with the enforcement of any Note, be
required to introduce into evidence or prove the existence of this
Agreement or the other Finance Documents (other than such Note) or the
making of Loans. In addition, the Borrower and each Guarantor shall,
from time to time at its expense, execute and/or deliver to each Lender
such amendments to the Notes, or replacement Notes, that may, in the
judgment of such Lender, be necessary and desirable in order to ensure
that the Notes duly reflect the terms of this Agreement. In addition,
and without limiting the foregoing, in the event that (i) any Interest
Period of a different duration from the prior Interest Period shall be
selected with respect to any Facility pursuant to Clause 10 (Interest
Periods) or (ii) the Termination Date of any Facility shall be extended
for any reason or (iii) any Lender assigns any of its rights and
benefits in respect of any Utilisation or transfers by novation any of
its rights, benefits and obligations in respect of any Utilisation
pursuant to Clause 23 (Changes to the Lenders), the Borrower and each
Guarantor shall, at its expense, execute and deliver to each Lender
under such Facility a replacement Note, which shall be subscribed in
the same manner and on the same terms and conditions as the Note
theretofore held by such Lender, and shall be delivered to each such
Lender no later than date on which any such change shall become
effective.
SECTION 3
UTILISATION
5. UTILISATION
5.1 Delivery of a Utilisation Request
The Borrower may utilise a Facility by delivery to the Agent of a duly
completed Utilisation Request not later than the Specified Time.
5.2 Completion of a Utilisation Request
(a) Each Utilisation Request is irrevocable and will not be
regarded as having been duly completed unless:
(i) it identifies the Facility to be utilised;
(ii) the proposed Utilisation Date is a Business Day
within the Availability Period applicable to that
Facility;
(iii) the currency and amount of the Loan complies with
Clause 5.3 (Currency and amount); and
(iv) the proposed Interest Period complies with Clause 10
(Interest Periods).
(b) Only one Loan may be requested in each Utilisation Request.
5.3 Currency and amount
(a) The currency specified in a Utilisation Request must be the
Base Currency or an Optional Currency.
(b) Unless the Agent otherwise agrees, the amount of the proposed
Utilisation must be an amount whose Base Currency Amount is
not more than the Available Facility (adjusted, where
applicable, to take account of any additional Utilisations
which are scheduled to take place on or before the relevant
Utilisation Date) and which is:
(i) if the currency selected is the Base Currency, a
minimum of US$10,000,000 or, if less, the relevant
Available Facility; and, if more, an integral
multiple of US$1,000,000 or
(ii) if the currency selected is sterling, euro or yen, a
minimum of the equivalent in the relevant Optional
Currency of US$10,000,000 (calculated at the Agent's
Spot Rate of Exchange) or, if less, the relevant
Available Facility and, if more, an integral multiple
of US$1,000,000; or
(iii) if the currency selected is an Optional Currency
other than sterling, euro or yen, the minimum amount
specified by the Agent pursuant to paragraph (c)(ii)
of Clause 4.3 (Conditions relating to Optional
Currencies) or, if less, the relevant Available
Facility.
5.4 Lenders' participation
(a) If the conditions set out in this Agreement have been met,
each Lender shall make its participation in each Loan
available by the Utilisation Date through its Facility Office.
(b) The amount of each Lender's participation in each Loan will be
equal to the proportion borne by its Available Commitment to
the relevant Available Facility immediately prior to making
the Loan.
(c) The Agent shall determine the Base Currency Amount of each
Loan which is to be made in an Optional Currency and shall
notify each Lender of the amount, currency and the Base
Currency Amount of each Loan and the amount of its
participation in that Loan, in each case by the Specified
Time.
6. OPTIONAL CURRENCIES
6.1 Selection of currency
The Borrower shall select the currency of each Loan in a Utilisation
Request.
6.2 Unavailability of a currency
If before the Specified Time on any Quotation Day:
(a) a Lender notifies the Agent that the Optional Currency
requested is not readily available to it in the amount
required, and provides in writing an objectively justified
reason therefor; or
(b) a Lender notifies the Agent that compliance with its
obligation to participate in a Loan in the proposed Optional
Currency would contravene a law or regulation applicable to
it,
the Agent will give notice to the Borrower to that effect by the
Specified Time on that day. In this event, any Lender that gives notice
pursuant to this Clause 6.2 will be required to participate in the Loan
in the Base Currency (in an amount equal to that Lender's proportion of
the Base Currency Amount, or in respect of a Rollover Loan, an amount
equal to that Lender's proportion of the Base Currency Amount of the
Rollover Loan that is due to be made) and its participation will be
treated as a separate Loan denominated in the Base Currency during that
Interest Period.
6.3 Agent's calculations
Each Lender's participation in a Loan will be determined in accordance
with paragraph (b) of Clause 5.4 (Lenders' participation).
SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION
7. REPAYMENT
7.1 Repayment of Facility A Loan
The Borrower shall repay the Facility A Loans in full on the
Termination Date.
7.2 Repayment of Facility B Loans
The Borrower shall repay each Facility B Loan on the last day of the
Interest Period relating to such Loan and, in any event, in full on the
Termination Date.
8. PREPAYMENT AND CANCELLATION
8.1 Illegality of a Lender
If, at any time, it is or will become unlawful in any applicable
jurisdiction for a Lender to perform any of its obligations as
contemplated by this Agreement or to fund or maintain its participation
in any Utilisation:
(a) that Lender shall promptly notify the Agent upon becoming
aware of that event and in any event at a time which permits
the Borrower to repay that Lender's participation on the date
such repayment is required to be made;
(b) upon the Agent notifying the Borrower, the Commitment of that
Lender will be immediately cancelled; and
(c) the Borrower shall on the last day of the Interest Period for
each Loan occurring after the Agent has notified the Borrower
or, if earlier, the date specified by the Lender in the notice
delivered to the Agent (being no earlier than the last day of
any applicable grace period permitted by law) repay that
Lender's participation in the Loans together with accrued
interest on and all other amounts owing to that Lender under
the Finance Documents.
8.2 Voluntary cancellation
The Borrower may if it gives the Agent not less than three Business
Days' (or such shorter period as the Majority Lenders in respect of the
Facility B to which such cancellation relates may agree) prior notice,
cancel the whole or any part (being a minimum amount of US$10,000,000
and, if more, an integral multiple of US$1,000,000) of Facility B. Any
cancellation under this Clause 8.2 shall reduce rateably the
Commitments of the Lenders under Facility B.
8.3 Automatic cancellation
At the close of business on the last day of the Availability Period in
respect of each Facility, the Available Commitment of each Lender under
such Facility shall be (if it has not already been) cancelled and
reduced to zero.
8.4 Voluntary prepayment of Loans
The Borrower may, if it gives the Agent not less than three Business
Days' (or such shorter period as the Majority Lenders in respect of the
relevant Facility may agree) prior notice, prepay the whole or any part
of any Loan (but, if in part, being an amount that reduces the Base
Currency Amount of that Loan by a minimum amount of US$10,000,000 and,
if more, an integral multiple of US$1,000,000).
8.5 Right of repayment and cancellation in relation to a single Lender
(a) If:
(i) any sum payable to any Lender by an Obligor is
required to be increased under paragraph (c) of
Clause 13.2 (Tax gross-up) solely as a result of the
application of a withholding tax rate higher than the
lowest withholding tax rate applicable in the
relevant jurisdiction; or
(ii) any Lender claims indemnification from an Obligor
under Clause 13.3 (Tax indemnity) or Clause 14.1
(Increased costs),
the Borrower may, whilst the circumstance giving rise to the
requirement or indemnification continues, give the Agent
notice of cancellation of the Commitment of that Lender and
its intention to procure the repayment of that Lender's
participation in the Loans.
(b) On receipt of a notice referred to in paragraph (a) above, the
relevant Commitment of that Lender shall immediately be
reduced to zero.
(c) On the last day of each Interest Period which ends after the
Borrower has given notice under paragraph (a) above (or, if
earlier, the date specified by the Borrower in that notice),
the Borrower shall repay that Lender's participation in the
Loans to which such Interest Period relates.
8.6 Mandatory prepayment
If on any date the Agent notifies the Borrower that the Base Currency
Amount in relation to Facility B (determined as of the most recent
Revaluation Date) shall exceed 103% of the Total Commitments, the
Borrower shall as soon as practicable, but in any event no later than
five Business Days after receipt of such notice, prepay the outstanding
principal amount of any Loans owing by the Borrower in an aggregate
amount sufficient to reduce such sum to an amount not to exceed 100% of
the Total Facility B Commitments on such date, together with any
interest and other amounts accrued to the date of such prepayment on
the aggregate principal amount of the Loan(s) prepaid. The Agent shall
give prompt notice of any prepayment required under this Clause 8.6 to
the Borrower, and shall provide prompt notice to the Borrower of any
such notice of mandatory prepayment the Agent receives from any Lender.
Any such prepayment shall be allocated at the Lender's discretion.
8.7 Restrictions
(a) Any notice of cancellation or prepayment given by any Party
under this Clause 8 shall be irrevocable and, unless a
contrary indication appears in this Agreement, shall specify
the date or dates upon which the relevant cancellation or
prepayment is to be made and the amount of that cancellation
or prepayment.
(b) Any prepayment under this Agreement shall be made together
with accrued interest on the amount prepaid and, subject to
any Break Costs, without premium or penalty.
(c) The Borrower may not reborrow any part of Facility A which is
prepaid.
(d) Unless a contrary indication appears in the Agreement, any
part of Facility B which is prepaid may be re-borrowed in
accordance with the terms of this Agreement.
(e) The Borrower shall not repay or prepay all or any part of the
Loans or cancel all or any part of the Commitments except at
the times and in the manner expressly provided for in this
Agreement.
(f) No amount of the Total Commitments cancelled under this
Agreement may be subsequently reinstated.
(g) If the Agent receives a notice under this Clause 8 it shall
promptly forward a copy of that notice to either the Borrower
or the affected Lenders, as appropriate.
SECTION 5
COSTS OF UTILISATION
9. INTEREST
9.1 Calculation of interest
The rate of interest on each Loan for each Interest Period is the
percentage rate per annum which is the aggregate of the applicable:
(a) Margin;
(b) LIBOR or, in relation to any Loan in euro, EURIBOR; and
(c) Mandatory Cost, if any.
9.2 Payment of interest
On the last day of each Interest Period relating to a Loan, the
Borrower shall pay accrued interest on the Loan to which that Interest
Period relates (and, if the Interest Period is longer than six Months,
on the dates falling at six Monthly intervals after the first day of
that Interest Period).
9.3 Default interest
(a) If an Obligor fails to pay any amount payable by it under a
Finance Document on its due date, interest shall accrue on the
overdue amount from the due date up to the date of actual
payment (both before and after judgment) at a rate which,
subject to paragraph (b) below, is two per cent higher than
the rate which would have been payable if the overdue amount
had, during the period of non-payment, constituted a Loan in
the currency of the overdue amount for successive Interest
Periods, each of a duration of one Month. Any interest
accruing under this Clause 9.3 shall be immediately payable by
the Obligor on demand by the Agent.
(b) If any overdue amount consists of all or part of a Loan which
became due on a day which was not the last day of an Interest
Period relating to that Loan:
(i) the first Interest Period for that overdue amount
shall have a duration equal to the unexpired portion
of the current Interest Period relating to that Loan;
and
(ii) the rate of interest applying to the overdue amount
during that first Interest Period shall be two per
cent. higher than the rate which would have applied
if the overdue amount had not become due.
(c) Default interest (if unpaid) arising on an overdue amount will
be compounded with the overdue amount at the end of each
Interest Period applicable to that overdue amount but will
remain immediately due and payable.
9.4 Notification of rates of interest
The Agent shall promptly notify the Lenders and the Borrower of the
determination of a rate of interest under this Agreement.
10. INTEREST PERIODS
10.1 Selection of Interest Periods
(a) The Borrower may select an Interest Period for a Loan in the
Utilisation Request for that Loan or (if the Loan is a
Facility A Loan and has already been borrowed) in a Selection
Notice.
(b) Each Selection Notice is irrevocable and must be delivered to
the Agent by the Borrower not later than the Specified Time.
(c) If the Borrower fails to deliver a Selection Notice to the
Agent in accordance with paragraph (b) above, the relevant
Interest Period will be one Month.
(d) Subject to this Clause 10, the Borrower may select an Interest
Period of one, two, three or six Months, or any other period
agreed between the Borrower and the Agent (acting on the
instructions of all the Lenders participating in the relevant
Facility).
(e) An Interest Period for a Loan shall not extend beyond the
Termination Date applicable to its Facility.
(f) Each Interest Period for a Facility A Loan shall start on the
Utilisation Date or (if a Loan has already been made) on the
last day of its preceding Interest Period.
(g) A Facility B Loan has one Interest Period only.
10.2 Non-Business Days
If an Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period will instead end on the next
Business Day in that calendar month (if there is one) or the preceding
Business Day (if there is not).
10.3 Consolidation and division of Facility A Loans
(a) Subject to paragraph (b) below, if two or more Interest
Periods relate to Facility A Loans:
(i) in the same currency;
(ii) of the same period; and
(iii) ending on the same date,
those Facility A Loans will, unless the Borrower specifies to
the contrary in the Selection Notice for the next Interest
Period, be consolidated into, and be treated as, a single
Facility A Loan on the last day of the Interest Period.
(b) Subject to Clause 4.4 (Maximum number of Loans), and Clause
5.3 (Currency and amount) if the Borrower requests in a
Selection Notice that a Facility A Loan be divided into two or
more Facility A Loans, that Facility A Loan will, on the last
day of its Interest Period, be so divided into the Base
Currency Amounts specified in that Selection Notice, being an
aggregate Base Currency Amount equal to the Base Currency
Amount of the Facility A Loan immediately before its division.
11. CHANGES TO THE CALCULATION OF INTEREST
11.1 Absence of quotations
Subject to Clause 11.2 (Market disruption), if LIBOR or, if applicable
EURIBOR, is to be determined by reference to the Reference Banks but a
Reference Bank does not supply a quotation by the Specified Time on the
Quotation Day, the applicable LIBOR or EURIBOR shall be determined on
the basis of the quotations of the remaining Reference Banks.
11.2 Market disruption
(a) If a Market Disruption Event occurs in relation to a Loan for
any Interest Period, then the rate of interest on each
Lender's share of that Loan for the Interest Period shall be
the rate per annum which is the sum of:
(i) the Margin;
(ii) the rate notified to the Agent by that Lender as soon
as practicable and in any event before interest is
due to be paid in respect of that Interest Period, to
be that which expresses as a percentage rate per
annum the cost to that Lender of funding its
participation in that Loan from whatever source it
may reasonably select; and
(iii) the Mandatory Cost, if any, applicable to that
Lender's participation in that Loan.
(b) In this Agreement "Market Disruption Event" means:
(i) at or about noon on the Quotation Day for the
relevant Interest Period the Screen Rate not being
available and none or only one of the Reference Banks
supplying a rate to the Agent to determine LIBOR or,
if applicable, EURIBOR for the relevant currency and
Interest Period; or
(ii) before close of business in New York on the Quotation
Day for the relevant Interest Period, the Agent
receiving notifications from a Lender or Lenders (in
either case whose participations in a Loan exceed 50
per cent. of that Loan) that the cost to it or them
of obtaining matching deposits in the Relevant
Interbank Market would be in excess of LIBOR or, if
applicable, EURIBOR.
11.3 Alternative basis of interest or funding
(a) If a Market Disruption Event occurs and the Agent or the
Borrower so requires, the Agent and the Borrower shall enter
into negotiations (for a period of not more than thirty days)
with a view to agreeing a substitute basis for determining the
rate of interest in respect of the relevant Loan.
(b) Any alternative basis agreed pursuant to paragraph (a) above
shall, with the prior consent of all the Lenders participating
in the relevant Loan and the Borrower, be binding on all
Parties.
11.4 Break Costs
(a) The Borrower shall, within three Business Days of demand by a
Lender, pay to that Lender its Break Costs attributable to all
or any part of a Loan or Unpaid Sum being paid by the Borrower
on a day other than the last day of an Interest Period for
that Loan or Unpaid Sum.
(b) Each Lender shall, as soon as reasonably practicable after a
demand by the Agent, provide a certificate confirming in
reasonable detail the amount of its Break Costs for any
Interest Period in which they accrue.
12. FEES
12.1 Arrangement fee
The Borrower shall pay to the Arranger an arrangement fee in the amount
and at the times agreed in the Syndication and Fees Letter.
12.2 Agency fee
The Borrower shall pay to (or procure payment to) the Agent (for its
own account) an agency fee in the amount and at the times agreed in the
Syndication and Fees Letter.
12.3 Commitment fee
(a) The Borrower shall pay to the Agent (for the account of each
Lender under Facility B) a commitment fee computed at the rate
of 30 per cent. of the applicable Margin from time to time in
relation to Facility B on that Lender's Average Available
Commitment (as defined below) for each successive period of
three Months during the Availability Period and for any
shorter period of availability ending by the cancellation or
termination of Facility B.
(b) The accrued commitment fees are payable on the last day of
each successive period of three Months which ends during the
Availability Period, on the last day of the Availability
Period and, if cancelled in full, on the cancelled amount of
the relevant Lender's Commitment at the time the cancellation
is effective.
(c) In this Clause 12.3:
"Average Available Commitment" means, in respect of each
Lender during the relevant period, the Aggregate Available
Commitment divided by the number of actual days elapsed during
that Availability Period; and
"Aggregate Available Commitment" means, in respect of each
Lender during any Availability Period, the sum of such
Lender's Available Commitment in relation to Facility B at the
start of each day during that period.
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
13. TAX GROSS UP AND INDEMNITIES
13.1 Definitions
(a) In this Clause 13:
"Protected Party" means a Finance Party which is or will be
subject to any liability or required to make any payment, for
or on account of Tax in relation to a sum received or
receivable (or any sum deemed for the purposes of Tax to be
received or receivable) under a Finance Document.
"Tax Deduction" means a deduction or withholding for or on
account of Tax from a payment made under a Finance Document.
"Tax Payment" means either the increase in a payment made by
an Obligor to a Finance Party under Clause 13.2 (Tax gross-up)
or a payment under Clause 13.3 (Tax indemnity).
(b) Unless a contrary indication appears, in this Clause 13 a
reference to "determines" or "determined" means a
determination made in the absolute good faith discretion of
the person making the determination.
13.2 Tax gross-up
(a) Each Obligor shall make all payments to be made by it without
any Tax Deduction, unless a Tax Deduction is required by law
or regulation.
(b) The Borrower or a Lender shall promptly upon becoming aware
that an Obligor must make a Tax Deduction (or that there is
any change in the rate or the basis of a Tax Deduction) notify
the Agent accordingly. If the Agent receives such notification
from a Lender it shall notify the Borrower and that Obligor.
(c) If a Tax Deduction is required by law or regulation to be made
by an Obligor, the amount of the payment due from that Obligor
shall be increased to an amount which (after making any Tax
Deduction) leaves an amount equal to the payment which would
have been due and payable if no Tax Deduction had been
required.
(d) If an Obligor is required to make a Tax Deduction, that
Obligor shall make that Tax Deduction and any payment required
in connection with that Tax Deduction within the time allowed
and in the minimum amount required by law or regulation.
(e) Within thirty days of making either a Tax Deduction or any
payment required in connection with that Tax Deduction, the
Obligor making that Tax Deduction shall deliver to the Agent
for the Finance Party entitled to the payment an original
receipt (or certified copy thereof) or if unavailable such
other evidence as is reasonably satisfactory to that Finance
Party that the Tax Deduction has been made or (as applicable)
any appropriate payment paid to the relevant taxing authority.
13.3 Tax indemnity
(a) The Borrower shall (within five Business Days of demand by the
Agent) pay to a Protected Party an amount equal to the amount
of any Tax assessed on that Protected Party (together with any
interest, costs or expenses payable, directly or indirectly,
or incurred in connection therewith) in relation to a sum
received or receivable (or any sum deemed for the purposes of
Tax to be received or receivable) under a Finance Document.
(b) Paragraph (a) of this Clause 13.3 shall not apply with respect
to any Tax assessed on a Finance Party:
(i) under the laws and regulations of the jurisdiction in
which that Finance Party is incorporated or, if
different, the jurisdiction (or jurisdictions) in
which that Finance Party is treated as resident for
tax purposes; or
(ii) under the laws and regulations of the jurisdiction in
which that Finance Party's Facility Office is located
in respect of amounts received or receivable in that
jurisdiction,
if that Tax is imposed on or calculated by reference to the net income
(but not on any sum deemed to be received or receivable in respect of
any payment made under Clause 13.2 (Tax gross-up)) of that Finance
Party.
(c) A Protected Party making, or intending to make a claim
pursuant to paragraph (a) of this Clause 13.3 shall promptly
notify the Agent of the event which will give, or has given,
rise to the claim, following which the Agent shall notify the
Borrower.
(d) A Protected Party shall, on receiving a payment from an
Obligor under this Clause 13.3, notify the Agent.
13.4 Tax Exemptions
A Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower
is located, or under any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Agent), upon the Borrower's reasonable
request, such properly completed and executed documentation as will
permit such payments to be made without withholding or at a reduced
withholding tax rate; provided that such Lender is legally entitled to
complete, execute and deliver such documentation and in such Lender's
reasonable judgment such completion, execution or submission would not
cause such Lender or its lending office(s) to suffer any economic,
legal or regulatory disadvantage.
13.5 Stamp taxes
The Borrower shall pay and, within five Business Days of demand,
indemnify each Finance Party against any cost, loss or liability that
Finance Party incurs in relation to all stamp duty, registration and
other similar Taxes payable in respect of any Finance Document except
for any such tax payable in connection with the entry into of a
Transfer Certificate.
13.6 Value added tax
(a) All consideration expressed to be payable under a Finance
Document by any Party to a Finance Party shall be deemed to be
exclusive of any VAT. If VAT is chargeable on any supply made
by any Finance Party to any Party in connection with a Finance
Document, that Party shall pay to the Finance Party (in
addition to and at the same time as paying the consideration)
an amount equal to the amount of the VAT and such Finance
Party shall promptly provide an appropriate VAT invoice to
such Party.
(b) Where a Finance Document requires any Party to reimburse a
Finance Party for any costs or expenses, that Party shall also
at the same time pay and indemnify that Finance Party against
all VAT incurred by the Finance Party in respect of the costs
or expenses to the extent that the Finance Party reasonably
determines that it is not entitled to credit or repayment of
the VAT.
14. INCREASED COSTS
14.1 Increased costs
(a) Subject to Clause 14.2 (Increased Cost Claims) and Clause 14.3
(Exceptions) the Borrower shall, within three Business Days of
a demand by the Agent, pay for the account of a Finance Party
the amount of any Increased Costs incurred by that Finance
Party or any of its Affiliates as a result of:
(i) the introduction of or any change in (or in the
interpretation, administration or application of) any
law or regulation; or
(ii) compliance with any law or regulation,
in each case made after the date of this Agreement.
(b) In this Agreement "Increased Costs" means, without
duplication:
(i) a reduction in the rate of return from a Facility or
on a Finance Party's (or its Affiliate's) overall
capital;
(ii) an additional or increased cost; or
(iii) a reduction of any amount due and payable under any
Finance Document,
which is incurred or suffered by a Finance Party or any of its
Affiliates to the extent that it is attributable to that
Finance Party having entered into its Commitments or funding
or performing its obligations under any Finance Document.
14.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to Clause
14.1 (Increased costs) shall notify the Agent of the event
giving rise to the claim and a calculation evidencing in
reasonable detail the amount of such Increased Costs to be
claimed by such Finance Party, following which the Agent shall
promptly notify the Borrower and provide the Borrower with
such calculations.
(b) Each Finance Party shall, as soon as practicable after a
demand by the Agent, provide a certificate confirming the
amount of its Increased Costs.
14.3 Exceptions
(a) Clause 14.1 (Increased costs) does not apply to the extent any
Increased Cost is:
(i) attributable to a Tax Deduction required by law or
regulation to be made by an Obligor;
(ii) compensated for by Clause 13.3 (Tax indemnity) (or
would have been compensated for under Clause 13.3
(Tax indemnity) but was not so compensated solely
because any of the exclusions in paragraph (b) of
Clause 13.3 (Tax indemnity) applied);
(iii) compensated for by the payment of the Mandatory Cost;
or
(iv) attributable to the breach by the relevant Finance
Party or its Affiliates of any law or regulation.
(b) In this Clause 14.3, a reference to a "Tax Deduction" has the
same meaning given to the term in Clause 13.1 (Definitions).
15. OTHER INDEMNITIES
15.1 Currency indemnity
(a) If any sum due from an Obligor under the Finance Documents (a
"Sum"), or any order, judgment or award given or made in
relation to a Sum, has to be converted from the currency (the
"First Currency") in which that Sum is payable into another
currency (the "Second Currency") for the purpose of:
(i) making or filing a claim or proof against that
Obligor; or
(ii) obtaining or enforcing an order, judgment or award in
relation to any litigation or arbitration
proceedings,
that Obligor shall as an independent obligation, within three
Business Days of demand, indemnify each Finance Party to whom
that Sum is due against any cost, loss or liability arising
out of or as a result of the conversion including any
discrepancy between (A) the rate of exchange used to convert
that Sum from the First Currency into the Second Currency and
(B) the rate or rates of exchange available to that person at
the time of its receipt of that Sum.
(b) Each Obligor waives any right it may have in any jurisdiction
to pay any amount under the Finance Documents in a currency or
currency unit other than that in which it is expressed to be
payable.
15.2 Other indemnities
Each Obligor shall, within five Business Days of demand, indemnify each
Finance Party against any cost, loss or liability not otherwise
compensated under the provisions of this Agreement and excluding any
lost profits, consequential or indirect damages (other than interest or
default interest) incurred by that Finance Party as a result of its
Commitment or the making of any Loan under the Finance Documents as a
result of:
(a) the occurrence of any Event of Default;
(b) a failure by an Obligor to pay any amount due under a Finance
Document on its due date, including without limitation, any
cost, loss or liability arising as a result of Clause 27
(Sharing among the Finance Parties);
(c) funding, or making arrangements to fund, its participation in
a Loan requested by the Borrower in a Utilisation Request but
not made by reason of the operation of any one or more of the
provisions of this Agreement (other than by reason of default
or negligence by that Finance Party alone); or
(d) a Loan (or part of a Loan) not being prepaid in accordance
with a notice of prepayment given by the Borrower.
15.3 Indemnity to the Agent
The Borrower shall (or shall procure that another Obligor will)
promptly indemnify the Agent against any cost, loss or liability
directly related to this Agreement incurred by the Agent (acting
reasonably and otherwise than by reason of the Agent's gross negligence
or wilful misconduct) as a result of:
(a) investigating any event which it reasonably believes (acting
prudently and, if possible, following consultation with the
Borrower) is a Default; or
(b) acting or relying on any notice, request or instruction which
it reasonably believes to be genuine, correct and
appropriately authorised.
16. MITIGATION BY THE LENDERS
16.1 Mitigation
(a) Each Finance Party shall, in consultation with the Borrower,
take all reasonable steps to mitigate any circumstances which
arise after the date of this Agreement and which would result
in any amount becoming payable under or pursuant to, or
cancelled pursuant to, any of Clause 8.1 (Illegality of a
Lender), Clause 13 (Tax gross-up and indemnities), Clause 14
(Increased costs) or paragraph 3 of Schedule 4 (Mandatory Cost
Formulae) including (but not limited to) transferring its
rights and obligations under the Finance Documents to another
Affiliate or Facility Office.
(b) Paragraph (a) above does not in any way limit the obligations
of any Obligor under the Finance Documents.
16.2 Limitation of liability
(a) The Borrower shall (or shall procure that another Obligor
will) indemnify each Finance Party for all costs and expenses
reasonably incurred by that Finance Party as a result of steps
taken by it under Clause 16.1 (Mitigation).
(b) A Finance Party is not obliged to take any steps under Clause
16.1 (Mitigation) if, in the opinion of that Finance Party
(acting reasonably), to do so might be prejudicial to it.
17. COSTS AND EXPENSES
17.1 Transaction expenses
The Borrower shall promptly on demand pay the Agent and the Arrangers
the amount of all documented costs and expenses (including legal fees)
reasonably incurred by any of them in connection with the negotiation,
preparation, printing, execution and syndication of:
(a) this Agreement and any other documents referred to in this
Agreement; and
(b) any other Finance Documents executed after the date of this
Agreement.
17.2 Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an
amendment is required pursuant to Clause 28.9 (Change of currency), the
Borrower shall, within three Business Days of demand, reimburse the
Agent, the Arranger and each Lender for the amount of all costs and
expenses (including legal fees, but in this case, only the legal fees
of one law firm in each relevant jurisdiction acting on behalf of all
the Lenders) reasonably incurred by such parties in responding to,
evaluating, negotiating or complying with that request or requirement.
17.3 Enforcement costs
The Borrower shall, within three Business Days of demand, pay to each
Finance Party the amount of all costs and expenses (including legal
fees) incurred by that Finance Party in connection with the enforcement
of, or the preservation of any rights under, any Finance Document.
SECTION 7
GUARANTEE
18. GUARANTEE AND INDEMNITY
18.1 Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a) guarantees to each Finance Party punctual performance by the
Borrower of all the Borrower's obligations under the Finance
Documents;
(b) undertakes with each Finance Party that whenever the Borrower
does not pay any amount when due under or in connection with
any Finance Document, it shall immediately on demand pay that
amount as if it was the principal obligor; and
(c) indemnifies each Finance Party immediately on demand against
any cost, loss or liability suffered by that Finance Party if
any obligation guaranteed by it is or becomes unenforceable,
invalid or illegal. The amount of the cost, loss or liability
shall be equal to the amount which that Finance Party would
otherwise have been entitled to recover.
18.2 Continuing guarantee
This guarantee is a continuing guarantee and will extend to the
ultimate balance of sums payable by the Borrower under the Finance
Documents, regardless of any intermediate payment or discharge in whole
or in part.
18.3 Reinstatement
If any payment by the Borrower or any discharge given by a Finance
Party (whether in respect of the obligations of the Borrower or any
security for those obligations or otherwise) is avoided or reduced as a
result of insolvency or any similar event:
(a) the liability of the Borrower shall continue as if the
payment, discharge, avoidance or reduction had not occurred;
and
(b) each Finance Party shall be entitled to recover the value or
amount of that security or payment from the Borrower, as if
the payment, discharge, avoidance or reduction had not
occurred.
18.4 Waiver of defences
The obligations of each Guarantor under this Clause 18 will not be
affected by an act, omission, matter or thing which, but for this
Clause 18, would reduce, release or prejudice any of its obligations
under this Clause 18 (without limitation and whether or not known to it
or any Finance Party) including:
(a) any time, waiver or consent granted to, or composition with,
the Borrower or other person;
(b) the release of the Borrower or any other person under the
terms of any composition or arrangement with any creditor of
any member of the Group;
(c) the taking, variation, compromise, exchange, renewal or
release of, or refusal or neglect to perfect, take up or
enforce, any rights against, or security over assets of, the
Borrower or other person or any non-presentation or
non-observance of any formality or other requirement in
respect of any instrument or any failure to realise the full
value of any security;
(d) any incapacity or lack of power, authority or legal
personality of or dissolution or change in the members or
status of the Borrower or any other person;
(e) any amendment (however fundamental) or replacement of a
Finance Document or any other document or security;
(f) any unenforceability, illegality or invalidity of any
obligation of any person under any Finance Document or any
other document or security; or
(g) any insolvency or similar proceedings.
18.5 Immediate recourse
Each Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from
any person before claiming from a Guarantor under this Clause 18 and
waives any similar or additional rights that may be granted by
applicable law. This waiver applies irrespective of any law or
regulation or any provision of a Finance Document to the contrary.
Each Guarantor also waives any right to be sued jointly with other
Guarantors and to share liability resulting from any claim against it.
18.6 Appropriations
Until all amounts which may be or become payable by the Borrower under
or in connection with the Finance Documents have been irrevocably paid
in full, each Finance Party (or any trustee or agent on its behalf)
may:
(a) refrain from applying or enforcing any other monies, security
or rights held or received by that Finance Party (or any
trustee or agent on its behalf) in respect of those amounts,
or apply and enforce the same in such manner and order as it
sees fit (whether against those amounts or otherwise) and no
Guarantor shall be entitled to the benefit of the same; and
(b) hold in an interest-bearing suspense account any monies
received from a Guarantor or on account of such Guarantor's
liability under this Clause 18,
provided that the operation of this Clause 18.6 shall not be deemed to
create any Liens.
18.7 Deferral of Guarantors' rights
Until all amounts which may be or become payable by the Borrower under
or in connection with the Finance Documents have been irrevocably paid
in full and unless the Agent (acting on the instructions of the
Majority Lenders) otherwise directs, no Guarantor will exercise any
rights which it may have by reason of performance by it of its
obligations under the Finance Documents:
(a) to be indemnified by the Borrower;
(b) to claim any contribution from any other guarantor of the
Borrower's obligations under the Finance Documents; and/or
(c) to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Finance Parties
under the Finance Documents or of any other guarantee or
security taken pursuant to, or in connection with, the Finance
Documents by any Finance Party.
18.8 Additional security
This guarantee is in addition to and is not in any way prejudiced by
any other guarantee or security now or subsequently held by any Finance
Party.
SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
19. REPRESENTATIONS
Each Obligor makes the representations and warranties set out in Clause
19.1 (Corporate Existence and Power) to Clause 19.11 (No default)
(inclusive) to each Finance Party.
Each of the Borrower and Cemex Parent makes the representations and
warranties set out in Clauses 19.12 (No misleading information) to
Clause 19.16 (Intellectual property) (inclusive) to each Finance Party.
Cemex Parent makes the representations and warranties set out in
Clauses 19.17 (Financial information) to Clause 23.24 (Environmental
Matters) (inclusive) to each Finance Party.
Each Guarantor makes the representations and warranties set out in
Clause 19.26 (Mutual Benefits) to each Finance Party.
19.1 Corporate Existence and Power
(a) Each Obligor is a corporation duly incorporated, validly
existing under the laws of its jurisdiction of incorporation
and has all requisite corporate power and authority (including
all governmental licences, permits and other approvals except
for such licences, permits and approvals the absence of which
will not have a Material Adverse Effect) to own its assets and
carry on its business as now conducted and as proposed to be
conducted.
(b) All of the outstanding stock of such Obligor has been validly
issued and is fully paid and non-assessable.
(c) The Borrower is in full compliance with the applicable
provisions of the Dutch Banking Act and any implementing
regulations, including, but not limited to, the Dutch
Exemption Regulation and the Dutch Policy Guidelines. The
Borrower has verified the status of each Lender and each such
Lender is either (i) a Professional Market Party or (ii)
exempted from the requirement to be a Professional Market
Party because it forms a closed circle (besloten kring),
within the meaning of the Dutch Exemption Regulation, with the
Borrower.
19.2 Power and Authority; Enforceable Obligations
(a) The execution, delivery and performance by each Obligor of
each Finance Document to which it is or will be a party, and
the consummation of the transactions contemplated hereby and
thereby, are within such Obligor's corporate powers and have
been duly authorised by all necessary corporate action
pursuant to the statuten or, as the case may be, estatutos
sociales of such Obligor.
(b) This Agreement and the other Finance Documents to which each
Obligor is a party have been duly executed and delivered by
such Obligor and constitute legal, valid and binding
obligations of such Obligor enforceable in accordance with
their respective terms, except as enforceability may be
limited by applicable concurso mercantil, bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or general equity
principles.
19.3 Compliance with Law and Other Instruments
The execution, delivery and performance of this Agreement and any of
the other Finance Documents to which such Obligor is a party and the
consummation of the transactions herein or therein contemplated, and
compliance with the terms and provisions hereof and thereof, do not and
will not (a) conflict with, or result in a breach or violation of, or
constitute a default under, or result in the creation or imposition of
any Lien upon the assets of such Obligor pursuant to, any Contractual
Obligation of such Obligor or (b) result in any violation of the
statuten or, as the case may be, estatutos sociales of such Obligor or
any provision of any Requirement of Law applicable to such Obligor.
19.4 Consents/Approvals
No order, permission, consent, approval, licence, authorization,
registration or validation of, or notice to or filing with, or
exemption by, any Governmental Authority or third party is required to
authorise, or is required in connection with, the execution, delivery
and performance by such Obligor of this Agreement and the other Finance
Documents to which such Obligor is a party or the taking of any action
contemplated hereby or by any other Finance Document.
19.5 Litigation; Material Adverse Effect
Except as set forth in Schedule 11 (Litigation), there is no pending or
threatened action, suit, investigation, litigation or proceeding,
including any Environmental Action, affecting Cemex Parent or any of
its Subsidiaries before any court, Governmental Authority or arbitrator
that (i) would be reasonably likely to have a Material Adverse Effect
or (ii) purports to affect the legality, validity or enforceability of
any Finance Document or the consummation of the transactions
contemplated thereby, and there has been no adverse change in the
status, or financial effect on Cemex Parent or any of its Subsidiaries,
of the litigation described in Schedule 11 (Litigation).
19.6 No Immunity
Each Obligor is subject to civil and commercial law with respect to its
obligations under this Agreement and each other Finance Document to
which it is a party and the execution, delivery and performance of this
Agreement or any such other Finance Document by such Obligor constitute
private and commercial acts rather than public or governmental acts.
Under the laws of Mexico or The Netherlands (as applicable) neither
such Obligor nor any of its property has any immunity from jurisdiction
of any court or any legal process (whether through service or notice,
attachment prior to judgment or attachment in aid of execution).
19.7 Governmental Regulations
Each Obligor is not, and is not controlled by, (a) an "investment
company" within the meaning of the United States Investment Company Act
of 1940, as amended or (b) a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
19.8 Direct Obligations: Pari Passu
(a) This Agreement constitutes a direct, unconditional,
unsubordinated and unsecured obligation of such Obligor.
(b) The obligations of such Obligor under this Agreement rank and
will rank in priority of payment at least pari passu with all
other senior unsecured Debt of such Obligor.
19.9 No Recordation Necessary
This Agreement is in proper legal form under the laws of Mexico and of
The Netherlands for the enforcement thereof against such Obligor under
the law of Mexico or, as the case may be, The Netherlands. To ensure
the legality, validity, enforceability or admissibility in evidence of
this Agreement and each other Finance Document in Mexico and in The
Netherlands, it is not necessary that this Agreement or any other
Finance Document be filed or recorded with any Governmental Authority
in Mexico or any Governmental Authority in The Netherlands or that any
stamp or similar tax be paid on or in respect of this Agreement or any
other document to be furnished under this Agreement unless such stamp
or similar taxes have been paid by the Borrower or the Guarantors;
provided, however, that in the event any legal proceedings are brought
in the courts of Mexico, an official Spanish translation of the
documents required in such proceedings, including this Agreement, would
have to be approved by the court after the defendant is given an
opportunity to be heard with respect to the accuracy of the
translation, and proceedings would thereafter be based upon the
translated documents.
19.10 Governing law
In any action or proceeding involving any Finance Party arising out of
or relating to any Finance Document in any Mexican or Dutch court or
tribunal, the Lenders and the Agent would be entitled to the
recognition and effectiveness of the choice of law, submission to
jurisdiction and waiver of sovereign immunity provisions of Clause 36
(Governing Law), Clause 37.1 (Jurisdiction of English Courts) and
Clause 38 (Waiver of Sovereign Immunity).
19.11 No default
No Default or Event of Default has occurred and is continuing.
19.12 No misleading information
All material written information supplied by any member of the Group is
true, complete and accurate in all material respects as at the date it
was given and is not misleading in any material respect.
19.13 Financial statements/condition
(a) The financial statements delivered pursuant to Clause 20.1
(Financial statements) are complete and correct in all
material respects and present fairly (i) the consolidated
financial condition of each of Cemex Parent and its
Subsidiaries and Cemex Spain and its Subsidiaries as at the
dates thereof, and the consolidated results of its operations
and its consolidated cash flows for the periods then ended
(subject, in the case of quarterly financial statements, to
normal year end audit adjustments) and (ii) the financial
condition of the Borrower and each of the Guarantors other
than Cemex Parent as at the dates thereof, and the results of
each of their operations and cash flows for the periods then
ended, subject, in the case of quarterly financial statements,
to normal year end audit adjustments. All such financial
statements, including the related schedules and notes thereto,
have been prepared in accordance with Applicable GAAP applied
consistently throughout the periods involved.
(b) No member of the Group has any guarantee obligations,
contingent liabilities, liabilities for taxes, or any long
term leases or unusual forward or long term commitments,
including without limitation any interest rate or foreign
currency swap or exchange transaction or other obligation in
respect of Derivatives Obligations, which is material and is
not reflected in the most recent financial statements referred
to in paragraph (a) above.
(c) Since 31 December 2004, (i) there has been no development or
event that has had or would reasonably be expected to have a
Material Adverse Effect and (ii) there has been no Disposition
by any member of the Group which has had or would reasonably
be expected to have a Material Adverse Effect.
19.14 Full Disclosure
All information heretofore furnished by the Borrower to the Agent, the
Arrangers or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby (other than
projections and other "forward-looking" information that have been
prepared on a reasonable basis and in good faith by the Borrower) is,
and all such information hereafter furnished by the Borrower to the
Agent, the Arrangers or any Lender will be, true and accurate in all
material respects on the date as of which such information is stated or
certified and does not omit to state any material fact necessary in
order to make the statements contained herein or therein, taken as a
whole, not misleading. The Borrower has disclosed to the Lenders in
writing any and all facts which may have a Material Adverse Effect.
19.15 Margin Regulations
No part of the proceeds of the Loans hereunder will be used, directly
or indirectly, for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by
any Lender or the Agent, the Borrower will furnish to the Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U. No
indebtedness being reduced or retired out of the proceeds of the Loans
hereunder was or will be incurred for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U or any
"margin security" within the meaning of Regulation T. Margin stock
within the meaning of Regulation U does not constitute more than 25% of
the value of the consolidated assets of Cemex Parent and its
Subsidiaries. Neither the execution and delivery hereof by the
Borrower, nor the performance by it of any of the transactions
contemplated by this Agreement (including the direct or indirect use of
the proceeds of the Loans) will violate or result in a violation of the
Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, or regulations issued pursuant thereto, or Regulation
T, U, or X.
19.16 Intellectual Property
Each member of the Group owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as currently
conducted free and clear of Liens, conditions, adverse claims or other
restrictions. No material claim has been asserted and is pending by any
Person challenging or questioning the use of any Intellectual Property
or the validity, enforceability or effectiveness of any Intellectual
Property owned by any member of the Group, nor does any Obligor know of
any valid basis for any such claim. The use of Intellectual Property by
each member of the Group does not infringe on the rights of any Person
in any material respect.
19.17 Financial Information.
The consolidated balance sheet of Cemex Parent and its Subsidiaries as
at December 31, 2004, and the related consolidated statements of income
and cash flows of Cemex Parent and its Subsidiaries for the fiscal year
then ended, accompanied by an opinion of KPMG Cardenas Dosal, S.C.,
independent public accountants, and the consolidated balance sheet of
Cemex Parent and its Subsidiaries as at March 31, 2005, and the related
consolidated statements of income and cash flows of Cemex Parent and
its Subsidiaries for the three months then ended, duly certified by the
chief financial officer of Cemex Parent, copies of which have been
furnished to the Agent, fairly present, subject, in the case of said
balance sheet as at March 31, 2005, and said statements of income and
cash flows for the three months then ended, to year-end audit
adjustments, the consolidated financial condition of Cemex Parent and
its Subsidiaries as at such dates and the consolidated results of the
operations of Cemex Parent and its Subsidiaries for the periods ended
on such dates, all in accordance with Mexican GAAP, consistently
applied.
19.18 Liens
There are no Liens on the property of Cemex Parent or any of its
Subsidiaries other than Permitted Liens.
19.19 Subsidiaries
As of 31 March 2005, all Material Subsidiaries of the Borrower are
listed in Schedule 12 (Material Subsidiaries), without giving effect to
the acquisition of RMC Group p.l.c.
19.20 Ownership of Property and insurance
(a) Except as, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect, each of Cemex Parent and
its Subsidiaries has title in fee simple to, or a valid
leasehold interest in, all its real property, and good title
to, or a valid leasehold interest in, all its other property,
and none of such property is subject to any Lien except
Permitted Liens.
(b) Each Obligor maintains insurance as required by Clause 21.3
(Maintenance of insurance).
19.21 Enforcement
It is not necessary (a) in order for the Agent, any Lender or any other
Finance Party to enforce any rights or remedies under the Finance
Documents or (b) solely by reason of the execution, delivery and
performance of this Agreement by the Agent, any Lender or any other
Finance Party, that the Agent, such Lender or such other Finance Party
be licensed or qualified with any Mexican Governmental Authority or any
Dutch Governmental Authority or be entitled to carry on business in
Mexico or, as the case may be, The Netherlands.
19.22 Taxes
(a) Each Obligor has filed all material tax returns which are
required to be filed by it and has paid all taxes due pursuant
to such returns or pursuant to any material assessment
received by Cemex Parent, except where the same may be
contested in good faith by appropriate proceedings and as to
which such Obligor maintains reserves to the extent it is
required to do so by law or pursuant to Mexican GAAP. The
charges, accruals and reserves on the books of each Obligor in
respect of taxes or other governmental charges are, in the
opinion of Cemex Parent, adequate.
(b) Except for tax imposed by way of withholding on interest, fees
and commissions remitted from Mexico, there is no tax (other
than taxes on, or measured by, income or profits), levy,
impost, deduction, charge or withholding imposed, levied,
charged, assessed or made by or in Mexico or any political
subdivision or taxing authority thereof or therein either (i)
on or by virtue of the execution or delivery of this Agreement
or any of the other Finance Documents or (ii) on any payment
to be made by the Borrower pursuant to this Agreement or any
of the other Finance Documents. The Borrower and each
Guarantor is permitted to pay any additional amounts payable
pursuant to Clause 13 (Tax Gross Up and Indemnities).
19.23 Compliance with Laws
Cemex Parent and its Subsidiaries are in compliance in all material
respects with all applicable Requirements of Law (including with
respect to the licences, certificates, permits, franchises, and other
governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses,
antitrust laws or Environmental Laws and the rules and regulations and
laws with respect to social security, workers' housing funds, and
pension funds obligations), except where the failure to so comply would
not have a Material Adverse Effect.
19.24 Pension and Welfare Plans
During the consecutive twelve-month period prior to the date of the
execution and delivery of this Agreement and prior to the date of any
Utilisation hereunder, no steps have been taken to terminate any
Pension Plan, and no contribution failure has occurred with respect to
any Pension Plan sufficient to give rise to a Lien under Section 302(f)
of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which would reasonably be expected to
result in the incurrence by any Obligor, any of its Subsidiaries, or
any its ERISA Affiliates of any material liability (other than
liabilities incurred in the ordinary course of maintaining the Pension
Plan), fine or penalty. No Obligor, nor any of its Subsidiaries, has
any contingent liability with respect to any post-retirement benefit
under a Welfare Plan which would reasonably be expected to have a
Material Adverse Effect, other than liability for continuation coverage
described in Part 6 of Title I of ERISA.
19.25 Environmental Matters
Except as would not have or be reasonably expected to have a Material
Adverse Effect:
(a) each of the properties owned or leased by an Obligor or any of
its Subsidiaries (the "Real Properties") and all operations at
the Real Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the
businesses operated by the Obligors or any of their respective
Subsidiaries (the "Businesses"), and there are no conditions
relating to the Businesses or Real Properties that would
reasonably be expected to give rise to liability under any
applicable Environmental Laws.
(b) No Obligor has received any written notice of, or inquiry from
any Governmental Authority regarding, any violation, alleged
violation, non-compliance or liability regarding Hazardous
Materials or compliance with Environmental Laws with regard to
any of the Real Properties or the Businesses, nor, to the
knowledge of an Obligor or any of its Subsidiaries, is any
such notice being threatened.
(c) Hazardous Materials have not been transported or disposed of
from the Real Properties, or generated, treated, stored or
disposed of at, on or under any of the Real Properties or any
other location, in each case by, or on behalf or with the
permission of, an Obligor or any of its Subsidiaries in a
manner that would give rise to liability under any applicable
Environmental Laws.
(d) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of an Obligor or any of
its Subsidiaries, threatened, under any Environmental Law to
which an Obligor or any of its Subsidiaries is or will be
named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to an
Obligor or any of its Subsidiaries, the Real Properties or the
Businesses.
(e) There has been no release (including disposal) or to Cemex
Parent's knowledge, threat of release of Hazardous Materials
at or from the Real Properties, or arising from or related to
the operations of an Obligor or any of its Subsidiaries in
connection with the Real Properties or otherwise in connection
with the Businesses where such release constituted a violation
of, or would give rise to liability under, any applicable
Environmental Laws.
(f) None of the Real Properties contains any Hazardous Materials
at, on or under the Real Properties in amounts or
concentrations that, if released, constitute a violation of,
or could give rise to liability under, Environmental Laws.
(g) No Obligor, nor any of their respective Subsidiaries, has
assumed any liability of any Person (other than another
Obligor or one of its Subsidiaries) under any Environmental
Law. This Clause 19.23 constitutes the only representations
and warranties of the Obligors with respect to any
Environmental Law or Hazardous Substance.
19.26 Mutual Benefits
Each Guarantor represents and warrants to each Finance Party as
follows: having taken into account the financial interdependence and
mutual reliance between each Guarantor, its subsidiaries, and the
Borrower, the continuing financial and other assistance from time to
time given by each Guarantor to the Borrower and the other Obligors and
vice versa, each Guarantor expects to derive material benefits,
directly or indirectly (through the financing provided to its
subsidiaries), from the financing obtained under this Facility, both in
its separate capacity, as shareholder in various subsidiaries and as
member of the Group, since the successful operation and condition of
each Guarantor is dependent on the continued successful performance of
the functions of the Group as a whole.
19.27 Repetition
The Repeating Representations are deemed to be made by each Obligor by
reference to the facts and circumstances then existing on:
(a) the date of each Utilisation Request and the first day of each
Interest Period; and
(b) in the case of an Additional Guarantor, the day on which the
company becomes (or it is proposed that the company becomes)
an Additional Guarantor.
20. INFORMATION UNDERTAKINGS
The undertakings in this Clause 20 remain in force from the date of
this Agreement for so long as any amount is outstanding under the
Finance Documents or any Commitment is in force.
20.1 Financial statements
The Borrower shall supply to the Agent:
(a) as soon as the same become available, but in any event within:
(i) 120 days after the end of each of the financial years
of Cemex Parent:
(A) a copy of the annual audit report for such
year for Cemex Parent and its Subsidiaries
containing consolidated and consolidating
balance sheets of Cemex Parent and its
Subsidiaries, as of the end of such
financial year and consolidated statements
of income and cash flows of Cemex Parent and
its Subsidiaries, for such financial year,
in each case accompanied by an opinion
acceptable to the Majority Lenders (acting
reasonably) by KPMG Cardenas Dosal, S.C. or
other independent public accountants of
recognised standing acceptable to the
Majority Lenders, together with a
certificate of such accounting firm to the
Lenders stating that in the course of the
regular audit of the business of Cemex
Parent and its Subsidiaries, which audit was
conducted by such accounting firm in
accordance with Mexican GAAP, such
accounting firm has obtained no knowledge
that a Default or Event of Default has
occurred and is continuing, or if, in the
opinion of such accounting firm a Default or
Event of Default has occurred and is
continuing, a statement as to the nature
thereof; and
(B) the audited unconsolidated financial
statements of each Guarantor (other than
Cemex Parent) for that financial year (if
available and upon request by the Agent);
and
(ii) 183 days after the end of the financial year of the
Borrower, its audited unconsolidated financial
statements for that financial year; and
(iii) 183 days after the end of the financial year of Cemex
Spain, its audited consolidated financial statements
for that financial year (if available); and
(b) as soon as the same become available, but in any event within:
(i) 60 days after the end of each of the first three
quarterly periods of each of the financial years of
Cemex Parent:
(A) consolidated balance sheets of Cemex Parent
and its Subsidiaries, as of the end of such
quarter and consolidated statements of
income and cash flows of Cemex Parent and
its Subsidiaries for the period commencing
at the end of the previous financial year
and ending with the end of such quarter,
duly certified (subject to year-end audit
adjustments) by an Authorised Signatory of
Cemex Parent as having been prepared in
accordance with Mexican GAAP and together
with a certificate of an Authorised
Signatory of Cemex Parent, as to compliance
with the terms of this Agreement; and
(B) together with the financial statements
delivered with respect to the fiscal quarter
ended 30 June 2005, a schedule of all
Material Subsidiaries of the Borrower, after
giving effect to the acquisition of RMC
Group PLC.
(ii) 90 days after the end of each of the first three
quarterly periods of each of the financial years of
the Borrower, its unconsolidated financial statements
for that period; and
(iii) 90 days after the end of each of the first half of
each of the financial years of Cemex Spain, its
consolidated financial statements for that period (if
available).
20.2 Compliance Certificate
(a) The Borrower shall supply to the Agent, with each set of
financial statements delivered pursuant to paragraph
(a)(i)(A), (a)(ii), (b)(i)(A) or (b)(ii) of Clause 20.1
(Financial statements), a Compliance Certificate setting out
(in reasonable detail) computations as to compliance with
Clause 21.13 (Financial condition covenants) as at the date as
at which those financial statements were drawn up.
(b) Each Compliance Certificate shall be signed by an Authorised
Signatory of Cemex Parent or the Borrower, as the case may be.
20.3 Requirements as to financial statements
(a) Each set of financial statements delivered by the Borrower
pursuant to Clause 20.1 (Financial statements) shall be
certified by an Authorised Signatory of the relevant company
as fairly representing its financial condition as at the date
as at which those financial statements were drawn up.
(b) The Borrower shall procure that each set of financial
statements of an Obligor delivered pursuant to Clause 20.1
(Financial statements) is prepared using Applicable GAAP and
accounting practices and financial reference periods
consistent with those applied in the preparation of the
Original Financial Statements for that Obligor unless, in
relation to any set of financial statements, it notifies the
Agent that there has been a change in Applicable GAAP or the
accounting practices or reference periods and, unless
amendments are agreed in accordance with paragraph (c) of this
Clause 20.3 its auditors (or, if appropriate, the auditors of
the Obligor) deliver to the Agent:
(i) a description of any change necessary for those
financial statements to reflect the Applicable GAAP,
accounting practices and reference periods upon which
that Obligor's Original Financial Statements were
prepared; and
(ii) sufficient information, in form and substance as may
be reasonably required by the Agent, to enable the
Lenders to determine whether Clause 21.13 (Financial
condition covenants) has been complied with and make
an accurate comparison between the financial position
indicated in those financial statements and that
Obligor's Original Financial Statements.
Any reference in this Agreement to those financial statements
shall be construed as a reference to those financial
statements as adjusted to reflect the basis upon which the
Original Financial Statements were prepared.
(c) If the Borrower adopts International Accounting Standards or,
subject to paragraph (b) above, there are changes to the
Applicable GAAP, or the accounting practices or reference
periods the Borrower and the Agent shall, at the Borrower's
request, negotiate in good faith with a view to agreeing such
amendments to the financial covenants in Clause 21.13
(Financial condition covenants) and the ratios used to
calculate the Margin and, in each case, the definitions used
therein as may be necessary to ensure that the criteria for
evaluating the Group's financial condition grant to the
Lenders protection equivalent to that which would have been
enjoyed by them had the Borrower not adopted International
Accounting Standards or there had not been a change in the
Applicable GAAP, or the accounting practices or reference
periods (subject to compliance with paragraph (b) above). Any
amendments agreed will take effect on the date agreed between
the Agent and the Borrower subject to the consent of the
Majority Lenders. If no such agreement is reached within 90
days of the Borrower's request, the Borrower will remain
subject to the obligation to deliver the information specified
in paragraph (b) of this Clause 20.3.
20.4 Information: miscellaneous
The Borrower shall supply to the Agent:
(a) within five days after the same are sent, copies of all
financial statements and reports that Cemex Parent sends to
the holders of any class of its debt securities; and
(b) promptly, such further information regarding the financial
condition, business and operations of any member of the Group
as any Finance Party (through the Agent) may reasonably
request.
20.5 Notification of default
(a) Each Obligor shall notify the Agent of any Default (and the
steps, if any, being taken to remedy it) promptly upon
becoming aware of its occurrence and in any event within five
days after becoming aware of the occurrence of such Default
(unless that Obligor is aware that a notification has already
been provided by another Obligor).
(b) Promptly upon a request by the Agent, the Borrower shall
supply to the Agent a certificate signed by an Authorised
Signatory on its behalf certifying that no Default is
continuing (or if a Default is continuing, specifying the
Default and the steps, if any, being taken to remedy it).
20.6 "Know your client" checks
(a) Each Obligor shall promptly upon the request of the Agent or
any Lender and each Lender shall promptly upon the request of
the Agent supply, or procure the supply of, such documentation
and other evidence as is reasonably requested by the Agent
(for itself or on behalf of any Lender) or any Lender (for
itself or on behalf of any prospective New Lender) in order
for the Agent, such Lender or any prospective New Lender to
carry out and be satisfied with the results of all necessary
"know your client" or other checks, such as the checks
required by the US Patriot Act (Title III of Pub. L. 107-56
(signed into law 26 October 2001) in relation to the identity
of any person that it is required by law to carry out in
relation to the transactions contemplated in the Finance
Documents. For the avoidance of doubt, a Lender will have no
obligation towards the Agent to evidence that it has complied
with any "know your client" or similar checks in relation to
the Obligors.
(b) The Borrower shall, by not less than 5 Business Days' written
notice to the Agent, notify the Agent (which shall promptly
notify the Lenders) of its intention to request that one of
its Subsidiaries becomes an Additional Obligor pursuant to
Clause 24 (Changes to the Obligors).
(c) Following the giving of any notice pursuant to paragraph (b)
above, the Borrower shall promptly upon the request of the
Agent or any Lender supply, or procure the supply of, such
documentation and other evidence as is reasonably requested by
the Agent (for itself or on behalf of any Lender) or any
Lender (for itself or on behalf of any prospective New Lender)
in order for the Agent, such Lender or any prospective New
Lender to carry out and be satisfied with the results of all
necessary "know your client" or other checks in relation to
the identity of any person that it is required by law to carry
out in relation to the accession of such Additional Obligor to
this Agreement.
20.7 Notices
Give notice to the Agent and each Lender as soon as practicable after
the occurrence of:
(a) promptly after the commencement thereof, notice of all
litigation, actions, investigations and proceedings before any
court, Governmental Authority or arbitrator affecting the
Borrower or any of its Subsidiaries of the type described in
Clause 19.5 (Litigation; Material Adverse Effect) or the
receipt of written notice by the Borrower or any of its
subsidiaries of potential liability or responsibility for
violation, or alleged violation of any federal, state or local
law, rule or regulation (including Environmental Laws) the
violation of which could reasonably be expected to have a
Material Adverse Effect;
(b) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect; and
(c) any increase of the ratio of Total Borrowings of the Borrower
to Total Net Worth of Cemex Spain above 0.35 to 1.00.
Each notice pursuant to this Clause 20.7 shall be accompanied by a
certificate signed by an Authorised Signatory setting forth details of
the occurrence referred to therein and stating what action the relevant
member of the Group proposes to take with respect thereto.
21. GENERAL UNDERTAKINGS
The Borrower and the Guarantors hereby jointly and severally agree
that, so long as the Commitments remain in effect or any Loan or other
amount is owing to any Lender or Agent hereunder, the Borrower and the
Guarantors shall and, in the case of Cemex Parent only, shall cause
each of its Subsidiaries to:
21.1 Compliance with laws and Contractual Obligations, etc.
(a) Comply, in all material respects, with all applicable
Requirements of Law (including with respect to the licences,
approvals, certificates, permits, franchises, notices,
registrations and other governmental authorisations necessary
to the ownership of its respective properties or to the
conduct of its respective business, antitrust laws or
Environmental Laws and laws with respect to social security
and pension funds obligations) and all material Contractual
Obligations, except where the failure to so comply could not
reasonably be expected to result in a Material Adverse Effect.
(b) In the case of the Borrower, comply with any applicable
provisions of the Dutch Banking Act and any implementing
regulations including, without limitation, the Dutch Exemption
Regulation and the Dutch Policy Guidelines.
(c) In the case of the Borrower, for so long as it is a
requirement of Dutch law that each Lender hereunder be a
Professional Market Party at the time such Lender enters into
this Agreement, the Borrower shall represent and warrant to
each Lender, as of each date that any New Lender becomes a
Lender hereunder, that the Borrower has verified that on such
date such New Lender is either (i) a Professional Market Party
or (ii) exempted from the requirement to be a Professional
Market Party because it forms a closed circle (besloten
kring), within the meaning of the Dutch Exemption Regulation,
with the Borrower.
21.2 Payment of obligations
Pay and discharge, before the same shall become delinquent, (a) all
taxes, assessments and governmental charges or levies assessed, charged
or imposed upon it or upon its property and (b) all lawful claims that,
if unpaid, might by law become a Lien upon its property, except where
the failure to make such payments or effect such discharges could not
reasonably be expected to have a Material Adverse Effect; provided that
no member of the Group shall be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim that
is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained, unless and until any
Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
21.3 Maintenance of insurance
Maintain insurance with reputable insurance companies or associations
in such amounts and covering such risks as is usually carried by
companies of established reputation engaged in similar businesses and
owning similar properties in the same general areas in which Cemex
Parent or such Subsidiary of Cemex Parent operates.
21.4 Conduct of business and preservation of corporate existence
Continue to engage in business of the same general type as now
conducted by members of the Group and preserve and maintain its
corporate existence, rights (charter and statutory), licences,
consents, permits, notices or approvals and franchises deemed material
to its business; provided that no member of the Group shall be required
to maintain its corporate existence in connection with a merger or
consolidation permitted by Clause 21.15 (Consolidations and Mergers),
and provided further that no member of the Group shall be required to
preserve any right or franchise if that member of the Group shall in
its good faith judgment determine that the preservation thereof is no
longer in the best interests of Cemex Parent or that member of the
Group and the loss thereof could not reasonably be expected to have a
Material Adverse Effect.
21.5 Inspection of property
At any reasonable time during normal business hours and from time to
time with at least ten Business Days' prior notice, or at any time if a
Default or Event of Default shall have occurred and be continuing,
permit the Agent or any of the Lenders or any agents or representatives
thereof to examine and make abstracts from the records and books of
account of, and visit the properties of, each of the Obligors, and to
discuss the affairs, finances and accounts of such Obligors with any of
its officers or directors and with its independent certified public
accountants. All expenses associated with such inspection shall be
borne by the inspecting Lenders; provided that if a Default or an Event
of Default shall have occurred and be continuing, any expenses
associated with such inspection shall be borne by the Obligors.
21.6 Books and records
Keep proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of such member of the Group in accordance with Applicable
GAAP, consistently applied.
21.7 Maintenance of properties, etc.
Maintain and preserve all of its properties that are used or useful in
the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and maintain, preserve and protect all
intellectual property and all necessary governmental and third party
approvals, franchises, licences and permits material to the business of
Cemex Parent or any Subsidiary of Cemex Parent; provided that none of
the foregoing shall prevent any member of the Group from discontinuing
the operation and maintenance of any of its properties or allowing to
lapse certain approvals, licences or permits the discontinuance of
which is desirable in the conduct of its business and which
discontinuance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
21.8 Maintenance of Government approvals
Maintain in full force and effect at all times all approvals of and
filings with any Governmental Authority or third party required under
applicable law for (a) the conduct of its business (including, without
limitation, antitrust laws or Environmental Laws); (b) the performance
of each Obligors' obligations hereunder and under the other Finance
Documents by such Obligors and (c) for the validity or enforceability
hereof and thereof,
except where in each case, failure to maintain any such approvals or
fillings could not reasonably be expected to have a Material Adverse
Effect.
21.9 Pari passu ranking
Ensure that at all times the obligations of each Obligor under the
Finance Documents constitute unconditional general obligations of such
Obligor ranking in priority of payment at least pari passu with all
other senior unsecured, unsubordinated Debt of such Obligor.
21.10 Transactions with Affiliates
Conduct each transaction otherwise permitted under this Agreement with
any of its Affiliates on terms that are commercially reasonable and no
less favourable to that member of the Group than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
21.11 Use of Proceeds
The Borrower will use the proceeds of all Loans made hereunder for
general corporate purposes (including the repayment of existing Debt of
Cemex Parent or any of its Subsidiaries).
21.12 Further assurances
From time to time, do and perform any and all acts and execute any and
all documents as may be necessary or as reasonably requested by any
Lender in order to effect the purposes of this Agreement or to protect
the rights or interests of the Lenders under any of the Finance
Documents.
Negative Covenants - all Obligors
The Borrower and the Guarantors hereby jointly and severally agree that, so long
as the Commitments remain in effect or any Loan or other amount is owing to any
Lender or the Agent hereunder, the Borrower and the Guarantors shall not, and
shall not permit any of their Subsidiaries to, directly or indirectly:
21.13 Financial condition covenants
(a) Permit the Consolidated Leverage Ratio of Cemex Parent at any
time to exceed 3.50 to 1.00.
(b) Permit the Consolidated Fixed Charge Coverage Ratio of Cemex
Parent for any period of four consecutive fiscal quarters of
Cemex Parent to be less than 2.50 to 1.00.
(c) At the time of any entry into or incurrence of any Debt or
other obligation constituting a portion of Total Borrowings of
the Borrower, and after giving effect thereto, permit the
ratio of Total Borrowings of the Borrower to Total Net Worth
of Cemex Spain, to exceed 0.35 to 1.0.
(d) Concurrently with the delivery by Cemex Parent of any
financial statements pursuant to Clause 20 (Information
Undertakings), Cemex Parent shall deliver to the Agent (with
sufficient copies for each Lender) a certificate from an
Authorised Signatory containing all information and
calculations necessary for determining compliance by the
Borrower with paragraphs (a), (b) and (c) of this Clause
21.13.
21.14 Liens
Create, incur, assume or permit to exist any Lien on or with respect to
any property or asset of any member of the Group, whether now owned or
held or hereafter acquired, other than the following ("Permitted
Liens"):
(a) Liens for taxes, assessments and other governmental charges
the payment of which is being contested in good faith by
appropriate proceedings promptly initiated and diligently
conducted and for which adequate reserves or other appropriate
provision, if any, as shall be required by Applicable GAAP
shall have been made;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due or the
payment of which is being contested in good faith by
appropriate proceedings promptly initiated and diligently
conducted and for which such reserves or other appropriate
provision, if any, as shall be required by Applicable GAAP
shall have been made;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security;
(d) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof,
have been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within 60 days after
the expiration of any such stay;
(e) liens existing on the date of this Agreement (other than liens
with respect to the acquisition of RMC Group PLC) as described
in Part I of Schedule 10 and liens existing as of 31 March
2005 (including liens with respect to the acquisition of RMC
Group PLC) as described in Part II of Schedule 10 (Permitted
Liens);
(f) any Lien on property acquired by the Borrower or any Guarantor
or any of their Subsidiaries after the date hereof that was
existing on the date of acquisition of such property; provided
that such Lien was not incurred in anticipation of such
acquisition, and any Lien created to secure all or any part of
the purchase price, or to secure Debt incurred or assumed to
pay all or any part of the purchase price, of property
acquired by any member of the Group after the date hereof;
provided, further that (i) any such Lien permitted pursuant to
this paragraph (f) shall be confined solely to the item or
items of property so acquired (including, in the case of any
Acquisition of a corporation through the acquisition of 51% or
more of the voting stock of such corporation, the stock and
assets of any Acquired Subsidiary or Acquiring Subsidiary)
and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to,
or is acquired for specific use with, such acquired property;
and (ii) if applicable, any such Lien shall be created within
nine months after, in the case of property, its acquisition,
or, in the case of improvements, their completion;
(g) any Lien renewing, extending or refunding any Lien permitted
by paragraph (f) above; provided that the principal amount of
Debt secured by such Lien immediately prior thereto is not
increased or the maturity thereof reduced and such Lien is not
extended to other property;
(h) any Liens created on shares of capital stock of Cemex Parent
or any of its Subsidiaries solely as a result of the deposit
or transfer of such shares into a trust or a special purpose
vehicle (including any entity with legal personality) of which
such shares constitute the sole assets; provided that (i) any
shares of Subsidiary stock held in such trust, corporation or
entity could be sold by Cemex Parent; and (ii) proceeds from
the deposit or transfer of such shares into such trust,
corporation or entity and from any transfer of or
distributions in respect of any member of the Group's interest
in such trust, corporation or entity are applied as provided
under Clause 21.16 (Sales of assets, etc); and provided
further that such Liens may not secure Debt of any member of
the Group (unless permitted under another clause of this
Clause 21.14);
(i) any Liens on securities securing repurchase obligations in
respect of such securities;
(j) any Liens in respect of any Receivables Program Assets which
are or may be sold or transferred pursuant to a Qualified
Receivables Transaction; and
(k) in addition to the Liens permitted by the foregoing clauses
(a) through (j), Liens securing Debt of Cemex Parent and its
Subsidiaries (taken as a whole) not in excess of 5% of the
Adjusted Consolidated Net Tangible Assets of Cemex Parent;
unless, in each case, Cemex Parent has made or caused to be made
effective provision whereby the Obligations hereunder are secured
equally and ratably with, or prior to, the Debt secured by such Liens
(other than Permitted Liens) for so long as such Debt is so secured.
21.15 Consolidations and mergers
With respect to the Obligors only, in one or more related transactions
(a) consolidate with or merge into any other Person or permit any other
Person to merge into it, or (b) directly or indirectly, transfer,
convey, sell, lease or otherwise dispose of all or substantially all of
its properties or assets to any Person unless, with respect to any
transaction described in (a) or (b) above:
(a) immediately after giving effect to such transaction, the
Person formed by any such consolidation or merger, if it was
not an Obligor, or the Person that acquires by transfer,
conveyance, sale, lease or other disposition all or
substantially all of the properties or assets of such Obligor
(any such Person, a "Successor") (i) shall be a company
organised and validly existing under the laws of its place of
incorporation, which in the case of a Successor to the
Borrower or any Guarantor, shall be any of Mexico, the United
States, Canada, France, Belgium, Germany, Italy, Luxembourg,
The Netherlands, Portugal, Spain, Switzerland or the United
Kingdom or any political subdivision thereof, (ii) shall
expressly assume, pursuant to a written agreement in form and
substance satisfactory to the Majority Lenders, all of the
obligations of that Obligor, under each of the Finance
Documents to which that Obligor is party;
(b) in the case of any such transaction involving the Borrower or
any Guarantor, the Borrower or such Guarantor, or the
Successor of any thereof, as the case may be, shall expressly
agree to indemnify each Lender and the Agent against any tax,
levy, assessment or governmental charge payable by withholding
or deduction thereafter imposed on such Lender and/or the
Agent solely as a consequence of such transaction with respect
to any payments under the Finance Documents;
(c) immediately after giving effect to such transaction, including
for purposes of this paragraph (c), the substitution of any
Successor to any Obligor for such Obligor (treating any Debt
or Lien incurred by any Obligor or any Successor to such
Obligor, as a result of such transactions as having been
incurred at the time of such transaction), no Default or Event
of Default shall have occurred and be continuing; and
(d) the Borrower shall have delivered to the Agent an officer's
certificate and an opinion of counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
written agreement is required in connection with such
transaction, such written agreement shall comply with the
relevant provisions of this Clause 21, and that all conditions
precedent provided for in this Agreement relating to such
transaction have been complied with.
21.16 Sales of assets, etc.
Sell, lease or otherwise dispose of any of its assets (including the
capital stock of any Subsidiary), other than (a) inventory, trade
receivables and assets surplus to the needs of the business of Cemex
Parent or any Subsidiary of Cemex Parent sold in the ordinary course of
business and (b) assets not used, usable or held for use in connection
with cement operations and related operations, unless the proceeds of
the sale of such assets are retained by Cemex Parent or such
Subsidiary, as the case may be, and, as promptly as practicable after
such sale (but in any event within 180 days of such sale), the proceeds
are applied to (i) expenditures for property, plant and equipment
usable in the cement industry or related industries; (ii) the repayment
of senior Debt of Cemex Parent or any Subsidiary of Cemex Parent,
whether secured or unsecured; or (iii) investments in companies engaged
in the cement industry or related industries.
21.17 Restricted payments
In the case of Cemex Parent only, declare or pay any dividend (other
than dividends payable solely in common stock of Cemex Parent) on, or
make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of Cemex Parent
(other than any cash payment in respect of pre-existing scheduled
obligations under forward purchase agreements for stock of Cemex Parent
entered into by Cemex Parent or its Subsidiaries with third-party
financial institutions) whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or obligations of any Person
(collectively, "Restricted Payments") (a) while any Event of Default
described in paragraph (a) or (b) of Clause 22 (Events of Default) or
any Default or Event of Default described in paragraph (d) of Clause 22
(Events of Default) (but only with respect to Clause 21.13 (Financial
condition covenants)) shall have occurred and be continuing or (b) if
any Default or Event of Default would exist after giving effect to such
Restricted Payment.
21.18 Accounting changes
(a) Make or permit any change in accounting policies or reporting
practices, except as required or permitted by Applicable GAAP or (b)
permit the fiscal year of any Obligor to end on a day other than 31
December or change any Obligor's method of determining fiscal quarters,
unless, in the case of paragraph (b), the Borrower shall have entered
into negotiations with the Agent in order to amend the relevant
provisions of this Agreement so as to equitably reflect such change in
the Borrower's fiscal year end or method of calculating fiscal quarters
with the desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such change as if such
change had not been made (and until such time as such an amendment
shall have been executed and delivered by the Borrower, the Agent and
the Majority Lenders, all financial covenants, standards and terms in
this Agreement shall continue to be calculated or construed as if such
change had not occurred).
21.19 Clauses restricting Subsidiary distributions
Enter into or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary
to (a) make Restricted Payments in respect of any Capital Stock of such
Restricted Subsidiary held by, or pay any Debt owed to, any Obligor or
any other such Restricted Subsidiary, (b) make loans or advances to, or
other investments in, any Obligor or any other such Restricted
Subsidiary or (c) transfer any of its assets to any Obligor or any
other such Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of any restrictions with
respect to a Restricted Subsidiary imposed pursuant to an agreement
that has been entered into in connection with the Disposition of all or
substantially all of the Capital Stock or assets of such Restricted
Subsidiary; provided, however, that nothing in this Clause 21.19 shall
prevent CTW from paying declaring or paying any dividend to the
Borrower.
21.20 Change in nature of business
With respect to the Obligors and all Material Subsidiaries only, make
any material change in the nature of its business as carried on at the
date hereof.
21.21 Margin regulations
Use any part of the proceeds of the Loans for any purpose which would
result in any violation (whether by the Borrower, any Guarantor, the
Agent or the Lenders) of Regulation T, U or X of the Federal Reserve
Board or to extend credit to others for any such purpose, or engage in,
or maintain as one of its important activities, the business of
extending credit for the purpose of purchasing or carrying any margin
stock (as defined in such regulations).
21.22 Ownership of Cemex Spain
Permit the Borrower at any time to own less than an 80% direct (or
indirect if solely through intermediate holding companies which have no
indebtedness and no restrictions on their ability to pay dividends)
voting and equity ownership interest in Cemex Spain, or its successors
or transferees in the event of the merger or consolidation of Cemex
Spain or the transfer, conveyance, sale, lease or other disposition of
all or substantially all its properties and assets in Clause 21.15
(Consolidations and mergers).
21.23 Ownership of the Borrower
Permit Cemex Parent at any time to cease to control, or to own less
than a 90% direct or indirect equity ownership interest in, the
Borrower, or its Successors or transferees in the event of the merger
or consolidation of the Borrower or the transfer, conveyance, sale,
lease or other disposition of all or substantially all its properties
and assets in accordance with Clause 21.15 (Consolidations and
mergers).
21.24 Ownership of Trademark Companies
(a) Permit the Borrower, at any time after 31 December 2003, to
own less than a 99.9% direct voting and equity ownership
interest in CTW and each other Trademark Company, provided
that such interest may be indirect in the case of any
Trademark Company in which CTW owns a 99.9% direct voting and
equity ownership interest.
(b) Permit Cemex Parent at any time to own less than 99.9% direct
or indirect voting and equity ownership interest in each
Trademark Company.
21.25 Incurrence of Debt by Trademark Companies
Permit any Trademark Company at any time to assume, incur or suffer to
exist any Debt or other monetary liability of any kind to any Person
other than any member of the Group except, in the case of any monetary
liability not constituting Debt, in the ordinary course pursuant to its
day to day business activities.
22. EVENTS OF DEFAULT
22.1 Events of Default
If any of the following specified events (each an "Event of Default")
shall occur:
(a) any principal of any Loan is not paid when due in accordance
with the terms hereof; or
(b) any interest on any Loan, any fee or other amount payable
hereunder or under any other Finance Document, is not paid
within three Business Days after any such interest or other
amount becomes due and payable in accordance with the terms
hereof; or
(c) any representation or warranty made or deemed made by any
Obligor herein or in any other Finance Document or that is
contained in any certificate, document or financial or other
statement furnished at any time under or in connection with
this Agreement or any other Finance Document shall prove to
have been incorrect in any material respect on or as of the
date made or deemed to be made and, if remediable, such
failure shall remain unremedied for thirty days after the
earlier of the date on which (i) written notice thereof shall
have been given to the Borrower by the Agent and (ii) a
director of any Obligor becomes aware of such incorrectness;
or
(d) any Obligor shall fail to perform or observe any term,
covenant or agreement contained in Clause 20.1 (Financial
Statements), paragraph (a) of Clause 20.5 (Notification of
default), Clause 21.4 (Conduct of business and preservation of
corporate existence) (with respect to the Borrower's or any
Guarantor's existence only), Clause 21.5 (Inspection of
Property), Clause 21.9 (Pari passu ranking) or Clauses 21.13
(Financial condition covenants) to Clause 21.25 (Incurrence of
debt by trademark companies) of this Agreement; or
(e) any Obligor shall fail to perform or observe any term,
covenant or agreement contained in this Agreement or any other
Finance Document (other than as provided in paragraphs (a) to
(d) of this Clause 22.1), and such default shall continue
unremedied for a period of 30 days after the earlier of the
date on which (i) written notice shall have been given to the
Borrower by the Agent at the request of any Lender and (ii) a
director of any Obligor becomes aware of such failure; or
(f) the occurrence of a default or event of default under any
indenture, agreement or instrument relating to any Material
Debt of any Cemex Parent or any of its Subsidiaries and
(unless any principal amount of such Material Debt is
otherwise due and payable) such default or event of default
results in the acceleration of the maturity of any principal
amount of such Material Debt prior to the date on which it
would otherwise become due and payable; or
(g) the Borrower, any Guarantor or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking
liquidation, reorganisation, concurso mercantil or other
relief with respect to itself or its debts under any
bankruptcy, insolvency, reorganisation or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take
any corporate action to authorise any of the foregoing or the
equivalent thereof under Mexican law (including the Ley de
Concursos Mercantiles) or under Dutch law; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower, any Guarantor or any Material Subsidiary
seeking liquidation, reorganisation or other relief with
respect to it or its debts under any bankruptcy, insolvency,
concurso mercantil or other similar law now or hereafter in
effect (including but not limited to the Ley de Concursos
Mercantiles) or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 consecutive days; or an order
for relief shall be entered against the Borrower, any
Guarantor or any Material Subsidiaries under any bankruptcy,
insolvency suspension de pagos or other similar law as now or
hereafter in effect; or
(i) a final judgment or judgments or order or orders not subject
to further appeal for the payment of money in an aggregate
amount in excess of U.S.$50,000,000 shall be rendered against
the Borrower, Cemex Parent and/or one or more of the
Subsidiaries of Cemex Parent that are neither discharged nor
bonded in full within 30 days thereafter; or
(j) the obligations of the Borrower under this Agreement or of any
Obligor under this Agreement shall fail to rank at least pari
passu with all other senior unsecured Debt of the Borrower or
such Obligor, as the case may be; or
(k) the Borrower shall contest the validity or enforceability of
any Finance Document or shall deny generally the liability of
the Borrower under any Finance Documents or any Guarantor
shall contest the validity of or the enforceability of their
guarantee hereunder or any obligation of any Guarantor under
Clause 18 (Guarantee and Indemnity) hereof shall not be (or is
claimed by either Guarantor not to be) in full force and
effect;
(l) any governmental or other consent, license, approval, permit
or authorisation which is now or may in the future be
necessary or appropriate under any applicable Requirement of
Law for the execution, delivery, or performance by the
Borrower or any Guarantor of any Finance Document to which it
is a party or to make such Finance Document legal, valid,
enforceable and admissible in evidence shall not be obtained
or shall be withdrawn, revoked or modified or shall cease to
be in full force and effect or shall be modified in any manner
that would have an adverse effect on the rights or remedies of
the Agent or the Lenders; or
(m) any Governmental Authority shall condemn, nationalise, seize
or otherwise expropriate all or any substantial portion of the
property of, or capital stock issued or owned by, the Borrower
or any Guarantor or take any action that would prevent the
Borrower or any Guarantor from performing its obligations
under this Agreement or the other Finance Documents; or
(n) a moratorium shall be agreed or declared in respect of any
Debt of the Borrower or any Guarantor or any restriction or
requirement not in effect on the date hereof shall be imposed,
whether by legislative enactment, decree, regulation, order or
otherwise, which limits the availability or the transfer of
foreign exchange by the Borrower or any Guarantor for the
purpose of performing any material obligation under any
Agreement or any other Finance Document; or
(o) the beneficial ownership (within the meaning of Rule 13d-3
promulgated by the SEC under the Securities Exchange Act of
1934, as amended) of 20% or more in voting power of the
outstanding voting stock of the Borrower or any other
Guarantor is acquired by any Person; provided that the
acquisition of beneficial ownership of capital stock of Cemex
Parent or any other Guarantor by Lorenzo H. Zambrano or any
member of his immediate family shall not constitute an Event
of Default,
then, and in any such event:
(i) if such event is an Event of Default specified in
paragraphs (h) or (i) above with respect to any
Obligor, automatically the Commitments shall
immediately terminate and the Loans (with accrued
interest thereon) and all other amounts owing under
this Agreement and the other Finance Documents shall
immediately become due and payable; and
(ii) if such event is any other Event of Default, either
of the following actions may be taken:
(A) with the consent of the Majority Lenders,
the Agent may, or upon the request of the
Majority Lenders, the Agent shall, by notice
to the Borrower declare the Commitments to
be terminated forthwith, whereupon the
Commitments shall immediately terminate; and
(B) with the consent of the Majority Lenders,
the Agent may, or upon the request of the
Majority Lenders, the Agent shall, by notice
to the Borrower, declare the Loans (with
accrued interest thereon) and all other
amounts owing under this Agreement and the
other Finance Documents to be due and
payable forthwith, whereupon the same shall
immediately become due and payable.
Except as expressly provided above in this Clause, presentment, demand,
protest and all other notices of any kind are hereby expressly waived
by the Borrower.
SECTION 9
CHANGES TO PARTIES
23. CHANGES TO THE LENDERS
23.1 Assignments and transfers by the Lenders
Subject to this Clause 23, a Lender (the "Existing Lender") may:
(a) assign any of its rights and benefits in respect of any
Utilisation; or
(b) transfer by novation any of its rights, benefits and
obligations in respect of any Commitment or Utilisation,
to another bank or financial institution or to a securitisation trust
or fund or (subject to paragraph (a) of Clause 23.2 (Conditions of
assignment or transfer)) other entity (the "New Lender").
23.2 Conditions of assignment or transfer
(a) The Borrower must be given prior notification of any
assignment or transfer becoming effective under Clause 23.1
(Assignments and transfers by the Lenders) and the consent of
the Borrower is required for an assignment or transfer to an
entity which is not a bank or financial institution or a
securitisation trust or fund.
(b) The consent of the Borrower to an assignment or transfer must
not be unreasonably withheld or delayed. The Borrower will be
deemed to have given its consent five Business Days after the
Existing Lender has requested it unless consent is expressly
refused by the Borrower within that time.
(c) An assignment will only be effective on:
(i) receipt by the Agent of written confirmation from the
New Lender that the New Lender will assume the same
obligations to the other Finance Parties as it would
have been under if it was an Original Lender; and
(ii) the satisfaction of the Agent with the results of all
"know your client" or other checks relating to the
identity of any person that it is required by law to
carry out in relation to such assignment to a New
Lender, the completion of which the Agent shall
promptly notify to the Existing Lender and the New
Lender.
(d) A transfer will only be effective if the procedure set out in
Clause 23.5 (Procedure for transfer) is complied with.
(e) An assignment or transfer will be effective upon surrender for
registration of assignment or transfer, by way of an
endorsement (endoso) and delivery of the Notes held by the
Existing Lender evidencing such Loan accompanied by a duly
executed Transfer Certificate, and thereupon one or more new
Notes shall be issued to the New Lender.
(f) If:
(i) a Lender assigns or transfers any of its rights,
benefits or obligations under the Finance Documents
or changes its Facility Office; and
(ii) as a result of circumstances existing at the date the
assignment, transfer or change occurs, an Obligor
would be obliged to make a payment to the New Lender
or Lender acting through its new Facility Office
under Clause 13 (Tax gross-up and indemnities) or
Clause 14 (Increased costs),
then the New Lender or Lender acting through its new Facility
Office is only entitled to receive payment under those Clauses
to the same extent as the Existing Lender or Lender acting
through its previous Facility Office would have been if the
assignment, transfer or change had not occurred.
(g) Notwithstanding any of the preceding provisions of this Clause
23 to the contrary, for so long as it is a requirement of
Dutch law that each Lender be a Professional Market Party (i)
any Existing Lender shall, at least five Business Days prior
to the date of any proposed assignment, provide to the
Borrower and the Agent information in respect of the
prospective New Lender sufficient to enable the Borrower to
verify the Professional Market Party status of such New Lender
and (ii) no such assignment shall be permitted unless the New
Lender is a Verifiable Professional Market Party or unless the
Borrower determines that such New Lender qualifies as a
Professional Market Party; provided that the Borrower shall be
deemed to have made such determination if, on or prior to the
fifth Business Day after the Existing Lender has provided the
information described in section (i) above, the Borrower has
not made a good faith determination, based on an opinion of
reputable Dutch counsel, and notified the Agent and the
Existing Lender thereof (together with a copy of such opinion
of counsel) in writing, that (x) the Assignee does not qualify
as a Professional Market Party or (y) the Borrower is unable
to determine whether the New Lender qualifies as a
Professional Market Party.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank of the United
States in accordance with applicable law and without
compliance with the foregoing provisions of this Clause 23.2
provided however, that such pledge or assignment shall not
release such Lender from its obligations hereunder.
23.3 Assignment or transfer fee
The New Lender shall, on the date upon which an assignment or transfer
takes effect, pay to the Agent (for its own account) a fee of $2,000,
except no such fee shall be payable in connection with an assignment or
transfer to a New Lender upon primary syndication of the Facilities.
23.4 Limitation of responsibility of Existing Lenders
(a) Unless expressly agreed to the contrary, an Existing Lender
makes no representation or warranty and assumes no
responsibility to a New Lender for:
(i) the legality, validity, effectiveness, adequacy or
enforceability of the Finance Documents or any other
documents;
(ii) the financial condition of any Obligor;
(iii) the performance and observance by any Obligor of its
obligations under the Finance Documents or any other
documents; or
(iv) the accuracy of any statements (whether written or
oral) made in or in connection with any Finance
Document or any other document,
and any representations or warranties implied by law or
regulation are excluded.
(b) Each New Lender confirms to the Existing Lender, and the other
Finance Parties that it:
(i) has made (and shall continue to make) its own
independent investigation and assessment of the
financial condition and affairs of each Obligor and
its related entities in connection with its
participation in this Agreement and has not relied
exclusively on any information provided to it by the
Existing Lender in connection with any Finance
Document; and
(ii) will continue to make its own independent appraisal
of the creditworthiness of each Obligor and its
related entities whilst any amount is or may be
outstanding under the Finance Documents or any
Commitment is in force.
(c) Nothing in any Finance Document obliges an Existing Lender to:
(i) accept a re-transfer from a New Lender of any of the
rights and obligations assigned or transferred under
this Clause 23; or
(ii) support any losses directly or indirectly incurred by
the New Lender by reason of the non-performance by
any Obligor of its obligations under the Finance
Documents or otherwise.
23.5 Procedure for transfer
(a) Subject to the conditions set out in Clause 23.2 (Conditions
of assignment or transfer) a transfer is effected in
accordance with paragraph (b) below when the Agent executes an
otherwise duly completed Transfer Certificate delivered to it
by the Existing Lender and the New Lender. The Agent shall, as
soon as reasonably practicable after receipt by it of a duly
completed Transfer Certificate appearing on its face to comply
with the terms of this Agreement and delivered in accordance
with the terms of this Agreement, execute that Transfer
Certificate and send a copy to the Borrower.
(b) On the Transfer Date:
(i) to the extent that in the Transfer Certificate the
Existing Lender seeks to transfer by novation its
rights and obligations under the Finance Documents
each of the Obligors and the Existing Lender shall be
released from further obligations towards one another
under the Finance Documents and their respective
rights against one another under the Finance
Documents shall be cancelled (being the "Discharged
Rights and Obligations");
(ii) each of the Obligors and the New Lender shall assume
obligations towards one another and/or acquire rights
against one another which differ from the Discharged
Rights and Obligations only insofar as that Obligor
and the New Lender have assumed and/or acquired the
same in place of that Obligor and the Existing
Lender;
(iii) the Agent, the Arranger, the New Lender and the other
Lenders, shall acquire the same rights and assume the
same obligations between themselves as they would
have acquired and assumed had the New Lender been an
Original Lender with the rights and/or obligations
acquired or assumed by it as a result of the transfer
and to that extent the Agent, the Arranger and the
Existing Lender shall each be released from further
obligations to each other under the Finance
Documents; and
(iv) the New Lender shall become a Party as a "Lender".
23.6 Copy of Transfer Certificate to Borrower
The Agent shall, as soon as reasonably practicable after it has
received a Transfer Certificate, send to the Borrower a copy of that
Transfer Certificate.
23.7 Disclosure of information
Any Lender may disclose to any of its Affiliates and any other person:
(a) to (or through) whom that Lender assigns or transfers (or may
potentially assign or transfer) all or any of its rights and
obligations under the Finance Documents;
(b) with (or through) whom that Lender enters into (or may
potentially enter into) any sub-participation (provided that,
for so long as it is a requirement of Dutch law, such
sub-participant qualifies as a Professional Market Party) in
relation to, or any other transaction under which payments are
to be made by reference to, the Finance Documents; or
(c) to whom, and to the extent that, information is required to be
disclosed by any applicable law or regulation,
any information about any Obligor, the Group and the Finance Documents
as that Lender shall consider appropriate provided that the person to
whom the information is to be given has entered into a Confidentiality
Undertaking.
23.8 Interest
All interest accrued in the Interest Period in which a transfer is
effective shall be paid to the Existing Lender.
23.9 Existing Lenders
No person may become a Lender under this Agreement until it has
confirmed at the date of this Agreement that it is either (i) a
Professional Market Party or (ii) exempted from the requirement to be a
Professional Market Party because it forms a closed circle (besolten
kring), within the meaning of the Dutch Exemption Regulation, with the
Borrower.
24. CHANGES TO THE OBLIGORS
24.1 Assignments and transfers by Obligors
No Obligor may assign any of its rights or transfer any of its rights
or obligations under the Finance Documents.
24.2 Additional Guarantors
(a) Subject to compliance with the provisions of paragraphs (b)
and (c) of Clause 20.6 ("Know your client" checks), the
Borrower may request that any of its wholly owned Subsidiaries
become an Additional Guarantor.
(b) The Borrower shall procure that in respect of (i) each of its
Subsidiaries to whom a sale, lease, transfer or other disposal
is made by an Obligor in accordance with the terms of this
Agreement; (ii) each of its Subsidiaries which is or which is
deemed to be a Material Subsidiary in accordance with the
terms of this Agreement, such Subsidiary or the Holding
Company of such Material Subsidiary (at the election of the
Borrower) or such person respectively become an Additional
Guarantor (unless such Subsidiary or such Material Subsidiary
(in the case of (i) and (ii) respectively) is already a
Guarantor) by:
(A) the Borrower delivering to the Agent a duly
completed and executed Accession Letter; and
(B) the Agent receiving from the Borrower all of
the documents and other evidence referred to
in Part II of Schedule 2 (Conditions
Precedent required to be delivered by an
Additional Guarantor) in relation to that
Additional Guarantor.
(c) The Agent shall notify the Guarantors and the Lenders promptly
upon being satisfied that it has received all the documents
and other evidence listed in Part II of Schedule 2 (Conditions
Precedent required to be delivered by an Additional
Guarantor).
(d) For the purposes of this Clause 24.2 only, a "Holding Company"
means, in relation to a Material Subsidiary, any company or
corporation in respect of which it is a Subsidiary and which
is not in turn a Subsidiary of a Holding Company (as defined
in Clause 1.1 (Definitions)).
24.3 Resignation of Guarantor
A Guarantor (a "Resigning Guarantor") will cease to be a Guarantor if:
(a) it makes a sale, lease, transfer or other disposal of all or
substantially all (but not a part only) of its assets to
another member of the Group which is or becomes a Guarantor in
accordance with paragraph (a) (i) of Clause 24.2 (Additional
Guarantors); or
(b) its Holding Company becomes a Guarantor,
provided that:
(i) such Resigning Guarantor also, if applicable, ceases
concurrently to be a guarantor in respect of any
other indebtedness of the Group or of any member of
the Group;
(ii) such Resigning Guarantor notifies the Agent of any
sale, lease, transfer or other disposal in accordance
with paragraph (a) of this Clause 24.3; and
(iii) the Borrower may not resign as a Guarantor without
the consent of all Lenders.
24.4 Repetition of Representations
Delivery of an Accession Letter constitutes confirmation by the
relevant Affiliate that the Repeating Representations are true and
correct in relation to it as at the date of delivery as if made by
reference to the facts and circumstances then existing.
SECTION 10
THE FINANCE PARTIES
25. ROLE OF THE AGENT AND THE ARRANGER
25.1 Appointment of the Agent
(a) Each of the Arranger and the Lenders appoints the Agent to act
as its agent under and in connection with the Finance
Documents.
(b) Each of the Arranger and the Lenders, authorises the Agent to
exercise the rights, powers, authorities and discretions
specifically given to the Agent under or in connection with
the Finance Documents together with any other incidental
rights, powers, authorities and discretions.
25.2 Duties of the Agent
(a) The Agent shall promptly forward to a Party the original or a
copy of any document (including, but not limited to, the
Borrower's annual financial statements) which is delivered to
the Agent for that Party by any other Party.
(b) The Agent is not obliged to review or check the adequacy,
accuracy or completeness of any document it forwards to
another Party.
(c) If the Agent receives notice from a Party referring to this
Agreement, describing a Default and stating that the
circumstance described is a Default, it shall promptly notify
the other Finance Parties.
(d) If the Agent is aware of the non-payment of any principal,
interest or fee payable to a Finance Party (other than the
Agent or the Arranger) under this Agreement it shall promptly
notify the other Finance Parties.
(e) The Agent's duties under the Finance Documents are solely
mechanical and administrative in nature.
25.3 Role of the Arranger
Except as specifically provided in the Finance Documents, the Arranger
has no obligations of any kind to any other Party under or in
connection with any Finance Document.
25.4 No fiduciary duties
(a) Nothing in this Agreement constitutes the Agent and/or the
Arranger, as a trustee or fiduciary of any other person.
(b) Neither the Agent nor the Arranger shall be bound to account
to any Lender for any sum or the profit element of any sum
received by it for its own account.
25.5 Business with the Group
The Agent and the Arranger may accept deposits from, lend money to and
generally engage in any kind of banking or other business with any
member of the Group.
25.6 Rights and discretions of the Agent
(a) The Agent may rely on:
(i) any representation, notice or document (including,
for the avoidance of doubt, any representation,
notice or document communicating the consent of the
Majority Lenders pursuant to Clause 34.1 (Required
consents)) believed by it to be genuine, correct and
appropriately authorised; and
(ii) any statement made by a director, authorised
signatory or employee of any person regarding any
matters which may reasonably be assumed to be within
his knowledge or within his power to verify.
(b) The Agent may assume (unless it has received notice to the
contrary in its capacity as agent for the Lenders) that:
(i) no Default has occurred (unless it has actual
knowledge of a Default arising under paragraphs (a)
or (b) of Clause 22 (Events of Default));
(ii) any right, power, authority or discretion vested in
any Party or the Majority Lenders has not been
exercised; and
(iii) any notice or request made by the Borrower (other
than a Utilisation Request or Selection Notice) is
made on behalf of and with the consent and knowledge
of all the Obligors.
(c) The Agent may engage, pay for and rely on the advice or
services of any lawyers, accountants, surveyors or other
experts.
(d) The Agent may act in relation to the Finance Documents through
its personnel and agents.
(e) The Agent may disclose to any other Party any information it
reasonably believes it has received as agent under this
Agreement.
(f) Notwithstanding any other provision of any Finance Document to
the contrary, neither the Agent nor the Arranger is obliged to
do or omit to do anything if it would or might in its
reasonable opinion constitute a breach of any law and
regulation or a breach of a fiduciary duty or duty of
confidentiality.
25.7 Majority Lenders' instructions
(a) Unless a contrary indication appears in a Finance Document,
the Agent shall (i) exercise any right, power, authority or
discretion vested in it as Agent in accordance with any
instructions given to it by the Majority Lenders (or, if so
instructed by the Majority Lenders, refrain from exercising
any right, power, authority or discretion vested in it as
Agent) and (ii) not be liable for any act (or omission) if it
acts (or refrains from taking any action) in accordance with
an instruction of the Majority Lenders.
(b) Unless a contrary indication appears in a Finance Document,
any instructions given by the Majority Lenders will be binding
on all the Finance Parties.
(c) The Agent may refrain from acting in accordance with the
instructions of the Majority Lenders (or, if appropriate, the
Lenders) until it has received such security as it may require
for any cost, loss or liability (together with any associated
VAT) which it may incur in complying with the instructions.
(d) In the absence of instructions from the Majority Lenders, (or,
if appropriate, the Lenders) the Agent may act (or refrain
from taking action) as it considers to be in the best interest
of the Lenders.
(e) The Agent is not authorised to act on behalf of a Lender
(without first obtaining that Lender's consent) in any legal
or arbitration proceedings relating to any Finance Document.
25.8 Responsibility for documentation
Neither the Agent nor the Arranger:
(a) is responsible for the adequacy, accuracy and/or completeness
of any information (whether oral or written) supplied by the
Agent, the Arranger, an Obligor or any other person given in
or in connection with any Finance Document or the Information
Memorandum; or
(b) is responsible for the legality, validity, effectiveness,
adequacy or enforceability of any Finance Document or any
other agreement, arrangement or document entered into, made or
executed in anticipation of or in connection with any Finance
Document.
25.9 Exclusion of liability
(a) Without limiting paragraph (b) below, neither the Agent nor
the Arranger will be liable for any action taken by it under
or in connection with any Finance Document, unless directly
caused by its gross negligence or wilful misconduct or wilful
breach of any Finance Document.
(b) No Party (other than the Agent) may take any proceedings
against any officer, employee or agent of the Agent in respect
of any claim it might have against the Agent or in respect of
any act or omission of any kind by that officer, employee or
agent in relation to any Finance Document or any Finance
Document and any officer, employee or agent of the Agent may
rely on this Clause 25 subject to Clause 1.4 (Third Party
Rights) and the provisions of the Third Parties Act.
(c) The Agent will not be liable for any delay (or any related
consequences) in crediting an account with an amount required
under the Finance Documents to be paid by the Agent if the
Agent has taken all necessary steps as soon as reasonably
practicable to comply with the regulations or operating
procedures of any recognised clearing or settlement system
used by the Agent for that purpose.
(d) Nothing in this Agreement shall oblige the Agent or the
Arranger to carry out any checks pursuant to any laws or
regulations relating to money laundering in relation to any
person on behalf of any Lender and each Lender confirms to the
Agent and the Arranger that it is solely responsible for any
such checks it is required to carry out and that it may not
rely on any statement in relation to such checks made by the
Agent or the Arranger.
25.10 Lenders' indemnity to the Agent
Each Lender shall (in proportion to its share of the Total Commitments
or, if the Total Commitments are then zero, to its share of the Total
Commitments immediately prior to their reduction to zero) indemnify the
Agent, within three Business Days of demand, against any cost, loss or
liability incurred by the Agent (otherwise than by reason of the
Agent's gross negligence or wilful misconduct) in acting as Agent under
the Finance Documents (unless the Agent has been reimbursed by an
Obligor pursuant to a Finance Document).
25.11 Resignation of the Agent
(a) The Agent may resign and appoint one of its Affiliates acting
through an office in the European Union as successor by giving
notice to the other Finance Parties and the Borrower.
(b) Alternatively the Agent may resign by giving notice to the
other Finance Parties and the Borrower, in which case the
Majority Lenders (after consultation with the Borrower) may
appoint a successor Agent.
(c) If the Majority Lenders have not appointed a successor Agent
in accordance with paragraph (b) above within 30 days after
notice of resignation was given, the Agent (after consultation
with the Borrower) may appoint a successor Agent (acting
through an office in the European Union).
(d) The retiring Agent shall, at its own cost, make available to
the successor Agent such documents and records and provide
such assistance as the successor Agent may reasonably request
for the purposes of performing its functions as Agent under
the Finance Documents.
(e) The Agent's resignation notice shall only take effect upon the
appointment of a successor.
(f) Upon the appointment of a successor, the retiring Agent shall
be discharged from any further obligation in respect of the
Finance Documents but shall remain entitled to the benefit of
this Clause 25. Its successor and each of the other Parties
shall have the same rights and obligations amongst themselves
as they would have had if such successor had been an original
Party.
(g) After consultation with the Borrower, the Majority Lenders
may, by notice to the Agent, require it to resign in
accordance with paragraph (b) above. In this event, the Agent
shall resign in accordance with paragraph (b) above.
25.12 Confidentiality
(a) In acting as agent for the Finance Parties, the Agent shall be
regarded as acting through its agency division which shall be
treated as a separate entity from any other of its divisions
or departments.
(b) If information is received by another division or department
of the Agent, it may be treated as confidential to that
division or department and the Agent shall not be deemed to
have notice of it.
(c) Notwithstanding any other provision of any Finance Document to
the contrary, none of the Agent and the Arranger are obliged
to disclose to any other person (i) any confidential
information or (ii) any other information if the disclosure
would or might in its reasonable opinion constitute a breach
of any law or a breach of a fiduciary duty.
25.13 Relationship with the Lenders
(a) The Agent may treat each Lender as a Lender, entitled to
payments under this Agreement and acting through its Facility
Office unless it has received not less than five Business Days
prior notice from that Lender to the contrary in accordance
with the terms of this Agreement.
(b) Each Lender shall supply the Agent with any information
required by the Agent in order to calculate the Mandatory Cost
in accordance with Schedule 4 (Mandatory Cost Formulae).
25.14 Credit appraisal by the Finance Parties
Without affecting the responsibility of any Obligor for information
supplied by it or on its behalf in connection with any Finance
Document, each Finance Party confirms to the Agent that it has been,
and will continue to be, solely responsible for making its own
independent appraisal and investigation of all risks arising under or
in connection with any Finance Document including but not limited to:
(a) the financial condition, status and nature of each member of
the Group;
(b) the legality, validity, effectiveness, adequacy or
enforceability of any Finance Document and any other
agreement, arrangement or document entered into, made or
executed in anticipation of, under or in connection with any
Finance Document;
(c) whether that Finance Party has recourse, and the nature and
extent of that recourse, against any Party or any of its
respective assets under or in connection with any Finance
Document, the transactions contemplated by the Finance
Documents or any other agreement, arrangement or document
entered into, made or executed in anticipation of, under or in
connection with any Finance Document; and
(d) the adequacy, accuracy and/or completeness of the Information
Memorandum and any other information provided by the Agent,
any Party or by any other person under or in connection with
any Finance Document, the transactions contemplated by the
Finance Documents or any other agreement, arrangement or
document entered into, made or executed in anticipation of,
under or in connection with any Finance Document.
25.15 Reference Banks
If a Reference Bank (or, if a Reference Bank is not a Lender, the
Lender of which it is an Affiliate) ceases to be a Lender, the Agent
shall (in consultation with the Borrower) appoint another Lender or an
Affiliate of a Lender to replace that Reference Bank.
25.16 Agent's Management Time
Any amount payable to the Agent under Clause 15.3 (Indemnity to the
Agent) and Clause 25.10 (Lenders' indemnity to the Agent) shall include
the cost of utilising the Agent's management time or other resources
and will be calculated on the basis of such reasonable daily or hourly
rates as the Agent may notify to the Borrower and the Lenders, and is
in addition to any fee paid or payable to the Agent under Clause 12
(Fees).
25.17 Deduction from amounts payable by the Agent
If any Party owes an amount to the Agent under the Finance Documents
the Agent may, after giving notice to that Party, deduct an amount not
exceeding that amount from any payment to that Party which the Agent
would otherwise be obliged to make under the Finance Documents and
apply the amount deducted in or towards satisfaction of the amount
owed. For the purposes of the Finance Documents that Party shall be
regarded as having received any amount so deducted.
26. CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a) interfere with the right of any Finance Party to arrange its
affairs (tax or otherwise) in whatever manner it thinks fit;
(b) oblige any Finance Party to investigate or claim any credit,
relief, remission or repayment available to it or the extent,
order and manner of any claim; or
(c) oblige any Finance Party to disclose any information relating
to its affairs (tax or otherwise) or any computations in
respect of Tax.
27. SHARING AMONG THE FINANCE PARTIES
27.1 Payments to Finance Parties
If a Finance Party (a "Recovering Finance Party") receives or recovers
any amount from an Obligor other than in accordance with Clause 28
(Payment mechanics) (whether by way of set-off or otherwise) and
applies that amount to a payment due under the Finance Documents then:
(a) the Recovering Finance Party shall, within three Business
Days, notify details of the receipt or recovery, to the Agent;
(b) the Agent shall determine whether the receipt or recovery is
in excess of the amount the Recovering Finance Party would
have been paid had the receipt or recovery been received or
made by the Agent and distributed in accordance with Clause 28
(Payment mechanics), without taking account of any Tax which
would be imposed on the Agent in relation to the receipt,
recovery or distribution; and
(c) the Recovering Finance Party shall, within three Business Days
of demand by the Agent, pay to the Agent an amount (the
"Sharing Payment") equal to such receipt or recovery less any
amount which the Agent determines may be retained by the
Recovering Finance Party as its share of any payment to be
made, in accordance with Clause 28.5 (Partial payments).
27.2 Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the
relevant Obligor and distribute it between the Finance Parties (other
than the Recovering Finance Party) in accordance with Clause 28.5
(Partial payments).
27.3 Recovering Finance Party's rights
(a) On a distribution by the Agent under Clause 27.2
(Redistribution of payments), the Recovering Finance Party
will be subrogated to the rights of the Finance Parties which
have shared in the redistribution.
(b) If and to the extent that the Recovering Finance Party is not
able to rely on its rights under paragraph (a) above, the
relevant Obligor shall be liable to the Recovering Finance
Party for a debt equal to the Sharing Payment which is
immediately due and payable.
27.4 Reversal of redistribution
If any part of the Sharing Payment received or recovered by a
Recovering Finance Party becomes repayable and is repaid by that
Recovering Finance Party, then:
(a) each Finance Party which has received a share of the relevant
Sharing Payment pursuant to Clause 27.2 (Redistribution of
payments) shall, upon request of the Agent, pay to the Agent
for account of that Recovering Finance Party an amount equal
to the appropriate part of its share of the Sharing Payment
(together with an amount as is necessary to reimburse that
Recovering Finance Party for its proportion of any interest on
the Sharing Payment which that Recovering Finance Party is
required to pay); and
(b) that Recovering Finance Party's rights of subrogation in
respect of any reimbursement shall be cancelled and the
relevant Obligor will be liable to the reimbursing Finance
Party for the amount so reimbursed.
27.5 Exceptions
(a) This Clause 27 shall not apply to the extent that the
Recovering Finance Party would not, after making any payment
pursuant to this Clause 27, have a valid and enforceable claim
against the relevant Obligor.
(b) A Recovering Finance Party is not obliged to share with any
other Finance Party any amount which the Recovering Finance
Party has received or recovered as a result of taking legal or
arbitration proceedings, if:
(i) it notified that other Finance Party of the legal or
arbitration proceedings; and
(ii) that other Finance Party had an opportunity to
participate in those legal or arbitration proceedings
but did not do so as soon as reasonably practicable
having received notice and did not take separate
legal or arbitration proceedings.
SECTION 11
ADMINISTRATION
28. PAYMENT MECHANICS
28.1 Payments to the Agent
(a) On each date on which an Obligor or a Lender is required to
make a payment under a Finance Document, that Obligor or
Lender shall make the same available to the Agent (unless a
contrary indication appears in a Finance Document) for value
on the due date at the time and in such funds specified by the
Agent as being customary at the time for settlement of
transactions in the relevant currency in the place of payment.
(b) Payments by Obligors or Lenders shall be made to such account
in the principal financial centre of the country of that
currency (or, in relation to euro, in a principal financial
centre in a Participating Member State or London) with such
bank as the Agent specifies.
28.2 Distributions by the Agent
Each payment received by the Agent under the Finance Documents for
another Party shall, subject to Clause 28.3 (Distributions to an
Obligor), Clause 28.4 (Clawback) and Clause 25.17 (Deduction from
amounts payable by the Agent) be made available by the Agent as soon as
practicable after receipt to the Party entitled to receive payment in
accordance with this Agreement (in the case of a Lender, for the
account of its Facility Office), to such account as that Party may
notify to the Agent by not less than five Business Days' notice with a
bank in the principal financial centre of the country of that currency
(or, in relation to euro, in a principal financial centre in a
Participating Member State or London).
28.3 Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with
Clause 29 (Set-off) apply any amount received by it for that Obligor in
or towards payment (on the date and in the currency and funds of
receipt) of any amount due from that Obligor under the Finance
Documents or in or towards purchase of any amount of any currency to be
so applied.
28.4 Clawback
(a) Where a sum is to be paid to the Agent under the Finance
Documents for another Party, the Agent is not obliged to pay
that sum to that other Party (or to enter into or perform any
related exchange contract) until it has been able to establish
to its satisfaction that it has actually received that sum.
(b) If the Agent pays an amount to another Party and it proves to
be the case that the Agent had not actually received that
amount, then the Party to whom that amount (or the proceeds of
any related exchange contract) was paid by the Agent shall on
demand refund the same to the Agent together with interest on
that amount from the date of payment to the date of receipt by
the Agent, calculated by the Agent to reflect its cost of
funds.
28.5 Partial payments
(a) If the Agent receives a payment that is insufficient to
discharge all the amounts then due and payable by an Obligor
under the Finance Documents, the Agent shall apply that
payment towards the obligations of that Obligor under the
Finance Documents in the following order:
(i) first, in or towards payment pro rata of any unpaid
fees, costs and expenses of the Agent and the
Arranger under the Finance Documents;
(ii) secondly, in or towards payment pro rata of any
accrued interest, fee or commission due but unpaid
under this Agreement;
(iii) thirdly, in or towards payment pro rata of any
principal due but unpaid under this Agreement; and
(iv) fourthly, in or towards payment pro rata of any other
sum due but unpaid under the Finance Documents.
(b) The Agent shall, if so directed by the Majority Lenders, vary
the order set out in paragraphs (a)(ii) to (iv) above.
(c) Paragraphs (a) and (b) above will override any appropriation
made by an Obligor.
28.6 No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall
be calculated and be made without (and free and clear of any deduction
for) set-off or counterclaim.
28.7 Business Days
(a) Any payment which is due to be made on a day that is not a
Business Day shall be made on the next Business Day in the
same calendar month (if there is one) or the preceding
Business Day (if there is not).
(b) During any extension of the due date for payment of any
principal or Unpaid Sum under this Agreement interest is
payable on the principal or Unpaid Sum at the rate payable on
the original due date.
28.8 Currency of account
(a) Subject to paragraphs (b) to (e) below, the Base Currency is
the currency of account and payment for any sum due from an
Obligor under any Finance Document.
(b) A repayment of a Utilisation or Unpaid Sum or a part of a
Utilisation or Unpaid Sum shall be made in the currency in
which that Utilisation or Unpaid Sum is denominated on its due
date.
(c) Each payment of interest shall be made in the currency in
which the sum in respect of which the interest is payable was
denominated when that interest accrued.
(d) Each payment in respect of costs, expenses or Taxes shall be
made in the currency in which the costs, expenses or Taxes are
incurred.
(e) Any amount expressed to be payable in a currency other than
the Base Currency shall be paid in that other currency.
28.9 Change of currency
(a) Unless otherwise prohibited by law or regulation, if more than
one currency or currency unit are at the same time recognised
by the central bank of any country as the lawful currency of
that country, then:
(i) any reference in the Finance Documents to, and any
obligations arising under the Finance Documents in,
the currency of that country shall be translated
into, or paid in, the currency or currency unit of
that country designated by the Agent (after
consultation with the Borrower); and
(ii) any translation from one currency or currency unit to
another shall be at the official rate of exchange
recognised by the central bank for the conversion of
that currency or currency unit into the other rounded
up or down by the Agent (acting reasonably).
(b) If a change in any currency of a country occurs, this
Agreement will, to the extent the Agent (acting reasonably and
after consultation with the Borrower) specifies to be
necessary be amended to comply with any generally accepted
conventions and market practice in the Relevant Interbank
Market and otherwise to reflect the change in currency.
29. SET-OFF
A Finance Party may set off any matured obligation due from an Obligor
under the Finance Documents (to the extent beneficially owned by that
Finance Party) against any matured obligation owed by that Finance
Party to that Obligor, regardless of the place of payment, booking
branch or currency of either obligation. If the obligations are in
different currencies, the Finance Party may convert either obligation
at a market rate of exchange in its usual course of business for the
purpose of the set-off.
30. NOTICES
30.1 Communications in writing
Any communication to be made under or in connection with the Finance
Documents shall be made in writing and, unless otherwise stated, may be
made by fax or letter or (in accordance with Clause 30.5 (Electronic
Communication)) by email.
30.2 Addresses
The address and fax number (and the department or officer, if any, for
whose attention the communication is to be made) of each Party for any
communication or document to be made or delivered under or in
connection with the Finance Documents is:
(a) in the case of the Borrower, that identified with its name
below;
(b) in the case of each Lender, or any other Obligor, that
notified in writing to the Agent on or prior to the date on
which it becomes a Party; and
(c) in the case of the Agent, that identified with its name below,
or any substitute address or fax number or department or officer as the
Party may notify to the Agent (or the Agent may notify to the other
Parties, if a change is made by the Agent) by not less than five
Business Days' notice.
30.3 Delivery
(a) Any communication or document made or delivered by one person
to another under or in connection with the Finance Documents
will only be effective:
(i) if by way of fax, when received in legible form; or
(ii) if by way of letter, when it has been left at the
relevant address or five Business Days after being
deposited in the post postage prepaid in an envelope
addressed to it at that address,
and, if a particular department or officer is specified as
part of its address details provided under Clause 30.2
(Addresses), if addressed to that department or officer.
(b) Any communication or document to be made or delivered to the
Agent will be effective only when actually received by the
Agent and then only if it is expressly marked for the
attention of the department or officer identified with the
Agent's signature below (or any substitute department or
officer as the Agent shall specify for this purpose).
(c) All notices from or to an Obligor shall be sent through the
Agent. The Borrower may make and/or deliver as agent of each
Obligor notices and/or requests on behalf of each Obligor.
(d) Any communication or document made or delivered to the
Borrower in accordance with this Clause 30.3 will be deemed to
have been made or delivered to each of the Obligors.
30.4 Notification of address and fax number
Promptly upon receipt of notification of an address or fax number or
change of address or fax number pursuant to Clause 30.2 (Addresses) or
changing its own address or fax number, the Agent shall notify the
other Parties.
30.5 Electronic communication
(a) Any communication to be made between the Agent and a Lender
and/or any member of the Group under or in connection with the
Finance Documents may be made by electronic mail or other
electronic means, if the Agent and the relevant Lender and/or
member of the Group:
(i) agree that, unless and until notified to the
contrary, this is to be an accepted form of
communication;
(ii) notify each other in writing of their electronic mail
address and/or any other information required to
enable the sending and receipt of information by that
means; and
(iii) notify each other of any change to their address or
any other such information supplied by them.
(b) Any electronic communication made between the Agent and a
Lender and/or any member of the Group will be effective only
when actually received in readable form and in the case of any
electronic communication made by a Lender and/or any member of
the Group to the Agent only if it is addressed in such a
manner as the Agent shall specify for this purpose.
30.6 English language
(a) Any notice given under or in connection with any Finance
Document must be in English.
(b) All other documents provided under or in connection with any
Finance Document must be:
(i) in English or Spanish; or
(ii) if not in English or Spanish and if so required by
the Agent, accompanied by a certified English
translation and, in this case, the English
translation will prevail unless the document is a
constitutional, statutory or other official document.
30.7 Obligor Agent
(a) Each Obligor (other than the Borrower) by its execution of
this Agreement or an Accession Letter (as the case may be)
irrevocably appoints the Borrower to act on its behalf as its
agent in relation to the Finance Documents and irrevocably
authorises (i) the Borrower on its behalf to supply all
information concerning itself contemplated by this Agreement
to the Finance Parties and to give all notices and
instructions (including, in the case of a Borrower,
Utilisation Requests, Renewal Requests or Selection Notices),
to execute on its behalf any documents required hereunder and
to make such agreements capable of being given or made by any
Obligor notwithstanding that they may affect such Obligor,
without further reference to or consent of such Obligor; and
(ii) each Finance Party to give any notice, demand or other
communication to such Obligor pursuant to the Finance
Documents to the Borrower on its behalf, and in each case such
Obligor shall be bound thereby as though such Obligor itself
had given such notices and instructions (including, without
limitation, any Utilisation Requests, Renewal Requests or
Selection Notices) or executed or made such agreements or
received any notice, demand or other communication.
(b) Every act, agreement, undertaking, settlement, waiver, notice
or other communication given or made by the Borrower, or given
to the Borrower, in its capacity as agent in accordance with
paragraph (a) of this Clause 30.7, in connection with this
Agreement shall be binding for all purposes on such Obligors
as if the other Obligors had expressly made, given or
concurred with the same. In the event of any conflict between
any notices or other communications of the Borrower and any
other Obligor, those of the Borrower shall prevail.
30.8 Use of Websites
(a) The Borrower may satisfy its obligation under this Agreement
to deliver any information in relation to those Lenders (the
"Website Lenders") who accept this method of communication by
posting this information onto an electronic website designated
by the Borrower and the Agent (the "Designated Website") if:
(i) the Agent expressly agrees (after consultation with
each of the Lenders) that it will accept
communication of the information by this method;
(ii) both the Borrower and the Agent are aware of the
address of and any relevant password specifications
for the Designated Website; and
(iii) the information is in a format previously agreed
between the Borrower and the Agent.
If any Lender (a "Paper Form Lender") does not agree to the
delivery of information electronically then the Agent shall
notify the Borrower accordingly and the Borrower shall supply
the information to the Agent in paper form. In any event the
Borrower shall supply the Agent with at least one copy in
paper form of any information required to be provided by it.
(b) The Agent shall supply each Website Lender with the address of
and any relevant password specifications for the Designated
Website following designation of that website by the Borrower
and the Agent.
(c) The Borrower shall promptly upon becoming aware of its
occurrence notify the Agent if:
(i) the Designated Website cannot be accessed due to
technical failure;
(ii) the password specifications for the Designated
Website change;
(iii) any new information which is required to be provided
under this Agreement is posted onto the Designated
Website;
(iv) any existing information which has been provided
under this Agreement and posted onto the Designated
Website is amended; or
(v) the Borrower becomes aware that the Designated
Website or any information posted onto the Designated
Website is or has been infected by any electronic
virus or similar software.
If the Borrower notifies the Agent under paragraph (c)(i) or
paragraph (c)(v) above, all information to be provided by the
Borrower under this Agreement after the date of that notice
shall be supplied in paper form unless and until the Agent and
each Website Lender is satisfied that the circumstances giving
rise to the notification are no longer continuing.
(d) Any Website Lender may request, through the Agent, one paper
copy of any information required to be provided under this
Agreement which is posted onto the Designated Website. The
Borrower shall comply with any such request within ten
Business Days.
31. CALCULATIONS AND CERTIFICATES
31.1 Accounts
In any litigation or arbitration proceedings arising out of or in
connection with a Finance Document, the entries made in the accounts
maintained by a Finance Party are prima facie evidence of the matters
to which they relate.
31.2 Certificates and Determinations
Any certification or determination by a Finance Party of a rate or
amount under any Finance Document is, in the absence of manifest error,
conclusive evidence of the matters to which it relates.
31.3 Day count convention
Any interest, commission or fee accruing under a Finance Document will
accrue from day to day and is calculated on the basis of the actual
number of days elapsed and a year of 360 days, or where the interest,
commission or fee is to accrue in respect of any amount denominated in
sterling, 365 days or, in any case where the practice in the Relevant
Interbank Market differs, in accordance with that market practice.
31.4 No personal liability
If an individual signs a certificate on behalf of any member of the
Group and the certificate proves to be incorrect, the individual will
incur no personal liability as a result, unless the individual acted
fraudulently in giving the certificate. In this case any liability of
the individual will be determined in accordance with applicable law.
32. PARTIAL INVALIDITY
If, at any time, any provision of the Finance Documents is or becomes
illegal, invalid or unenforceable in any respect under any law or
regulation of any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions nor the legality, validity
or enforceability of such provision under the laws or regulations of
any other jurisdiction will in any way be affected or impaired.
33. REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any
Finance Party, any right or remedy under the Finance Documents shall
operate as a waiver, nor shall any single or partial exercise of any
right or remedy prevent any further or other exercise or the exercise
of any other right or remedy. The rights and remedies provided in this
Agreement are cumulative and not exclusive of any rights or remedies
provided by law or regulation.
34. AMENDMENTS AND WAIVERS
34.1 Required consents
(a) Subject to Clause 34.2 (Exceptions) any term of the Finance
Documents may be amended or waived only with the consent of
the Majority Lenders and the Borrower and any such amendment
or waiver will be binding on all Parties.
(b) The Agent may effect, on behalf of any Finance Party, any
amendment or waiver permitted by this Clause.
(c) The Borrower may effect, as agent of each Obligor, any
amendment or waiver permitted by this Clause 34.
34.2 Exceptions
(a) An amendment or waiver that has the effect of changing or
which relates to:
(i) the definition of "Majority Lenders" or "Optional
Currency" in Clause 1.1 (Definitions);
(ii) an extension to the date of payment of any scheduled
payment of any amount under the Finance Documents;
(iii) a reduction in the Margin or a reduction in the
amount of any payment of principal, interest, fees or
commission payable;
(iv) a change in currency of payment of any amount under
the Finance Documents;
(v) an increase in or an extension of any Commitment;
(vi) a change to the Borrower or any of the Guarantors
other than in accordance with Clause 24 (Changes to
the Obligors);
(vii) any provision which expressly requires the consent of
all the Lenders; or
(viii) Clause 2.2 (Finance Parties' rights and obligations),
Clause 18 (Guarantee and Indemnity), Clause 23
(Changes to the Lenders), Clause 24 (Changes to the
Obligors) or this Clause 34,
shall not be made without the prior consent of all the
Lenders.
(b) An amendment or waiver which relates to the rights or
obligations of the Agent or the Arranger, may not be effected
without the consent of the Agent or the Arranger at such time.
35. COUNTERPARTS
Each Finance Document may be executed in any number of counterparts,
and this has the same effect as if the signatures on the counterparts
were on a single copy of the Finance Document.
SECTION 12
GOVERNING LAW AND ENFORCEMENT
36. GOVERNING LAW
36.1 This Agreement is governed by English law.
36.2 If the Borrower or any of the Original Guarantors is represented
by an attorney or attorneys in connection with the signing and/or
execution and/or delivery of this Agreement or any agreement or
document referred to herein or made pursuant hereto and the relevant
power or powers of attorney is or are expressed to be governed by the
laws and regulations of a particular jurisdiction, it is hereby
expressly acknowledged and accepted by the other parties hereto that
such laws and regulations shall govern the existence and extent of such
attorney's or attorney's authority and the effects of the exercise
thereof.
37. ENFORCEMENT
37.1 Jurisdiction of English Courts
(a) Each of the parties hereto irrevocably submits to the
jurisdiction of the courts of England and to the jurisdiction
of the courts of its own domicile with respect to any action
initiated against it, to settle any dispute arising out of or
in connection with this Agreement (including a dispute
regarding the existence, validity or termination of this
Agreement) (a "Dispute").
(b) the Parties agree that such courts are the most appropriate
and convenient courts to settle Disputes and accordingly no
Party will argue to the contrary.
(c) To the extent allowed by law or regulation, the Finance
Parties may take proceedings related to a Dispute in any other
courts with jurisdiction or concurrent proceedings in any
number of jurisdictions.
37.2 Service of process
Without prejudice to any other mode of service allowed under any
relevant law or regulation, each Obligor (other than an Obligor
incorporated in England and Wales):
(a) shall irrevocably appoint the Process Agent as its agent for
service of process in relation to any proceedings before the
English courts in connection with any Finance Document and
shall procure that the Process Agent confirms its acceptance
of that appointment in writing on or before the date of this
Agreement; and
(b) agrees that failure by the Process Agent to notify the
relevant Obligor of the process will not invalidate the
proceedings concerned.
38. WAIVER OF SOVEREIGN IMMUNITY
To the extent that Cemex Parent or any Obligor has acquired or
hereafter may acquire any immunity from jurisdiction of any court or
from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, or otherwise) with
respect to itself or its property, Cemex Parent or the relevant
Obligor, as the case may be, hereby irrevocably waives such immunity in
respect of its obligations hereunder to the extent permitted by
applicable law. Without limiting the generality of the foregoing, Cemex
Parent and each Obligor agrees that the waivers set forth in this
Clause 38 shall have force and effect to the fullest extent permitted
under the Foreign Sovereign Immunities Act of 1976 of the United States
and are intended to be irrevocable for the purposes of such Act.
This Agreement has been entered into on the date stated at the beginning of this
Agreement.
SCHEDULE 1
THE ORIGINAL PARTIES
Part I
The Original Obligors
Part IA
Name of Borrower Registration number (or equivalent, if
any)
New Sunward Holding B.V. 34133556
Address for delivery of Notices:
Amsteldijk 166,
1079LH Amsterdam,
The Netherlands
Tel: (31) 20 642-2048
Fax: (31) 20 644-4095
Attn: Managing Director(s)
Part IB
Name of Original Guarantors Registration numbers (or equivalent,
if any)
CEMEX, S.A. de C.V. numero 21, folios 157 a 186 vuelta,
volumen 16, Libro No. 3, Segundo
Auxiliar Escrituras de Sociedades
Mercantiles, Seccion de Comercio, 11
de junio de 1920, Registro Publico de
la Propiedad y del Comercio de
Monterrey, Nuevo Leon
Address for delivery of Notices:
Ave. Ricardo Margain Zozaya #325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico, 66265
Tel: (52 81) 8888-4115
Fax: (52 81) 8888-4415
Attn: Humberto Lozano
Cemex Mexico, S.A. de C.V. Numero 55, folio 127, volumen 186,
Libro No. 3, Segundo Auxiliar
Escrituras de Sociedades Mercantiles,
Seccion de Comercio, 23 de agosto de
1968, Registro Publico de la Propiedad
y del Comercio de Monterrey, Nuevo
Leon
Address for delivery of Notices:
Ave. Ricardo Margain Zozaya #325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico, 66265
Tel: (52 81) 8888-4115
Fax: (52 81) 8888-4415
Attn: Humberto Lozano
Empresas Tolteca de Mexico, S.A. de Numero 1508, folio 241, volumen 321,
C.V. Libro No. 3, Segundo Auxiliar
Escrituras de Sociedades Mercantiles,
Seccion de Comercio, 22 de septiembre
de 1989, Registro Publico de la
Propiedad y del Comercio de Monterrey,
Nuevo Leon
Address for delivery of Notices:
Ave. Ricardo Margain Zozaya #325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico 66265
Tel: (52 81) 8888-4115
Fax: (52 81) 8888-4415
Attn: Humberto Lozano
Part II
The Original Lenders
- --------------------------------------------------------------------------------
Name of Original Lender Facility A Facility B
Commitment Commitment
US$ US$
- --------------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria, S.A. 31,166,666.66 31,166,666.66
BNP Paribas 31,166,666.67 31,166,666.67
Citibank, N.A. Nassau Bahamas Branch 31,166,666.67 31,166,666.67
Calyon Sucursal en Espana 24,250,000 24,250,000
ING Bank N.V. 24,250,000 24,250,000
JPMorgan Chase Bank 24,250,000 24,250,000
Lloyds TSB Bank plc 24,250,000 24,250,000
Mizuho Corporate Bank, Ltd 24,250,000 24,250,000
Banco Santander Central Hispano S.A. 24,250,000 24,250,000
The Royal Bank of Scotland plc 24,250,000 24,250,000
Wachovia Bank, National Association 24,250,000 24,250,000
The Bank of Tokyo-Mitsubishi, Ltd 15,000,000 15,000,000
Fortis Bank S.A./N.V. 15,000,000 15,000,000
Banco de Sabadell, S.A. 10,000,000 10,000,000
Bank of America, N.A. 7,500,000 7,500,000
The Governor and Company of the Bank of
Ireland 7,500,000 7,500,000
Banco Itau Europa, S.A. Sucursal
Financeira Exterior 7,500,000 7,500,000
- --------------------------------------------------------------------------------
TOTALS (US$) 350,000,000 350,000,000
- --------------------------------------------------------------------------------
SCHEDULE 2
CONDITIONS PRECEDENT
Part I
Conditions Precedent to initial Utilisation
1. Obligors
(a) A copy of the current constitutional documents of each Obligor
including copies certified by one director of the relevant
company below of:
(i) the akte van oprichting and statuten of the Borrower
and a copy of the extract from the trade register of
Chamber of Commerce of Amsterdam;
(ii) the estatutos sociales in effect on the First
Utilisation Date of each Guarantor; and
(iii) the power-of-attorney of each Person executing any
Finance Document on behalf of any Obligor, together
with specimen signatures of such Person.
(b) A power of attorney granting a specific individual or
individuals sufficient power to sign the Finance Documents on
behalf of each Original Obligor and in relation to the
Borrower and Cemex Parent, a copy of a resolution of the board
of directors of the Borrower and Cemex Parent:
(i) approving the terms of, and the transactions
contemplated by, the Finance Documents to which it is
a party and resolving that it execute the Finance
Documents to which it is a party;
(ii) authorising a specified person or persons to execute
the Finance Documents to which it is a party on its
behalf; and
(iii) authorising a specified person or persons, on its
behalf, to sign and/or despatch all documents and
notices (including, if relevant, any Utilisation
Request) to be signed and/or despatched by it under
or in connection with the Finance Documents to which
it is a party.
(c) A specimen of the signature of each person authorised by the
resolution or power of attorney referred to in paragraph (b)
above in relation to the Finance Documents.
(d) A certificate of each of the Obligors (signed by an Authorised
Signatory) confirming that borrowing or guaranteeing, as
appropriate, the Total Commitments would not cause any
borrowing, guarantee, security or similar limit binding on any
Obligor to be exceeded.
(e) A certificate of an Authorised Signatory of the relevant
Obligor certifying that each copy document relating to it
specified in this Part I of Schedule 2 is correct, complete
and in full force and effect as at a date no earlier than the
date of this Agreement.
2. Legal opinions
(a) A legal opinion from Clifford Chance LLP, legal advisers to
the Arranger and the Agent in England, as to English law
substantially in the form distributed to the Original Lenders
prior to signing this Agreement satisfactory to the Lenders.
(b) An opinion with respect to the laws and regulations of The
Netherlands from Warendorf, substantially in the form
distributed to the Original Lenders prior to signing this
Agreement.
(c) An opinion with respect to the laws and regulations of Mexico
from Ritch, Heather & Mueller, S.C., substantially in the form
distributed to the Original Lenders prior to signing this
Agreement.
(d) An opinion from in-house counsel of the Borrower,
substantially in the form distributed to the Original Lenders
prior to signing the Agreement.
3. Other documents and evidence
(a) A copy of this Agreement, duly executed and delivered by each
Party.
(b) A copy of the Notes evidencing the Loans to be made on the
First Utilisation Date, executed and delivered by the Borrower
and each Guarantor, in favour of each Lender.
(c) True and current copies of:
(i) audited consolidated financial statements of each of
Cemex Parent and its Subsidiaries and Cemex Spain and
its Subsidiaries for the 2004 fiscal year;
(ii) audited unconsolidated financial statements of the
Borrower and each Guarantor other than Cemex Parent
for the 2004 fiscal year; and
(iii) unaudited unconsolidated interim financial statements
of the Borrower and each Guarantor other than Cemex
Parent for the quarter ended 31 March 2005.
(d) A notice of prepayment and cancellation relating to all loans
outstanding, and facilities available, under the Existing NSH
Agreement, specifying the First Utilisation Date as the date
on which such prepayment and cancellation is to take effect.
(e) Evidence that Cemex UK Limited has accepted its appointment as
the Obligors' process agent to receive service of process in
relation to any proceedings before the English Courts in
connection with any Finance Document.
Part II
Conditions Precedent required to be delivered by an Additional Guarantor
1. Obligors
(a) An Accession Letter, duly executed by the Additional Guarantor
and the Borrower.
(b) A copy of the constitutional documents of the Additional
Guarantor.
(c) A copy of a resolution of the board of directors of the
Additional Guarantor:
(i) approving the terms of, and the transactions
contemplated by, the Accession Letter and this
Agreement and resolving that it execute the Accession
Letter;
(ii) authorising a specified person or persons to execute
the Accession Letter on its behalf; and
(iii) authorising a specified person or persons, on its
behalf, to sign and/or despatch all documents and
notices (including, if relevant, any Utilisation
Request) to be signed and/or despatched by it under
or in connection with this Agreement.
(d) A specimen of the signature of each person authorised by the
resolution referred to in paragraph (c) above.
(e) Should the legal advisers of the Lenders consider it
advisable, a copy of a resolution signed by all the holders of
the issued shares of the Additional Guarantor, approving the
terms of, and the transactions contemplated by, the Finance
Documents to which the Additional Guarantor is a party.
(f) A certificate of the Additional Guarantor (signed by an
Authorised Signatory) confirming that guaranteeing the Total
Commitments would not cause any guaranteeing or similar limit
binding on it to be exceeded.
(g) A certificate of an Authorised Signatory of the Additional
Guarantor certifying that each copy document listed in this
Part II of Schedule 2 is correct, complete and in full force
and effect as at a date no earlier than the date of the
Accession Letter.
2. Legal opinions
(a) A legal opinion of the legal advisers to the Additional
Guarantor in form and substance reasonably satisfactory to the
legal advisers of the Lenders.
(b) A legal opinion of Clifford Chance, or other firm that can
opine for the Additional Guarantor if not Clifford Chance,
legal advisers to the Lenders.
3. Other documents and evidence
(a) Evidence that any process agent referred to in Clause 37.2
(Service of process) has accepted its appointment.
(b) A copy of any other Authorisation or other document, opinion
or assurance which the Agent considers (after having taken
appropriate legal advice) to be necessary or desirable (if it
has notified the Additional Guarantor and the Borrower
accordingly) in connection with the entry into and performance
of the transactions contemplated by any Finance Document or
for the validity and enforceability of any Finance Document.
(c) The Original Financial Statements of the Additional Guarantor.
SCHEDULE 3
REQUESTS
Part I
Utilisation Request
From: [Borrower]
To: [Agent]
Dated:
Dear Sirs
Cemex - $700,000,000 Term and Revolving Facilities Agreement
dated __________ 2005 (the "Agreement")
1. We refer to the Agreement. This is a Utilisation Request. Terms defined
in the Agreement have the same meaning in this Utilisation Request
unless given a different meaning in this Utilisation Request.
2. We wish to borrow a Loan on the following terms:
Proposed Utilisation Date: [ ] (or, if that is not a Business Day,
the next Business Day)
Facility to be utilised: [Facility A]/[Facility B]*
Currency of Loan: [ ]
Amount: [ ] or, if less, the Available Facility
Interest Period: [ ]
3. We confirm that, to the extent applicable, each condition specified in
Clause 4.2 (Further conditions precedent) is satisfied or waived on the
date of this Utilisation Request.
4. The proceeds of this Loan should be credited to [account].
5. This Utilisation Request is irrevocable.
6. Terms used in this Utilisation Request which are not defined in this
Utilisation Request but are defined in the Agreement shall have the
meaning given to those terms in the Agreement.
Yours faithfully
.......................................
authorised signatory for
[New Sunward Holding B.V.]
NOTES:
* delete as appropriate
Part II
Selection Notice
From: [Borrower]
To: [Agent]
Dated:
Dear Sirs
Cemex - $700,000,000 Term and Revolving Facilities Agreement
dated __________ 2005 (the "Agreement")
1. We refer to the Agreement. This is a Selection Notice. Terms defined in
the Agreement have the same meaning in this Selection Notice unless
given a different meaning in this Selection Notice.
2. We refer to the Facility A Loan with an Interest Period ending on [ ].
3. [We request that the above Facility A Loan be divided into [O] term
loans with the following Interest Periods:]
or
[We request that the next Interest Period for the Facility A Loan is
[ ].]
4. This Selection Notice is irrevocable.
5. Terms used in this Selection Notice which are not defined in this
Selection Notice but are defined in the Agreement shall have the
meaning given to those terms in the Agreement.
Yours faithfully
.....................................
authorised signatory for
[New Sunward Holding B.V.]
SCHEDULE 4
MANDATORY COST FORMULAE
1. The Mandatory Cost is an addition to the interest rate to compensate
Lenders for the cost of compliance with (a) the requirements of the
Bank of England and/or the Financial Services Authority (or, in either
case, any other authority which replaces all or any of its functions)
or (b) the requirements of the European Central Bank.
2. On the first day of each Interest Period (or as soon as possible
thereafter) the Agent shall calculate, as a percentage rate, a rate
(the "Additional Cost Rate") for each Lender, in accordance with the
paragraphs set out below. The Mandatory Cost will be calculated by the
Agent as a weighted average of the Lenders' Additional Cost Rates
(weighted in proportion to the percentage participation of each Lender
in the relevant Loan) and will be expressed as a percentage rate per
annum.
3. The Additional Cost Rate for any Lender lending from a Facility Office
in a Participating Member State will be the percentage notified by that
Lender to the Agent. This percentage will be certified by that Lender
in its notice to the Agent to be its reasonable determination of the
cost (expressed as a percentage of that Lender's participation in all
Loans made from that Facility Office) of complying with the minimum
reserve requirements of the European Central Bank in respect of loans
made from that Facility Office.
4. The Additional Cost Rate for any Lender lending from a Facility Office
in the United Kingdom will be calculated by the Agent as follows:
(a) in relation to a sterling Loan:
AB + C(B - D) + E x 0.01
------------------------ per cent. per annum.
100 - (A + C)
(b) in relation to a Loan in any currency other than sterling:
E x 0.01
-------- per cent. per annum.
300
Where:
A is the percentage of Eligible Liabilities (assuming these to
be in excess of any stated minimum) which that Lender is from
time to time required to maintain as an interest free cash
ratio deposit with the Bank of England to comply with cash
ratio requirements.
B is the percentage rate of interest (excluding the Margin and
the Mandatory Cost and, if the Loan is an Unpaid Sum, the
additional rate of interest specified in paragraph (a) of
Clause 9.3 (Default interest)) payable for the relevant
Interest Period on the Loan.
C is the percentage (if any) of Eligible Liabilities which that
Lender is required from time to time to maintain as interest
bearing Special Deposits with the Bank of England.
D is the percentage rate per annum payable by the Bank of
England to the Agent on interest bearing Special Deposits.
E is designed to compensate Lenders for amounts payable under
the Fees Rules and is calculated by the Agent as being the
average of the most recent rates of charge supplied by the
Reference Banks to the Agent pursuant to paragraph 6 below and
expressed in pounds per (pound)1,000,000.
5. For the purposes of this Schedule:
(a) "Eligible Liabilities" and "Special Deposits" have the
meanings given to them from time to time under or pursuant to
the Bank of England Act 1998 or (as may be appropriate) by the
Bank of England;
(b) "Fees Rules" means the rules on periodic fees contained in the
FSA Supervision Manual or such other law or regulation as may
be in force from time to time in respect of the payment of
fees for the acceptance of deposits;
(c) "Fee Tariffs" means the fee tariffs specified in the Fees
Rules under the activity group A.1 Deposit acceptors (ignoring
any minimum fee or zero rated fee required pursuant to the
Fees Rules but taking into account any applicable discount
rate); and
(d) "Tariff Base" has the meaning given to it in, and will be
calculated in accordance with, the Fees Rules.
6. In application of the above formulae, A, B, C and D will be included in
the formulae as percentages (i.e. 5 per cent. will be included in the
formula as 5 and not as 0.05). A negative result obtained by
subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal places.
7. If requested by the Agent, each Reference Bank shall, as soon as
practicable after publication by the Financial Services Authority,
supply to the Agent, the rate of charge payable by that Reference Bank
to the Financial Services Authority pursuant to the Fees Rules in
respect of the relevant financial year of the Financial Services
Authority (calculated for this purpose by that Reference Bank as being
the average of the Fee Tariffs applicable to that Reference Bank for
that financial year) and expressed in pounds per (pound)1,000,000 of
the Tariff Base of that Reference Bank.
8. Each Lender shall supply any information required by the Agent for the
purpose of calculating its Additional Cost Rate. In particular, but
without limitation, each Lender shall supply the following information
on or prior to the date on which it becomes a Lender:
(a) the jurisdiction of its Facility Office; and
(b) any other information that the Agent may reasonably require
for such purpose.
Each Lender shall promptly notify the Agent of any change to the
information provided by it pursuant to this paragraph.
9. The percentages of each Lender for the purpose of A and C above and the
rates of charge of each Reference Bank for the purpose of E above shall
be determined by the Agent based upon the information supplied to it
pursuant to paragraphs 7 and 8 above and on the assumption that, unless
a Lender notifies the Agent to the contrary, each Lender's obligations
in relation to cash ratio deposits and Special Deposits are the same as
those of a typical bank from its jurisdiction of incorporation with a
Facility Office in the same jurisdiction as its Facility Office.
10. The Agent shall have no liability to any person if such determination
results in an Additional Cost Rate which over or under compensates any
Lender and shall be entitled to assume that the information provided by
any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is
true and correct in all respects.
11. The Agent shall distribute the additional amounts received as a result
of the Mandatory Cost to the Lenders on the basis of the Additional
Cost Rate for each Lender based on the information provided by each
Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.
12. Any determination by the Agent pursuant to this Schedule in relation to
a formula, the Mandatory Cost, an Additional Cost Rate or any amount
payable to a Lender shall, in the absence of manifest error, be
conclusive and binding on all Parties.
13. The Agent may from time to time, after consultation with the Borrower
and the Lenders, determine and if so requested by any Lender, notify to
all Parties any amendments which are required by such Lender to be made
to this Schedule in order to comply with any change in law or
regulation or any requirements from time to time imposed by the Bank of
England, the Financial Services Authority or the European Central Bank
(or, in any case, any other authority which replaces all or any of its
functions) and any such determination shall, in the absence of manifest
error, be conclusive and binding on all Parties.
SCHEDULE 5
FORM OF TRANSFER CERTIFICATE
To: [Agent]
From: [The Existing Lender] (the "Existing Lender") and [The New Lender]
(the "New Lender")
Dated:
Cemex - $700,000,000 Term and Revolving Facilities Agreement
dated __________ 2005 (the "Agreement")
1. We refer to the Agreement. This is a Transfer Certificate. Terms
defined in the Agreement have the same meaning in this Transfer
Certificate unless given a different meaning in this Transfer
Certificate.
2. We refer to Clause 23.5 (Procedure for transfer):
(a) The Existing Lender and the New Lender agree to the Existing
Lender transferring to the New Lender by novation all or part
of the Existing Lender's Commitment, rights and obligations
referred to in the schedule to this certificate in accordance
with Clause 23.5 (Procedure for transfer).
(b) The proposed Transfer Date is [ ].
(c) The Facility Office and address, fax number and attention
details for notices of the New Lender for the purposes of
Clause 30.2 (Addresses) are set out in the schedule to this
certificate.
3. The New Lender expressly acknowledges the limitations on the Existing
Lender's obligations set out in paragraph (c) of Clause 23.4
(Limitation of responsibility of Existing Lenders).
4. This Transfer Certificate may be executed in any number of counterparts
and this has the same effect as if the signatures on the counterparts
were on a single copy of this Transfer Certificate.
5. We confirm that we have carried out and are satisfied with the results
of all compliance checks we consider necessary in relation to our
participation in the Facilities.
6. This Transfer Certificate is governed by English law.
THE SCHEDULE
Commitment/rights and obligations to be transferred
[insert relevant details]
[Facility Office address, email, fax number and attention details for notices
and account details for payments,]
[Existing Lender] [New Lender]
By: By:
This Transfer Certificate is accepted by the Agent and the Transfer Date is
confirmed as [o].
[Agent]
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
To: [Agent]
From: [Borrower]
Dated:
Dear Sirs
Cemex - $700,000,000 Term and Revolving Facilities Agreement
dated __________ 2005 (the "Agreement")
1. We refer to the Agreement. This is a Compliance Certificate. Terms
defined in the Agreement have the same meaning when used in this
Compliance Certificate unless given a different meaning in this
Compliance Certificate.
2. We confirm that:
(a) Pursuant to Clause 21.13 (Financial condition covenants) the
financial condition of the Group as of [ ] evidenced by the
consolidated financial statements for the financial year/first
half/second half of the financial year then ended comply with
the following conditions:
[___]
(b) As at the date of this Certificate the following Subsidiaries
of the Group fall within the definition of Material
Subsidiaries as set out in Clause 1.1 (Definitions):
3. We confirm that no Default is continuing.(1)
Signed: ........................................
Authorised Signatory of New Sunward Holding B.V.
- ---------------------------
(1) If a Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto.
SCHEDULE 7
FORM OF LMA CONFIDENTIALITY UNDERTAKING
[Letterhead of Existing Bank]
To:
============================================
| [insert name of Potential Lender]
============================================
Re: The Facility
============================================
Borrower:
Date:
Amount:
Agent:
============================================
Dear Sirs
We understand that you are considering participating in the Facility. In
consideration of us agreeing to make available to you certain information, by
your signature of a copy of this letter you agree as follows:
1. Confidentiality Undertaking
(a) You undertake to keep the Confidential Information
confidential and not to disclose it to anyone except as
provided for by paragraph 2 below and to ensure that the
Confidential Information is protected with security measures
and a degree of care that would apply to your own confidential
information;
(b) to keep confidential and not disclose to anyone the fact that
the Confidential Information has been made available or that
discussions or negotiations are taking place or have taken
place between us in connection with the Facility;
(c) to use the Confidential Information only for the Permitted
Purpose;
(d) to use all reasonable endeavours to ensure that any person to
whom you pass any Confidential Information (unless disclosed
under paragraph 2(b) below) acknowledges and complies with the
provisions of this letter as if that person were also a party
to it, and
(e) not to make enquiries of any member of the Group or any of
their officers, directors, employees or professional advisers
relating directly or indirectly to the Facility.
2. Permitted Disclosure
We agree that you may disclose Confidential Information:
(a) to members of the Participant Group and their officers,
directors, employees and professional advisers to the extent
necessary for the Permitted Purpose and to any auditors of
members of the Participant Group;
(b) (i) where requested or required by any court of competent
jurisdiction or any competent judicial, governmental,
supervisory or regulatory body, (ii) where required by the
rules of any stock exchange on which the shares or other
securities of any member of the Participant Group are listed
or (iii) where required by the laws or regulations of any
country with jurisdiction over the affairs of any member of
the Participant Group;
(c) with the prior written consent of us and the Borrower.
3. Notification of Required or Unauthorised Disclosure
You agree (to the extent permitted by law) to inform us of the full
circumstances of any disclosure under paragraph 2(b) or upon becoming
aware that Confidential Information has been disclosed in breach of
this letter.
4. Return of Copies
If we so request in writing, you shall return all Confidential
Information supplied to you by us and destroy or permanently erase all
copies of Confidential Information made by you and use all reasonable
endeavours to ensure that anyone to whom you have supplied any
Confidential Information destroys or permanently erases such
Confidential Information and any copies made by them, in each case save
to the extent that you or the recipients are required to retain any
such Confidential Information by any applicable law, rule or regulation
or by any competent judicial, governmental, supervisory or regulatory
body or in accordance with internal policy, or where the Confidential
Information has been disclosed under paragraph 2(b)(3) above.
5. Continuing Obligations
The obligations in this letter are continuing and, in particular, shall
survive the termination of any discussions or negotiations between you
and us. Notwithstanding the previous sentence, the obligations in this
letter shall cease (a) if you become a party to or otherwise acquire
(by assignment or sub-participation) an interest, direct or indirect,
in the Facility or (b) twelve months after you have returned all
Confidential Information supplied to you by us and destroyed or
permanently erased all copies of Confidential Information made by you
(other than any such Confidential Information or copies which have been
disclosed under paragraph 2 above (other than sub-paragraph 2(a)) or
which, pursuant to paragraph 4 above, are not required to be returned
or destroyed).
6. No Representation; Consequences of Breach, etc.
You acknowledge and agree that:
(a) neither we, [nor our principal] nor any member of the Group
nor any of our or their respective officers, employees or
advisers (each a "Relevant Person") (i) make any
representation or warranty, express or implied, as to, or
assume any responsibility for, the accuracy, reliability or
completeness of any of the Confidential Information or any
other information supplied by us or any member of the Group or
the assumptions on which it is based or (ii) shall be under
any obligation to update or correct any inaccuracy in the
Confidential Information or any other information supplied by
us or any member of the Group or be otherwise liable to you or
any other person in respect to the Confidential Information or
any such information; and
(b) we [or our principal] or members of the Group may be
irreparably harmed by the breach of the terms of this letter
and damages may not be an adequate remedy; each Relevant
Person may be granted an injunction or specific performance
for any threatened or actual breach of the provisions of this
letter by you.
7. No Waiver; Amendments, etc.
This letter sets out the full extent of your obligations of
confidentiality owed to us in relation to the information the subject
of this letter. No failure or delay in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise of any right, power or privilege preclude
any further exercise thereof or the exercise of any other right, power
or privileges hereunder. The terms of this letter and your obligations
hereunder may only be amended or modified by written agreement between
us.
8. Inside Information
You acknowledge that some or all of the Confidential Information is or
may be price-sensitive information and that the use of such information
may be regulated or prohibited by applicable legislation relating to
insider dealing and you undertake not to use any Confidential
Information for any unlawful purpose.
9. No Front Running
(a) You agree that until primary syndication of the Facility has
been completed and allocations released, you will not, and
will procure that no other member of the Participation Group
will:
(i) undertake any Front Running;
(ii) enter into (or agree to enter into) any agreement
with any bank, financial institution or other third
party which to your knowledge may be approached to
become a syndicate member, under which that bank,
financial institution or other third party shares any
risk or participates in any exposure of any Lender
under the Facility; or
(iii) offer to make any payment or other compensation of
any kind to any bank, financial institution or third
party for its participation (direct or indirect) in
the Facility.
(b) Neither you nor any other member of the Participant Group has
engaged in any Front Running:
(i) if you or any other member of the Participant Group
engages in any Front Running before the close of
primary syndication we may suffer loss or damage and
your position in future financings with us and the
Borrower may be prejudiced; and
(ii) if you or any other member of the Participant Group
engages in any Front Running before the close of
primary syndication we retain the right not to
allocate to you a commitment under the Facility.
For the purpose "Front Running" means the process of:
(c) communicating with any bank, financial institution or third
party which, to its knowledge, may be approached to become a
syndicate member with a view of encouraging, or with the
result that such bank or financial institution is encouraged,
to await the secondary market in respect of participation in
the Facility; and/or
(d) actually making a price (generally or to a specific bank,
financial institution or third party) in respect of a
participation in the Facility.
10. Nature of Undertakings
The undertakings given by you under this letter are given to us and
(without implying any fiduciary obligations on our part) are also given
for the benefit of [our principal,](4) the Borrower and each other
member of the Group.
11. Third Party Rights
(a) Subject to paragraph 6 and paragraph 9 the terms of this
letter may be enforced and relied upon only by you and us and
the operation of the Contracts (Rights of Third Parties) Act
1999 (the "Third Parties Act") is excluded.
(b) Notwithstanding any provisions of this letter, any Relevant
Person or any member of the Group may enjoy the benefit of the
terms of paragraphs 6 and 9 subject to and in accordance with
this paragraph 10 and the provisions of the Third Parties Act.
(c) The parties to this letter do not require the consent of the
Relevant Persons to rescind or vary this letter at any time.
12. Governing Law and Jurisdiction
(a) This letter (including the agreement constituted by your
acknowledgement of its terms) is governed by English law.
(b) The parties submit to the non-exclusive jurisdiction of the
English courts.
13. Definitions
In this letter (including the acknowledgement set out below) terms
defined in the Agreement shall, unless the context otherwise requires,
have the same meaning and:
"Confidential Information" means any information relating to the
Borrower, the Group, the Agreement and the Facility including, without
limitation, the information memorandum, provided to you by us or any of
our affiliates or advisers, in whatever form, and includes information
given orally and any document, electronic file or any other way of
representing or recording information which contains or is derived or
copied from such information but excludes information that (a) is or
becomes public knowledge other than as a direct or indirect result of
any breach of this letter or (b) is known by you before the date the
information is disclosed to you by us or any of our affiliates or
advisers or is lawfully obtained by you thereafter, other than from a
source which is connected with the Group and which, in either case, as
far as you are aware, has not been obtained in violation of, and is not
otherwise subject to, any obligation of confidentiality;
"Group" means the Borrower and each of its holding companies and
subsidiaries and each subsidiary of each of its holding companies (as
each such term is defined in the Companies Act 1985);
"Participant Group" means you, each of your holding companies and
subsidiaries and each subsidiary of each of your holding companies (as
each such term is defined in the Companies Act 1985; and
"Permitted Purpose" means considering and evaluating whether to enter
into the Facility.
Please acknowledge your agreement to the above by signing and returning the
enclosed copy.
Yours faithfully
....................................
For and on behalf of
[Existing Lender]
To: [Existing Lender]
The Borrower and each other member of the Group
We acknowledge and agree to the above:
....................................
For and on behalf of
[Potential New Lender]
SCHEDULE 8
TIMETABLE
Loans in euro, Loans in other
dollars, yen or currencies
sterling
Agent notifies the Borrower if a currency is approved as an - U-4
Optional Currency in accordance with Clause 4.3 (Conditions
relating to Optional Currencies)
Delivery of a duly completed Utilisation Request (Clause 5.1 U-3 U-3
(Delivery of a Utilisation Request)) or a Selection Notice
(Clause 10.1 (Selection of Interest Periods)) 11.00am 11.00am
Agent determines (in relation to a Utilisation) the Base Currency U-3 U-3
Amount of the Loan, if required under paragraph (c) of Clause 5.4
(Lenders' participation) and notifies the Lenders of the Loan in 3.00pm 3.00pm
accordance with Clause 5.4 (Lenders' participation)
Agent receives a notification from a Lender under Clause 6.2 U-2 U-2
(Unavailability of a currency)
9.30am 9.30am
Agent gives notice in accordance with Clause 6.2 (Unavailability U-2 U-2
of a currency)
10.30am 10.30am
LIBOR or EURIBOR is fixed Quotation Day as of Quotation Day as of
11:00am New York 11:00am New York
time in respect of time in respect of
LIBOR and as of LIBOR
11.00am New York
time in respect of
EURIBOR
"U" = date of utilisation
"U-X" = X Business Days prior to date of utilisation
SCHEDULE 9
FORM OF ACCESSION LETTER
To: [Agent ]
From: [Borrower]
Dated:
Dear Sirs
Cemex - $700,000,000 Term and Revolving Facilities Agreement
dated __________ 2005 (the "Agreement")
1. [Additional Guarantor] agrees to become an Additional Guarantor and to
be bound by the terms of the Facility Agreement as an Additional
Guarantor pursuant to Clause 24 (Changes to the Obligors) of the
Facility Agreement. [Additional Guarantor] is a company duly
incorporated under the laws and regulations of [name of relevant
jurisdiction].
2. [Additional Guarantor's] administrative details are as follows:
Address:
Fax No:
Attention:
3. This Accession Letter is governed by English law and is entered into by
deed.
Signed:............................ Signed:............................
[Authorised Signatory of Additional [Authorised Signatory of New
Guarantor] Sunward Holding BV]
[____]
SCHEDULE 10
PERMITTED LIENS
CEMEX, S.A. de C.V.
LIEN SCHEDULE
AS OF 06/20/2005
(Figures in millions of US Dollars)
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Company Lender Lien Concept Balance
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
CEMEX, Inc. GE Capital (FKIT 279,280) Equipment related with the credit $0.748
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Kosmos Cement Company First Corp (FKIT 101649) Equipment related with the credit $0.014
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
CEMEX, Inc. Hampton Land related with the credit $0.230
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Mineral Resource Technologies, Inc. Met-South, Inc. Ash storage facility $0.158
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
TOTAL $1.149
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
AS OF 03/31/2005
(Figures in millions of US Dollars)
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Company Lender Lien Concept Balance
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
CEMEX, Inc. GE Capital (FKIT 279,280) Equipment related with the credit $0.821
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Kosmos Cement Company First Corp (FKIT 101649) Equipment related with the credit $0.019
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
CEMEX, Inc. Hampton Land related with the credit $0.236
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Mineral Resource Technologies, Inc. Met-South, Inc. Ash storage facility $0.170
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex, S.A. Deutsche Bank Collateral $12.000
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cementownia Rudniki S.A. SOCIETE GENERALE Plant Equipment $14.800
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
BETON PRET DE L'EST SOCIETE GENERALE Equipment related with the credit $0.154
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
A Beton Viacolor Terko Rt. Raiffeisen Bank Mortgage $1.750
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Danubiusbeton Dunantul Kft. Raiffeisen Bank Mortgage $1.500
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
4K Beton (Cemex) A/S, Denmark Nordea Leasing; Denmark Leased equipment $1.421
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex, Latvia Disko Leasing GMBH Truck finance lease $0.226
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit $0.510
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit $0.445
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit $0.320
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Betonring Sud Raiffeisen Bank Equipment related with the credit $0.582
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Transportbeton Hutten GmbH & Co. KG Dresdner Bank AG Land related with the credit $0.366
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
X. Buchenrieder GmbH & Co.
Transportbeton KG Raiffeisenbank Land related with the credit $1.200
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7724) Kreissparkasse Schwarzenbek Land related with the credit $0.313
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7725) Kreissparkasse Schwarzenbek Land related with the credit $0.117
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7725) Landesbank Kiel Land related with the credit $0.117
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7726) Kreissparkasse Schwarzenbek Land related with the credit $0.313
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7726) Landesbank Kiel Land related with the credit $0.313
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG (7727) Kreissparkasse Schwarzenbek Land related with the credit $0.210
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Quarzsandwerk Wellmersdorf GmbH & Co. KG Raiffeisenbank Land related with the credit $0.300
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Wunder Kies GmbH & Co. KG LGS Sparkassen Leasing Finance Lease for aggregates washing $0.567
unit
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Rudersdorfer Zement GmbH Rudersdorfer Logistik GmbH Finance Lease for mixing facility $0.257
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Betonforderung Nordwest Hanseatische Leasing Finance Lease for concrete pump $0.267
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex Deutschland AG KGAL Asset Rental Equipment related with the credit $14.615
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
ROMBUS LEASING/RMC (UK) ING HP equipment finance $1.727
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex Co., KG ING Equipment related with the credit $21.807
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex Co., KG ING Equipment related with the credit $62.819
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
Cemex Co., KG Lloyds TSB Equipment related with the credit $6.931
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
TOTAL $147.193
- ---------------------------------------- ------------------------------ ------------------------------------ -------------------
SCHEDULE 11
LITIGATION
A description of material regulatory and legal matters affecting Cemex
Parent or any of its Subsidiaries is provided below.
Tariffs
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the Commerce
Department and the International Trade Commission, or ITC, are required to
conduct "sunset reviews" of outstanding anti-dumping and countervailing duty
orders and suspension agreements every five years. At the conclusion of these
reviews, the Commerce Department is required to terminate the order or
suspension agreement unless the agencies have found that termination is likely
to lead to continuation or recurrence of dumping, or a subsidy in the case of
countervailing duty orders, and material injury. Under special transition rules,
the first sunset reviews commenced in August 1999 for cases involving gray
Portland cement and clinker from Mexico and Venezuela (described below), which
had orders and agreements issued before 1995, and were concluded by the Commerce
Department in July 2000 and by the ITC in October 2000.
In July 2000, the Commerce Department determined not to revoke the
anti-dumping order on imports from Mexico. On October 5, 2000, the ITC found
likelihood of injury to the U.S. industry and determined not to revoke this
anti-dumping order. Thus, the order remains in place. On September 19, 2001,
Cemex Parent filed a petition for a "changed circumstances" review. The ITC
decided in December 2001 not to initiate such a review. Cemex Parent has
appealed the ITC's decision in the "sunset review" and the "changed
circumstances" review to NAFTA. In January 2005, a NAFTA Panel was formed to
review the ITC's sunset review determination. On April 7, 2005, the NAFTA Panel
heard oral arguments, but had not issued its determination as of the date of
this annual report.
U.S. Anti-Dumping Rulings--Mexico
Cemex Parent's exports of Mexican gray cement from Mexico to the United
States are subject to an anti-dumping order that was imposed by the Commerce
Department on August 30, 1990. Pursuant to this order, firms that import gray
Portland cement from Cemex Parent's Mexican operations in the United States must
make cash deposits with the U.S. Customs Service to guarantee the eventual
payment of anti-dumping duties.
Mexican importers' deposits are being liquidated in stages, as appeals
are exhausted for each annual review period. When the final anti-dumping rate
for any review period causes the amount due to exceed the amount that was
deposited, the Mexican importers are required to pay the difference with
interest. When the final anti-dumping rate for any review period is lower than
the amount that was deposited, the U.S. Customs Service refunds the difference,
with interest, to the Mexican importers.
As of December 31, 2004, CEMEX Corp., as the parent company of Cemex
Parent's U.S. subsidiaries that import Mexican cement into the United States,
had accrued liabilities of U.S.$103.6 million, including accrued interest, for
the difference between the amount of anti-dumping duties paid on imports and the
latest findings by the Commerce Department in its administrative reviews.
The Commerce Department has published its final dumping determinations
for the first, second, third, fourth, fifth and seventh review periods. The
Commerce Department's final results of its final determinations for the sixth,
eighth, ninth, tenth, eleventh, twelfth and thirteenth review periods have also
been published, but have been suspended pending review by NAFTA panels.
On October 20, 2003, the NAFTA Extraordinary Challenge Committee upheld
the NAFTA Panel reviewing the final results of the fifth administrative review,
covering the period August 1, 1994 -- July 1, 1995. The NAFTA Panel upheld the
Commerce Department's remand results which lowered the antidumping duty margin
for imports during the fifth review period to 44.9% ad valorem. The Customs
Service has completed liquidating entries of cement from Mexico made during the
fifth review period.
On November 25, 2003, the NAFTA Panel reviewing the final results of
the seventh review period upheld the Commerce Department's remand results of the
seventh review period. The remand results lowered the antidumping margin for
imports made during the seventh review period to 37.3% ad valorem. The Customs
Service has begun liquidating all entries of cement from Mexico made during the
seventh review period.
On September 16, 2003, the Commerce Department issued its final
determination covering the twelfth review period, commencing on August 1, 2001
and ending on July 31, 2002. The Commerce Department determined that the
antidumping margin was 80.75% ad valorem. The final results for the twelfth
review period established a cash deposit rate for imports of gray Portland
cement and cement clinker from Mexico made on or after September 16, 2003. The
cash deposit rate was established at $52.41 per ton, which remained in effect
until the final results of the thirteenth review period were published.
The latest final determination by the Commerce Department covering the
thirteenth review period, commencing on August 1, 2002 and ending on July 31,
2003, was issued on December 29, 2004. The Commerce Department determined that
the antidumping margin was 54.97% ad valorem. The final results for the
thirteenth review period set the cash deposit rate for imports of gray Portland
cement and cement clinker from Mexico made on or after December 29, 2004. The
cash deposit rate was set at $32.85 per ton, which will remain in effect until
the final results of the fourteenth review period are published.
The status of each period still under review or appeal is as follows:
Period Cash Deposits Status
8/1/95-7/31/96 61.85% 37.49% determined by the Commerce
(effective 5/5/1997) Department upon review. Liquidation
suspended pending NAFTA panel review.
8/1/97-7/31/98 73.69%, 35.88% and 37.49% 45.98% determined by the Commerce
(effective 5/4/1998) Department upon review. Liquidation
suspended pending NAFTA panel review.
8/1/98-7/31/99 37.49%, 49.58% 38.65% determined by the Commerce
(effective 3/17/1999) Department upon review. Liquidation
suspended pending NAFTA panel review.
8/1/99-7/31/00 49.58%, 45.98% 50.98% determined by the Commerce
(effective 3/16/2000) Department upon review. Liquidation
suspended pending appeal to NAFTA
panel review.
8/1/00-7/31/01 49.58%, 38.65% 73.74% determined by the Commerce
(effective 5/14/2001) Department upon review. Liquidation
suspended pending appeal to NAFTA
panel review.
8/1/01-7/31/02 38.65%, 50.98% 80.75% determined by the Commerce
(effective 3/19/2002) Department upon review. Liquidation
suspended pending appeal to NAFTA
panel review.
8/1/02 - 7/31/03 50.98%, 73.74% 54.97% determined by the Commerce
(effective 1/14/2003) Department upon review. Liquidation
suspended pending appeal to NAFTA
Panel.
8/1/03 - 7/31/04 73.74%, U.S.$52.41 per ton Subject to review by the Commerce
(effective 10/15/2003) Department.
8/01/04 - to date U.S.$52.41 per ton, U.S.$32.85 Subject to review by the Commerce
per ton Department.
(effective 12/29/2004)
U.S. Anti-Dumping Rulings --Venezuela
On May 21, 1991, U.S. producers of gray cement and clinker filed
petitions with the Department of Commerce and the ITC claiming that imports of
gray cement and clinker from Venezuela were subsidized by the Venezuelan
government and were being dumped into the U.S. market. The producers asked the
U.S. government to impose anti-dumping and countervailing duties on these
imports. The Commerce Department initially found that CEMEX Venezuela had a
dumping margin of 49.2%. Rather than proceeding with the final Commerce
Department and ITC determinations, CEMEX Venezuela and the Commerce Department
entered into an Anti-Dumping Suspension Agreement on February 11, 1992. Under
the Anti-Dumping Suspension Agreement, CEMEX Venezuela agreed not to sell gray
cement or clinker in the United States at a price less than the "foreign market
value." On October 5, 2000, the ITC determined that terminating the Anti-Dumping
Suspension Agreement involving imports from Venezuela would not likely lead to a
continuation or recurrence of injury to the U.S. market, and voted to terminate
such agreement. Consequently, on November 8, 2000, the Commerce Department
issued a notice terminating the Anti-Dumping Suspension Agreement covering
imports of cement from Venezuela. On July 28, 2003, the United States Court of
International Trade, or CIT, upheld the Commerce Department's decision to
terminate the Suspension Agreement. The U.S. cement industry appealed the
decision of the Court of International Trade to the Court of Appeals for the
Federal Circuit. On December 14, 2004, the Court of Appeals for the Federal
Circuit upheld the CIT's decision affirming the Commerce Department's
termination of the Suspension Agreement. Thus, all litigation involving the
Venezuelan Suspension Agreement has been completed and imports of cement from
Venezuela are free of all antidumping restrictions.
Anti-Dumping in Taiwan
Five Taiwanese cement producers -- Asia Cement Corporation, Taiwan
Cement Corporation, Lucky Cement Corporation, Hsing Ta Cement Corporation and
China Rebar -- filed before the Tariff Commission under the Ministry of Finance
(MOF) of Taiwan an anti-dumping case involving imported gray Portland cement and
clinker from the Philippines and Korea.
In July 2001, the MOF informed the petitioners and the respondent
producers in exporting countries that a formal investigation had been initiated.
Among the respondents in the petition are APO, Rizal and Solid, indirect
subsidiaries of CEMEX.
In June 2002, the International Trade Commission under the Ministry of
Economic Affairs (ITC-MOEA) notified respondent producers that its final injury
investigation concluded that the imports from South Korea and the Philippines
have caused material injury to the domestic industry in Taiwan.
In July 2002, the MOF notified the respondent producers that a dumping
duty would be imposed on Portland cement and clinker imports from the
Philippines and South Korea commencing from July 19, 2002. The duty rate imposed
on imports from APO, Rizal and Solid was 42%.
In September 2002, APO, Rizal and Solid filed before the Taipei High
Administrative Court an appeal in opposition to the anti-dumping duty imposed by
the MOF. In August 2004, Cemex Parent received a copy of the decision of the
Taipei Administrative High Court, which was adverse to its appeal. The decision
has since become final.
Tax Matters
As of December 31, 2004, Cemex Parent and some of its Mexican
subsidiaries have been notified of several tax assessments determined by the
Mexican tax office with respect to the tax years from 1992 through 1996 in a
total amount of Ps3,638.6 million. The tax assessments are based primarily on:
(i) recalculations of the inflationary tax deduction, since the tax authorities
claim that "Advance Payments to Suppliers" and "Guaranty Deposits" are not by
their nature credits, (ii) disallowed restatement of tax loss carryforwards in
the same period in which they occurred, (iii) disallowed determination of tax
loss carryforwards, and (iv) disallowed amounts of business asset tax, commonly
referred to as BAT, creditable against the controlling entity's income tax
liability on the grounds that the creditable amount should be in proportion to
the equity interest that the controlling entity has in its relevant controlled
entities. Cemex Parent has filed an appeal for each of these tax claims before
the Mexican federal tax court, and the appeals are pending resolution.
As of December 31, 2004, the Philippine Bureau of Internal Revenue, or
BIR, assessed APO and Solid, Cemex Parent's operating subsidiaries in
Philippines, for deficiencies in the amount of income tax paid in prior tax
years amounting to a total of approximately PhP3,069.1 million (approximately
U.S.$54.8 million as of December 31, 2004, based on an exchange rate of
PhP56.702 to U.S.$1.00, which was the Philippine Peso/Dollar exchange rate on
December 31, 2004 as published by the Bangko Sentral ng Pilipinas, the central
bank of the Republic of the Philippines). The tax assessments result primarily
from: (i) the disallowance of APO's income tax holiday related income from 1998
to 2001; and (ii) deficiencies in national taxes paid by APO for the 1999 tax
year and by Solid for the 2000 tax year. In the first case, Cemex Parent has
contested the BIR's assessment with the Court of Tax Appeal, or CTA. In the
second case, both APO and Solid continue to submit relevant evidence to the BIR
to contest these assessments and intend to contest these assessments with the
CTA in case the BIR issues a final collection letter. In addition, Solid's 1998
tax year and APO's 1997 and 1998 tax years are under preliminary review by the
BIR for deficiency in the payment of taxes. As of the date of this annual
report, the finalization of these assessments was held in abeyance by the BIR as
APO and Solid continue to present evidence to dispute its findings. Cemex Parent
believes that these assessments will not have a material adverse effect on it.
However, an adverse resolution of these assessments could have a material
adverse effect on the results of its operations in the Philippines.
Other Legal Proceedings
In May 1999, several companies filed a civil liability suit in the
civil court of the circuit of Ibague, Colombia, against two of Cemex Parent's
Colombian subsidiaries, alleging that these subsidiaries were responsible for
deterioration of the rice production capacity of the land of the plaintiffs
caused by pollution from Cemex Parent's cement plants located in Ibague,
Colombia. On January 13, 2004, CEMEX Colombia was notified of the judgment the
court entered against CEMEX Colombia which awarded damages to the plaintiffs in
the amount of CoP21,114 million (U.S.$9.09 million as of February 28, 2005,
based on an exchange rate of CoP2,323.77 to U.S.$1.00, which was the Colombian
Peso/Dollar exchange rate on February 28, 2005 as published by the Banco de la
Republica de Colombia, the central bank of Colombia). On January 15, 2004 CEMEX
Colombia, appealed the judgment. The appeal was admitted and the case was sent
to the Tribunal Superior de Ibague, where CEMEX Colombia filed, on March 23,
2004, a statement of the arguments supporting its appeal. The case is currently
under review by the appellate court. Cemex Parent expects this proceeding to
continue for several years before final resolution.
In March 2001, 42 transporters filed a civil liability suit in the
civil court of Ibague, Colombia, against three of Cemex Parent's Colombian
subsidiaries. The plaintiffs content that these subsidiaries are responsible for
alleged damages caused by breach of raw material transportation contracts. The
plaintiffs asked for relief in the amount of CoP127,242 million (U.S.$54.76
million as of February 28, 2005). This proceeding has reached the evidentiary
stage. Typically, proceedings of this nature continue for several years before
final resolution.
As of December 31, 2004, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
U.S.$28.3 million. The environmental matters relate to (i) the disposal of
various materials in accordance with past industry practice, which might be
categorized as hazardous substances or wastes, and (ii) the cleanup of sites
used or operated by CEMEX, Inc., including discontinued operations, in regard to
the disposal of hazardous substances or wastes, either individually or jointly
with other parties. Most of the proceedings are in the preliminary stage, and a
final resolution might take several years. For purposes of recording the
provision, CEMEX, Inc. considers that it is probable that a liability has been
incurred and the amount of the liability is reasonably estimable, whether or not
claims have been asserted, and without giving effect to any possible future
recoveries. Based on information developed to date, CEMEX, Inc. does not believe
it will be required to spend significant sums on these matters in excess of the
amounts previously recorded. Until all environmental studies, investigations,
remediation work, and negotiations with or litigation against potential sources
of recovery have been completed, the ultimate cost that might be incurred to
resolve these environmental issues cannot be assured.
In March 2003, a lawsuit was filed in the Indonesian province of West
Sumatra in the Padang District Court against (i) Gresik, an Indonesian cement
producer in which Cemex Parent indirectly owns a 25.5% interest through CAH and
the Republic of Indonesia owns a 51% interest, (ii) Semen Padang, a 99.9%-owned
subsidiary of Gresik that owns and operates Gresik's Padang cement plant, and
(iii) several Indonesian government agencies. The lawsuit, which was filed by a
foundation purporting to act in the interest of the people of West Sumatra,
challenged the validity of the sale of Semen Padang by the Indonesian government
to Gresik in 1995 on the grounds that the Indonesian government did not obtain
the necessary approvals for such sale. On May 9, 2003, the Padang District Court
issued an interim decision suspending Gresik's rights as a shareholder in Semen
Padang on the grounds that ownership of Semen Padang was an issue in dispute. On
March 31, 2004, the Padang District Court announced its final decision in favor
of the foundation. On April 12, 2004, Gresik filed an appeal of this decision
with the Padang District Court, which will in turn forward the appeal to the
High Court of the West Sumatra province.
In addition to the case outlined in the preceding paragraph, there are
two other formal legal proceedings relating to the change of management at PT
Semen Padang in May 2003. In one case, filed by the Employees' Cooperative of PT
Semen Padang, the District Court of Padang ruled that the replacement of
management at PT Semen Padang was legally valid. An appeal of that decision by
the former management is currently pending before the High Court for West
Sumatra. In the other proceeding, certain members of the former management of PT
Semen Padang have filed a request for consideration with the Supreme Court in
regard to its decision in March 2003 to permit the general meeting of
shareholders of PT Semen Padang which led to the replacement of the former
management. This request is still pending.
After the failure of several attempts to reach a negotiated or mediated
solution to these problems involving Gresik, on December 10, 2003, CAH filed a
request for arbitration against the Republic of Indonesia and the Indonesian
government before the International Centre for Settlement of Investment
Disputes, or ICSID, based in Washington D.C. CAH is seeking, among other things,
rescission of the purchase agreement entered into with the Republic of Indonesia
in 1998, plus repayment of all costs and expenses, and compensatory damages.
ICSID has accepted and registered CAH's request for arbitration and issued a
formal notice of registration on January 27, 2004. On May 10, 2004, an Arbitral
Tribunal was established to hear the dispute. The Indonesian government has
objected to the Tribunal's jurisdiction over the claims asserted in CAH's
request for arbitration, and a hearing to resolve these jurisdictional
objections is expected to take place during 2005. Cemex Parent cannot predict
what effect, if any, this action will have on its investment in Gresik, how the
Tribunal will rule on the Indonesian government's jurisdictional objections or
the merits of the dispute, or the time-frame in which the Tribunal will rule.
During 2004, four lawsuits filed in protection of the public interest,
which include a subsidiary of CEMEX Colombia as a codefendant, were filed; the
first was filed on April 14 and the last was filed on December 16. The
plaintiffs argue that the use of a base material sold by the ready-mix industry
resulted in premature distress of the roads built for the mass public
transportation system of Bogota. The lawsuits allege that the base material
supplied by CEMEX Colombia and the other suppliers failed to meet technical
standards offered by the producers (quality deficiencies) and/or that they
provided insufficient or inaccurate information in connection with the product.
The four lawsuits seek the repair of the road in a manner which guarantees its
service during the 20-year period for which it was originally designed. However,
the lawsuits do not estimate the alleged damages, in this case, cost of repairs.
CEMEX Colombia has vigorously defended itself and will continue to do so. One of
the lawsuits was dismissed based on arguments presented to the court by CEMEX
Colombia; each of the others is in the initial stage of proceedings. CEMEX
Colombia has timely contested each of the lawsuits of which have been notified.
At this early stage it is not possible to estimate the potential damages or the
portion thereof which could be borne by CEMEX Colombia. Typically, proceedings
of this nature continue for several years before final resolution.
An administrative case is pending with the Philippine Department of
Trade and Industry ("DTI") against Solid Cement Corporation ("Solid") for
alleged violation of consumer product and quality safety standards. In August
12, 2004, and prior to the trial of the main case, the Philippine Department of
Trade and Industry ("DTI") issued a Preliminary Order (hereinafter referred to
as the "CDO") enjoining Solid from selling, distributing, delivering and
disposing of Island Cement or any brand manufactured by the Solid Cement plant
in Antipolo, Rizal, in bulk and in bags, to customers, dealers, and
distributors, including but not limited to, batching plants and hardware
outlets/stores. It must be emphasized that said CDO is preliminary in nature and
was issued by the DTI without a finding of any violation on the part of Solid.
Solid has contested the propriety of the issuance of the CDO. Subsequently, the
DTI ordered the conduct of a factory/product audit of Solid's plant in Antipolo,
Rizal. Several samples of Island Cement were taken by the DTI Audit Group and
were sent to a third party laboratory for testing. Soon after the complete
results of the tests came out which confirmed the fact that Island Cement indeed
complies with the standards set by the DTI, the DTI lifted the CDO. The main
case is still pending trial with the Office of Legal Affairs of the DTI, with
the prosecution presenting its evidence-in-chief. Notably, despite the
allegations hurled against Solid regarding the quality of its Island Cement, no
judicial action has yet been filed against Solid to date.
In the ordinary course of their business, Cemex Parent and its
Subsidiaries are party to various legal proceedings. Other than as disclosed
herein, Cemex Parent and its Subsidiaries are not currently involved in any
litigation or arbitration proceedings, including any such proceedings which are
pending, which they believe will have, or have had, a material adverse effect on
them, nor, so far as they are aware, are any proceedings of that kind
threatened.
SCHEDULE 12
MATERIAL SUBSIDIARIES
NEW SUNWARD HOLDING B.V.
MATERIAL SUBSIDIARIES
As of March 31, 2005
Cemex Espana, S.A.
Cemex Caracas Investments B.V.
Cemex Caracas II Investments B.V.
Cemex Venezuela, S.A.C.A.
Cemex American Holdings B.V.
Cemex Holdings Inc.
Cemex Corp.
Cemex, Inc.
Cemex Cement, Inc.
Sunbelt Cement Holdings Inc.
Cemex Concrete Holdings LLC
Cemex Construction Materials, L.P.
Sunbelt Investments, Inc.
SCHEDULE 13
PROMISSORY NOTES
Part I
FORM OF FACILITY A NOTE
PROMISSORY NOTE
[US$/(pound)/EUR/JPY]
For value received, the undersigned, NEW SUNWARD HOLDING B.V. (the "Borrower"),
by this Promissory Note unconditionally promises to pay to the order of
________________, the principal sum of [US$]/[euro]/[insert currency]*
__________________ (__________________________, [currency of the United States
of America,]/[currency of a member state of the European Union adopted in
accordance with the legislation relating to the Economic and Monetary
Union]/[other - please describe]* ___/100) on _____________ _____, 20__, (the
"Termination Date"), provided that if such day is not a Business Day, the
Termination Date shall be the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case the
Termination Date shall be the immediately preceding Business Day.
The Borrower further promises to pay interest on the principal amount
outstanding hereunder for each day during each Interest Period (as hereinafter
defined) at a rate per annum equal to the Screen Rate (as hereinafter defined)
for such Interest Period plus [o] [o per cent.)]. Interest shall be payable on
the Termination Date.
The Borrower also promises to pay, to the fullest extent permitted by applicable
law, default interest on any amount payable hereunder that is not paid when due,
payable on demand, at a rate per annum equal to the Screen Rate then in effect
plus [o]% (o per cent.) plus o% (o per cent.).
All computations of interest hereunder shall be made on the basis of a year of
360 days for the actual number of days elapsed in the period for which any such
interest is payable (including the first day but excluding the last day).
All payments to be made on or in respect of this Promissory Note shall be made
not later than 10:00 a.m., London time, to the account number __________, ABA
number _____________, Ref.:_______________ in __________________, maintained by
the Agent (as hereinafter defined), in [Dollars]/[euro]/[insert currency]* and
in immediately available funds.
- ---------------------------
* Please delete as appropriate
All payments hereunder shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority (as
hereinafter defined) ("Taxes"). If any Taxes are required to be deducted or
withheld from any amounts payable hereunder, the amounts so payable to the
holder hereof shall be increased to the extent necessary so that the holder
hereof receives all the amount it would have received had no such deduction or
withholding been made.
The undersigned agree to reimburse upon demand, in like manner and funds, all
losses, costs and reasonable expenses of the holder hereof, if any, incurred in
connection with the enforcement of this Promissory Note (including, without
limitation, all reasonable legal costs and expenses).
For purposes of this Note, the following terms shall have the following
meanings:
"Agent" means Citibank, N.A.
"Business Day" means a day (other than a Saturday or Sunday) on which banks are
open for general business in Amsterdam and New York, and:
(a) (in relation to any date for payment or lending or purchase of, or the
determination of an interest rate or rate of exchange in relation to, a
currency other than euro) London and the principal financial centre of
the country of that currency; or
(b) (in relation to any date for payment or lending or purchase of, or the
determination of an interest rate or rate of exchange in relation to,
euro) any TARGET Day.
"Governmental Authority" means any branch of power or government or any state,
department or other political subdivision thereof, or any governmental body,
agency, authority (including any central bank or taxing or environmental
authority), any entity or instrumentality (including any court or tribunal)
exercising executive, legislative, judicial, regulatory, administrative or
investigative functions of or pertaining to government.
"Interest Payment Date" means the last day of each Interest Period.
"Interest Period" shall mean, the period commencing on the execution date of
this Promissory Note and ending [one] [two] [three] [six] months thereafter and
thereafter, each period commencing on the last day of the immediately preceding
Interest Period and ending [one] [two] [three] [six] months thereafter; provided
that (i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such extension would carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the immediately
preceding Business Day; (ii) no Interest Period shall extend beyond the
Termination Date; and (iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
"Reference Banks" means the principal London offices of Citibank, N.A., BNP
Paribas and Banco Bilbao Vizcaya Argentaria, S.A..
"Screen Rate" means:
(a) in relation to LIBOR, the British Bankers' Association Interest
Settlement Rate for the relevant currency and period; and
(b) in relation to EURIBOR, the percentage rate per annum determined by the
Banking Federation of the European Union for the relevant period,
displayed on the appropriate page of the Reuters screen. If the agreed page is
replaced or service ceases to be available, the Agent may specify another page
or service displaying the appropriate rate after consultation with the Borrower
and the Lenders.
["TARGET" means Trans-European Automated Real-time Gross Settlement Express
Transfer payment system.
"TARGET Day" means any day on which TARGET is open for the settlement of
payments in euro.]**
This Promissory Note shall in all respects be governed by, and construed in
accordance with, the laws of England.
Any legal action or proceeding arising out of or relating to this Promissory
Note may be brought, in the competent courts of England. The undersigned waive
the jurisdiction of any other courts that may correspond for any other reason.
The undersigned hereby waive diligence, presentment, protest or notice of total
or partial non- payment or dishonour with respect to this Promissory Note.
This Promissory Note consists of ____ pages.
__________ [PLACE OF EXECUTION] ___________________ ______, 2005.
NEW SUNWARD HOLDING B.V.
---------------------------------
By:
----------------------
Title: Attorney-in-Fact
GUARANTORS
CEMEX, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
CEMEX MEXICO, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
- --------------------------
** Please delete if the Promissory note is not in euro.
Part II
FORM OF FACILITY B NOTE
PROMISSORY NOTE
[US$/EUR/(pound)/JPY]
For value received, the undersigned, NEW SUNWARD HOLDING B.V. (the "Borrower"),
by this Promissory Note unconditionally promises to pay to the order of
________________, the principal sum of [US$]/[euro]/[insert currency]*
__________________ (__________________________, [currency of the United States
of America,]/[currency of a member state of the European Union adopted in
accordance with the legislation relating to the Economic and Monetary
Union]/[other - please describe]*___/100) on _____________ _____, 20__, (the
"Termination Date"), provided that if such day is not a Business Day, the
Termination Date shall be the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case the
Termination Date shall be the immediately preceding Business Day.
The Lender is authorized to record the date, type, amount and currency of each
Loan made by the Lender pursuant to the US$700,000,000 Facility Agreement dated
[o] June 2005, the date and amount of each repayment of principal hereof, and
the date and currency of each interest rate conversion and each continuation
pursuant to the Facility Agreement and the principal amount subject thereto, the
interest rate and interest period with respect thereto on the schedule annexed
hereto and made a part hereof or on any other record customarily maintained by
the Lender with respect to this Note and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded; provided
however that the failure of the Lender to make such recordation (or any error in
such recordation) shall not affect the obligations of the Borrower hereunder or
under the Facility Agreement.
The Borrower further promises to pay interest on the principal amount
outstanding hereunder for each day during each Interest Period (as hereinafter
defined) at a rate per annum equal to the Screen Rate (as hereinafter defined)
for such Interest Period plus [o%] [(o per cent.)]. Interest shall be payable on
each Interest Payment Date (as hereinafter defined).
The Borrower also promises to pay, to the fullest extent permitted by applicable
law, default interest on any amount payable hereunder that is not paid when due,
payable on demand, at a rate per annum equal to the Screen Rate then in effect
plus [o]% [(o per cent.)] plus 2.00% (o per cent.).
All payments to be made on or in respect of this Promissory Note shall be made
not later than 10:00 a.m., London time, to the account number __________, ABA
number _____________, Ref.:_______________ in __________________, maintained by
the Agent (as hereinafter defined), in [Dollars]/[euro]/[insert currency]* and
in immediately available funds.
- ---------------------------
* Please delete as appropriate
* Please delete as appropriate.
All payments hereunder shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority (as
hereinafter defined) ("Taxes"). If any Taxes are required to be deducted or
withheld from any amounts payable hereunder, the amounts so payable to the
holder hereof shall be increased to the extent necessary so that the holder
hereof receives all the amount it would have received had no such deduction or
withholding been made.
The undersigned agree to reimburse upon demand, in like manner and funds, all
losses, costs and reasonable expenses of the holder hereof, if any, incurred in
connection with the enforcement of this Promissory Note (including, without
limitation, all reasonable legal costs and expenses).
For purposes of this Note, the following terms shall have the following
meanings:
"Agent" means Citibank, N.A.
"Business Day" means a day (other than a Saturday or Sunday) on which banks are
open for general business in Amsterdam and New York, and:
(a) (in relation to any date for payment or lending or purchase of, or the
determination of an interest rate or rate of exchange in relation to, a
currency other than euro) London and the principal financial centre of
the country of that currency; or
(b) (in relation to any date for payment or lending or purchase of, or the
determination of an interest rate or rate of exchange in relation to,
euro) any TARGET Day.
"Governmental Authority" means any branch of power or government or any state,
department or other political subdivision thereof, or any governmental body,
agency, authority (including any central bank or taxing or environmental
authority), any entity or instrumentality (including any court or tribunal)
exercising executive, legislative, judicial, regulatory, administrative or
investigative functions of or pertaining to government.
"Interest Payment Date" means the last day of each Interest Period.
"Interest Period" shall mean, the period commencing on the execution date of
this Promissory Note and ending [one] [two] [three] [six] months thereafter and
thereafter, each period commencing on the last day of the immediately preceding
Interest Period and ending [one] [two] [three] [six] months thereafter; provided
that (i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such extension would carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the immediately
preceding Business Day; (ii) no Interest Period shall extend beyond the
Termination Date; and (iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
"Reference Banks" means the principal London offices of Citibank, N.A., BNP
Paribas and Banco Bilbao Vizcaya Argentaria, S.A..
"Screen Rate" means:
(a) in relation to LIBOR, the British Bankers' Association Interest
Settlement Rate for the relevant currency and period; and
(b) in relation to EURIBOR, the percentage rate per annum determined by the
Banking Federation of the European Union for the relevant period,
displayed on the appropriate page of the Reuters screen. If the agreed page is
replaced or service ceases to be available, the Agent may specify another page
or service displaying the appropriate rate after consultation with the Borrower
and the Lenders.
["TARGET" means Trans-European Automated Real-time Gross Settlement Express
Transfer payment system.
"TARGET Day" means any day on which TARGET is open for the settlement of
payments in euro.]**
This Promissory Note shall in all respects be governed by, and construed in
accordance with, the laws of England.
Any legal action or proceeding arising out of or relating to this Promissory
Note may be brought, in the competent courts of England. The undersigned waive
the jurisdiction of any other courts that may correspond for any other reason.
The undersigned hereby waive diligence, presentment, protest or notice of total
or partial non-payment or dishonour with respect to this Promissory Note.
This Promissory Note consists of ____ pages.
__________ [PLACE OF EXECUTION] ___________________ ______, 2005.
NEW SUNWARD HOLDING B.V.
---------------------------------
By:
----------------------
Title: Attorney-in-Fact
GUARANTORS
CEMEX, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
CEMEX MEXICO, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
----------------------------------------
By:
----------------------
Title: Attorney-in-Fact
- ---------------------------
** Please delete if the Promissory note is not in euro.
SCHEDULE TO NOTE
LOANS AND PAYMENTS OF PRINCIPAL
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
Date Amount of Currency of Type of Interest Interest Termination Principal Principal Notation
Loan Loan Loan(2) Rate Period Date Paid or Balance Made By
Converted
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ------------ ------------ ------------ ----------- ----------- ----------- ------------- -------------- ----------- ------------
- ---------------------------
(2) The type of Loan may be represented by "L" for LIBOR Loans, "E" for
Euribor Loans.
SIGNATURES
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
NEW SUNWARD HOLDING B.V.
Address: Amsteldijk 166
1079LH Amsterdam
The Netherlands
Fax: (31) 20 644-4095
Attention: Managing Director(s)
as Borrower
By: /s/ Hector Vela
Name: Hector Vela
Title: Attorney-in-fact
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CEMEX, S.A. DE C.V.
Address: Ave. Ricardo Margain Zozaya # 325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico 66265
Fax: (52 81) 8888-4415
Attention: Humberto Lozano
as Original Guarantor
By: /s/ Hector Vela
Name: Hector Vela
Title: Attorney-in-fact
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CEMEX MEXICO, S.A. DE C.V.
Address: Ave. Ricardo Margain Zozaya # 325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico 66265
Fax: (52 81) 8888-4415
Attention: Humberto Lozano
as Original Guarantor
By: /s/ Hector Vela
Name: Hector Vela
Title: Attorney-in-fact
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
Address: Ave. Ricardo Margain Zozaya # 325
Col. Valle del Campestre
San Pedro Garza Garcia, N.L.
Mexico 66265
Fax: (52 81) 8888-4415
Attention: Humberto Lozano
as Original Guarantor
By: /s/ Hector Vela
Name: Hector Vela
Title: Attorney-in-fact
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CITIBANK, N.A.
Address: 399 Park Avenue
New York
NY 10043
Fax:
Attention: Medium Term Finance / Agency
as Agent
By: /s/ Mario Espinosa
Name: Mario Espinosa
Title: Vice President
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CITIGROUP GLOBAL MARKETS, INC.
Address: 390 Greenwich Street, First Floor
New York
NY 10013
Fax: +(212) 723-8543/8541
as Arranger
By: /s/ Mario Espinosa
Name: Mario Espinosa
Title: Managing Director
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Address: Alcala 16, 4a p
28014 Madrid
Fax: + (3491) 537-0624
as Arranger
By: /s/ Jose Maria Sagardoy
Name: Jose Maria Sagardoy
Title: Director
By: /s/ Luis Martinez Nussio
Name: Luis Martinez Nussio
Title: Director de Relacion
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BNP PARIBAS
Address: 10 Harewood Avenue
London NW1 6AA
Fax: + 44 (20) 7595-6597
as Arranger
By: /s/ Illegible
Name: Illegible
Title: Illegible
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANCO BILBOA VIZCAYA ARGENTARIA, S.A.
as Original Lender
By: /s/ Jose Maria Sagardoy
Name: Jose Maria Sagardoy
Title: Director
By: /s/ Luis Martinez Nussio
Name: Luis Martinez Nussio
Title: Director de Relacion
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BNP PARIBAS
as Original Lender
By: /s/ Illegible
Name: Illegible
Title: Illegible
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CITIBANK, N.A. NASSAU BAHAMAS BRANCH
as Original Lender
By: /s/ Leslie Munroe
Name: Leslie Munroe
Title: Attorney-in-fact
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
CALYON SUCURSAL EN ESPANA
as Original Lender
By: /s/ Ramon Fernandez
Name: Ramon Fernandez
Title: Executive Director
By: /s/ Javier Alvarez-Rendueles
Name: Javier Alvarez-Rendueles
Title: Executive Director
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
ING BANK N.V.
as Original Lender
By: /s/ A.C. Zulia
Name: A.C. Zulia
Title: Senior Manager Transaction Processing
By: /s/ A.A. Felipa Ventura
Name: A.A. Felipa Ventura
Title: Manager Credit-Administration
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
JPMORGAN CHASE BANK
as Original Lender
By: /s/ Linda Meyer
Name: Linda Meyer
Title: Vice President
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
LLOYDS TSB BANK PLC
as Original Lender
By: /s/ Chris Spedding
Name: Chris Spedding
Title: Corporate Manger
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
MIZUHO CORPORATE BANK, LTD
as Original Lender
By: /s/ Tsukasa Takasawa
Name: Tsukasa Takasawa
Title: Senior Vice President
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANCO SANTANDER CENTRAL HISPANO S.A.
as Original Lender
By: /s/ Simon Ergas Testa
Name: Simon Ergas Testa
Title: Director
By: /s/ Jose Luis Munoz Cintron
Name: Jose Luis Munoz Cintron
Title: Vice President
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
THE ROYAL BANK OF SCOTLAND PLC
as Original Lender
By: /s/ Inaki Basterreche
Name: Inaki Basterreche
Title: Senior Director
By: /s/ Carmen Alto
Name: Carmen Alto
Title: Head of CIB Iberia
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
WACHOVIA BANK, NATIONAL ASSOCIATION
as Original Lender
By: /s/ Kathleen H. Reedy
Name: Kathleen H. Reedy
Title: Managing Director
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
THE BANK OF TOKYO-MITSUBISHI, LTD
as Original Lender
By: /s/ Pamela D. Price
Name: Pamela D. Price
Title: Vice President and Manager
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
FORTIS BANK S.A./N.V.
as Original Lender
By: /s/ Hans DE LANGHE
Name: Hans DE LANGHE
Title: Corporate Credit Support Manager
By: /s/ Herman Sonck
Name: Herman Sonck
Title: Senior Credit Manager
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANCO DE SABADELL, S.A.
as Original Lender
By: /s/ Jose Carlos Hernandez Bertomeu
Name: Jose Carlos Hernandez Bertomeu
Title: Director
By: /s/ Manuel Perez-Pedrero Diaz
Name: Manuel Perez-Pedrero Diaz
Title: Director
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANK OF AMERICA, N.A.
as Original Lender
By: /s/ John Donnelly
Name: John Donnelly
Title: Managing Director
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND
as Original Lender
By: /s/ Paul Costello
Name: Paul Costello
Title: Deputy Manager
By: /s/ Maurice Healy
Name: Maurice Healy
Title: Senior Manager
THIS IS A SIGNATURE PAGE TO THE US$700,000,000 FACILITIES AGREEMENT, DATED AS OF
27 JUNE 2005.
BANCO ITAU EUROPA, S.A. SUCURSAL FINANCEIRA EXTERIOR
as Original Lender
By: /s/ Jose Francisco Claro
Name: Jose Francisco Claro
Title: Chief Operating Officer
By: /s/ Alejandra Vicoso
Name: Alejandra Vicoso
Title: Director
Exhibit 4.16
===============================================================================
CEMEX ESPANA FINANCE LLC
$133,000,000 5.18% Senior Notes, Series A, due 2010
$192,000,000 5.62% Senior Notes, Series B, due 2015
---------------
NOTE PURCHASE AGREEMENT
---------------
Dated as of June 13, 2005
===============================================================================
1. AUTHORIZATION OF NOTES................................................1
2. SALE AND PURCHASE OF NOTES............................................1
3. CLOSING...............................................................2
4. CONDITIONS TO CLOSING.................................................2
4.1 Representations and Warranties...............................2
4.2 Performance; No Default......................................2
4.3 Compliance Certificates......................................3
4.4 Opinions of Counsel..........................................3
4.5 Purchase Permitted By Applicable Law, etc....................3
4.6 Related Transactions.........................................4
4.7 Payment of Special Counsel Fees..............................4
4.8 Private Placement Number.....................................4
4.9 Changes in Corporate Structure...............................4
4.10 Proceedings and Documents....................................4
4.11 Note Guarantee...............................................4
4.12 Agent for Service of Process.................................4
5. REPRESENTATIONS AND WARRANTIES OF CEMEX ESPANA AND THE COMPANY........5
5.1 Organization; Power and Authority............................5
5.2 Authorization, etc...........................................5
5.3 Disclosure...................................................5
5.4 Organization and Ownership of Shares of Subsidiaries.........6
5.5 Financial Statements.........................................6
5.6 Compliance with Laws, Other Instruments, etc.................6
5.7 Governmental Authorizations, etc.............................7
5.8 Litigation; Observance of Agreements, Statutes and Orders....7
5.9 Taxes........................................................7
5.10 Title to Property; Leases....................................8
5.11 Licenses, Permits, etc.......................................8
5.12 ERISA; Foreign Pension Plans.................................8
5.13 Private Offering by the Company..............................9
5.14 Use of Proceeds; Margin Regulations..........................9
5.15 Existing Financial Indebtedness; Future Liens...............10
-i-
5.16 Foreign Assets Control Regulations, Foreign Corrupt
Practices Act, etc..........................................10
5.17 Status under Certain Statutes...............................10
5.18 Environmental Matters.......................................11
5.19 Pari Passu Obligations......................................11
6. REPRESENTATIONS OF THE PURCHASERS....................................11
6.1 Purchase for Investment.....................................11
6.2 Source of Funds.............................................12
7. INFORMATION AS TO CEMEX ESPANA AND THE COMPANY.......................13
7.1 Financial and Business Information..........................13
7.2 Officer's Certificate.......................................15
7.3 Inspection..................................................16
7.4 Maintenance of Books and Records............................16
8. MATURITY; PREPAYMENT OF THE NOTES....................................16
8.1 Stated Maturity.............................................16
8.2 Optional Prepayments with Make-Whole Amount.................17
8.3 Optional Prepayment of Notes for Tax Reasons................17
8.4 Prepayment Upon Substantial Asset Disposition...............19
8.5 Allocation of Partial Prepayments...........................19
8.6 Maturity; Surrender, etc....................................20
8.7 Purchase of Notes...........................................20
8.8 Make-Whole Amount for Notes.................................20
8.9 Change in Control, Offer to Prepay, etc.....................21
9. AFFIRMATIVE COVENANTS................................................23
9.1 Compliance with Law.........................................23
9.2 Insurance...................................................23
9.3 Maintenance of Properties...................................23
9.4 Payment of Taxes and Claims.................................23
9.5 Corporate Existence, etc....................................24
9.6 Pari Passu Obligations......................................24
10. NEGATIVE COVENANTS...................................................24
10.1 Transactions with Affiliates................................24
10.2 Merger, Consolidation, etc..................................25
10.3 Liens.......................................................26
-ii-
10.4 Sales of Assets.............................................28
10.5 Financial Covenants.........................................29
10.6 Limitation on Non-Guarantor Financial Indebtedness..........29
11. EVENTS OF DEFAULT....................................................32
12. REMEDIES ON DEFAULT, ETC.............................................34
12.1 Acceleration................................................34
12.2 Other Remedies..............................................35
12.3 Rescission..................................................35
12.4 No Waivers or Election of Remedies, Expenses, etc...........35
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................36
13.1 Registration of Notes.......................................36
13.2 Transfer and Exchange of Notes..............................36
13.3 Replacement of Notes........................................36
14. PAYMENTS ON NOTES....................................................37
14.1 Place of Payment............................................37
14.2 Home Office Payment.........................................37
14.3 Tax Indemnification.........................................37
14.4 Currency of Payment.........................................40
15. EXPENSES, ETC........................................................40
15.1 Transaction Expenses........................................40
15.2 Survival....................................................41
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.........41
17. AMENDMENT AND WAIVER.................................................41
17.1 Requirements................................................41
17.2 Solicitation of Holders of Notes............................42
17.3 Binding Effect, etc.........................................42
17.4 Notes held by Company, etc..................................42
18. NOTICES..............................................................42
19. REPRODUCTION OF DOCUMENTS............................................43
20. CONFIDENTIAL INFORMATION.............................................44
21. SUBSTITUTION OF PURCHASER............................................45
22. MISCELLANEOUS........................................................45
-iii-
22.1 Successors and Assigns......................................45
22.2 Payments Due on Non-Business Days...........................45
22.3 Severability................................................45
22.4 Construction................................................46
22.5 Counterparts................................................46
22.6 Governing Law...............................................46
22.7 Jurisdiction; Service of Process............................46
22.8 Judgment Currency...........................................48
-iv-
Schedules
- ---------
Schedule A Information Relating to Purchasers
Schedule B Defined Terms
Schedule 4.9 Changes in Corporate Structure
Schedule 5.3 Disclosure Exceptions
Schedule 5.4 Subsidiaries (including identification of Material
Subsidiaries)
Schedule 5.5 Financial Statements
Schedule 5.8 Litigation
Schedule 5.11 License, etc. Exceptions
Schedule 5.15 Financial Indebtedness
Schedule 10.3 Existing Liens
UExhibits
Exhibit 1(a) Form of Series A Note
Exhibit 1(b) Form of Series B Note
Exhibit 4.4(a) Form of Opinion of Counsel to Cemex Espana
Exhibit 4.4(b) Form of Opinion of Special New York Counsel to the Obligors
Exhibit 4.4(c) Form of Opinion of Special Netherlands Counsel to the
Obligors
Exhibit 4.4(d) Form of Opinion of Special US Counsel to the Purchasers
Exhibit 4.4(e) Form of Opinion of Special Spanish Counsel to the
Purchasers
-v-
CEMEX ESPANA FINANCE LLC
c/o Cemex Espana, S.A.
c/Hernandez de Tejada, 1
28027 Madrid, Spain
$133,000,000 5.18% Senior Notes, Series A, due 2010
$192,000,000 5.62% Senior Notes, Series B, due 2015
as of June 13, 2005
TO EACH OF THE PURCHASERS LISTED ON
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
CEMEX ESPANA, S.A., a corporation organized under the laws of the
Kingdom of Spain ("Cemex Espana"), and its wholly owned Subsidiary CEMEX ESPANA
FINANCE LLC, a limited liability company organized under the laws of Delaware
(the "Company"), agree with the Purchasers listed on the attached Schedule A
(the "Purchasers") to this Note Purchase Agreement (as amended, modified or
supplemented, this "Agreement") as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of (i) $133,000,000
aggregate principal amount of its 5.18% Senior Notes, Series A, due 2010 (the
"Series A Notes"), and (ii) $192,000,000 aggregate principal amount of its
5.62% Senior Notes, Series B, due 2015 (the "Series B Notes"; the Series A
Notes and the Series B Notes are collectively referred to herein as the
"Notes", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement). The Notes shall be substantially
in the forms set out in Exhibit 1(a) and Exhibit 1(b), respectively, with
such changes therefrom, if any, as may be approved by the Purchasers and the
Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to each Purchaser and each Purchaser will purchase from the
Company, at the Closing provided for in Section 3U, Notes in the principal
amount and of the series specified opposite such Purchaser's name on Schedule
A at the purchase price of 100% of the principal amount thereof. The
obligations of each Purchaser hereunder are several and not joint obligations
and no Purchaser shall have any liability to any other Person for the
performance or non-performance by any other Purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser
shall occur at the offices of Mayer, Brown, Rowe & Maw LLP, 1675 Broadway, New
York, New York 10019, at 10:00 a.m., New York time, at a closing (the
"Closing") on June 13, 2005 or on such other Business Day thereafter on or
prior to June 13, 2005 as may be agreed upon by the Company and the Purchasers.
At the Closing the Company will deliver to each Purchaser the Notes to be
purchased by such Purchaser in the form of a single Note (or such greater
number of Notes in denominations of at least $500,000 as such Purchaser may
request) dated the date of the Closing and registered in the name of such
Purchaser (or in the name of such Purchaser's nominee), against delivery by
such Purchaser to the Company or its order of immediately available funds in
the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to Citibank, N.A., ABA:
021000089 for credit to Citibank International, PLC, Madrid Branch, swift:
CITIESMX, Beneficiary: Cemex Espana Finance LLC Account number: 0011022014. If
at the Closing the Company shall fail to tender such Notes to any Purchaser as
provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to any Purchaser's reasonable
satisfaction, such Purchaser shall, at such Purchaser's election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights such Purchaser may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Notes to
be sold to it at the Closing is subject to the fulfillment to such Purchaser's
satisfaction, prior to or at the Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of Cemex Espana and the Company in
this Agreement shall be correct when made and at the time of the Closing
(except for such representations and warranties made as of a specific earlier
date).
4.2 Performance; No Default.
Cemex Espana and the Company shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by them prior to or at the Closing, and after giving
effect to the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by Section 5.14) no Default or Event of Default shall
have occurred and be continuing. Neither Cemex Espana nor any Subsidiary shall
have entered into any transaction since the date of the Memorandum that would
have been prohibited by Section 10.1 or 10.3 hereof had such Sections
applied since such date.
4.3 Compliance Certificates.
(a) Officer's Certificate. Each of Cemex Espana and the Company shall
have delivered to such Purchaser an Officer's Certificate, dated the date of
the Closing, certifying that the conditions specified in Sections 4.1, 4.2
and 4.9 have been fulfilled.
(b) Secretary's Certificate. Each of the Company, Cemex Espana and
each other Guarantor shall have delivered to such Purchaser a certificate,
signed by the Secretary of the manager of the Company, the Secretary of Cemex
Espana and one or more Managing Directors of the other Guarantors,
respectively, certifying as to the resolutions attached thereto and other
corporate proceedings taken by it relating to the authorization, execution and
delivery of the Financing Documents to which it is a party.
4.4 Opinions of Counsel.
Such Purchaser shall have received opinions in form and substance
satisfactory to it, dated the date of the Closing (a) from Juan Pelegri y
Giron, counsel for Cemex Espana, covering the matters set forth in Exhibit
4.4(a) and covering such other matters incident to the transactions
contemplated hereby as such Purchaser or such Purchaser's counsel may
reasonably request (and Cemex Espana and the Company hereby instruct such
counsel to deliver such opinion to such Purchaser), (b) from Mayer, Brown, Rowe
& Maw LLP, special New York counsel to the Obligors, covering the matters set
forth in Exhibit 4.4(b) and covering such other matters incident to the
transactions contemplated hereby as such Purchaser or such Purchaser's counsel
may reasonably request (and Cemex Espana and the Company hereby instruct such
special counsel to deliver such opinion to such Purchaser), (c) from Warendorf,
special Netherlands counsel for each Obligor that is organized in The
Netherlands, covering the matters set forth in Exhibit 4.4(c) and covering
such other matters as such Purchaser or such Purchaser's counsel may reasonably
request (and Cemex Espana and the Company hereby instruct such counsel to
deliver such opinion to such Purchaser), (d) from Latham & Watkins LLP, the
Purchasers' US special counsel in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(d) and covering such other
matters incident to such transactions as such Purchaser may reasonably request
and (e) from Uria & Menendez, the Purchasers' Spanish special counsel in
connection with such transactions, substantially in the form set forth in
Exhibit 4.4(e) and covering such other matters incident to such transactions
as such Purchaser may reasonably request.
4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing each purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which each
Purchaser is subject, without recourse to provisions (such as Section
1405(a)(8) of the New York Insurance Law) permitting limited investments by
insurance companies without restriction as to the character of the particular
investment, (ii) not violate any applicable law or regulation (including,
without limitation, Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and (iii) not subject any Purchaser to any tax, penalty
or liability under or pursuant to any applicable law or regulation, which law
or regulation was not in effect on the date hereof. If requested by any
Purchaser, such Purchaser shall have received an Officer's Certificate
certifying as to such matters of fact as such Purchaser may reasonably specify
to enable such Purchaser to determine whether such purchase is so permitted.
4.6 Related Transactions.
The Company shall have consummated the sale of the entire principal
amount of the Notes scheduled to be sold on the date of Closing pursuant to
this Agreement.
4.7 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of the
Purchasers' special counsel referred to in Section 4.4 to the extent reflected
in a statement of such counsel rendered to the Company at least one Business
Day prior to the Closing.
4.8 Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the SVO) shall have been obtained for each series
of the Notes.
4.9 Changes in Corporate Structure.
Except as specified on Schedule 4.9, neither the Company nor Cemex
Espana nor any other Guarantor shall have changed its jurisdiction of
incorporation or formation or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to on Schedule 5.5.
4.10 Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be reasonably satisfactory to such
Purchaser and the Purchasers' special counsel, and such Purchaser and the
Purchasers' special counsel shall have received all such counterpart originals
or certified or other copies of such documents as such Purchaser and the
Purchasers' special counsel may reasonably request.
4.11 Note Guarantee.
Cemex Espana and each other Guarantor shall have executed and
delivered to each Purchaser a counterpart of the Note Guarantee and the Note
Guarantee shall be in full force and effect.
4.12 Agent for Service of Process.
CT Corporation System shall have accepted its appointment by the
Company and each Guarantor as the agent for service of process for the Company
and each Guarantor in the City of New York, State of New York, from the date of
the Closing to and including June 30, 2016, and the Purchasers shall have
received evidence of such acceptance.
5. REPRESENTATIONS AND WARRANTIES OF CEMEX ESPANA AND THE COMPANY.
Cemex Espana and the Company represent and warrant to the Purchasers
that:
5.1 Organization; Power and Authority.
The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware. Cemex Espana is a
corporation duly organized, validly existing and in good standing under the
laws of the Kingdom of Spain. Each of Cemex Espana and the Company is qualified
to do business in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
would not reasonably be expected to have a Material Adverse Effect. Each of
Cemex Espana and the Company has the corporate or other organizational power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver the Financing Documents to which it is a party
and to perform the provisions thereof.
5.2 Authorization, etc.
Each Financing Document has been duly authorized by all necessary
corporate or other organizational action on the part of each Obligor party
thereto, and each Financing Document constitutes, or will constitute upon
execution and delivery thereof, a legal, valid and binding obligation of each
Obligor party thereto enforceable against such Obligor in accordance with its
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
5.3 Disclosure.
The Company, through its agent, RBS Securities Corporation, has
delivered to each Purchaser a copy of a Private Placement Memorandum, dated
March, 2005 (the "Memorandum"), relating to the transactions contemplated
hereby. The Memorandum fairly describes, in all material respects, the general
nature of the business and principal properties of Cemex Espana and its
Subsidiaries. Except as disclosed on Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings delivered to the
Purchasers by or on behalf of Cemex Espana or the Company in connection with
the transactions contemplated hereby and the financial statements listed on
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. Except as disclosed in the Memorandum or as expressly described
on Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed on Schedule 5.5,
since December 31, 2004, there has been no change in the financial condition,
operations, business, properties or prospects of Cemex Espana or any Subsidiary
except changes that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company or Cemex Espana that would reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the Memorandum or in
the other documents, certificates and other writings delivered to the
Purchasers by or on behalf of the Company or Cemex Espana specifically for use
in connection with the transactions contemplated hereby.
5.4 Organization and Ownership of Shares of Subsidiaries.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) Cemex Espana's Subsidiaries as of April 30, 2005,
excluding the subsidiaries of RMC Group Limited integrated into Cemex Espana as
a result of the RMC Group Limited acquisition on March 1, 2005, showing, as to
each Cemex Espana Subsidiary, the correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class of its Capital Stock
outstanding owned by Cemex Espana and each other Subsidiary, (ii) RMC Group
Limited subsidiaries and affiliates as of April 30, 2005 showing, as to each
subsidiary and affiliate, the correct name thereof and the jurisdiction of its
organization, and (ii) the directors and senior officers of each of Cemex
Espana and the manager of the Company.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown on Schedule 5.4 as being owned by Cemex
Espana and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by Cemex Espana or another Subsidiary free and
clear of any Lien (except as otherwise disclosed on Schedule 5.4).
(c) Each Subsidiary identified on Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and, if applicable, in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and, if applicable, is
in good standing in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(d) Except for any legal restriction or agreement to which any
Subsidiary acquired as part of the acquisition of RMC Group Limited was subject
at the time of such acquisition (which restrictions and agreements Cemex Espana
shall use its reasonable endeavors to remove as soon as possible), no
Subsidiary is a party to, or otherwise subject to any legal restriction or any
agreement (except for customary limitations imposed by corporate law statutes)
directly restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to Cemex Espana or
any of its Subsidiaries that owns outstanding shares of Capital Stock or
similar equity interests of such Subsidiary.
5.5 Financial Statements.
Cemex Espana has delivered to each Purchaser copies of the financial
statements of Cemex Espana and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of Cemex Espana and its Subsidiaries as of the respective dates
specified in such schedule and the consolidated results of their operations for
the respective periods so specified and have been prepared in accordance with
Spanish GAAP consistently applied throughout the periods involved except as set
forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Obligors of the
Financing Documents will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of Cemex Espana or any Subsidiary under, any indenture, mortgage,
deed of trust, loan purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which Cemex Espana or any
Subsidiary is bound or by which Cemex Espana or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree or ruling of any court, arbitrator or Governmental Authority applicable
to Cemex Espana or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to Cemex
Espana or any Subsidiary.
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by any Obligor of any Financing Document to
which such Obligor is a party.
5.8 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed on Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of Cemex Espana, threatened against
or affecting Cemex Espana or any Subsidiary or any property of Cemex Espana or
any Subsidiary in any court or before any arbitrator of any kind or before or
by any Governmental Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(b) Neither Cemex Espana nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
5.9 Taxes.
Cemex Espana and its Subsidiaries have filed all Material tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the
amount of which is not individually or in the aggregate Material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which Cemex Espana or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with relevant national accounting standards and practices (in the case of Cemex
Espana, Spanish GAAP). Cemex Espana knows of no basis for any other tax or
assessment that would reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of Cemex Espana and its
Subsidiaries in respect of Federal, state or other taxes for all fiscal periods
are adequate.
5.10 Title to Property; Leases.
Cemex Espana and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Section 5.5U or purported to have been acquired by Cemex
Espana or any Subsidiary after said date (except as sold or otherwise disposed
of in the ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that individually or in the aggregate
are Material are valid and subsisting and are in full force and effect in all
material respects.
5.11 Licenses, Permits, etc.
Except as disclosed on Schedule 5.11,
(a) Cemex Espana and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others except
for those conflicts that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect;
(b) to the best knowledge of Cemex Espana, no product of Cemex Espana
or of any Subsidiary infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person; and
(c) to the best knowledge of Cemex Espana, there is no Material
violation by any Person of any right of Cemex Espana or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by Cemex Espana or any of its Subsidiaries.
5.12 ERISA; Foreign Pension Plans.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and would not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any Material liability pursuant to Title I or IV
of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that would reasonably be
expected to result in the incurrence of any such Material liability by the
Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding in such Plan's most recent actuarial valuation report,
did not exceed the aggregate current value of the assets of such Plan allocable
to such benefit liabilities by an amount that would reasonably be expected to
have a Material Adverse Effect in the case of any single Plan or in the
aggregate for all Plans. The term "benefit liabilities" has the meaning
specified in section 4001 of ERISA and the terms "current value" and "present
value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that are
individually or in the aggregate are Material.
(d) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax
would be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation in the first sentence of this Section 5.12(d) is made in
reliance upon and subject to the accuracy of the representations of the
Purchasers in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes.
(e) All Foreign Pension Plans have been established, operated,
administered and maintained in material compliance with all laws, regulations
and orders applicable thereto. Except where it would not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect,
all premiums, contributions and any other amounts required to be paid pursuant
to applicable Foreign Pension Plan documents or applicable laws have been paid
or accrued as required.
5.13 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes, the Note Guarantee or any similar securities for sale to, or solicited
any offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any Person other than the Purchasers and not more than 40
other Institutional Investors (as defined in clause (c) of the definition of
such term), each of which has been offered the Notes and the Note Guarantee at
a private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes or the Note Guarantee to the registration requirements of
Section 5 of the Securities Act.
5.14 Use of Proceeds; Margin Regulations.
The Company, through its parent Cemex Netherlands B.V., will apply the
proceeds of the sale of the Notes for general corporate purposes (including the
repayment of Financial Indebtedness) of Cemex Espana and its Subsidiaries. No
part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board or to involve any broker or dealer in a violation of
Regulation T of said Board. Margin stock does not constitute more than 5% of
the value of the consolidated assets of Cemex Espana and its Subsidiaries and
Cemex Espana does not have any present intention that margin stock will
constitute more than 25% of the value of such assets. As used in this Section,
the terms "margin stock" and "purpose of buying or carrying" shall have the
meanings assigned to them in said Regulation U.
5.15 Existing Financial Indebtedness; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Financial Indebtedness of Cemex Espana and
its Subsidiaries as of March 31, 2005, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Financial Indebtedness of Cemex Espana or its
Subsidiaries. Neither Cemex Espana nor any Subsidiary is in default, and no
waiver of such a default is currently in effect, in the payment of any
principal or interest on any Financial Indebtedness of Cemex Espana or such
Subsidiary and no Material event or condition exists with respect to any
Financial Indebtedness of Cemex Espana or any Subsidiary that would permit (or
that with notice or other lapse of time, or both, would permit) one or more
Persons to cause such Financial Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed on Schedule 5.15, neither Cemex Espana nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.3U.
5.16 Foreign Assets Control Regulations, Foreign Corrupt Practices Act, etc.
Neither the sale of the Notes by the Company hereunder nor the use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the
foregoing, neither Cemex Espana nor any Subsidiary (i) is or will become a
blocked person described in the Anti-Terrorism Order or the Department of the
Treasury Rule or (ii) knowingly engages or will engage in any dealings or
transactions with any such person. Cemex Espana and its Subsidiaries are in
compliance, in all material respects, with the USA Patriot Act.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will cause any Purchaser to be in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977 or other applicable
national or local law regulating the payments of bribes to government officials
or employees nor will the proceeds from the sale of the Notes be used by the
Company for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, to make any direct or indirect unlawful
payment to any foreign or domestic government official or employee or make any
bribe or other unlawful payment.
5.17 Status under Certain Statutes.
Neither the Company nor any Guarantor is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the ICC Termination Act of 1995, as amended,
or the Federal Power Act, as amended.
5.18 Environmental Matters.
Neither Cemex Espana nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and, to Cemex Espana's knowledge, no
proceeding has been instituted raising any claim against Cemex Espana or any of
its Subsidiaries or any of their respective real properties now or formerly
owned, leased or operated by any of them or other assets, alleging any
violation of Environmental Laws, except, in each case, such as would not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to the Purchasers in writing,
(a) neither Cemex Espana nor any Subsidiary has knowledge of
any facts that would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties or other
assets now or formerly owned, leased or operated by any of them or
their use, except, in each case, such as would not reasonably be
expected to result in a Material Adverse Effect;
(b) neither Cemex Espana nor any Subsidiary has stored any
Hazardous Materials on real properties now or formerly owned, leased
or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws, in each case
in any manner that would reasonably be expected to result in a
Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by Cemex Espana or any Subsidiary are in compliance with
applicable Environmental Laws, except where failure to comply would
not reasonably be expected to result in a Material Adverse Effect.
5.19 Pari Passu Obligations.
The obligations of each Obligor under the Financing Documents rank at
least pari passu with the claims of all other unsecured and unsubordinated
creditors of such Obligor, except for obligations mandatorily preferred by law
applying to companies generally (including but not limited to under paragraph
1, 2 or 3 of Article 913 of the Spanish Commercial Code (Codigo de Comercio),
Articles 90 and 91 of the Spanish Insolvency Law (Law 22/2003), Article 32 of
the Spanish Workers' Statute (Estatuto de los Trabajadores), Article 71 of the
Spanish General Taxation Law (Ley General Tributaria), Article 22 of the
Spanish General Law on Social Security (Ley General de la Seguridad Social).
6. REPRESENTATIONS OF THE PURCHASERS.
6.1 Purchase for Investment.
Each Purchaser represents that it is purchasing the Notes for its own
account or for one or more separate accounts maintained by it or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof; provided that the disposition of such Purchaser's or such
pension or trust funds' property shall at all times be within such Purchaser's
or such pension or trust funds' control. Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes.
6.2 Source of Funds.
Each Purchaser represents that at least one of the following
statements is an accurate representation as to each source of funds (a
"Source") to be used by such Purchaser to pay the purchase price of the Notes
to be purchased by such Purchaser hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no
employee benefit plan, treating as a single plan, all plans maintained
by the same employer or employee organization, with respect to which
the amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds 10% of the total
reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the NAIC
Annual Statement filed with such Purchaser's state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990) or (ii) a bank collective investment fund, within the meaning of
PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
disclosed to the Company in writing pursuant to this clause (b) at
least five Business Days prior to such Purchaser's purchase of the
Notes, no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than 10%
of all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition
of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM and (ii) the
names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant
to this clause (c) at least five Business Days prior to such
Purchaser's purchase of the Notes; or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this clause (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA. If Cemex Espana notifies
a proposed Purchaser prior to its purchase of the Notes that any plan
identified by Purchaser pursuant to clause (b) or (c) of this Section 6.2U
would be prohibited by ERISA section 406 from purchasing the Notes, the Source
shall not include assets of any such plan.
7. INFORMATION AS TO CEMEX ESPANA AND THE COMPANY.
7.1 Financial and Business Information.
Cemex Espana shall deliver to each holder that is an Institutional
Investor:
(a) Semi-Annual Statements -- within 90 days after the end of
the first half of each fiscal year of Cemex Espana, duplicate copies
of
(i) a consolidated balance sheet of Cemex Espana and
its Subsidiaries as at the end of such period, and
(ii) consolidated statements of income and changes
in shareholders' equity of Cemex Espana and its Subsidiaries,
for such period,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with Spanish GAAP applicable to interim
financial statements generally (for the avoidance of doubt, until such
time as Cemex Espana produces its interim financial statements with
notes, such statements may be provided without notes attached
thereto), and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations, subject
to changes resulting from year-end adjustments;
(b) Annual Statements -- within 180 days after the end of
each fiscal year of Cemex Espana, duplicate copies of,
(i) a consolidated balance sheet of Cemex Espana and
its Subsidiaries as at the end of such year, and
(ii) consolidated statements of income, of changes
in shareholders' equity and of source and application of
funds of Cemex Espana and its Subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with Spanish GAAP, and accompanied by an opinion thereon of
independent certified public accountants of recognized standing, which
opinion shall state that such financial statements present fairly, in
all material respects, the financial position of the companies being
reported upon and their results of operations and of source and
application of funds and have been prepared in conformity with Spanish
GAAP, and that the examination by such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards in Spain, and that such audit provides a
reasonable basis for such opinion in the circumstances;
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by Cemex Espana or any Subsidiary to public
securities holders generally and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly
requested by such holder), and each prospectus and all amendments
thereto filed by Cemex Espana or any Subsidiary with the Securities
and Exchange Commission or with any other Governmental Authority of
competent jurisdiction charged with the regulation of securities and
of all press releases and other statements made available generally by
Cemex Espana or any Subsidiary to the public concerning developments
that are Material;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five days after a Senior Financial Officer becomes
aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type
referred to in Section 11(f)U, a written notice specifying the nature
and period of existence thereof and what action Cemex Espana is taking
or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to
take with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(c) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(ii) the taking by the PBGC of steps to institute,
or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan,
or the receipt by the Company or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, would reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
Cemex Espana or any Subsidiary from any Governmental Authority
relating to any order, ruling, statute or other law or regulation that
would reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of Cemex Espana or
any of its Subsidiaries or relating to the ability of the Company or
any Guarantor to perform its obligations hereunder and under the other
Financing Documents as from time to time may be reasonably requested
by any such holder. In furtherance of the foregoing, if reasonably
requested by any holder, Cemex Espana shall provide information
regarding Cemex Espana's business and financial statements if such
information has been requested by the SVO in order to assign or
maintain a designation of the Notes.
7.2 Officer's Certificate.
Each set of financial statements delivered to a holder pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations, to the extent applicable) required in order to
establish whether Cemex Espana was in compliance with the requirements
of Sections 10.3 through 10.6 during the semi-annual or annual period
covered by the statements then being furnished (including with respect
to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Section, and the calculation of
the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of Cemex Espana and its Subsidiaries from the beginning of
the semi-annual or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of
Cemex Espana or any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action
Cemex Espana shall have taken or proposes to take with respect
thereto.
7.3 Inspection.
Cemex Espana and the Company shall permit the representatives of each
holder that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to Cemex Espana, to visit the principal executive offices of Cemex
Espana and the Company, to discuss the affairs, finances and accounts
of Cemex Espana and its Subsidiaries with the officers of Cemex Espana
and the manager of the Company, and (with the consent of Cemex Espana,
which consent will not be unreasonably withheld), and to visit the
other offices and properties of Cemex Espana and each Material
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices
or properties of Cemex Espana or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to
make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with the officers of Cemex Espana and
the manager of the Company and the independent public accountants of
Cemex Espana (and by this provision Cemex Espana authorizes said
accountants to discuss the affairs, finances and accounts of Cemex
Espana and its Subsidiaries), all at such times and as often as may be
reasonably requested;
provided that at all such meetings with independent public accountants, a
representative of Cemex Espana is entitled to, but need not, be in attendance.
7.4 Maintenance of Books and Records.
Cemex Espana will, and will cause each of its Subsidiaries to, keep
accurate records and books of account, in which complete entries will be made
in accordance with relevant national accounting standards and practices (in the
case of Cemex Espana, Spanish GAAP).
8. MATURITY; PREPAYMENT OF THE NOTES.
8.1 Stated Maturity.
(a) The entire principal amount of the Series A Notes shall become due
and payable on June 13, 2010.
(b) The entire principal amount of the Series B Notes shall become due
and payable on June 13, 2015.
8.2 Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes, in an amount not
less than 5% of the aggregate principal amount of the Notes then outstanding in
the case of a partial prepayment, at 100% of the principal amount so prepaid,
together with interest accrued but unpaid thereon to the date of such
prepayment, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2 not less
than 30 days and not more than 60 days prior to the date fixed for such
prepayment (which date shall be a Business Day and shall be specified in such
notice), the aggregate principal amount of the Notes to be prepaid on such
date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.5) and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of
the specified prepayment date. In the event the Company shall incorrectly
compute the Make-Whole Amount, if any, payable in connection with any Note to
be prepaid pursuant to this Section 8.2, the holder of such Note shall not be
bound by such incorrect computation, but instead, shall be entitled to receive
an amount equal to the correct Make-Whole Amount, if any, computed in
compliance with the terms of this Agreement.
8.3 Optional Prepayment of Notes for Tax Reasons.
If the Company or Cemex Espana (assuming that Cemex Espana is required
to make a payment) shall deliver to each holder (each, an "Affected Holder") to
which an Additional Payment would be payable by the Company or Cemex Espana on
the occasion of the next payment by the Company or Cemex Espana in respect of
such Notes (in the case of Cemex Espana, in an amount greater than 10% of the
amount which Cemex Espana would have been obligated to pay exclusive of the
requirements of Section 14.3) (the date of such next payment in respect of
which such Additional Payment will be due is herein referred to as the
"Affected Payment Date") written notice of a Responsible Officer (with respect
to each incident in which a Related Tax is initially levied by a Taxing
Jurisdiction that would result in the payment of an Additional Payment, a "Tax
Prepayment Notice") setting forth in reasonable detail the nature of the
Related Tax in respect of such Additional Payment and confirming that
(a) such Related Tax is required, under the laws of such
Taxing Jurisdiction, to be withheld or deducted from the payment due
to such Affected Holders on such Affected Payment Date and that such
payment is the first payment in respect of which such particular
Related Tax must be withheld (it being understood that the payment
immediately following and reflecting a change in a pre-existing
Related Tax shall be deemed the first payment with respect to such
Related Tax), provided that if the enactment of the statute or
regulation, the amendment of an existing statute or regulation or the
adoption or amendment of a treaty giving rise to a Related Tax occurs
less than 180 days prior to the due date of a payment in respect of
the Notes that is subject to such Related Tax, then, at the election
of the Company, the first payment in respect of the Notes, the due
date of which is more than 180 days after such enactment, shall be
deemed to be such first payment and
(b) as of the date of such opinion, such Related Tax would be
required to be withheld from similar future payments to such Affected
Holders,
then the Company may elect to prepay all (but not less than all) of the Notes
held by each such Affected Holder, provided that the Company may not elect to
so prepay if
(i) the Related Tax being levied is in respect of a payment
under the Notes having an Affected Payment Date that is more than 180
days after the delivery of the notice from a Responsible Officer
referred to above in respect of such Related Tax or
(ii) the Company (or, if applicable, Cemex Espana) shall have
failed to take such reasonable actions as are provided by law so as to
avoid the imposition of such Related Tax, or the Company (or, if
applicable, Cemex Espana) shall have taken any action the direct
result of which is the imposition of such Related Tax.
The Company shall deliver such Tax Prepayment Notice to each Affected Holder
not less than 30 nor more than 60 days prior to the prepayment date (in respect
of each Tax Prepayment Notice, a "Tax Prepayment Date"), which Tax Prepayment
Date shall be the Affected Payment Date related to such Additional Payment,
which Tax Prepayment Notice shall state the circumstances giving rise to the
Company's (or, if applicable, Cemex Espana's) obligation to make such
Additional Payment and shall set forth the Tax Prepayment Date. Such Tax
Prepayment Notice shall also state that each Note of each such Affected Holder
shall be prepaid on such Tax Prepayment Date at a price equal to 100% of the
principal amount of such Note, together with an amount equal to the Make-Whole
Amount, if any, as of the Tax Prepayment Date in respect of the principal
amount of the Notes being so prepaid and interest on such principal amount then
being prepaid accrued to the Tax Prepayment Date (as provided in the definition
of Reinvestment Yield, in determining the Make-Whole Amount with respect to any
prepayment under this Section 8.3, and only under this Section 8.3, the
margin over the implied yield of U.S. Treasury Securities will be 0.85% rather
than 0.50%). No Note of any Affected Holder shall be prepaid pursuant to this
Section 8.3 if such Affected Holder shall, not less than five Business Days
prior to the Tax Prepayment Date, deliver a written notice to the Company
(which notice shall be binding on any transferee of such Note), stating that
such Affected Holder unconditionally and irrevocably waives any right to any
Additional Payment under Section 14.3 in respect of the specific event or
condition (including with respect to the continuing or future effects of such
specific event or condition on subsequent payments) that shall have given rise
to the Company's prepayment right under this Section 8.3 (it being agreed
that no such waiver shall constitute a waiver of any other right to receive
Additional Payments in respect of any event or condition other than the
specific event or condition in respect of which such waiver shall be given).
Two Business Days prior to the Tax Prepayment Date, the Company will deliver to
each Affected Holder a certificate of a Responsible Officer specifying the
principal amount of the Notes of such Affected Holders specified therein,
together with the Make-Whole Amount, if any, as of the specified Tax Prepayment
Date with respect thereto, if any, and accrued interest thereon shall become
due and payable on the specified Tax Prepayment Date. In the event the Company
shall incorrectly compute the Make-Whole Amount, if any, payable in connection
with any Note to be prepaid pursuant to this Section 8.3, the holder of such
Note shall not be bound by such incorrect computation, but instead, shall be
entitled to receive an amount equal to the correct Make-Whole Amount, if any,
computed in compliance with the terms of this Agreement. The Company will,
promptly after making such prepayment, notify in writing all holders of Notes
of the payment amount, and the name of the holder, of each Note prepaid under
this Section 8.3.
8.4 Prepayment Upon Substantial Asset Disposition.
In the event that Cemex Espana or any Subsidiary (i) effects any sale,
lease or other disposition of assets constituting a Substantial Asset
Disposition and (ii) elects to apply the Net Proceeds Amount resulting from
such Substantial Asset Disposition to the retirement of Senior Debt in
accordance with Section 10.4, the Company will offer to prepay, by written
notice to all holders as provided in the next sentence (a "Section 8.4
Notice"), a principal amount of each Note equal to the Pro Rata Amount of the
Net Proceeds Amount of such Substantial Asset Disposition, together with
accrued and unpaid interest due on each Note to the Disposition Prepayment Date
(defined below), without any Make-Whole Amount. Each Section 8.4 Notice shall
(i) describe the material facts of the related Substantial Asset Disposition in
reasonable detail, (ii) refer to this Section 8.4 and the rights of each
holder of the Notes to require that an amount equal to the Pro Rata Amount of
the Net Proceeds Amount from such Substantial Asset Disposition be applied to
the prepayment of such holder's Notes on the terms and conditions provided
herein, (iii) contain an offer by the Company to apply an amount equal to the
Pro Rata Amount of the Net Proceeds Amount to the prepayment of the principal
of the outstanding Notes held by such holder, with accrued interest to the
Disposition Prepayment Date, but not including any Make-Whole Amount, and (iv)
set forth the date, which shall be not less than 30 nor more than 60 days
following the date of the Section 8.4 Notice and not more than one year
following the date of such Substantial Asset Disposition (the "Disposition
Prepayment Date"), on which the Company shall make such prepayment. Each holder
of the Notes shall have the right to accept such offer of prepayment by written
notice to the Company given not later than 20 days following receipt of the
Section 8.4 Notice. Holders that do not submit such a written notice to the
Company accepting such offer of prepayment within such 20-day period shall be
deemed to have rejected such offer. The Company shall on the relevant
Disposition Prepayment Date prepay an amount equal to the Pro Rata Amount of
the Net Proceeds Amount, together with accrued and unpaid interest to the
Disposition Prepayment Date, without any Make-Whole Amount, and shall apply
such amounts to the Notes held by holders who have accepted the Company's offer
of prepayment.
8.5 Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes pursuant to
Section 8.2U, the principal amount of the Notes to be prepaid shall be
allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.
8.6 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8U,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to
the Company and cancelled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
8.7 Purchase of Notes.
Cemex Espana and the Company will not, nor will Cemex Espana or the
Company permit any Affiliate (to the extent that the Company or Cemex Espana
controls such Affiliate), to purchase, redeem, prepay or otherwise acquire,
directly or indirectly, any of the outstanding Notes except (a) upon the
payment or prepayment of the Notes in accordance with the terms of this
Agreement and the Notes or (b) pursuant to an offer to purchase made by any
Obligor or an Affiliate pro rata to the holders of all Notes at the time
outstanding upon the same terms and conditions. Any such offer pursuant to the
preceding clause (b) shall provide each holder with sufficient information to
enable it to make an informed decision with respect to such offer, and shall
remain open for at least 30 Business Days. If the Required Holders accept such
offer, the Company shall promptly notify the remaining holders of such fact and
the expiration date for the acceptance by holders of Notes of such offer shall
be extended by the number of days necessary to give each such remaining holder
at least five Business Days from its receipt of such notice to accept such
offer. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
8.8 Make-Whole Amount for Notes.
The term "Make-Whole Amount" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal; provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2
or 8.3 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called
Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on such Note is payable)
equal to the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.50% (or 0.85% in the case of any prepayment
under Section 8.3) plus the yield to maturity implied by: the yields
reported, as of 10:00 a.m. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called
Principal, on the displays designated as "Page PX1" on the Bloomberg
Financial Markets Services Screen (or such other display as may
replace Page PX1 on the Bloomberg Financial Markets Services Screen)
for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Life of such Called Principal as of such Settlement
Date, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal,
in Federal Reserve Statistical Release H.15(519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the term to maturity
closest to and greater than the Remaining Life and (2) the actively
traded U.S. Treasury security with the term to maturity closest to and
less than the Remaining Life.
"Remaining Life" means, with respect to any Called Principal
of any Note, the number of years (calculated to the nearest
one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the maturity date of such Note.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date; provided that if
such Settlement Date is not a date on which interest payments are due
to be made under the terms of such Note, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2, 8.3 or 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or 8.3 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
8.9 Change in Control, Offer to Prepay, etc.
(a) Notice and Offer. If a Responsible Officer shall have knowledge of
Cemex having entered into a binding agreement that will give rise to a Change
in Control, such agreement shall have been publicly disclosed, and it is
reasonably practicable to give notice of such agreement to the holders prior to
the expected effective date of such Change in Control (taking into account any
applicable confidentiality agreements and other business considerations arising
in connection with the negotiation of related transactions), Cemex Espana shall
cause the Company to give each holder of the Notes notice of such agreement and
such expected effective date no less than 10 Business Days prior to such
expected effective date. Within 30 days of the actual effective date (if any)
of such Change in Control, Cemex Espana will cause the Company to give written
notice of such Change in Control to each holder. Such written notice of the
actual effective date shall contain, and such written notice shall constitute,
an irrevocable offer by the Company to prepay all of the Notes held by such
holder (or, at the election of such holder, a portion of such Notes designated
by such holder) on a date specified in such notice (the "Control Prepayment
Date") that is not less than 30 days and not more than 60 days after the date
of such written notice. If the Control Prepayment Date shall not be specified
in such notice, the Control Prepayment Date shall be the 60th day after the
date of such written notice.
(b) Acceptance and Payment. To accept (in whole or in part) or reject
(in its entirety) such offered prepayment, a holder shall cause a notice of
such acceptance or rejection to be delivered to the Company not later than five
Business Days prior to the Control Prepayment Date. In such notice, such holder
shall, if such notice is an acceptance, designate the principal amount of Notes
that it has elected to have prepaid and, if such notice is a rejection, state
that such holder is rejecting in its entirety such offered prepayment. If so
accepted, such offered prepayment in respect of such principal amount of such
Notes shall be due and payable on the Control Prepayment Date. Such accepted
offered prepayment shall be made at 100% of the principal amount of such Notes
so elected to be prepaid, together with interest on such principal amount
accrued to the Control Prepayment Date, but not including any Make-Whole
Amount. If a holder shall not have responded to such offered prepayment on or
prior to five Business Days prior to the Control Prepayment Date, such holder
shall be deemed to have rejected, in its entirety, such offered prepayment.
(c) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 8.9 will be accompanied by an Officer's Certificate dated the date
of such offer, specifying:
(i) the Control Prepayment Date;
(ii) the principal amount of each Note offered to be prepaid
on such Control Prepayment Date;
(iii) the interest to be paid on each such Note, accrued to
the Control Prepayment Date; and
(iv) in reasonable detail, the nature of the Change in
Control.
(d) Notice Concerning Status of Holders of Notes. Promptly after each
Control Prepayment Date and the making of all prepayments contemplated on such
Control Prepayment Date under this Section 8.9 (and, in any event, within 30
days thereof) the Company shall deliver to each holder a certificate signed by
a Responsible Officer of the Company containing a list of the then current
holders of Notes and setting forth as to each such holder the outstanding
principal amount of Notes held by such holder at such time.
9. AFFIRMATIVE COVENANTS.
Cemex Espana and the Company covenant that so long as any of the Notes
are outstanding:
9.1 Compliance with Law.
Cemex Espana will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2 Insurance.
Cemex Espana will and will cause each of its Subsidiaries to maintain
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated, except to the extent that the failure to maintain such
insurance would not have a Material Adverse Effect.
9.3 Maintenance of Properties.
Cemex Espana will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear),
so that the business carried on in connection therewith may be properly
conducted at all times; provided that this Section shall not prevent Cemex
Espana or any Subsidiary from discontinuing the operation and the maintenance
of any of its properties if such discontinuance is desirable in the conduct of
its business and Cemex Espana has concluded that such discontinuance would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.4 Payment of Taxes and Claims.
Cemex Espana will and will cause each of its Subsidiaries to file all
Material tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes,
assessments, charges and levies have become due and payable and before they
have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of Cemex
Espana or any Subsidiary; provided that neither Cemex Espana nor any Subsidiary
need pay any such tax, charge, levy, assessment or claim if (i) the amount,
applicability or validity thereof is contested by Cemex Espana or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
Cemex Espana or a Subsidiary has established adequate reserves therefor in
accordance with relevant national accounting standards and practices (in the
case of Cemex Espana, Spanish GAAP) on the books of Cemex Espana or such
Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges,
levies and claims in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
9.5 Corporate Existence, etc.
Cemex Espana will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.2 and 10.4, Cemex
Espana will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries (unless merged into Cemex
Espana or a Subsidiary) and all rights and franchises of Cemex Espana and its
Subsidiaries unless, in the good faith exercise of the reasonable business
judgment of Cemex Espana, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise would not,
individually or in the aggregate, have a Material Adverse Effect.
9.6 Pari Passu Obligations.
Cemex Espana covenants that the obligations of each Obligor hereunder
and under the Financing Documents rank at least pari passu with the claims of
all other unsecured and unsubordinated creditors of such Obligor, except for
obligations mandatorily preferred by law applying to companies generally
(including but not limited to under paragraph 1, 2 or 3 of Article 913 of the
Spanish Commercial Code (Codigo de Comercio), Articles 90 and 91 of the Spanish
Insolvency Law (Law 22/2003), Article 32 of the Spanish Workers' Statute
(Estatuto de los Trabajadores), Article 71 of the Spanish General Taxation Law
(Ley General Tributaria) and Article 22 of the Spanish General Law on Social
Security (Ley General de la Seguridad Social).
10. NEGATIVE COVENANTS.
Cemex Espana and the Company covenant that so long as any of the Notes
are outstanding:
10.1 Transactions with Affiliates.
Cemex Espana will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than Cemex Espana or another Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of Cemex Espana's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to Cemex Espana or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
10.2 Merger, Consolidation, etc.
(a) Merger, Consolidation, etc. of Guarantors.
Cemex Espana will not, and will not permit any other Guarantor to,
consolidate with or merge with any other Person or convey, transfer or lease
all or substantially all of its assets in a single transaction or series of
transactions to any Person unless:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease all or substantially all of the assets of such
Guarantor as an entirety, as the case may be, shall be a Guarantor or
a solvent Person organized and existing under the laws of the United
States or any State thereof (including the District of Columbia) or
any country that was a member of the EU as of April 30, 2004 (other
than Greece) or any political subdivision thereof and, if a Guarantor
is not the surviving Person, such Person (x) shall have executed and
delivered to each holder of any Notes its assumption of the due and
punctual performance and observance of such Guarantor's obligations
under this Agreement (if such Guarantor was obligated hereunder
immediately prior to such consolidation, merger, conveyance, transfer
or lease) and the Note Guarantee and (y) shall have caused to be
delivered to each holder of any Notes an opinion of nationally
recognized independent counsel, or other independent counsel
reasonably satisfactory to the Required Holders, to the effect that
all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof; and
(ii) at the time of and immediately after giving effect to
such transaction, no Default or Event of Default shall result from
such transaction.
Except as provided in the next sentence, no such conveyance, transfer
or lease of all or substantially all of the assets of a Guarantor shall have
the effect of releasing such Guarantor or any successor Person that shall
theretofore have become such in the manner prescribed in this Section 10.2(a)
from any liability under this Agreement or the Note Guarantee. The Company
shall have the right to cause any Guarantor to be released from liability under
the Note Guarantee if (a) such Guarantor has conveyed, transferred or leased
all or substantially all of its assets to another Person in accordance with
this Section 10.2(a) and such Guarantor becomes dormant or otherwise stops
conducting trading activity and (b) both immediately prior thereto and after
giving effect to such release, no Default or Event of Default exists. Any such
release shall be effective upon the Company providing notice thereof to each
holder, which notice shall state that the foregoing conditions have been
satisfied with respect to such release.
(b) Merger, Consolidation, etc. of the Company.
The Company shall not consolidate with or merge with any other Person
or convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease all or substantially all of the assets of the
Company as an entirety, as the case may be, shall be a solvent Person
organized and existing under the laws of the United States or any
State thereof (including the District of Columbia) or any political
subdivision of any thereof and, if the Company is not the surviving
Person, such Person (x) shall have executed and delivered to each
holder of any Notes its assumption of the due and punctual performance
and observance of each covenant and condition of this Agreement and
the Notes and (y) shall have caused to be delivered to each holder of
any Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof; and
(ii) at the time of and immediately after giving effect to
such transaction, no Default or Event of Default shall result from
such transaction.
No such conveyance, transfer or lease of all or substantially all of
the assets of the Company shall have the effect of releasing the Company or any
successor Person that shall theretofore have become such in the manner
prescribed in this Section 10.2(b) from its liability under this Agreement or
the Notes.
10.3 Liens.
(a) Cemex Espana shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any of its property or assets or those of
any Subsidiary, whether now owned or held or hereafter acquired, other than the
following Liens ("Permitted Liens"):
(i) Liens for taxes, assessments and other governmental
charges the payment of which is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted
and for which such reserves or other appropriate provision, if any, as
shall be required by relevant national accounting standards and
practices (in the case of Cemex Espana, Spanish GAAP) shall have been
made;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or the payment of which is
being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted and for which such reserves or
other appropriate provision, if any, as shall be required by GAAP
shall have been made;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security;
(iv) any judgment Lien, unless the judgment it secures shall
not, within 90 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been
discharged within 90 days after the expiration of any such stay;
(v) Liens existing on the date of this Agreement as described
in Schedule 10.3 (Existing Liens) and any Lien renewing or extending
such Lien, provided that the principal amount of Financial
Indebtedness secured by such Lien immediately prior thereto is not
increased and such Lien is not extended to other property;
(vi) any Lien on property acquired by Cemex Espana or any of
its Subsidiaries after the date of this Agreement that was existing on
the date of acquisition of such property, provided that such Lien was
not incurred in anticipation of such acquisition, and any Lien created
to secure all or any payment of the purchase price, or to secure
indebtedness incurred or assumed to pay all or any part of the
purchase price, of property acquired by Cemex Espana or any of its
Subsidiaries after the date of this Agreement; provided that (A) any
such Lien permitted pursuant to this clause (vi) shall be confined
solely to the item or items of property so acquired (including, in the
case of any acquisition of a corporation through the acquisition of
51% or more of the Voting Stock of such corporation, the stock and
assets of any acquired Subsidiary or acquiring Subsidiary by which the
acquired Subsidiary will be directly or indirectly controlled) and, if
required by the terms of the instrument originally creating such Lien,
other property which is an improvement to, or is acquired for specific
use with, such acquired property, (B) if applicable, any such Lien
shall be created within nine months after, in the case of property,
its acquisition, or, in the case of improvements, their completion and
(C) no such Lien shall be made in respect of any indebtedness in
relation to repayment of which recourse may be had to Cemex Espana or
any Subsidiary other than in relation to the item or items as referred
to in clause (vi)(A) above;
(vii) any Lien renewing, extending or refinancing the
indebtedness to which any Lien permitted by clause (vi) above relates;
provided that the principal amount of indebtedness secured by such
Lien immediately prior thereto is not increased and such Lien is not
extended to other property;
(viii) the transfer of shares or any other instrument of
title representing an equity participation in the Asia Fund into a
trust, provided it does not secure Financial Indebtedness;
(ix) any Lien created on shares representing no more than a
Stake in the Capital Stock of any of Cemex Espana's Subsidiaries
solely as a result of the deposit or transfer of such shares into a
trust or a special purpose corporation (including any entity with
legal personality) of which such shares constitute the sole assets
provided that the proceeds from the deposit or transfer of such shares
into such trust, corporation or entity and from any transfer of or
distributions in respect of Cemex Espana's or any Subsidiary's
interest in such trust, corporation or entity are applied as provided
under Section 10.4; provided that such Lien may not secure Financial
Indebtedness of Cemex Espana or any Subsidiary unless otherwise
permitted under this clause (ix) and that the economic and voting
rights in such Capital Stock is maintained by Cemex Espana in its
Subsidiaries;
(x) any Lien on any asset of a Special Purpose Vehicle in
connection with a Permitted Securitization; and
(xi) in addition to the Liens permitted by the foregoing
clauses (i) through (x), Liens securing obligations of Cemex Espana
and its Subsidiaries, Tprovided Tthat, after giving effect to the
incurrence of such Liens and the concurrent retirement of any
Financial Indebtedness and/or release of Liens, the outstanding
principal amount of Priority Indebtedness does not exceed 15% of the
Consolidated Total Assets of Cemex Espana and its Subsidiaries.
(b) This Section 10.3 shall not apply to any Lien if, the Obligors
have made or caused to be made effective provision whereby the Notes are
secured equally and ratably with, or prior to, the indebtedness secured by such
Lien (other than Permitted Liens) for so long as such indebtedness is so
secured.
10.4 Sales of Assets.
Cemex Espana will not, and will not permit any Subsidiary to, sell,
lease or otherwise dispose of any substantial part (as defined below) of the
assets of Cemex Espana and its Subsidiaries; provided, however, that Cemex
Espana or any Subsidiary may sell, lease or otherwise dispose of assets
constituting a substantial part of the assets of Cemex Espana and its
Subsidiaries (a "Substantial Asset Disposition") if such assets are sold for at
least Fair Market Value and, at such time and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing, and an
amount equal to the Net Proceeds Amount with respect to such Substantial Asset
Disposition (determined without subtracting therefrom clause (b)(v) of the
definition of "Net Proceeds Amount") shall be used within one year of such
disposition as follows:
(1) to prepay or retire Senior Debt of Cemex Espana or a
Subsidiary, provided that if any Senior Debt is prepaid pursuant to
the terms of this Section 10.4, the Company shall offer to prepay the
Notes in accordance with the terms of Section 8.4 of this Agreement;
or
(2) to the extent not used to prepay Senior Debt as set forth
in clause (1) above, to acquire assets used or useful in carrying on
the business of Cemex Espana and its Subsidiaries and having a Fair
Market Value at least equal to the acquisition price thereof.
For purposes of any determination pursuant to this Section 10.4, the
Company shall be given credit for all amounts applied in accordance with the
preceding clauses (1) and (2) during the applicable one-year period but shall
not be required to apply any amount in accordance with the preceding clauses
(1) and (2) unless the book value of the assets that have been sold or
otherwise disposed of during the applicable one-year period is in excess of 15%
of Consolidated Total Assets of Cemex Espana and its Subsidiaries (determined
as set forth below).
If the Company makes an offer to prepay the Notes in accordance with
the terms of Section 8.4 of this Agreement with respect to any Net Proceeds
Amount, to the extent any holder rejects (or is deemed to have rejected) such
offer of prepayment, the Pro Rata Amount allocable to such holder may be
applied to general corporate purposes of Cemex Espana and its Subsidiaries
(including, without limitation, the repayment of Financial Indebtedness of
Cemex Espana and its Subsidiaries and for acquisitions).
As used in this Section 10.4, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of Cemex Espana
and its Subsidiaries if the book value of such assets, when added to the book
value of all other assets sold, leased or otherwise disposed of by Cemex Espana
and its Subsidiaries during the period of 12 consecutive calendar months
immediately preceding such proposed disposition, exceeds 15% of Consolidated
Total Assets of Cemex Espana and its Subsidiaries (determined as of the
beginning of such twelve-month period, but giving effect to any acquisition of
any Subsidiary or all or substantially all the assets of any Person during such
period); provided that in no event will (a) any Excluded Disposition constitute
a sale of a "substantial part" of the assets of Cemex Espana and its
Subsidiaries or (b) the book value of the assets sold in any Excluded
Disposition be counted in determining whether such 15% limit has been exceeded.
"Excluded Disposition" means any (i) transaction in the ordinary
course of business, (ii) transaction in which Cemex Espana or a Subsidiary is
the purchaser, (iii) transaction in which any assets acquired in an acquisition
of a Person or of a business are sold, transferred or otherwise disposed of for
not less than Fair Market Value to a Person that is not Cemex Espana or a
Subsidiary within one year of such acquisition, (iv) purchase by Cemex Espana
or its Subsidiary of any of its shares or any dividend or other distribution
made or paid by Cemex Espana or its Subsidiary to its equityholders, (v)
payment or transfer of cash, (vi) disposal of assets not required for the
efficient operation of the businesses of Cemex Espana and its Subsidiaries for
not less than Fair Market Value, (vii) disposal of investments or financial
assets on an arm's length basis for Fair Market Value, (viii) application of
the proceeds of any issuance of securities (whether equity or debt) or other
financial obligations for the purpose stated in the offering memorandum or any
other document related to such issuance or (ix) disposal pursuant to any
Permitted Securitization, sale-leaseback transaction or other asset-backed
financing.
10.5 Financial Covenants.
(a) Minimum Consolidated Net Worth. Cemex Espana will not permit
Consolidated Net Worth as of the last day of any Relevant Period to be less
than (euro)2,000,000,000.
(b) Maximum Leverage Ratio. Cemex Espana will not permit the ratio of
Net Borrowings to Adjusted EBITDA calculated on a Rolling Basis as of the last
day of any Relevant Period to exceed 3.5 to 1.0.
(c) Minimum Interest Coverage Ratio. Cemex Espana will not permit the
ratio of EBITDA to Finance Charges calculated on a Rolling Basis as of the last
day of any Relevant Period to be less than 2.5 to 1.0.
10.6 Limitation on Non-Guarantor Financial Indebtedness.
Cemex Espana will not, at any time, permit any Subsidiary (other than
the Company) to, directly or indirectly, create, incur, assume, guaranty, have
outstanding or otherwise become or remain directly or indirectly liable with
respect to, any Financial Indebtedness other than:
(a) Financial Indebtedness arising under the Note Guarantee;
(b) Financial Indebtedness of a Subsidiary that is an Excluded
Subsidiary Guarantor;
(c) Financial Indebtedness of a Subsidiary outstanding on the date
hereof and disclosed on Schedule 5.15 (Existing Financial Indebtedness), and
any Financial Indebtedness extending the maturity of, or refunding or
refinancing, the same, provided that (i) the principal amount of such Financial
Indebtedness shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, refunding or refinancing and
(ii) the aggregate amount of all Financial Indebtedness that has been extended,
refunded or refinanced under this clause (c) shall not exceed $100,000,000 (or
the equivalent thereof if denominated in another currency) (for the avoidance
of doubt, it is understood that (x) if any such Financial Indebtedness is
successively extended, refinanced or refunded, only the Financial Indebtedness
outstanding after giving effect to all such successive extensions, refinancings
and refundings shall be counted against the foregoing amount and (y) any
Financial Indebtedness incurred in a currency other than Dollars pursuant to
this clause (c) shall continue to be permitted under this clause (c),
notwithstanding any fluctuation in currency values, as long as the outstanding
principal amount of such Financial Indebtedness (denominated in its original
currency) does not exceed the maximum amount of such Financial Indebtedness
(denominated in such currency) permitted to be outstanding on the date such
Financial Indebtedness was incurred);
(d) Financial Indebtedness of a Subsidiary owed to Cemex Espana, the
Company or another Subsidiary;
(e) Financial Indebtedness of a Subsidiary that is (i) outstanding at
the time such Subsidiary becomes a Subsidiary or (ii) contractually required to
be incurred by such Subsidiary at such time, provided that such Financial
Indebtedness shall not have been incurred in contemplation of such Subsidiary
becoming a Subsidiary;
(f) any Financial Indebtedness extending the maturity of the Financial
Indebtedness referred to in clause (e) above, or any refunding or refinancing
of the same, Tprovided thatT the principal amount of such Financial
Indebtedness shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, refunding or refinancing;
(g) Financial Indebtedness of a Subsidiary which (i) has been formed
for the purpose of, and whose primary activities are, the issuance or other
incurrence of debt obligations to Persons other than Affiliates of Cemex
Espana, and the lending or other advance of the net proceeds of such debt
obligations (whether directly or indirectly) to the Company or an Excluded
Subsidiary Guarantor, and (ii) has no significant assets other than promissory
notes and other contract rights in respect of funds advanced to the Company or
the Excluded Subsidiary Guarantors;
(h) Financial Indebtedness of a Subsidiary incurred pursuant to or in
connection with any pooling agreements in place within a bank or financial
institution, but only to the extent of offsetting credit balances of Cemex
Espana or its Subsidiaries pursuant to such pooling arrangement; and
(i) Financial Indebtedness of a Subsidiary in addition to that
otherwise permitted by the foregoing provisions of this Section 10.6, provided
that on the date the Subsidiary incurs or otherwise becomes liable with respect
to such Financial Indebtedness and immediately after giving effect thereto and
the concurrent retirement of any Financial Indebtedness and/or release of
Liens, the aggregate outstanding principal amount of all Priority Indebtedness
does not exceed 15% of Consolidated Total Assets of Cemex Espana and its
Subsidiaries.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note for more than five Business Days after the same becomes due
and payable; or
(c) Cemex Espana or the Company defaults in the performance
of or compliance with any term contained in Section 7.1(d), U10.2,
10.4, 10.5 or 10.6 and such default is not remedied within 10 Business
Days after the earlier of (i) a Senior Financial Officer obtaining
actual knowledge of such default and (ii) the Company receiving
written notice of such default from any holder of a Note (any such
written notice to be identified as a "notice of default" and to refer
specifically to this clause (c) of Section 11); or
(d) Cemex Espana or the Company defaults in the performance
of or compliance with any term contained herein (other than those
referred to in clauses (a), (b) and (c) of this Section 11) and such
default is not remedied within 30 days after the earlier of (i) a
Senior Financial Officer obtaining actual knowledge of such default
and (ii) the Company receiving written notice of such default from any
holder of a Note (any such written notice to be identified as a
"notice of default" and to refer specifically to this clause (d) of
Section 11); or
(e) any representation or warranty made in writing by or on
behalf of Cemex Espana or the Company or by any officer of Cemex
Espana or the manager of the Company in this Agreement or in any
writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect
on the date as of which made; or
(f) (i) Cemex Espana or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal or premium or make-whole amount or interest on any Financial
Indebtedness in an aggregate principal amount of at least $50,000,000
(or the equivalent thereof, as of any date of determination, in any
other currency) other than Financial Indebtedness outstanding under
this Agreement, the Notes or the Note Guarantee, when the same becomes
due and payable (whether by way of scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the
relevant agreement or instrument relating to such Financial
Indebtedness or (ii) any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Financial
Indebtedness beyond any period of grace provided with respect thereto,
if the effect of such event or condition is to accelerate the maturity
of such Financial Indebtedness or (iii) any such Financial
Indebtedness shall be declared to be due and payable, or required to
be prepaid or redeemed (other than by a regularly scheduled required
payment or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Financial Indebtedness shall be
required to be made, in each case prior to the stated maturity
thereof; or
(g) the Company, Cemex Espana or any of its Material
Subsidiaries (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar
law of any jurisdiction, (iii) makes an assignment for the benefit of
its creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to
it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated or (vi) takes corporate
action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company, Cemex Espana or any of its Material Subsidiaries, a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company, Cemex Espana or any of its Material
Subsidiaries, or any such petition shall be filed against the Company,
Cemex Espana or any of its Material Subsidiaries and such petition
shall not be dismissed within 90 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $50,000,000 (or the equivalent thereof if
denominated in a currency other than euro) (excluding in the
calculation of such $50,000,000 any final judgment to the extent, but
only to the extent, such judgment will be covered by payments from
insurance maintained by Cemex Espana or any Subsidiary (x) in respect
of which insurance the issuer thereof has agreed, in writing, to make
such payments in respect of such judgment and (y) the issuer of which
insurance is an independent commercial insurer that, in the good faith
opinion of the Board of Directors of Cemex Espana, is capable of
discharging its payment obligations in connection with such insurance)
are rendered against one or more of Cemex Espana and the Subsidiaries
and which judgments are not, within 90 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged
within 90 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee
to administer any Plan or the PBGC shall have notified Cemex Espana or
any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) Cemex Espana or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (iv) Cemex Espana or any
ERISA Affiliate withdraws from any Multiemployer Plan or (v) Cemex
Espana or any Subsidiary establishes or amends any employee welfare
benefit plan (as defined in section 3(1) of ERISA) that provides
post-employment welfare benefits in a manner that would increase the
liability of Cemex Espana or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (v) above, either
individually or together with any other such event or events, would
reasonably be expected to have a Material Adverse Effect; or
(k) the Note Guarantee shall cease to be in full force and
effect with respect to Cemex Espana or any other Guarantor; or Cemex
Espana or any other Guarantor (or any Person by, through or on behalf
of Cemex Espana or such other Guarantor) shall contest in any manner
the validity, binding nature or enforceability of the Note Guarantee.
12. REMEDIES ON DEFAULT, ETC.
12.1 Acceleration.
(a) If an Event of Default with respect to the Company described in
clause (g) or (h) of Section 11 (other than an Event of Default described in
clause (g)(i) or described in clause (g)(vi) by virtue of the fact that such
clause encompasses clause (g)(i)) has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders of the Notes at the time outstanding may at any time at its or
their option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in clause (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it
or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company, in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such
circumstances.
12.2 Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3 Rescission.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the Required Holders by written
notice to the Company may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17 and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all costs and expenses of such holder incurred
in any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 Registration of Notes.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one
or more new Notes (as requested by the holder thereof) of the same series in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable
to such Person as such holder may request and shall be substantially in the
form of the Note of such series originally issued hereunder. Each such new Note
shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may require payment of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer of Notes. Notes shall not be transferred in denominations
of less than $500,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes of a series, one Note of
such series may be in a denomination of less than $500,000. Any transferee, by
its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representations set forth in Sections 6.1
and 6.2.
13.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such
Note is, or is a nominee for, an original Purchaser or another holder
of a Note with a minimum net worth of at least $50,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note of the same series, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in New
York, New York at Citibank, N.A, 111 Wall Street, 14th Floor, New York, New
York 10043, Corporate Agency and Trust Department. The Company may at any time,
by notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in such jurisdiction or the principal office of a bank or trust company
in the United States.
14.2 Home Office Payment.
So long as any Purchaser or a nominee of such Purchaser shall be the
holder of any Note, and notwithstanding anything contained in Section 14.1 or
in such Note to the contrary, the Company will pay all sums becoming due on
such Note for principal, Make-Whole Amount, if any, and interest by the method
and at the address specified for such purpose below such Purchaser's name on
Schedule A, or by such other method or at such other address as such Purchaser
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, such Purchaser shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition of any Note
held by any Purchaser or its nominee, such Purchaser will, at its election,
either endorse thereon the amount of principal paid thereon and the last date
to which interest has been paid thereon or surrender such Note to the Company
in exchange for a new Note or Notes pursuant to Section 13.2. The Company will
afford the benefits of this Section 14.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by any Purchaser under
this Agreement and that has made the same agreement relating to such Note as
such Purchaser has made in this Section 14.2.
14.3 Tax Indemnification.
(a) Payments Free and Clear. All payments to be made by the Company
under this Agreement and the Notes will be made free and clear of, and without
withholding or deduction for or on account of, any present or future taxes,
levies, imposts, duties, charges, assessments or fees of whatever nature, but
excluding franchise taxes and taxes imposed on or measured by any holder's net
income or receipts (such non-excluded items, "Related Taxes"), imposed or
levied by or on behalf of Spain, The Netherlands, the United States or any
jurisdiction from or through which any amount is paid by the Company pursuant
to the terms of this Agreement or the Notes (or any political subdivision or
taxing authority of or in any such jurisdiction) (a "Taxing Jurisdiction"),
unless the withholding or deduction of any such Related Tax is required by law.
(b) Gross-Up, etc. If any deduction or withholding for any present or
future Related Tax of a Taxing Jurisdiction shall at any time be required in
respect of any amount to be paid by the Company under this Agreement or the
Notes, the Company will promptly (i) pay over to the government or taxing
authority of the Taxing Jurisdiction imposing such Related Tax the full amount
required to be deducted or withheld by the Company (including the full amount
required to be deducted or withheld from or otherwise paid by the Company in
respect of any Additional Payment required to be made pursuant to clause (ii)
of this Section 14.3(b)) and (ii) except as expressly provided below, pay to
each holder entitled under this Agreement to receive the payment from which the
amount referred to in the foregoing clause (i) has been so deducted or withheld
such additional amount as is necessary in order that the amount received by
such holder after any required deduction or withholding of Related Tax
(including, without limitation, any required deduction, withholding or other
payment of Related Tax on or with respect to such additional amount) shall
equal the amount such holder would have received had no such deduction,
withholding or other payment of Related Tax been paid (the "Additional
Payment"), and if any holder pays any amount in respect of any Related Tax on
any payment due from the Company hereunder or under the Notes, or penalties or
interest thereon, then the Company shall reimburse such holder for that payment
upon demand, provided that no payment of any Additional Payment, or of any such
reimbursement in respect of any such payment made by any such holder, shall be
required to be made for or on account of:
(A) any Related Tax that would not have been imposed but for
the existence of any present or former connection between such holder
and the Taxing Jurisdiction or any territory or possession or area
subject to the jurisdiction of the Taxing Jurisdiction, other than the
mere holding of the relevant Note, including, without limitation, such
holder's being or having been a citizen or resident thereof, or being
or having been present or engaged in a trade or business therein or
having an establishment therein;
(B) any such holder that is not a resident of the United
States of America or, with respect to any payment hereunder or under
the Notes owing to such holder, all or any part of which represents
income that is not subject to United States tax as income of a
resident of the United States of America to the extent that, had such
holder been a resident of the United States of America or had the
payment been so subject to United States tax, or had the payment been
made to a location within the United States of America, the provisions
of a statute, treaty or regulation of the Taxing Jurisdiction would
have enabled an exemption to be claimed from the Related Tax in
respect of which an Additional Payment would otherwise have been
payable; or
(C) any combination of the items or conditions described in
clause (A) or clause (B) of this Section 14.3(b); and
provided further that the Company shall not be obliged to pay any Additional
Payment to any holder of a Note in respect of Related Taxes to the extent such
Related Taxes exceed the Related Taxes that would have been payable but for the
delay or failure by such holder (after receiving a written request from Cemex
Espana or the Company to make such filing and including copies (together with
instructions in English) of forms, certificates, documents, applications or
other reasonably required evidence (collectively, "Forms") to be filed) in the
filing with an appropriate Governmental Authority or otherwise of Forms
required to be filed by such holder to avoid or reduce such Related Taxes and
that in the case of any of the foregoing would not result in any confidential
income tax return information being revealed, either directly or indirectly, to
any Person and such delay or failure could have been lawfully avoided by such
holder, provided that such holder shall be deemed to have satisfied the
requirements of this proviso upon the good faith completion and submission of
such Forms as may be specified in a written request of the Company no later
than 45 days after receipt by such holder of such written request.
(c) Official Receipt. If the Company shall make any such Additional
Payment, it will promptly furnish each holder receiving such Additional Payment
under this Section 14.3U an official receipt issued by the relevant taxation or
other authorities involved for all amounts deducted or withheld as aforesaid.
(d) Other. Each holder agrees to use its best efforts to comply (after
a reasonable period to respond) with a written request of the Company delivered
to such holder to provide information (other than any confidential or
proprietary information) concerning the nationality, residence or identity of
such holder, and to make such declaration or other similar claim or reporting
requirement regarding such information (copies of the forms of which
declaration, claim or reporting requirement shall have been provided to such
holder by the Company), that is required by a statute, treaty or regulation of
the Taxing Jurisdiction as a precondition to exemption from all or part of any
Related Tax. The Company agrees to reimburse each holder for such holder's
reasonable out-of-pocket expenses, if any, incurred in complying with any such
request of such Person.
(e) Tax Refund. If the Company makes an Additional Payment under this
Section 14.3 for the account of any Person and such Person is entitled to a
refund of any portion of the tax (a "Tax Refund"), to which such payment is
attributable, and such Tax Refund may be obtained by filing one or more Forms,
then such Person shall after receiving a written request therefor from the
Company (which request shall specify in reasonable detail the Forms to be
filed), file such Forms. If such Person subsequently receives such a Tax
Refund, and such Person is readily able to identify the Tax Refund as being
attributable to the tax with respect to which an Additional Payment was made,
then such Person shall reimburse the Company such amount as such Person shall
determine acting in good faith to be the proportion of the Tax Refund, together
with any interest received thereon, attributable to such Additional Payment as
will leave such Person after the reimbursement (including such interest) in no
better or worse position than it would have been if the Additional Payment had
not been required. Nothing in this clause (e) shall obligate any holder to
disclose any information regarding its tax affairs or computations to the
Company.
(f) Survival. The obligations of the Company and the holders under
this Section 14.3 shall survive the payment in full of the Notes and the
termination of this Agreement.
14.4 Currency of Payment.
(a) Payment in Dollars. All payments under the Notes shall be made in
Dollars.
(b) Certain Expenses. If any expense required to be reimbursed
pursuant to this Agreement or the Notes is originally incurred in a currency
other than Dollars, the Company shall nonetheless make reimbursement of that
expense in Dollars, in an amount equal to the amount in Dollars that would have
been required for the Person that incurred such expense to have purchased, in
accordance with normal banking procedures, the sum paid in such other currency
(after any premium and costs of exchange) on the day that expense was
originally incurred.
(c) Payments Not in Dollars. To the fullest extent permitted by
applicable law, the obligations of the Company in respect of any amount due
under or in respect of this Agreement and the Notes shall (notwithstanding any
payment in any other currency, whether as a result of any judgment or order or
the enforcement thereof, the realization of any security, the liquidation of
any Obligor, any voluntary payment by any Obligor or otherwise) be discharged
only to the extent of the amount in Dollars that each holder entitled to
receive such payment may, in accordance with normal banking procedures,
purchase with the sum paid in such other currency (after any premium and costs
of exchange) on the Business Day immediately following the day on which such
holder receives such payment. If the amount in Dollars that may be so purchased
for any reason falls short of the amount originally due, the Company shall
indemnify and save harmless such holder from and against all loss or damage
arising out of or as a result of such deficiency. This indemnity shall
constitute an obligation separate and independent from the other obligations
contained in this Agreement and the Notes, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by such holder from time to time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an
amount due under this Agreement or the Notes or under any judgment or order.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated,
the Company and Cemex Espana will pay all reasonable costs and expenses
(including reasonable attorneys' fees of one special U.S. counsel and one
special Spanish counsel for the Purchasers, provided that, as to the costs and
expenses of Spanish counsel, Cemex Espana and the holders shall have agreed
upon the scope of work to be done by such Spanish counsel prior to its
engagement) incurred by the Purchasers in connection with such transactions and
in connection with any amendments, waivers or consents under or in respect of
this Agreement, the Note Guarantee or the Notes (whether or not such amendment,
waiver or consent becomes effective), including, without limitation: (a) the
costs and expenses incurred in enforcing or defending (or determining whether
or how to enforce or defend) any rights under this Agreement, the Note
Guarantee or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement, the
Note Guarantee or the Notes, or by reason of being a holder of any Note; (b)
the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company, Cemex Espana or
any Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby, by the Note Guarantee and by the Notes; and
(c) the fees and costs incurred in connection with the initial filing of this
Agreement and all related documents and financial information, and all
subsequent annual and interim filings of documents and financial information
related to this Agreement (provided the Company shall not be required to pay
more than $2,500 per year in respect of subsequent annual and interim filings),
with the SVO. The Company and Cemex Espana will pay, and will save each
Purchaser and each other holder of a Note harmless from, all claims in respect
of the fees, costs or expenses, if any, of brokers and finders (other than
those retained by any Purchaser).
15.2 Survival.
The obligations of the Company and Cemex Espana under this Section
15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, the Note Guarantee or
the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the related Notes, the purchase or
transfer by any Purchaser of any such Note or portion thereof or interest
therein and may be relied upon by any subsequent holder of any such Note,
regardless of any investigation made at any time by or on behalf of any
Purchaser or any other holder of any such Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company or
Cemex Espana pursuant to this Agreement shall be deemed representations and
warranties of the Company and Cemex Espana under this Agreement. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between the Purchasers and the Company and Cemex Espana and
supersede all prior agreements and understandings relating to the subject
matter hereof.
17. AMENDMENT AND WAIVER.
17.1 Requirements.
This Agreement, the Note Guarantee and the Notes may be amended, and
the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of
Cemex Espana, the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21
hereof, or any defined term (as it is used in any such Section), will be
effective as to any holder unless consented to by such holder in writing and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver or (iii) amend Section 8, 11(a), 11(b), 12, 17 or 20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof, the Note Guarantee or of the Notes. The Company will deliver executed
or true and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 17 to each holder of outstanding
Notes promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder as
consideration for or as an inducement to the entering into by any holder of any
waiver or amendment of any of the terms and provisions hereof or of the Note
Guarantee unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder then
outstanding even if such holder did not consent to such waiver or amendment.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon Cemex Espana and the Company without regard
to whether such Note has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Company,
Cemex Espana and the holder of any Note nor any delay in exercising any rights
hereunder, under the Note Guarantee or under any Note shall operate as a waiver
of any rights of any holder of such Note. As used herein, the term "this
Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement, the Note Guarantee or the Notes, or have directed
the taking of any action provided herein, in the Note Guarantee or in the Notes
to be taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company, Cemex Espana or any of its Affiliates shall be
deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), (b) by registered or certified mail with return receipt
requested (postage prepaid) or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to any Purchaser or its nominee, to such Purchaser or
nominee at the address specified for such communications on Schedule
A, or at such other address as such Purchaser or nominee shall have
specified to the Company and Cemex Espana in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing or, if to the Company or Cemex Espana, at Hernandez de
Tejada - 1, 28027 Madrid, Spain, Facsimile number:+ 34 91 377-6500,
phone number: + 34 91 377-6516, to the attention of Santiago
Puelles/Francisco Lopez, with a copy to Cemex Espana at Ave. Ricardo
Margain Zozaya, n(0) 325, Col. Valle del Campestre, Garza Garcia,
Nuevo Leon, 66220 Mexico, facsimile number: +52 81 8888-4519, to the
attention of Francisco Contreras, and with a copy (which shall
constitute notice hereunder) to Mayer, Brown, Rowe & Maw LLP, 1675
Broadway, 19th Floor, New York, NY 10019, facsimile number:
1-212-262-1910, to the attention of Peter V. Darrow or at such other
address as the Company or Cemex Espana shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when
actually received.
Each document, instrument, financial statement, report, notice, Form
or other communication delivered in connection with this Agreement shall be in
English or accompanied by an English translation thereof, which translation
shall be certified by a Responsible Officer.
The Financing Documents have been prepared and signed in English and
the parties hereto agree that the English versions of this Agreement and the
other Financing Documents shall be the only versions valid for the purpose of
the interpretation and construction hereof and thereof notwithstanding the
preparation of any translation into another language of any Financing Document,
whether official or otherwise or whether prepared in relation to any
proceedings which may be brought in the Kingdom of Spain or The Netherlands in
respect of any Financing Document.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by any Purchaser at the Closing (except the
Notes themselves) and (c) financial statements, certificates and other
information previously or hereafter furnished to any Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. Each of Cemex Espana and the
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 19 shall not prohibit Cemex Espana, the Company or any other
holder from contesting any such reproduction to the same extent that it could
contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of Cemex Espana or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of Cemex Espana or any Subsidiary;
provided that such term does not include information that (a) was publicly
known or otherwise known to such Purchaser prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission
by such Purchaser or any Person acting on the behalf of such Purchaser, (c)
otherwise becomes known to such Purchaser other than through disclosure by
Cemex Espana or any Subsidiary or (d) constitutes financial statements
delivered to such Purchaser under Section 7.1 that are otherwise publicly
available. Each Purchaser will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by such
Purchaser in good faith to protect confidential information of third parties
delivered to such Purchaser; provided that such Purchaser may deliver or
disclose Confidential Information to (i) such Purchaser's directors, trustees,
officers, employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (ii) such Purchaser's financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20U, (iii) any other holder of any Note, (iv) any Institutional
Investor to which such Purchaser sells or offers to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (v) any Person from which such Purchaser offers
to purchase any security of the Company or Cemex Espana (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over such Purchaser, (vii) the
National Association of Insurance Commissioners or any similar organization, or
any nationally recognized rating agency that requires access to information
about such Purchaser's investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to such
Purchaser, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which such Purchaser is a party or (z) if an
Event of Default has occurred and is continuing, to the extent such Purchaser
may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser's Notes, the Note Guarantee and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20U as though it
were a party to this Agreement. On reasonable request by Cemex Espana in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with Cemex Espana embodying the provisions
of this Section 20.
21. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Affiliate, shall contain such
Affiliate's agreement to be bound by this Agreement and shall contain a
confirmation by such Affiliate of the accuracy with respect to it of the
representations set forth in Section 6. Upon receipt of such notice, wherever
the word "Purchaser" is used in this Agreement (other than in this Section 21),
such words shall be deemed to refer to such Affiliate in lieu of such
Purchaser. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to such Purchaser all of the
Notes then held by such Affiliate, upon receipt by the Company of notice of
such transfer, wherever the word "Purchaser" is used in this Agreement (other
than in this Section 21), such words shall no longer be deemed to refer to such
Affiliate, but shall refer to such Purchaser, and such Purchaser shall have all
the rights of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest
on any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days elapsed
in the computation of the interest payable on such next succeeding Business
Day.
22.3 Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or that such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 Governing Law.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
22.7 Jurisdiction; Service of Process.
EACH OF CEMEX ESPANA AND THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND/OR ANY OTHER FINANCING DOCUMENT, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY
BREACH HEREUNDER OR UNDER ANY OTHER FINANCING DOCUMENT, BROUGHT BY ANY HOLDER
OF A NOTE AGAINST CEMEX ESPANA OR THE COMPANY OR ANY OF THEIR RESPECTIVE
PROPERTIES, MAY BE BROUGHT BY SUCH HOLDER OF A NOTE IN THE COURTS OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK
STATE COURT SITTING IN NEW YORK CITY, AS SUCH HOLDER OF A NOTE MAY IN ITS SOLE
DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT EACH OF
CEMEX ESPANA AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF EACH SUCH COURT AND AGREES THAT PROCESS SERVED
EITHER PERSONALLY OR BY REGISTERED MAIL ON CEMEX ESPANA, THE COMPANY OR A
DESIGNATED AGENT SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE
SERVICE OF PROCESS IN ANY SUCH SUIT, AND EACH OF CEMEX ESPANA AND THE COMPANY
IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED
BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE. WITHOUT LIMITING THE FOREGOING, EACH OF CEMEX
ESPANA AND THE COMPANY HEREBY APPOINTS, IN THE CASE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE OF NEW YORK, CT CORPORATION
SYSTEM, 111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011, TO RECEIVE, FOR IT AND ON
ITS BEHALF, SERVICE OF PROCESS IN THE STATE OF NEW YORK WITH RESPECT THERETO AT
ANY AND ALL TIMES. EACH OF CEMEX ESPANA AND THE COMPANY WILL TAKE ANY AND ALL
ACTION, INCLUDING THE EXECUTION AND FILING OF ALL SUCH DOCUMENTS AND
INSTRUMENTS AND TIMELY PAYMENTS OF FEES AND EXPENSES, AS MAY BE NECESSARY TO
EFFECT AND CONTINUE THE APPOINTMENT OF SUCH AGENT IN FULL FORCE AND EFFECT, OR
IF NECESSARY BY REASON OF ANY FACT OR CONDITION RELATING TO SUCH AGENT, TO
REPLACE SUCH AGENT (BUT ONLY AFTER HAVING GIVEN NOTICE THEREOF TO EACH HOLDER
OF NOTES AND ANY SUCCESSOR AGENT IS REASONABLY ACCEPTABLE TO REQUIRED HOLDERS).
EACH OF CEMEX ESPANA AND THE COMPANY AGREES THAT SERVICE OF PROCESS UPON SUCH
AGENT SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON EACH
OF CEMEX ESPANA AND THE COMPANY IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
SUCH COURT. EACH OF CEMEX ESPANA AND THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OR ERROR BY REASON OF ANY SUCH
SERVICE IN SUCH MANNER AND AGREES THAT SUCH SERVICE SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON EACH OF CEMEX ESPANA AND THE COMPANY
IN ANY SUCH SUIT, ACTION OR PROCEEDING AND SHALL, TO THE FULLEST EXTENT
PERMITTED BY LAW, BE TAKEN AND HELD TO BE VALID AND PERSONAL SERVICE UPON AND
PERSONAL DELIVERY TO EACH OF CEMEX ESPANA AND THE COMPANY. IN ADDITION, EACH OF
CEMEX ESPANA AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND/OR ANY OTHER FINANCING DOCUMENT BROUGHT IN SUCH COURTS, AND
HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF A NOTE
TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY
APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER CEMEX ESPANA OR THE COMPANY IN
SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE
LAW. NOTHING IN THIS SECTION 22.7 SHALL BE DEEMED TO LIMIT ANY OTHER
SUBMISSION TO JURISDICTION, WAIVER OR OTHER AGREEMENT BY CEMEX ESPANA OR THE
COMPANY CONTAINED IN ANY OTHER FINANCING DOCUMENT. TO THE EXTENT THAT CEMEX
ESPANA OR THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF CEMEX ESPANA AND THE
COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS.
22.8 Judgment Currency.
Each of Cemex Espana and the Company agrees that if, for the purposes
of obtaining judgment in any court, it is necessary to convert a sum due
hereunder or under the Notes in any currency into another currency, to the
fullest extent permitted by law, the rate of exchange used shall be that at
which in accordance with normal banking procedures a holder could purchase such
first currency with such other currency on the Business Day preceding that on
which final judgment is given.
* * * * *
The execution hereof by the Purchasers shall constitute a contract
among Cemex Espana, the Company and the Purchasers for the uses and purposes
hereinabove set forth.
Very truly yours,
CEMEX ESPANA, S.A.
By: /s/ Javier Garcia
-------------------------
Title: Attorney-in-fact
----------------------
CEMEX ESPANA FINANCE LLC
By: /s/ Javier Garcia
-------------------------
Title: Attorney-in-fact
----------------------
The foregoing is hereby
agreed to as of the
date hereof:
Mellon Bank, N.A., solely in its capacity as Custodian for AVIVA LIFE-
Principal Glob Priv EG Convertible Securities (as directed by the Principal
Global Investors, LLC), and not in its individual capacity (MAC & CO) - Nominee
Name
By: /s/ Bernadette T. Rist
-----------------------
Name: Bernadette T. Rist
Title: Authorized Signatory
The foregoing is hereby
agreed to as of the
date hereof:
Mellon Bank, N.A., solely in its capacity as Custodian for AVIVA
LIFE-Principal Glob Priv General Account Deferred TSA (as directed by the
Principal Global Investors, LLC), and not in its individual capacity (MAC & CO)
- - Nominee Name
By: /s/ Bernadette T. Rist
-----------------------
Name: Bernadette T. Rist
Title: Authorized Signatory
The foregoing is hereby
agreed to as of the
date hereof:
GENERAL AMERICAN LIFE INSURANCE COMPANY
By: METROPOLITAN LIFE INSURANCE COMPANY, ITS INVESTMENT MANAGER
By: /s/ Judith A. Gulotta
------------------------------
Name: Judith A. Gulotta
Title: Director
The foregoing is hereby
agreed to as of the
date hereof:
ING LIFE INSURANCE AND ANNUITY COMPANY
ING USA ANNUITY AND LIFE INSURANCE COMPANY
SECURITY LIFE OF DENVER INSURANCE COMPANY
BY: ING INVESTMENT MANAGEMENT LLC, AS AGENT
By: /s/ Kurt E. Oppermann
------------------------------
Name: Kurt E. Opperman
Title: Vice President
The foregoing is hereby
agreed to as of the
date hereof:
KNIGHTS OF COLUMBUS
By: /s/ Donald R. Kehoe
------------------------------
Name: Donald R. Kehoe
Title: Assistant Supreme Secretary
The foregoing is hereby
agreed to as of the
date hereof:
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Judith A. Gulotta
------------------------------
Name: Judith A. Gulotta
Title: Director
The foregoing is hereby
agreed to as of the
date hereof:
METROPOLITAN TOWER LIFE INSURANCE COMPANY
BY: METROPOLITAN LIFE INSURANCE COMPANY, ITS INVESTMENT MANAGER
By: /s/ Judith A. Gulotta
------------------------------
Name: Judith A. Gulotta
Title: Director
The foregoing is hereby
agreed to as of the
date hereof:
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE MULTIPLE MATURITY SEPARATE ACCOUNT
By: /s/ Mark W. Poeppelman
------------------------------
Name: Mark W. Poeppelman
Title: Authorized Signatory
The foregoing is hereby
agreed to as of the
date hereof:
NEW ENGLAND LIFE INSURANCE COMPANY
BY: METROPOLITAN LIFE INSURANCE COMPANY, ITS INVESTMENT MANAGER
By: /s/ Judith A. Gulotta
------------------------------
Name: Judith A. Gulotta
Title: Director
The foregoing is hereby
agreed to as of the
date hereof:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
BY: NEW YORK LIFE INVESTMENT MANAGEMENT LLC,
ITS INVESTMENT MANAGER
By: /s/ Lisa A. Scuderi
------------------------------
Name: Lisa A. Scuderi
Title: Director
The foregoing is hereby
agreed to as of the
date hereof:
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Lisa A. Scuderi
------------------------------
Name: Lisa A. Scuderi
Title: Investment Vice President
The foregoing is hereby
agreed to as of the date hereof:
PACIFIC LIFE INSURANCE COMPANY
(NOMINEE: MAC & CO)
By: /s/ Violet Osterberg
------------------------------
Name: Violet Osterberg
Title: Assistant Vice President
By: /s/ David C. Patch
------------------------------
Name: David C. Patch
Title: Assistant Secretary
The foregoing is hereby
agreed to as of the date hereof:
PHL VARIABLE INSURANCE COMPANY
By: /s/ Christopher M. Wilkos
------------------------------
Name: Christopher M. Wilkos
Title: Senior Vice President
The foregoing is hereby
agreed to as of the date hereof:
PRINCIPAL LIFE INSURANCE COMPANY
BY: PRINCIPAL GLOBAL INVESTORS, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
ITS AUTHORIZED SIGNATORY
By: /s/ Douglas A. Drees
------------------------------
Name: Douglas A. Drees
Title: Counsel
By: /s/ Christopher J. Henderson
------------------------------
Name: Christopher J. Henderson
Title: Counsel
The foregoing is hereby
agreed to as of the date hereof:
RGA REINSURANCE COMPANY, A MISSOURI CORPORATION
BY: PRINCIPAL GLOBAL INVESTORS, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
ITS AUTHORIZED SIGNATORY
By: /s/ Douglas A. Drees
------------------------------
Name: Douglas A. Drees
Title: Counsel
By: /s/ Christopher J. Henderson
------------------------------
Name: Christopher J. Henderson
Title: Counsel
The foregoing is hereby agreed
to as of the date hereof:
SYMETRA LIFE INSURANCE COMPANY, A WASHINGTON CORPORATION
BY: PRINCIPAL GLOBAL INVESTORS, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
ITS AUTHORIZED SIGNATORY
By: /s/ Douglas A. Drees
------------------------------
Name: Douglas A. Drees
Title: Counsel
By: /s/ Christopher J. Henderson
------------------------------
Name: Christopher J. Henderson
Title: Counsel
The foregoing is hereby agreed
to as of the date hereof:
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Lisa M. Ferraro
------------------------------
Name: Lisa M. Ferraro
Title: Director
The foregoing is hereby agreed
to as of the date hereof:
THE BANK OF NEW YORK, AS TRUSTEE FOR THE SCOTTISH RE (U.S.), INC. AND
SECURITY LIFE OF DENVER INSURANCE COMPANY SECURITY TRUST BY
AGREEMENT DATED DECEMBER 31, 2004
BY: PRINCIPAL GLOBAL INVESTORS, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
ITS AUTHORIZED SIGNATORY
By: /s/ Douglas A. Drees
------------------------------
Name: Douglas A. Drees
Title: Counsel
By: /s/ Christopher J. Henderson
------------------------------
Name: Christopher J. Henderson
Title: Counsel
The foregoing is hereby agreed
to as of the date hereof:
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Barry J. Scheinholtz
------------------------------
Name: Barry J. Scheinholtz
Title: Private Placements Manager
The foregoing is hereby agreed
to as of the date hereof:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ David A. Barras
------------------------------
Name: David A. Barras
Title: Authorized Representative
The foregoing is hereby agreed
to as of the date hereof:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By: /s/ Debra R. Thompson
------------------------------
Name: Debra R. Thompson
Title: Vice President
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
SERIES A NOTES
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- ------------
ING LIFE INSURANCE AND ANNUITY COMPANY $12,000,000 $10,000,000
(RA - 1)
$2,000,000
(RA - 2)
(1) All payments on account of the above
Notes numbered RA - 1 and RA - 2 (and any
replacement or substitute Notes therefor)
shall be made by wire transfer of
immediately available funds for credit
to:
Bank: The Bank of New York
ABA No.: 021000018
BFN: IOC 566/INST'L CUSTODY (for principal
and interest payments)
BFN: IOC 565/INST'L CUSTODY (for all
other payments)
Account No.: 216101 and PPN 15128@ AF 0
Attn: P&I Department
Ref.: ING Life Insurance and Annuity Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Operations/Settlements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-4886
(3) Address for all other communications and
notices:
Private Placements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-5057
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 71-0294708
(6) Original Notes to be sent to:
The Bank of New York
Window A - 3rd Floor
One Wall Street
New York, New York 10286
United States of America
Ref: ALI - Account No. 216101
with copy to:
Private Placements
ING Investment Management LLC
Suite 300
5780 Powers Ferry Road, NW
Atlanta, Georgia 30327-4349
United States of America
Fax: (770) 690-5057
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
ING USA ANNUITY AND LIFE INSURANCE COMPANY $10,000,000 $10,000,000
(RA - 3)
(1) All payments on account of the above Note
numbered RA - 3 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021000018
BFN: IOC 566/INST'L CUSTODY (for principal
and interest payments)
BFN: IOC 565/INST'L CUSTODY (for all other
payments)
Account No.: 136373 and PPN 15128@ AF 0
Ref.: ING USA Annuity and Life Insurance Co.
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Operations/Settlements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-4886
(3) Address for all other communications and
notices:
Private Placements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-5057
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 41-0991508
(6) Original Notes to be sent to:
The Bank of New York
Window A - 3rd Floor
One Wall Street
New York, New York 10286
United States of America
Ref: GOL - Account No. 136373
with copy to:
Private Placements
ING Investment Management LLC
Suite 300
5780 Powers Ferry Road, NW
Atlanta, Georgia 30327-4349
United States of America
Fax: (770) 690-5057
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
KNIGHTS OF COLUMBUS $5,000,000 $5,000,000
(RA - 4)
(1) All payments on account of the above Note
numbered RA - 4 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: BK OF NY/CUST
ABA No.: 021 000 018
KNIGHTS OF COLUMBUS DDA #8900300825
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Investment Accounting Department
Knights of Columbus
14th Floor
PO Box 2016
New Haven, Connecticut 06521-2016
United States of America
(3) Address for all other communications and
notices:
Investment Department
Knights of Columbus
19th Floor
One Columbus Plaza
New Haven, Connecticut 06510-3326
United States of America
Telephone: (203)-752-4385
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 06-0416470
(6) Original Notes to be sent to:
Anthony Paticchio
Investment Counsel
Knights of Columbus
One Columbus Plaza
New Haven, Connecticut 06510
United States of America
Telephone: 203 752 4025
Facsimile: 203-752-4119
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY $5,000,000 $5,000,000
(RA - 5)
(1) All payments on account of the above Note
numbered RA - 5 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
BNF: IOC566
F/A/O Nationwide Life and Annuity Insurance
Company
Attn: P & I Department
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
P & I Department
Nationwide Life and Annuity Insurance Company
c/o The Bank of New York
P O Box 19266
Newark, New Jersey 07195
United States of America
With a copy to:
Investment Accounting
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
United States of America
(3) Address for all other communications and
notices:
Corporate Fixed-Income Securities
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
United States of America
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 31-1000740
(6) Original Notes to be sent to:
The Bank of New York
One Wall Street
3rd Floor - Window A
New York, New York 10286
United States of America
F/A/O Nationwide Life and Annuity Insurance
Co. Acct #267961
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NATIONWIDE LIFE INSURANCE COMPANY $5,000,000 $5,000,000
(RA - 6)
(1) All payments on account of the above Note
numbered RA - 6 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
BNF: IOC566
Account No.: 267829
F/A/O Nationwide Life Insurance Company
Attn: P & I Department
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
P & I Department
Nationwide Life Insurance Company
c/o The Bank of New York
P O Box 19266
Newark, New Jersey 07195
United States of America
With a copy to:
Investment Accounting
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
United States of America
(3) Address for all other communications and
notices:
Corporate Fixed-Income Securities
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
United States of America
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 31-4156830
(6) Original Notes to be sent to:
The Bank of New York
One Wall Street
3rd Floor - Window A
New York, New York 10286
United States of America
F/A/O Nationwide Life Insurance Co. Acct #267829
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NATIONWIDE MULTIPLE MATURITY SEPARATE ACCOUNT $3,000,000 $3,000,000
(RA -7)
(1) All payments on account of the above Note
numbered RA - 7 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
BNF: IOC566
F/A/O Nationwide Multiple Maturity Separate Account
Attn: P & I Department
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
P & I Department
Nationwide Multiple Maturity Separate Account
c/o The Bank of New York
P O Box 19266
Newark, New Jersey 07195
United States of America
With a copy to:
Investment Accounting
Nationwide Multiple Maturity Separate Account
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
United States of America
(3) Address for all other communications and
notices:
Corporate Fixed-Income Securities
Nationwide Multiple Maturity Separate Account
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
United States of America
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 31-4156830
(6) Original Notes to be sent to:
The Bank of New York
One Wall Street
3rd Floor - Window A
New York, New York 10286
United States of America
F/A/O Nationwide Multiple Maturity Separate
Account. Acct # 267919
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PACIFIC LIFE INSURANCE COMPANY $20,000,000 $10,000,000
(RA - 8)
$5,000,000
(RA - 9)
$1,000,000
(RA - 10)
$1,000,000
(RA - 11)
$1,000,000
(RA - 12)
$1,000,000
(RA - 13)
$1,000,000
(RA - 14)
(1) All payments on account of the above
Notes numbered RA -8 thru RA - 14 (and
any replacement or substitute Notes
therefor) shall be made by wire transfer
of immediately available funds for credit
to:
Bank: Mellon Trust of New England
ABA No.: 0110-0123-4
DDA: 125261
Attn: MBS Income CC: 1253
Account No.: Pacific Life General Account/PLCF1810132
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Pacific Life Accounting Team
Mellon Trust
Three Mellon Bank Center
AIM# 153-3610
Pittsburgh, Pennsylvania 15259
United States of America
Facsimile: 412-236-7529
AND
Securities Administration - Cash Team
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660-6397
United States of America
Facsimile: 949-640-4013
(3) Address for all other communications and
notices:
Securities Department
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660-6397
United States of America
Facsimile: 949-219-5406
(4) Name of Nominee in which Notes are to be
issued: MAC & CO.
(5) Tax Identification No.: 95-1079000
(6) Original Notes to be sent to:
Robert Ferraro
Mellon Securities Trust Company
120 Broadway
13th Floor
New York, New York 10271
United States of America
Telephone: +1 212 374 1918
A/C Name: Pacific Life General Acct
A/C #: PLCF1810132
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PHL VARIABLE INSURANCE COMPANY $3,000,000 $3,000,000
(RA - 15)
(1) All payments on account of the above Note
numbered RA - 15 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JP Morgan Chase
New York, New York
United States of America
ABA No.: 021 000 021
Account No.: 900 9000 200
Account Name: Income Processing
Reference: G09388, Phoenix Life Insur.
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Private Placement Department
Phoenix Investment Partners
56 Prospect Street
Hartford, Connecticut 06115
United States of America
(3) Address for all other communications and
notices:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 06-1045829
(6) Original Notes to be sent to:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PHL VARIABLE INSURANCE COMPANY $1,000,000 $1,000,000
(RA - 16)
(1) All payments on account of the above Note
numbered RA - 16 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JP Morgan Chase
New York, New York
United States of America
ABA No.: 021 000 021
Account No.: 900 9000 200
Account Name: Income Processing
Reference: G09389, Phoenix Life Insur.
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Private Placement Department
Phoenix Investment Partners
56 Prospect Street
Hartford, Connecticut 06115
United States of America
(3) Address for all other communications and
notices:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 06-1045829
(6) Original Notes to be sent to:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PHL VARIABLE INSURANCE COMPANY $1,000,000 $1,000,000
(RA - 17)
(1) All payments on account of the above Note
numbered RA - 17 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JP Morgan Chase
New York, New York
United States of America
ABA No.: 021 000 021
Account No.: 900 9000 200
Account Name: Income Processing
Reference: G09390, Phoenix Life Insur.
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Private Placement Department
Phoenix Investment Partners
56 Prospect Street
Hartford, Connecticut 06115
United States of America
(3) Address for all other communications and
notices:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 06-1045829
(6) Original Notes to be sent to:
John Mulrain
Phoenix Life Insurance Company
One American Row
PO Box 5056
Hartford, Connecticut 06102-5056
United States of America
Telephone: 860 403 5799
Facsimile: 860 403 5182
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PRINCIPAL LIFE INSURANCE COMPANY $19,000,000 $12,350,000
(RA - 18)
$6,175,000
(RA - 19)
$475,000
(RA - 20)
(1) All payments on account of the above
Notes numbered RA - 18, RA - 19 and RA
-20 (and any replacement or substitute
Notes therefor) shall be made by wire
transfer of immediately available funds
for credit to:
Bank: Wells Fargo Bank, N.A.
San Francisco, California
United States of America
ABA No.: 121000248
Account No.: 0000014752
For credit to Principal Life Insurance Company
OBI PFGSE (S) B0067947/67948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 42-0127290
(6) Original Notes to be sent to:
Jon Heiny
Principal Life Insurance Company
711 High Street
G-24
Des Moines, Iowa 50392
United States of America
Tel.:(515) 246-7522
Fax: (515) 248-0483
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
SECURITY LIFE OF DENVER INSURANCE COMPANY $8,000,000 $4,000,000
(RA -21)
$4,000,000
(RA - 22)
(1) All payments on account of the above
Notes numbered RA -21 and RA - 22 (and
any replacement or substitute Notes
therefor) shall be made by wire transfer
of immediately available funds for credit
to:
Bank: The Bank of New York
ABA No.: 021000018
BFN: IOC 566/INST'L CUSTODY (for principal and
interest payments)
BFN: IOC 565/INST'L CUSTODY (for all other
payments)
Account No.: 178157 and PPN 15128@ AF 0
Ref.: Security Life of Denver Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Operations/Settlements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-4886
(3) Address for all other communications and
notices:
Private Placements
ING Investment Management LLC
5780 Powers Ferry Road, NW, Suite 300
Atlanta, Georgia 30327-4349
United States of America
Facsimile: (770) 690-5057
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 84-0499703
(6) Original Notes to be sent to:
The Bank of New York
Window A - 3rd Floor
One Wall Street
New York, New York 10286
United States of America
Ref: SLD - Account No. 178157
with copy to:
Private Placements
ING Investment Management LLC
Suite 300
5780 Powers Ferry Road, NW
Atlanta, Georgia 30327-4349
United States of America
Fax: (770) 690-5057
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA $16,000,000 $16,000,000
(RA - 23)
(1) All payments on account of the above Note
numbered RA - 23 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JP Morgan Chase
ABA No.: 021000021
Chase/NYC/CTR/BNF
Account No.: 900-9-000200
Reference A/C# G05978, Guardian Life
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to payments:
Barry Scheinholtz
The Guardian Life Insurance Company of America
Investment Department 20-D
7 Hanover Square
New York, New York 10004-2616
United States of America
Facsimile:(212) 919-2658/2656
(3) Address for all other communications and notices:
Barry Scheinholtz
The Guardian Life Insurance Company of America
Investment Department 20-D
7 Hanover Square
New York, New York 10004-2616
United States of America
Facsimile:(212) 919-2658/2656
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-5123390
(6) Original Notes to be sent to:
JP Morgan Chase
4 New York Plaza
Ground Floor Receive Window
New York, New York 10004
United States of America
Reference A/C #G05978, Guardian Life
PRINCIPAL PURCHASER Series A
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY $25,000,000 $25,000,000
(RA - 24)
(1) All payments on account of the above Note
numbered RA - 24 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: Boston Safe Deposit Trust
ABA No.: 011001234
Credit DDA Account No.: 125261
Attn: MBS Income, cc1253
Custody account # TRAF1515002
FC TOLIC Private
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.18% Series A Senior Notes due June 13,
2010, PPN 15128@ AF 0" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Custody Operations-Privates
AEGON USA Investment Management, LLC
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-7013
United States of America
Email: paymentnotifications@aegonusa.com
(3) Address for all other communications and
notices:
Chris Pahlke - Private Placements
AEGON USA Investment Management, LLC
400 West Market Street, 10th Floor
Louisville, KY 40202
United States of America
Telephone: 502-560-2198
Facsimile: 502-560-2030
With a copy to:
Director of Private Placements
AEGON USA Investment Management, LLC
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499-5335
United States of America
Telephone: 319-369-2432
Facsimile: 1-888-652-8024
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 95-1060502
(6) Original Notes to be sent to:
A) A copy of the Note MUST be faxed
to Custody Operations-Privates
at 888-652-8024 for
verification.
B) Once the note has been verified,
a letter including the Custody
Bank Instructions will then be
faxed back.
C) The FAXED LETTER will contain
the Custody vault address where
the FAXED LETTER and ORIGINAL
note needs to be sent.
SERIES B NOTES
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
AVIVA LIFE INSURANCE COMPANY $2,500,000 $2,500,000
(RB - 1)
(1) All payments on account of the above Note
numbered RB - 1 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: Mellon Bank (Boston Safe Deposit)
011001234/BOS SAFE DEP
DDA#125261
Cost Center #1253
Account No.: AVAF2011412
For Acct: Aviva Life-Principal Glob Priv
EG Convertible Securities
OBI PFGSE (S) B0067948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Aviva Life Insurance Company
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Aviva Life Insurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Aviva Life Insurance Company
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: MAC & CO.
(5) Tax Identification No.: 04-2235236
(6) Original Notes to be sent to:
Mike Visone
Mellon Securities Trust Company
120 Broadway, 13th Floor
New York, New York 10271
United States of America
Telephone:
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
AVIVA LIFE INSURANCE COMPANY $3,000,000 $3,000,000
(RB - 2)
(1) All payments on account of the above Note
numbered RB - 2 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: Mellon Bank (Boston Safe Deposit)
011001234/BOS SAFE DEP
DDA#125261
Cost Center #1253
Account No.: AVAF2010522
For Acct: Aviva Life-Principal Glob Priv
General Account Deferred TSA
OBI PFGSE (S) B0067948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Aviva Life Insurance Company
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Aviva Life Insurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Aviva Life Insurance Company
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: MAC & CO.
(5) Tax Identification No.: 04-2235236
(6) Original Notes to be sent to:
Mike Visone
Mellon Securities Trust Company
120 Broadway, 13th Floor
New York, New York 10271
United States of America
Telephone:
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
GENERAL AMERICAN LIFE INSURANCE COMPANY $5,000,000 $5,000,000
(RB - 3)
(1) All payments on account of the above Note
numbered RB - 3 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
ABA No.: 021-000-021
Account No.: 323-8-90946
Account Name: General American Life Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Director
GENERAL AMERICAN LIFE INSURANCE COMPANY
c/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
General American Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
GENERAL AMERICAN LIFE INSURANCE COMPANY
c/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(3) Address for all other communications and
notices:
Director
GENERAL AMERICAN LIFE INSURANCE COMPANY
c/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
General American Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
GENERAL AMERICAN LIFE INSURANCE COMPANY
c/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 43-0285930
(6) Original Notes to be sent to:
Kate Kelly, Esq.
General American Life Insurance Company
c/o Metropolitan Life Insurance Company
Securities Investment
Law Department
10 Park Avenue
Morristown, New Jersey 07962
United States of America
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
KNIGHTS OF COLUMBUS $10,000,000 $10,000,000
(RB - 4)
(1) All payments on account of the above Note
numbered RB - 4 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: BK OF NY/CUST
ABA No.: 021 000 018
KNIGHTS OF COLUMBUS DDA #8900300825
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Investment Accounting Department
Knights of Columbus
14th Floor
PO Box 2016
New Haven, Connecticut 06521-2016
United States of America
(3) Address for all other communications and
notices:
Investment Department
Knights of Columbus
19th Floor
One Columbus Plaza
New Haven, Connecticut 06510-3326
United States of America
Telephone: (203)-752-4385
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 06-0416470
(6) Original Notes to be sent to:
Anthony Paticchio
Investment Counsel
Knights of Columbus
One Columbus Plaza
New Haven, Connecticut 06510
United States of America
Telephone: 203 752 4025
Facsimile: 203-752-4119
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
METROPOLITAN LIFE INSURANCE COMPANY $36,000,000 $36,000,000
(RB - 5)
(1) All payments on account of the above Note
numbered RB - 5 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
ABA No.: 021-000-021
Account No.: 002-2-410591
Account Name: Metropolitan Life Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Director
Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
Metropolitan Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(3) Address for all other communications and
notices:
Director
Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
Metropolitan Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-5581829
(6) Original Notes to be sent to:
Kate Kelly, Esq.
Metropolitan Life Insurance Company
Securities Investments, Law Department
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
METROPOLITAN TOWER LIFE INSURANCE COMPANY $1,000,000 $1,000,000
(RB - 6)
(1) All payments on account of the above Note
numbered RB - 6 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
ABA No.: 021-000-021
Account No.: 002-2-403778
Account Name: Metropolitan Tower Life Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Director
METROPOLITAN TOWER LIFE INSURANCE COMPANY
C/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
Metropolitan Tower Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
METROPOLITAN TOWER LIFE INSURANCE COMPANY
C/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(3) Address for all other communications and
notices:
Director
METROPOLITAN TOWER LIFE INSURANCE COMPANY
C/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
Metropolitan Tower Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
METROPOLITAN TOWER LIFE INSURANCE COMPANY
C/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-3114906
(6) Original Notes to be sent to:
Kate Kelly, Esq.
METROPOLITAN TOWER LIFE INSURANCE COMPANY
C/o Metropolitan Life Insurance Company
Securities Investments, Law Department
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NEW ENGLAND LIFE INSURANCE COMPANY $8,000,000 $8,000,000
(RB - 7)
(1) All payments on account of the above Note
numbered RB - 7 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
ABA No.: 021-000-021
Account No.: 910-2-778983
Account Name: New England Life Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Director
New England Life Insurance Company
C/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
New England Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
New England Life Insurance Company
C/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(3) Address for all other communications and
notices:
Director
New England Life Insurance Company
C/o Metropolitan Life Insurance Company
Investments, Private Placements
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4250
AND
New England Life Insurance Company
c/o MetLife Investments Limited
Orion House 11th Floor
5 Upper St. Martin's Lane
London WC2H 9EA, England
Attention: Investments, Private Placements
Facsimile: 011-44-20-7632-8101
With a copy OTHER than with respect to
deliveries of financial statements to:
Chief Counsel-Securities Investments (PRIV)
New England Life Insurance Company
C/o Metropolitan Life Insurance Company
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
Facsimile (973) 355-4338
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 04-2708937
(6) Original Notes to be sent to:
Kate Kelly, Esq.
New England Life Insurance Company
C/o Metropolitan Life Insurance Company
Securities Investments, Law Department
10 Park Avenue
Morristown, New Jersey 07962-1902
United States of America
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION $9,000,000 $9,000,000
(RB - 8)
(1) All payments on account of the above Note
numbered RB - 8 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
New York, New York
United States of America
ABA No.: 021-000-021
General Account No. 323-8-47382
Credit: New York Life Insurance and Annuity Corporation
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Financial Management
Securities Operation
New York Life Insurance and Annuity Corporation
c/o New York Life Investment Management LLC
51 Madison Avenue
2nd Floor
New York, New York 10010-1603
United States of America
Facsimile: (212) 447-4160
WITH a copy sent electronically to:
SIGLibrary@nylim.com
(3) Address for all other communications and
notices:
Securities Investment Group
Private Finance
New York Life Insurance and Annuity Corporation
c/o New York Life Investment Management LLC
51 Madison Avenue
2nd Floor
New York, New York 10010-1603
United States of America
Facsimile: (212) 447-4122
WITH a copy sent electronically to:
SIGLibrary@nylim.com
AND with a copy of any notices regarding
defaults or Events of Default under the
operative documents to:
Office of General Counsel
Investment Section, Room 1104
Facsimile: (212) 576-8340
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-3044743
(6) Original Notes to be sent to:
R. Sharon Gravesande
Vice President & Assistant General Counsel
New York Life Investment Management LLC
51 Madison Avenue
Room 1104
New York, New York 10010
United States of America
Telephone: (212) 576-4825
Facsimile: (212) 576-8340
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
NEW YORK LIFE INSURANCE COMPANY $16,000,000 $16,000,000
(RB - 9)
(1) All payments on account of the above Note
numbered RB - 9 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase Bank
New York, New York
United States of America
ABA No.: 021-000-021
General Account No. 008-9-00687
Credit: New York Life Insurance Company
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Financial Management
Securities Operation
New York Life Insurance Company
c/o New York Life Investment Management LLC
51 Madison Avenue 2nd Floor
New York, New York 10010-1603
United States of America
Facsimile: (212) 447-4160
WITH a copy sent electronically to:
SIGLibrary@nylim.com
(3) Address for all other communications and
notices:
Securities Investment Group
Private Finance
New York Life Insurance Company
c/o New York Life Investment Management LLC
51 Madison Avenue
2nd Floor
New York, New York 10010-1603
United States of America
Facsimile: (212) 447-4122
WITH a copy sent electronically to:
SIGLibrary@nylim.com
AND with a copy of any notices regarding
defaults or Events of Default under the
operative documents to:
Office of General Counsel
Investment Section, Room 1104
Facsimile: (212) 576-8340
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-5582869
(6) Original Notes to be sent to:
R. Sharon Gravesande
Vice President & Assistant General Counsel
New York Life Investment Management LLC
51 Madison Avenue
Room 1104
New York, New York 10010
United States of America
Telephone: (212) 576-4825
Facsimile: (212) 576-8340
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PACIFIC LIFE INSURANCE COMPANY $5,000,000 $1,000,000
(RB - 10)
$1,000,000
(RB - 11)
$1,000,000
(RB - 12)
$1,000,000
(RB - 13)
$1,000,000
(RB - 14)
(1) All payments on account of the above
Notes numbered RB - 10 thru RB - 14 (and
any replacement or substitute Notes
therefor) shall be made by wire transfer
of immediately available funds for credit
to:
Bank: Mellon Trust of New England
ABA No.: 0110-0123-4
DDA: 125261
Attn: MBS Income CC: 1253
Account No.: Pacific Life General Account/PLCF1810132
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Pacific Life Accounting Team
Mellon Trust
Three Mellon Bank Center
AIM# 153-3610
Pittsburgh, Pennsylvania 15259
United States of America
Facsimile: 412-236-7529
AND
Securities Administration - Cash Team
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660-6397
United States of America
Facsimile: 949-640-4013
(3) Address for all other communications and
notices:
Securities Department
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660-6397
United States of America
Facsimile: 949-219-5406
(4) Name of Nominee in which Notes are to be
issued: MAC & CO.
(5) Tax Identification No.: 95-1079000
(6) Original Notes to be sent to:
Robert Ferraro
Mellon Securities Trust Company
120 Broadway
13th Floor
New York, New York 10271
United States of America
Telephone: +1 212 374 1918
A/C Name: Pacific Life General Acct
A/C #: PLCF1810132
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
PRINCIPAL LIFE INSURANCE COMPANY $5,000,000 $2,500,000
(RB - 15)
$2,000,000
(RB - 16)
$500,000
(RB - 17)
(1) All payments on account of the above
Notes numbered RB - 15, RB - 16 and RB-17
(and any replacement or substitute Notes
therefor) shall be made by wire transfer
of immediately available funds for credit
to:
Bank: Wells Fargo Bank, N.A.
San Francisco, California
United States of America
ABA No.: 121000248
Account No.: 0000014752
For credit to Principal Life Insurance Company
OBI PFGSE (S) B0067947/67948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 42-0127290
(6) Original Notes to be sent to:
Jon Heiny
Principal Life Insurance Company
711 High Street
G-24
Des Moines, Iowa 50392
United States of America
Tel.:(515) 246-7522
Fax: (515) 248-0483
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
RGA REINSURANCE COMPANY $7,500,000 $7,500,000
(RB - 18)
(1) All payments on account of the above Note
numbered RB - 18 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
Account No.: 0000303819
For credit to: RGA Re Private Placements PGI
OBI PFGSE (S) B0067948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
RGA Reinsurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
RGA Reinsurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
RGA Reinsurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: HARE & CO.
(5) Tax Identification No.: 43-1235868
(6) Original Notes to be sent to:
Lucille Del Terzo
The Bank of New York
One Wall Street - 3rd Floor Window A
Brooklyn, New York 11217
United States of America
Re: RGA Re Private Placements PGI
Account # 0000303819
Telephone: 718-315-3543
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
SYMETRA LIFE INSURANCE COMPANY $5,000,000 $5,000,000
(RB -19)
(1) All payments on account of the above Note
numbered RB - 19 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: JPMorgan Chase
ABA No.: 021-000-021
Account No.: 9009002859
For Acct: Funds Clearance
OBI PFGSE (S) B0067948()
Attn: Symetra Life - BOLI U LIFE #P21163
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Symetra Life Insurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: CUDD & CO.
(5) Tax Identification No.: 91-0742147
(6) Original Notes to be sent to:
Maribel C. Friend
White Mountains Advisors LLC
370 Church Street
Guilford, Connecticut 06437
United States of America
Tel.: 203-458-2380 ext. 41
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
SYMETRA LIFE INSURANCE COMPANY $10,000,000 $10,000,000
(RB -20 )
(1) All payments on account of the above Note
numbered RB - 20 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
BNF: IOC566
Account: Symetra Life LTD Maturity #196
OBI PFGSE (S) B0067948()
Attn: P&I Department
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Symetra Life Insurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: HARE & CO.
(5) Tax Identification No.: 91-0742147
(6) Original Notes to be sent to:
Maribel C. Friend
White Mountains Advisors LLC
370 Church Street
Guilford, Connecticut 06437
United States of America
Tel.: 203-458-2380 ext. 41
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
SYMETRA LIFE INSURANCE COMPANY $8,000,000 $8,000,000
(RB - 21)
(1) All payments on account of the above Note
numbered RB - 21 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: The Bank of New York
ABA No.: 021-000-018
BNF: IOC566
Account: Symetra Life Retirement Services #197
OBI PFGSE (S) B0067948()
Attn: P&I Department
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Symetra Life Insurance Company
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Symetra Life Insurance Company
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: HARE & CO.
(5) Tax Identification No.: 91-0742147
(6) Original Notes to be sent to:
Maribel C. Friend
White Mountains Advisors LLC
370 Church Street
Guilford, Connecticut 06437
United States of America
Tel.: 203-458-2380 ext. 41
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA $40,000,000 $40,000,000
(RB - 22)
(1) All payments on account of the above Note
numbered RB - 22 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit through the Automated
Clearing House System to:
Bank: JPMorgan Chase Bank, N.A.
ABA No.: 021-000-021
Account No.: 900-9-000200
Account Name: TIAA
For Further Credit to the Account Number: G07040
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Securities Accounting Division
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017
United States of America
Telephone: (212) 916-4109
Facsimile: (212) 916-6955
With a copy to:
JPMorgan Chase Bank, N.A.
P.O. Box 35308
Newark, New Jersey 07101
United States of America
Include the name and address of the bank
from which such electronic funds transfer
was sent.
(3) Address for all communications and
notices, including notices with respect
to payments:
Fixed Income and Real Estate
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017
United States of America
Telephone:(212) 916-6547 (Lisa Ferraro)
(212) 916-4000 (General Number)
Facsimile:(212) 916-6140
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 13-1624203
(6) Original Notes to be sent to:
JPMorgan Chase Bank, N.A.
4 New York Plaza
Ground Floor Window
New York, New York 10004
United States of America
For TIAA A/C#G07040
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
THE BANK OF NEW YORK, AS TRUSTEE FOR THE $1,000,000 $1,000,000
SCOTTISH RE (U.S.), INC. AND SECURITY (RB - 23)
LIFE OF DENVER INSURANCE COMPANY SECURITY
TRUST BY AGREEMENT DATED DECEMBER 31,
2004
(1) All payments on account of the above Note
numbered RB - 23 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: Bank of NYC
New York, New York
United States of America
ABA No.: 021-000-018
Account: GLA 111-565
Account No.: 327696
Account Name: Scottish RE US/ SLD Sec TR Principal
OBI PFGSE (S) B0067948()
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Fixed Income Private Placements
Scottish RE US - Security Life of Denver
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
and via Email: Privateplacements2@exchange.principal.com
COPY TO:
Investment Accounting Fixed Income Securities
Scottish RE US - Security Life of Denver
c/o Principal Global Investors, LLC
711 High Street
Des Moines, Iowa 50392-0960
United States of America
(3) Address for all other communications and
notices:
Fixed Income Private Placements
Scottish RE US - Security Life of Denver
C/o Principal Global Investors, LLC
711 High Street, G-26
Des Moines, Iowa 50392-0800
United States of America
(4) Name of Nominee in which Notes are to be
issued: HARE & CO.
(5) Tax Identification No.: 23-2038295
(6) Original Notes to be sent to:
PHYSICAL DELIVERY
The Bank of New York
One Wall St, 3rd Floor
Incoming Window,
Trust AC # 327696
New York, New York 10286
United States of America
PRINCIPAL PURCHASER Series B
-------------------
Aggregate Principal Note
Amount of Notes Denomination(s)
to be Purchased and Number(s)
--------------- -------------
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY $20,000,000 $20,000,000
(RB - 24)
(1) All payments on account of the above Note
numbered RB - 24 (and any replacement or
substitute Notes therefor) shall be made
by wire transfer of immediately available
funds for credit to:
Bank: US Bank
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
United States of America
ABA No.: 075000022
Account No.: 182380324521
Account Name: Northwestern Mutual Life
Each such wire transfer shall set forth a
reference to "CEMEX ESPANA FINANCE LLC
5.62% Series B Senior Notes due June 13,
2015, PPN 15128@ AG 8" and application
(as among principal, interest and
Make-Whole Amount) of the payment being
made.
(2) Address for all notices relating to
payments:
Investment Operations
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
United States of America
Facsimile: (414) 625-6998
(3) Address for all other communications and
notices:
Securities Department
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
United States of America
Facsimile: (414) 665-7124
(4) Name of Nominee in which Notes are to be
issued: NONE
(5) Tax Identification No.: 39-0509570
(6) Original Notes to be sent to:
Anthony C. Marino
Assistant General Counsel
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
United States of America
SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Additional Payment" is defined in Section 14.3(b)U; when used herein
with respect to any Guarantor, such term shall have the meaning assigned
thereto in the Note Guarantee.
"Adjusted EBITDA" means, for any Relevant Period, the sum of (a)
EBITDA and (b) with respect to any business acquired during such period, the
sum of (i) the operating income and (ii) depreciation and amortization expense
for such business for such period, as determined in accordance with Spanish
GAAP for such Relevant Period less (c) with respect to any business disposed of
during such period, the sum of (i) the operating income and (ii) depreciation
and amortization expense for such business for such period, as determined in
accordance with Spanish GAAP for such Relevant Period; provided that Cemex
Espana need only make the adjustments contemplated by clause (b) and/or (c)
above if the Adjusted EBITDA that would result therefrom would differ from
EBITDA by (euro)10,000,000 or more.
"Affiliate" means, at any time, (a) with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person and (b) with respect to Cemex Espana any Person beneficially
owning or holding, directly or indirectly, 10% or more of any class of voting
or equity interests of Cemex Espana or any Subsidiary or any Person of which
Cemex Espana and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity interests.
As used in this definition, "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of Cemex Espana.
"Agreement" is defined in the introduction hereto.
"Anti-Terrorism Order" means Executive Order 13,224 of September 23,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49,079 (2001), as
amended).
"Asia Fund" means Cemex Asia Holdings Ltd. or any other vehicles used
by Cemex Espana or any Subsidiary to invest, or finance investments already
made, in companies involved in or assets dedicated to the cement, concrete or
aggregates business in Asia in both cases, such company or vehicle, as
applicable, with committed third parties with minority interests other than
Cemex Espana and its Subsidiaries or Cemex and its Subsidiaries and with Cemex
Espana maintaining control of its management.
"Business Day" means (a) for the purposes of Section 8.8U only, any
day other than a Saturday, a Sunday or a day on which commercial banks in New
York City are required or authorized to be closed and (b) for the purposes of
any other provision of this Agreement, any day other than a Saturday, a Sunday
or a day on which commercial banks in Madrid, Spain or New York City are
required or authorized to be closed.
"Capital Lease" means any lease that is capitalized on a balance sheet
prepared in accordance with Spanish GAAP.
"Capital Stock" means, with respect to any Person, capital stock or
share capital or other ownership interests in such Person substantially similar
to capital stock or share capital, whether or not called "capital stock" or
"share capital" under the laws of (or in business terminology commonly used in)
the jurisdiction where such Person is organized or conducts its primary
business.
"Cemex" means CEMEX, S.A. de C.V., a stock corporation organized under
the laws of the United Mexican States.
"Cemex Espana" means (a) Cemex Espana, S.A., a corporation organized
under the laws of the Kingdom of Spain, and (b) any Person that, as a result of
a combination, merger or asset transfer permitted by Section 10.2, assumes
the obligations of Cemex Espana under the Note Guarantee and this Agreement.
"Change in Control" means that Cemex ceases to (a) be entitled to
(whether by way of ownership of shares, proxy, contract, agency or otherwise)
(i) cast, or control the casting of, at least 51% of the maximum number of
votes that might be cast at a general meeting of Cemex Espana, (ii) appoint or
remove all, or the majority, of the directors or other equivalent officers of
Cemex Espana or (iii) give directions with respect to the operating and
financial policies of Cemex Espana which the directors or other equivalent
officers of Cemex Espana are obliged to comply with or (b) hold at least 51% of
the common shares in Cemex Espana.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to
time.
"Company" means Cemex Espana Finance LLC, a limited liability company
organized under the laws of Delaware.
"Confidential Information" is defined in Section 20.
"Consolidated Net Worth" means, at any date, the sum of the
consolidated shareholders' equity plus minority interests of Cemex Espana and
its Subsidiaries in accordance with Spanish GAAP.
"Consolidated Total Assets" means, at any time, the total assets of
Cemex Espana and its Subsidiaries, as determined in accordance with Spanish
GAAP by reference to the most recent financial statements supplied by Cemex
Espana pursuant to Section 7.1(a) or 7.1(b), provided that such financial
statements shall be adjusted to reflect the acquisition or disposition of any
Subsidiary that has occurred since the date of such financial statements but
prior to or on the date of calculation.
"Control Prepayment Date" is defined in Section 8.9(a).
"Default" means an event or condition the occurrence or existence of
which if it continues uncured would, with the lapse of time or the giving of
notice or both, become an Event of Default.
"Default Rate" means, with respect to any Note, that rate of interest
that is the greater of (i) 2% per annum above the rate of interest stated in
clause (a) of the first paragraph of such Note or (ii) 2% over the rate of
interest publicly announced by Citibank, N.A. in New York, New York as its
"base" or "prime" rate.
"Department of the Treasury Rule" means Blocked Persons, Specially
Designated Nationals, Specifically Designated Terrorists, Foreign Terrorist
Organizations, and Specially Designated Narcotics Traffickers: Additional
Designations of Terrorism-Related Blocked Persons, 66 Fed. Reg. 54,404 (2001).
"Disposition Prepayment Date" is defined in Section 8.4.
"Dollar" and the sign "$" mean lawful currency of the United States of
America.
"EBITDA" means, for the Relevant Period immediately preceding the date
on which it is to be calculated, operating profit plus annual depreciation for
fixed assets plus annual amortization of intangible assets plus annual
amortization of start-up costs of Cemex Espana and its Subsidiaries plus
dividends received from non-consolidated companies, plus an amount equal to the
amount of Cemex Capital Contributions made during such period immediately
preceding the date on which it is to be calculated (up to an amount equal to
the amount of Royalty Expenses made in such period). Such calculation shall be
made in accordance with Spanish GAAP, where:
"Cemex Capital Contributions" means contributions in cash to
the capital of Cemex Espana by Cemex or by any of its Subsidiaries not
being a Subsidiary of Cemex Espana made after January 1, 2002.
"Intellectual Property Rights" means all copyrights
(including rights in computer software), trade marks, service marks,
business names, patents, rights in inventions, registered designs,
design rights, database rights and similar rights, rights in trade
secrets or other confidential information and any other intellectual
property rights and any interests (including by way of license) in any
of the foregoing (in each case whether registered or not and including
all applications for the same) which may subsist in any given
jurisdiction.
"Royalty Expenses" means expenses incurred by Cemex Espana or
any of its Subsidiaries to Cemex or any of its Subsidiaries not being
a Subsidiary of Cemex Espana as (a) consideration for the granting to
Cemex Espana or any Subsidiary of a license to use, exploit and enjoy
Intellectual Property Rights and any other intangible assets such as,
but not limited to, know-how, formulae, process technology and other
forms of intellectual and industrial property, whether or not
registered, held by Cemex or any of its Subsidiaries not being a
Subsidiary of Cemex Espana; or (b) fees, commissions or other amounts
accrued in respect of any management contract, services contract,
overhead expenses allocation arrangement or any other similar
transaction; provided that in clauses (a) and (b) such amounts
shall have been taken into consideration in the calculation of
operating profit under Spanish GAAP.
"Environmental Laws" means any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with Cemex Espana
under section 414 of the Code.
"EU" means the European Union.
"euro" or "(euro)" means the single currency of participating member
states of the EU.
"Event of Default" is defined in Section 11.
"Excess Asset Disposition" is defined in Section 10.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Disposition" is defined in Section 10.4.
"Excluded Subsidiary Guarantor" means any of the Subsidiaries that are
Guarantors when the Note Guarantee is initially delivered; provided that any
other Subsidiary that is a Guarantor shall be treated as an Excluded Subsidiary
Guarantor for purposes of this Agreement if legal opinions and other evidence
are delivered to the holders of Notes sufficient to establish to the reasonable
satisfaction of the Required Holders and their legal advisers that the
obligations of such Guarantor under the Note Guarantee ranks and will continue
to rank at least pari passu with all other unsecured and unsubordinated
Financial Indebtedness of such Guarantor, including in a bankruptcy or
insolvency proceeding.
"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"Finance Charges" means, for any period, the sum (without duplication)
of (a) all interest expense in respect of Financial Indebtedness (including
imputed interest on Capital Leases) for such period plus (b) all debt discount
and expense (including, without limitation, expenses relating to the issuance
of instruments representing Financial Indebtedness) amortized during such
period plus (c) amortization of discounts on sales of receivables during such
period plus (d) all factoring charges for such period plus (e) all guarantee
charges for such period plus (f) any charges analogous to the foregoing
relating to Off-Balance-Sheet Transactions for such period, all determined on a
consolidated basis in accordance with Spanish GAAP.
"Financial Indebtedness" means, without duplication, any indebtedness
for or in respect of:
(a) moneys borrowed (including, but not limited to, any amount raised
by acceptance under any acceptance credit facility and receivables sold or
discounted on a recourse basis (it being understood that Permitted
Securitizations shall be deemed not to be on a recourse basis));
(b) any amount raised pursuant to any note purchase facility or the
issue of bonds, notes, debentures, loan stock or any similar instrument;
(c) the amount of any liability in respect of any lease or hire
purchase contract that would, in accordance with Spanish GAAP, be treated as a
Capital Lease;
(d) deferred purchase price of assets or the deferred payment of
services, except trade accounts payable in the ordinary course of business;
(e) obligations of a Person under repurchase agreements for the stock
issued by such person or another Person;
(f) obligations of a Person with respect to product invoices incurred
in connection with exporting financing;
(g) all Financial Indebtedness of others secured by a Lien on any
asset of a Person, regardless of whether such Financial Indebtedness is assumed
by such person in an amount equal to the lower of (i) the net book value of
such asset and (ii) the amount secured thereby; and
(h) Guaranties of Financial Indebtedness of other Persons.
"Financing Documents" mean this Agreement, the Notes and the Note
Guarantee.
"Foreign Pension Plan" means any plan, fund or similar program (a)
established or maintained outside the United States of America by any one or
more of Cemex Espana and its Subsidiaries primarily for the benefit of
employees (substantially all of whom are Persons not residing in the United
States of America) of one or more of Cemex Espana and its Subsidiaries, which
plan, fund or other similar program provides for retirement income for such
employees or results in a deferral of income for such employees in
contemplation of retirement and (b) not otherwise subject to ERISA.
"GAAP" means, in relation to an Obligor, the generally accepted
accounting principles applicable to it in the country of its organization from
time to time.
"Governmental Authority" means
(a) the government of
(i) the Kingdom of Spain, The Netherlands, the United States
of America or any State or other political subdivision thereof, or
(ii) any jurisdiction in which Cemex Espana or any Subsidiary
conducts all or any part of its business, or that asserts jurisdiction
over any properties of Cemex Espana or any Subsidiary or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"Guarantor" means (a) each of (i) Cemex Espana, (ii) Cemex Caracas
Investments B.V., a limited liability company organized under the laws of The
Netherlands, (iii) Cemex Caracas II Investments B.V., a limited liability
company organized under the laws of The Netherlands, (iv) Cemex Egyptian
Investments B.V., a limited liability company organized under the laws of The
Netherlands, (v) Cemex Manila Investments B.V., a limited liability company
organized under the laws of The Netherlands, (vi) Cemex American Holdings B.V.,
a limited liability company organized under the laws of The Netherlands, and
(vii) Cemex Shipping B.V., a limited liability company organized under the laws
of The Netherlands, (b) any Person that, as a result of a consolidation, merger
or asset transfer permitted by Section 10.2, assumes the obligations of a
Person described in clause (a) above under the Note Guarantee and (if
applicable) this Agreement and (c) any other Person that executes a joinder of
the Note Guarantee from time to time; provided that any of the foregoing
Persons may cease to be a Guarantor as provided in Section 10.2(a).
"Guaranty" means any guaranty or indemnity (in the case of the latter
for any specified amount or otherwise in the amount specified in or for which
provision has been made in the accounts of the indemnifier) in any form made
other than in the ordinary course of business of the guarantor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"Holding Company" means, in relation to a company or a corporation, a
company or corporation in respect of which the first company or corporation is
a Subsidiary.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than $5,000,000 of the aggregate
principal amount of the Notes then outstanding and (c) any bank, trust company,
savings and loan association or other financial institution, any pension plan,
any investment company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person.
"Long-Term Indebtedness" means Financial Indebtedness the maturity of
which is more than one year after the date on which it was incurred.
"Make-Whole Amount" is defined in Section 8.8.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of Cemex Espana
and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of
Cemex Espana and its Subsidiaries taken as a whole, (b) the ability of Cemex
Espana or the Company to perform its obligations under this Agreement and the
other Financing Documents or (c) the validity or enforceability of this
Agreement or any other Financing Document.
"Material Subsidiary" means those Persons identified as such in
Schedule 5.4 and any other Subsidiary of Cemex Espana which, at any time after
the date hereof:
(i) has total assets representing 5% or more of the
total Consolidated Total Assets; and/or
(ii) has revenues representing 5% or more of the
consolidated net turnover of Cemex Espana and its
Subsidiaries.
in each case calculated on a consolidated basis and any Holding Company of any
such Subsidiary (unless such company is a Guarantor hereunder).
Compliance with the conditions set out in clauses (i) and (ii) shall
be determined by reference to the most recent financial statements supplied by
Cemex Espana pursuant to Section 7.1(a) or 7.1(b).
"Memorandum" is defined in Section 5.3.
"Moody's" means Moody's Investor Services Inc.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"Net Borrowings" means, at any time, the remainder of (a) Total
Borrowings at such time less (b) the aggregate amount of the following items
held by Cemex Espana and its Subsidiaries at such time: cash on hand, any
fixed-rate or floating-rate marketable debt security that is rated A or better
by S&P or A2 or better by Moody's, commercial paper that is rated A-2 or better
by S&P or P-2 or better by Moody's, investments in money market funds, banker's
acceptances, short-term deposits and other liquid investments.
"Net Proceeds Amount" means, with respect to any sale or transfer of
property by any Person, an amount equal to (a) the aggregate amount of the
consideration (valued at the Fair Market Value of such consideration at the
time of the consummation of such sale or transfer) received by such Person in
respect of such sale, minus (b) the sum of (i) all ordinary and reasonable
out-of-pocket costs and expenses actually incurred by such Person in connection
with such sale or transfer, (ii) taxes paid or reasonably estimated by such
Person to be payable as a result thereof, (iii) amounts required to be applied
to the repayment of any Financial Indebtedness secured by a Lien on the asset
subject to such sale or transfer, (iv) appropriate amounts to be provided by
such Person as a reserve against any liabilities associated with the assets
sold or transferred in such sale or disposition and retained by such Person
after such sale or disposition, including pension and other post-employment
benefit liabilities and liabilities related to environmental matters and
liabilities under any indemnification obligation associated with the assets
sold or disposed of in such sale or transfer and (v) amounts applied to the
acquisition of assets as contemplated by Section 10.4(2) within one year of
such sale or transfer.
"Note Guarantee" means a Note Guarantee to be entered into by Cemex
Espana and the other Guarantors in favor of the holders of Notes, as amended,
modified or supplemented from time to time.
"Notes" is defined in Section 1.
"Obligor" means the Company, Cemex Espana and each other Guarantor.
"Off-Balance-Sheet Transactions" means any present or future financing
transaction not reflected as indebtedness on the consolidated balance sheet of
Cemex Espana, but being structured in a way that may result in payment
obligations by Cemex Espana and its Subsidiaries for credit-related losses,
excluding any financing transaction in the form of:
(a) interest rate and currency exchange rate hedging
agreements to hedge risks arising in the normal course of business;
(b) transactions containing potential payments by Cemex
Espana and its Subsidiaries (e.g., via a put-option agreement or
similar structures) under which payments are incapable of being
triggered until June 15, 2015; or
(c) any supply arrangement or equipment lease in respect of
energy or raw material sourcing containing contingent obligations to
directly or indirectly purchase (including through the purchase of
shares or other equity participation) the underlying operations or
assets up to an aggregate maximum of $100,000,000.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of Cemex Espana or of an officer of the manager
of the Company whose responsibilities extend to the subject matter of such
certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Lien" is defined in Section 10.3(a).
"Permitted Securitization" means a sale, transfer or other
securitization of receivables and related assets by Cemex Espana or its
Subsidiaries, including a sale at a discount, provided that (i) such
receivables have been transferred, directly or indirectly, by the originator
thereof to a Special Purpose Vehicle in a manner that satisfies the
requirements for an absolute conveyance, and not merely a pledge, under the
laws of the jurisdiction in which such originator is organized, (ii) such
Special Purpose Vehicle issues notes, certificates or other obligations which
are to be repaid from collections and other proceeds of such receivables and
(iii) except for customary representations, warranties and covenants, holders
of such obligations of such Special Purpose Vehicle do not have recourse to
Cemex Espana or its Subsidiaries (other than a Special Purpose Vehicle) for
credit-related losses on such receivables.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is subject to Title IV of ERISA and that is or, within the
preceding five years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been made or
required to be made, by Cemex Espana or any ERISA Affiliate or with respect to
which Cemex Espana or any ERISA Affiliate may have any liability, but excluding
any Foreign Pension Plan.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Priority Indebtedness" means, at any time and without duplication,
(i) Financial Indebtedness of Subsidiaries (other than Excluded Subsidiary
Guarantors and the Company), excluding Financial Indebtedness of the type
described in Uclauses (a)U through U(h)U of Section 10.6U and (ii) Financial
Indebtedness secured by Liens on the assets of Cemex Espana or its
Subsidiaries, other than Financial Indebtedness secured by Liens described in
clauses (i) through (x) of Section 10.3(a).
"Pro Rata Amount", for any Note at any time with respect to any
payment of Senior Debt in connection with a Substantial Asset Disposition,
means an amount equal to the product of (x) an amount equal to the Net Proceeds
Amount of such Substantial Asset Disposition being applied to the payment of
Senior Debt multiplied by (y) a fraction the numerator of which is the
outstanding principal amount of such Note and the denominator of which is the
aggregate principal amount of Senior Debt of Cemex Espana and its Subsidiaries.
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"PTE" is defined in Section 6.2.
"Purchasers" means the purchasers of the Notes named on Schedule A to
this Agreement.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Related Taxes" is defined in Section 14.3(a).
"Relevant Period" means each period of twelve months ending on the
last day of the second quarter of Cemex Espana's fiscal year and each period of
twelve months ending on the last day of Cemex Espana's fiscal year.
"Required Holders" means, at any time, the holders of more than 50% of
the aggregate principal amount of the Notes at the time outstanding (exclusive
of Notes then owned by the Company, Cemex Espana or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of Cemex Espana with responsibility for the administration of the
relevant portion of this Agreement.
"Rolling Basis" means the calculation of a ratio or an amount made
with respect to a Relevant Period in respect to the twelve immediately
preceding months ending on the last day of such Relevant Period.
"S&P" means Standard and Poor's Ratings Group.
"Section 8.4 Notice" is defined in Section 8.4.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Debt" means all Financial Indebtedness of Cemex Espana and its
Subsidiaries including interest thereon, whether outstanding on the Closing
date or thereafter incurred, unless in the instrument creating or evidencing
the same or pursuant to which the same is outstanding it is provided that such
obligations are subordinated in right of payment to the Notes or to the Note
Guarantee; provided that "Senior Debt" shall not include (1) any obligation of
Cemex Espana or the Company to any Subsidiary or of any Subsidiary to another
Subsidiary, (2) any liability for Federal, state, local or other taxes or (3)
any accounts payable to trade creditors in the ordinary course of business.
"Senior Financial Officer" means the Financing Director or the
Treasurer of Cemex Espana or any other person authorized by the Board of
Directors of Cemex Espana to act on behalf of Cemex Espana.
"Series A Notes" is defined in Section 1.
"Series B Notes" is defined in Section 1.
"Short-Term Indebtedness" means Financial Indebtedness the maturity of
which is less than or equal to one year after the date on which it was
incurred.
"Source" is defined in Section 6.2.
"Spanish GAAP" means accounting principles generally accepted in Spain
from time to time.
"Special Purpose Vehicle" means a trust, limited liability company,
partnership or other special purpose Person established to implement a
securitization of receivables, provided that the business of such Person is
limited to acquiring, servicing and funding receivables and related assets and
activities incidental thereto.
"Stake" means a number of shares in a Subsidiary held by Cemex Espana
or held by another Subsidiary, the disposal of which would cause the first such
Person to cease to be a Subsidiary of the second such Person.
"Subordinated Debt" means debt granted by Cemex or any of its
Subsidiaries other than Cemex Espana or one of its Subsidiaries to Cemex Espana
or any of its Subsidiaries on terms such that no payments of principal may be
made thereunder (including but not limited to following any winding up,
suspension de pagos or quiebra or other like event of Cemex Espana) until all
Notes have been paid in full.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of Cemex Espana.
"Substantial Asset Disposition" is defined in Section 10.4.
"SVO" means the Securities Valuation Office of the National
Association of Insurance Commissioners, or any successor thereto.
"Tax Prepayment Date" is defined in Section 8.3.
"Tax Prepayment Notice" is defined in Section 8.3.
"Taxing Jurisdiction" is defined in Section 14.3(a).
"Total Borrowings" means, with respect to Cemex Espana and its
Subsidiaries, without duplication and determined on a consolidated basis, all
Guaranties of Financial Indebtedness granted by such Person, plus all
Off-Balance-Sheet Transactions entered into by Cemex Espana and its
Subsidiaries, plus all Financial Indebtedness of Cemex Espana and its
Subsidiaries, but excluding any Subordinated Debt.
"USA Patriot Act" means, United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
"Voting Stock" means, with respect to any corporation, any Capital
Stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time Capital Stock of any other class or
classes shall have or might have voting powers by reason of the happening of
any contingency).
SCHEDULE 4.9
CHANGES IN CORPORATE STRUCTURE
Since the date of the financial statements of Cemex Espana and its Subsidiaries
delivered to each Purchaser pursuant to Section 5.5 and listed on Schedule 5.5
to this Agreement, Cemex Espana completed the acquisition of RMC Group Limited
on March 1, 2005.
SCHEDULE 5.3
DISCLOSURE EXCEPTIONS
None.
SCHEDULE 5.4
SUBSIDIARIES (INCLUDING IDENTIFICATION OF MATERIAL SUBSIDIARIES)
As of April30, 2005
- ----------------------------------------------------- --------------------------- ---------------------------
PLACE OF INCORPORATION APPROXIMATE SHAREHOLDING
COMPANY'S NAME PARTICIPATION
- ----------------------------------------------------- --------------------------- ---------------------------
- ----------------------------------------------------- --------------------------- ---------------------------
ALTAIR (INDIA) PRIVATE LIMITED India 100%
- ----------------------------------------------------- --------------------------- ---------------------------
APO CEMENT CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
APO LAND & QUARRY CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
ARICEMEX, S.A. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
ASSIUT CEMENT COMPANY Egypt 80%
- ----------------------------------------------------- --------------------------- ---------------------------
AYFER TEKSTIL LTD. STI. Turkey 100%
- ----------------------------------------------------- --------------------------- ---------------------------
BEDROCK HOLDINGS, INC. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
C.A. VENCEMOS Venezuela 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CANADIAN MEDUSA CEMENT LIMITED Ontario 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CARIBBEAN FUNDING LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CECAR INC. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMAR INC. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENT TRANSIT COMPANY Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENTIFICIO DI MONTALTO SPA Italy 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENTILCE SRL Italy 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENTO BAYANO, S.A. Panama 99%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENTOS NACIONALES, S.A. Dominican Republic 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX (CAMBODIA) CO. LTD. Cambodia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX (THAILAND) CO. LTD. Thailand 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ADMINISTRACIONES LTDA. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ASIA HOLDINGS LTD. Singapore 99%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ASIA PACIFIC INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ASIA PTE. LTD. Singapore 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ASIAN INVESTMENTS N.V. Netherlands Antilles 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX BETON, S.A.S. France 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CALIFORNIA CEMENT LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CAPITAL DE COLOMBIA, S.A. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CARACAS II INVESTMENTS B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CARACAS INVESTMENTS B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CARIBE II INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CEMENT (BANGLADESH) LIMITED Bangladesh 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CEMENT OF TEXAS, L.P. Texas 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CEMENT, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CHILE INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX COLOMBIA, S.A. Colombia 99%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CONCRETE HOLDINGS, LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CONCRETOS DE COLOMBIA, S.A. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CONCRETOS, S.A. Panama 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CONSTRUCTION MATERIALS, L.P. Texas 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX CORP. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX (COSTA RICA), S.A. Costa Rica 99%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX EGYPT FOR DISTRIBUTION COMPANY Egypt 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX EGYPT FOR SERVICES Egypt 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX EGYPTIAN INVESTMENTS B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ENVIRONMENTAL LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ESPANA FINANCE LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX ESPANA INTERNATIONAL CAPITAL LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX FINANCE EUROPE B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX FINANCE, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX FOUNDATION Ohio 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX GLOBAL INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX GRANULATS, SAS France 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX HOLDINGS INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX HUNGARY KFT Hungary 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX INDONESIA INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX INTERNATIONAL CAPITAL LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX INVESTMENTS AKTIENGESELLSCHAFT Liechtenstein 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX INVESTMENTS, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX LAND COMPANY Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX LEASING, INC. Arizona 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX MANAGEMENT, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX MANILA INVESTMENTS B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX NETHERLANDS, B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX NICARAGUA, S.A. Nicaragua 98%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX NY CORPORATION Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX PACIFIC COAST CEMENT CORPORATION Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX PUERTO RICO, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX READY MIX LLKHARASANAH EL-JHAZAA Egypt 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX SIERRA INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX SIX INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX SMI HOLDINGS LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX STRATEGIC PHILIPPINES INC. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX TEN INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX TRADING EUROPE, S.A. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX TRANSPORTES DE COLOMBIA, S.A. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX TRUCKING, INC. California 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX VENEZUELA, S.A.C.A. Venezuela 76%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX VENTURES, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX, INC. Louisiana 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CENTRAL DE MEZCLAS, S.A. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CETACEA INVESTMENTS LIMITED Trinidad & Tobago 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CETRA INC. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
COMERCIALIZADORA FERREX, C.A. Venezuela 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CONOMITA, S.A. Venezuela 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CONSTRUCCIONES E INVERSIONES DIAMANTE LTDA. Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CONSTRUCTION FUNDING CORPORATION Ireland 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CX (THAILAND) LIMITED Thailand 100%
- ----------------------------------------------------- --------------------------- ---------------------------
DESARROLLOS MULTIPLES INSULARES, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
DIAMANTE TRANSPORTES LIMITADA (IN LIQUIDATION) Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
DISTRIBUIDORA DE CEMENTO, S.A. Panama 100%
- ----------------------------------------------------- --------------------------- ---------------------------
EDGEWATER VENTURES CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
ENTREPRISES PASTORELLO TRAVAUX ROUTIERS, SAS France 100%
- ----------------------------------------------------- --------------------------- ---------------------------
ESPARTANA SHIPPING CO. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
FLORIDA LIME CORPORATION Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
GANDALF HOLDINGS CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
GESTION FRANCAZAL ENTREPRISES, SAS France 100%
- ----------------------------------------------------- --------------------------- ---------------------------
GOOD ASSETS LIMITED Thailand 100%
- ----------------------------------------------------- --------------------------- ---------------------------
GRANINTRA, S.A. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
GULF COAST PORTLAND CEMENT CO. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
HORMICEMEX, S.A. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
HORMISOL CANARIAS, S.A. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
IMPORTADORA CANARIA DE ARIDOS, S.L. Spain 100%
- ----------------------------------------------------- --------------------------- ---------------------------
INDEPENDIENTE SHIPPING CO. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
INDUSTRIAS E INVERSIONES SAMPER, S.A. (IN Colombia 98%
LIQUIDATION)
- ----------------------------------------------------- --------------------------- ---------------------------
INMOBILIARIA VALLE DOS C.A. Venezuela 100%
- ----------------------------------------------------- --------------------------- ---------------------------
INMOBILIARIA Y ARRENDAMIENTO BAYANO, S.A. Panama 100%
- ----------------------------------------------------- --------------------------- ---------------------------
ISLAND QUARRY AND AGGREGATES CORP. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
KOSMOS CEMENT COMPANY Kentucky 75%
- ----------------------------------------------------- --------------------------- ---------------------------
LAI LIMITED Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
LATINASIAN INVESTMENTS PTE. LTD. Singapore 100%
- ----------------------------------------------------- --------------------------- ---------------------------
LIMESTONE MATERIALS, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
LOMAS DEL TEMPISQUE, S.R.L. Costa Rica 100%
- ----------------------------------------------------- --------------------------- ---------------------------
LOTHLORIEN HOLDINGS CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
MACORIS INVESTMENTS Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
MEXAM TRADE, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
MILTON INTERNATIONAL CORP. Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
MOJAVE NORTHERN RAILROAD COMPANY California 100%
- ----------------------------------------------------- --------------------------- ---------------------------
NORTH TRANSPORT, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
OCCITAN INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PACIFIC ASSETS N.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PANAMA PACIFIC INVESTMENTS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PARMA CEMENTI SPA Italy 70%
- ----------------------------------------------------- --------------------------- ---------------------------
PCG HOLDINGS, INC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PETROLEUM COKE GRINDING, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
POLY BAGS AND PACKAGING, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PONCE CAPITAL CORPORATION Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PONCE EQUIPMENT AND MAINTENANCE COMPANY Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PT BINTANG POLINDO PERKASA Indonesia 95%
- ----------------------------------------------------- --------------------------- ---------------------------
PT CEMEX INDONESIA Indonesia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PUERTO RICAN CEMENT COMPANY, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
PUERTO RICO FINANCE LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
READY MIX CONCRETE, INC. Puerto Rico 100%
- ----------------------------------------------------- --------------------------- ---------------------------
RIVENDELL HOLDINGS CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
RODNEY H. GREENWAY, INC. Georgia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SANDSTONE STRATEGIC HOLDINGS, INC. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SERVICRETO LTDA. Colombia 70%
- ----------------------------------------------------- --------------------------- ---------------------------
SHIRE HOLDINGS CORPORATION Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SIERRA TRADING Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SOLID CEMENT CORP. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SUNBELT CEMENT HOLDINGS, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SUNBELT INVESTMENTS INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
SUNBULK SHIPPING N.V. Netherlands Antilles 100%
- ----------------------------------------------------- --------------------------- ---------------------------
TOULOUSE MIDI PYRENNEES ENROBES, S.A. France 57%
- ----------------------------------------------------- --------------------------- ---------------------------
TRANSENERGY, INC. Texas 100%
- ----------------------------------------------------- --------------------------- ---------------------------
TRANSPORTES SAN PEDRO, S.A. Dominican Republic 99%
- ----------------------------------------------------- --------------------------- ---------------------------
TRICAP INVESTMENTS I-A, LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
TRICAP OPTION FUND A, LLC Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
TRIPLE DIME HOLDINGS INC. Philippines 100%
- ----------------------------------------------------- --------------------------- ---------------------------
TUNWOO CO. LTD Taiwan 100%
- ----------------------------------------------------- --------------------------- ---------------------------
UCIM, A.S. Turkey 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VALCEM INTERNATIONAL B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VALENCIANA DENMARK APS Denmark 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VENCEMENT INVESTMENTS Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VENMARCA OCCIDENTE, C.A. Venezuela 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VOGAN INVESTMENTS Cayman Islands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
WESTERN RAIL ROAD COMPANY Texas 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX LUXEMBOURG HOLDINGS S.A.R.L. Luxembourg 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX UK LIMITED United Kingdom 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX INVESTMENTS AFRICA AND MIDDLE EAST APS Denmark 100%
- ----------------------------------------------------- --------------------------- ---------------------------
NEW CARIBBEAN HOLDINGS B.V. Netherlands 100%
- ----------------------------------------------------- --------------------------- ---------------------------
EXTRACCIONES DEL PACIFICO, S.A. Panama 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CANTERA EL CERRO, S.A. Panama 100%
- ----------------------------------------------------- --------------------------- ---------------------------
VILLAMARTIN OVERSEAS LIMITED BVI 100%
- ----------------------------------------------------- --------------------------- ---------------------------
BERSAL, S.A. Dominican Republic 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX GLOBAL SOURCING, INC. Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
WIND ACQUISITION CORP. I Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
WIND ACQUISITION CORP. II Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
WIND ACQUISITION CORP III Delaware 100%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMENTICE PARMA SRL Italy 100%
- ----------------------------------------------------- --------------------------- ---------------------------
OPERACIONES CONCRETAS LIMITADA Colombia 100%
- ----------------------------------------------------- --------------------------- ---------------------------
HORMIGONES AUTOL, S.A. Spain 50.02%
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX SHIPPING B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
CEMEX AMERICAN HOLDINGS B.V. Netherlands 100% (G)
- ----------------------------------------------------- --------------------------- ---------------------------
* In Bold, material subsidiaries as of December 31, 2004
(G) In Bold, Guarantor
As of March 31, 2005
BOARD OF DIRECTORS OF CEMEX ESPANA
- ----------------------------------
LORENZO H. ZAMBRANO TREVINO
JOSE LUIS SAENZ DE MIERA ALONSO
IGNACIO MADRIDEJOS FERNANDEZ
HECTOR MEDINA AGUIAR
MARCELO ZAMBRANO LOZANO
VICTOR MANUEL ROMO MUNOZ
RAMIRO VILLARREAL MORALES
CEMEX ESPANA FINANCE LLC
- ------------------------
MANAGER OF THE COMPANY:
CEMEX NETHERLANDS B.V., A DUTCH COMPANY WITH ITS REGISTERED OFFICE AT
RIVIERSTAETE, AMSTELDIJK 166 1079 LH AMSTERDAM, THE NETHERLANDS.
OFFICERS OF THE MANAGER:
HANS S. LEIJDESDORFF
ALEJANDRO GARCIA COGOLLOS
LIST OF RMC GROUP LIMITEDD SUBSIDIARIES
As of April30, 2005
---------------------------------------------------------------------------------------------------------------
COMPANY COUNTRY
1 4K BETON A/S DENMARK
2 A.TURNER & SONS (LONDON BUILDERS' MERCHANTS) LIMITED
UNITED KINGDOM
3 AAC MARKETING, INC. FLORIDA
4 ABETON VIACOLOR TERKO KFT. HUNGARY
5 ACM LEASING, INC. ARIZONA
6 AD DALMACIJACEMENT-MONTENEGRO MONTENEGRO
7 AERATED CONCRETE LIMITED UNITED KINGDOM
8 AHG BRAUNKOHLENFLUGASCHEVERTRIEBS BETEILIGUNGS-GMBH, GRO(beta) GAGLOW GERMANY
9 AHG BRAUNKOHLENFLUGASCHEVERTRIEBS GMBH & CO. KG, GRO(beta) GAGLOW GERMANY
10 AKMENES CEMENTAS AB LITHUANIA
11 ALASTAIR PROJECTS CORPORATION B.V.I.
12 ALFA BETON LTD. ISRAEL
13 ALFA KINNERET ISRAEL
14 AMERICAN TRANSIT MIX COMPANY, INC. CALIFORNIA
15 AMIOT (SAS) FRANCE
16 ANGLIAN HOUSING LIMITED UNITED KINGDOM
17 ANNANDALE PROPERTIES LIMITED UNITED KINGDOM
18 ARIDOS Y ASOCIADOS DEL CENTRO S.A.. SPAIN
19 ASBERGER SAND- UND KIESBAGGEREI GMBH, ESSEN GERMANY
20 ASH RESOURCES LIMITED UNITED KINGDOM
21 ASHFORD BRICKWORKS LIMITED UNITED KINGDOM
22 ASOCIACION LA BELONGA SPAIN
23 ATLANTIC AGGREGATES LIMITED UNITED KINGDOM
24 ATLAS AGGREGATES LIMITED UNITED KINGDOM
25 ATLAS NEIF HOLDINGS LIMITED CYPRUS
26 AUTOMATIC AGGREGATE SYSTEMS, INC. CALIFORNIA
27 B.F.G. BETON-FORDERGESELLSCHAFT MBH AACHEN-DUREN-JULICH, AACHEN GERMANY
28 B.R. BETON (1986) READYMIXED CONCRETE ENTREPRISES LTD. ISRAEL
29 BAGREGATES LIMITED UNITED KINGDOM
30 BARG POLAND
31 BARKER & BENCE LIMITED UNITED KINGDOM
32 BASE 6 BUILDING MATERIALS LIMITED UNITED KINGDOM
33 BASICS BUILDING MATERIALS LIMITED UNITED KINGDOM
34 BAUSTOFFHANDEL GMBH, RATINGEN: ZN IBH INDUSTRIE-BEDARF-HANDEL, NEUSS GERMANY
35 BAUSTOFFTECHNIK UNTERWESER GMBH, BREMEN GERMANY
36 BAUSTOFFTECHNIK GMBH AUSTRIA
37 BAUTIAA TP (SAS) FRANCE
38 BB BAUSTOFF BETEILIGUNGS-GMBH & CO. KG GERMANY
39 BB BAUSTOFF BETEILIGUNGS-VERWALTUNGS-GMBH GERMANY
40 BBQ BAUTECHNIK SUDBAYERN GMBH, ASCHHEIM GERMANY
41 BDC CONCRETE PRODUCTS LIMITED UNITED KINGDOM
42 BEAUFORT QUARRIES LIMITED UNITED KINGDOM
43 BEDFONT INSURANCE COMPANY LIMITED UNITED KINGDOM
44 BEPEBE POLAND
45 BETECNA- BETAO PRONTO S.A. PORTUGAL
46 BETON CONTROLE DE GASCOGNE (SA) FRANCE
47 BETON DE FRANCE ILE DE France (SAS) FRANCE
48 BETON DE FRANCE CENTRE ET BRETAGNE (SAS) FRANCE
49 BETON DE FRANCE NORD OUEST (SAS) FRANCE
50 BETON DE FRANCE RHONE ALPES ALSACE (SAS) FRANCE
51 BETON DE FRANCE SUD OUEST FRANCE
52 BETON DE FRANCE SUD EST FRANCE
53 BETON DU HAUT VAR (SARL) FRANCE
54 BETONEXPRESS GMBH AUSTRIA
55 BETON HA'EMEK ISRAEL
56 BETON LABO SERVICES (SARL) FRANCE
57 BETONLIFT GMBH AUSTRIA
58 BETONRING SUD GMBH AUSTRIA
59 BETON MARKETING OST GMBH, BERLIN GERMANY
60 BETON MARKETING WEST GMBH, BECKUM GERMANY
61 BETON MODERNE DU BASSIN (SAS) FRANCE
62 BETON MODERNE DU BORN (SAS) FRANCE
63 BETONKIES ISINGERODE GMBH & CO. KG GERMANY
64 BETONKIES ISINGERODE VERWALTUNGSGESELLSCHAFT MBH GERMANY
65 BETONLIFT GMBH, RATINGEN GERMANY
66 BETONPRUFINSTITUT BAYREUTH GMBH, BAYREUTH GERMANY
67 BETONSTEINWERK HEIDE ERNST SCHRODER GMBH & CO. KG, HEIDE GERMANY
68 BETONSTEINWERK SCHRODER GMBH, HEIDE GERMANY
69 BETONTECHNIK HANNOVER GMBH GERMANY
70 BETONWERK WERTH GMBH GERMANY
71 BETRA GESELLSCHAFT FUR DEN BETRIEB VON TRANSPORTBETONPUMPEN MBH GERMANY
72 BETRA VERWALTUNGSGESELLSCHAFT MBH GERMANY
73 BIL GRUNDSTUCKSVERWALTUNGS-GMBH & CO. RODENA KG, POCKING GERMANY
74 BLACKWATER AGGREGATES LIMITED UNITED KINGDOM
75 BNW GMBH & CO.KG. AUSTRIA
76 BOHEMIA TRANSPORTBETON S.R.O. CZECH REPUBLIC
77 BOTHEL LIMESTONE AND BRICK COMPANY LIMITED UNITED KINGDOM
78 BOULTON & PAUL (BUILDING SERVICES) LIMITED UNITED KINGDOM
79 BOULTON & PAUL (MANUFACTURING) LIMITED UNITED KINGDOM
80 BOULTON & PAUL (SALES) LIMITED UNITED KINGDOM
81 BOULTON & PAUL (SCOTLAND) LIMITED UNITED KINGDOM
82 BOULTON & PAUL PENSION TRUST LIMITED UNITED KINGDOM
83 BOULTON & PAUL SENIOR PENSION TRUST LIMITED UNITED KINGDOM
84 BPD VOGTLAND GMBH & CO. KG, HARTMANNSGRUN GERMANY
85 BPL BAUSTOFF-PRUF-LABOR GMBH, PLAUEN GERMANY
86 BPU BETONPUMPENUNION GMBH & CO. KG, ULM GERMANY
87 BRETT HALL AGGREGATES LIMITED UNITED KINGDOM
88 BRIMAC AGGREGATES LIMITED UNITED KINGDOM
89 BRITISH DOOR MARKETING COMPANY LIMITED UNITED KINGDOM
90 BRITISH DREDGING (SOUTH WALES) LIMITED UNITED KINGDOM
91 BRITISH DREDGING LIMITED UNITED KINGDOM
92 BRUNTINGTHORPE GRAVELS LIMITED UNITED KINGDOM
93 BUKKOSDKO KFT. HUNGARY
94 BUSS-BASALT GMBH & CO. KG, MUNZENBERG/GAMBACH GERMANY
95 BUTTERLEY AGGREGATES LIMITED UNITED KINGDOM
96 BUXTON RAIL LIMITED UNITED KINGDOM
97 BVT BETONPUMPEN VERMIETUNG THURINGEN GMBH & CO. KG, WECHMAR GERMANY
98 BVT BETONPUMPEN VERMIETUNG THURINGEN VERWALTUNGS-GMBH, WECHMAR GERMANY
99 BVV BAUSTOFFVERRECHNUNGGESELLSCHAFT VOGTLAND MBH, PLAUEN GERMANY
100 C.C.P. LIMITED UNITED KINGDOM
101 CAGNY BETON (SAS) FRANCE
102 CALIFORNIA READYMIX, INC. DELAWARE
103 CARRIERES DE LA LOIRE (SA) FRANCE
104 CARRIERES ET BALLASTIERES DE PICARDIE (SNC) FRANCE
105 CEMENTOWNIA CHELM S.A. POLAND
106 CEMENTOWNIA RUDNIKI S.A. POLAND
107 CEMEX BLENDING USA LIMITED UNITED KINGDOM
108 CEMEX BRITANNIA INVESTMENTS UNLIMITED UNITED KINGDOM
109 CEMEX DEUTSCHLAND AG GERMANY
110 CEMEX EL PASO, INC. TEXAS
111 CEMEX CZECH REPUBLIC, S.R.O. CZECH REPUBLIC
112 CEMTRADE LIMITED UNITED KINGDOM
113 CENTRAL BLOCKS LIMITED UNITED KINGDOM
114 CHANDLER READY MIX, INC. ARIZONA
115 CHANTIERS DE LA HAUTE SEINE (SAS) FRANCE
116 CHARTER OAKS FARMS, INC. CALIFORNIA
117 CHELMSKI CEMENT SP. Z O.O. POLAND
118 CHEMOCRETE LTD. ISRAEL
119 CIBCO INSULATIONS (UK) LIMITED UNITED KINGDOM
120 CLUGSTON ASPHALT LIMITED UNITED KINGDOM
121 CM TRANSPORTBETON GMBH & CO. KG, WITTGENSDORF GERMANY
122 COAST MATERIALS COMPANY MISSISSIPPI
123 COMBINED MANAGEMENT SERVICES LIMITED UNITED KINGDOM
124 CONCRETE AGGREGATES LIMITED UNITED KINGDOM
125 CONCRETE PUMPING LIMITED UNITED KINGDOM
126 CONCRETE RESEARCH LIMITED UNITED KINGDOM
127 CORY HALL LIMITED UNITED KINGDOM
128 CROATIA OSIGURANJE D.D. -only 0,08% in share capital CROATIA
129 CROWN CEMENT SALES LIMITED UNITED KINGDOM
130 CROWWOOD GRANGE ESTATES LIMITED UNITED KINGDOM
131 CSA CEMENTISSIMA AG SWITZERLAND
132 CWRC SP. Z O.O. POLAND
133 CWRH SP. Z O.O. POLAND
134 CWRW SP. Z O.O. POLAND
135 DAGENHAM WHARF LIMITED UNITED KINGDOM
136 DALEFORD ESTATES LIMITED UNITED KINGDOM
137 DALMACIJACMENT -RMC GROUP D.D. CROATIA
138 DANUBIUSBETON BETONKESZITO KFT. HUNGARY
139 DANUBIUSBETON DUNANTUL KFT. HUNGARY
140 DANUBIUSBETON KECSKEMET KFT. HUNGARY
141 DANUBIUSBETON SZOLNOK KFT. HUNGARY
142 DANUBIUSBETON VESZPREM KFT. HUNGARY
143 DB BACSKA KFT. HUNGARY
144 DB MARCALI KFT. HUNGARY
145 DB PAKS KFT. HUNGARY
146 DB PERI KFT. HUNGARY
147 DE LANK QUARRIES LIMITED UNITED KINGDOM
148 DGW BODENSYSTEME GMBH & CO. KG, WUPPERTAL GERMANY
149 DGW BODENSYSTEME VERWALTUNGS-GMBH, WUPPERTAL GERMANY
150 DMK DONAUMOOS KIES GMBH & CO. KG, WEICHERING GERMANY
151 DMK DONAUMOOS KIES VERWALTUNGS-GMBH, WEICHERING GERMANY
152 DONAU TRANSPORTBETON GMBH & CO. KG, DILLINGEN GERMANY
153 DONAU TRANSPORTBETON VERWALTUNGS-GMBH GERMANY
154 DRAUBETON GMBH AUSTRIA
155 DROME ARDECHE GRANULATS (SNC) FRANCE
156 DSS LIMITED UNITED KINGDOM (Isle of Man)
157 EAST PONCE HOLDINGS LLC DELAWARE
158 EASTERN ROADSTONE LIMITED UNITED KINGDOM
159 ECONOMICS VERSICHERUNGSVERMITTLUNGS GMBH GERMANY
160 EITAN BETON (1993) LTD. ISRAEL
161 ELDON HILL QUARRIES LIMITED UNITED KINGDOM
162 EMBRA AB SWEDEN
163 EMBRA AS NORWAY
164 EMBRA CEMENT AS (49% OWNED BY LAFARGE UK PLC) NORWAY
165 EMBRA ETNE AS (40% OWNED BY LOCAL CONTRACTOR) NORWAY
166 EMBRA OY FINLAND
167 EMBRA TRADING AS NORWAY
168 ENTAL INTERNATIONAL LIMITED D.O.O. CROATIA
169 ERDBAU-KIES GUTH AUSTRIA
170 ETABLISSEMENTS MOREAU (SAS) (MOREAU in the organizational chart) FRANCE
171 ETON AGGREGATES LIMITED UNITED KINGDOM
172 EURO BETAO - BETAO PRONTO S.A. PORTUGAL
173 EVRY ENVIRONNEMENT SERVICES (SNC) FRANCE
174 FALCON CEMENT LLC UAE
175 FBS - FERTIGBETON GMBH & CO. KG, BOHLITZ-EHRENBERG GERMANY
176 FBS - FERTIGBETON GMBH, BOHLITZ-EHRENBERG GERMANY
177 FBT - FERTIGBETON GMBH & CO. KG, ERFURT GERMANY
178 FBT - FERTIGBETON VERW.-GMBH, ERFURT GERMANY
179 FERTIGMORTEL SAUERLAND GMBH, ISERLOHN GERMANY
180 FIFTH LETTUCE PTY LIMITED AUSTRALIA
181 FILBUK III LIMITED UNITED KINGDOM
182 FINCHMEAD LIMITED UNITED KINGDOM
183 FITTSCHEN BAUSTOFF VERWALTUNGS-GMBH, BUXTEHUDE GERMANY
184 FLOWLINE KITCHENS INTERNATIONAL LIMITED UNITED KINGDOM
185 FMD MORTELDIENST MAINFRANKEN GMBH & CO. KG, WURZBURG GERMANY
186 FMD MORTELDIENST MAINFRANKEN VERWALTUNGSGESELLSCHAFT MBH, WURZBURG GERMANY
187 FODEX PTE LTD SINGAPORE
188 FRANCE LIANTS (SAS) FRANCE
189 FRANKFURTER LIEFERBETON GMBH & CO. KG, FRANKFURT GERMANY
190 FRANKFURTER LIEFERBETON GMBH, FRANKFURT GERMANY
191 FREIBERGER TRANSPORTBETON GMBH & CO. KG GERMANY
192 FREIBERGER TRANSPORTBETON VERWALTUNGS-GMBH GERMANY
193 FRISCHBETON UELZEN GMBH GERMANY
194 FRISCHBETON UELZEN GMBH & CO. KG GERMANY
195 FUEL AND COMBUSTION TECHNOLOGY INTERNATIONAL LIMITED UNITED KINGDOM
196 GABA (SAS) FRANCE
197 GAVE MATERIAUX ENROBES (SNC) FRANCE
198 GEMEINNUTZIGE WOHNUNGSGESELLSCHAFT MBH, WERDOHL GERMANY
199 GENERAL ASPHALT SURFACING LIMITED UNITED KINGDOM
200 GERMANIA UNION GMBH & CO. KG GERMANY
201 GERMANIA UNION VERWALTUNGS-GMBH GERMANY
202 GESTORA RUNAS VALLES OCCIDENTAL SPAIN
203 GIE DE SAINT JULIEN ET DE SAINT ELIX LE CHATEAU(GIE)(GIE SAINT FRANCE
JULIEN in the organizational chart
204 GILLINGHAM PORTLAND CEMENT COMPANY LIMITED UNITED KINGDOM
205 GISAB (GIE) FRANCE
206 GLASER TROCKENSAND GMBH, MALSCH GERMANY
207 GOLDEN PLUS GRANITE SDN BHD MALAYSIA
208 GOLDEN PLUS MANAGEMENT SDN BHD MALAYSIA
209 GOLDEN PLUS PREMIX SDN BHD MALAYSIA
210 GOLDEN PLUS QUARRY (MELAKA) SDN BHD MALAYSIA
211 GRAF RECYCLING-BAUSTOFFE GMBH & CO. KG, RUDERSDORF GERMANY
212 GRAF RECYCLING-BAUSTOFFE GMBH, RUDERSDORF GERMANY
213 GRAZER TRANSPORTBETON GMBH AUSTRIA
214 GRAUWACKENINDUSTRIE GMBH, HAGEN GERMANY
215 GREENWOOD QUARRIES (WENVOE) LIMITED UNITED KINGDOM
216 GROUPEMENT DU PERTHUIS DE POSES (GIE) FRANCE
217 GULF QUARRIES UAE
218 GYOMROI 76 KFT. HUNGARY
219 GZ SAND, S.R.O. CZECH REPUBLIC
220 H.E. PORTER & COMPANY LIMITED UNITED KINGDOM
221 HALL & HAM RIVER LIMITED UNITED KINGDOM
222 HALL (MARINE) LIMITED UNITED KINGDOM
223 HALL AGGREGATES (EASTERN COUNTIES) LIMITED UNITED KINGDOM
224 HALL AGGREGATES (SOUTH COAST) LIMITED UNITED KINGDOM
225 HALL AGGREGATES (SOUTH EAST) LIMITED UNITED KINGDOM
226 HALL AGGREGATES (THAMES VALLEY) LIMITED UNITED KINGDOM
227 HALL AGGREGATES LIMITED UNITED KINGDOM
228 HALL DREDGING LIMITED UNITED KINGDOM
229 HANS BALTUS GMBH, BREMEN GERMANY
230 HANSEATISCHE BETONSTEININDUSTRIE MBH, HENSTEDT-ULZBURG GERMANY
231 HARBOR SAND AND GRAVEL, INC. CALIFORNIA
232 HARGREAVES QUARRIES LIMITED UNITED KINGDOM
233 HARTKALKSTEINWERK HORST GMBH, BALVE GERMANY
234 HARTSTEINWERK RADAUTAL GMBH GERMANY
235 HAUSGES. D. VEREINS DEUTSCHER ZEMENTWERKE MBH, DUSSELDORF GERMANY
236 HAVERING AGGREGATES LIMITED UNITED KINGDOM
237 HBM HUB (TECHNOLOGY) LIMITED UNITED KINGDOM
238 HBM HUB LIMITED UNITED KINGDOM
239 HEIDE-TRANSPORTBETON GMBH GERMANY
240 HEIDE-TRANSPORTBETON GMBH & CO. KG GERMANY
241 HERBERT JOHNE GMBH & CO. KG, SCHWEPNITZ GERMANY
242 HHB HAMBURGER HAFENBETON GMBH & CO. KG, HAMBURG GERMANY
243 HHB HAMBURGER HAFENBETON GMBH, HAMBURG GERMANY
244 HKW-BETON GMBH & CO. KG, HAGEN GERMANY
245 HKW-BETON VERWALTUNGS-GMBH, HAGEN GERMANY
246 HOLLITZER BAUSTOFFWERKE GMBH AUSTRIA
247 HORMIGONES ARIDOS Y MAQUINARIA S.A. SPAIN
248 HORMIGONES CIUDAD REAL S.A. SPAIN
249 HTG HANDELS- UND TRANSPORT GMBH, RATINGEN GERMANY
250 HUMBER SAND AND GRAVEL LIMITED UNITED KINGDOM
251 HYDE-CRETE LIMITED UNITED KINGDOM
252 I.M.D. SERVICES LIMITED UNITED KINGDOM
253 IA LIMITED UNITED KINGDOM (Isle of Man)
254 ISLAND BARN AGGREGATES LIMITED UNITED KINGDOM
255 ISLE OF WIGHT AGGREGATES LIMITED UNITED KINGDOM
256 ISOLA BAUCHEMIE GMBH, SALZKOTTEN GERMANY
257 JAUNTALER GMBH AUSTRIA
258 J C WASTE LIMITED UNITED KINGDOM
259 JOHN CARR (AVON) LIMITED UNITED KINGDOM
260 JOHN CARR (CORBY) LIMITED UNITED KINGDOM
261 JOHN CARR (DONCASTER) LIMITED UNITED KINGDOM
262 JOHN CARR (ESSEX) LIMITED UNITED KINGDOM
263 JOHN CARR (GLOUCESTER) LIMITED UNITED KINGDOM
264 JOHN CARR (HOLDINGS) LIMITED UNITED KINGDOM
265 JOHN CARR (SBK) LIMITED UNITED KINGDOM
266 JOHN CARR (WINDOWS) LIMITED UNITED KINGDOM
267 JOHN CARR CENTRAL SERVICES LIMITED UNITED KINGDOM
268 JOHN McQUILLAN LIMITED UNITED KINGDOM (N. Ireland)
269 K.I.S. KREDITINFORMATIONSSYSTEM GMBH & CO. KG, BERLIN GERMANY
270 K+R DRESDNER TRANSPORTBETON GMBH & CO. KG, DRESDEN GERMANY
271 K+R DRESDNER TRANSPORTBETON VERWALTUNGS-GMBH, DRESDEN GERMANY
272 K+R LAUSITZER TRANSPORTBETON GMBH & CO. KG, GRO(beta)RACHEN GERMANY
273 K+R LAUSITZER TRANSPORTBETON GMBH, GRO(beta)RACHEN GERMANY
274 KAISER-OMNIA BAUELEMENTE GMBH & CO. KG, BISCHOFSHEIM GERMANY
275 KALKSTEINWERK MEDENBACH GMBH, BREITSCHEID GERMANY
276 KALKSTEINWERK NIEDERKLEEN GMBH, LANGGONS GERMANY
277 KE DOLNA ODRA POLAND
278 KGH KIESGEWINNUNGS- HANDELSGESELLSCHAFT GMBH & CO. KG, HAMBURG GERMANY
279 KIES- UND NATURSTEINBETRIEBE READYMIX GMBH & CO. KG, BEUCHA GERMANY
280 KIES- UND NATURSTEINBETRIEBE READYMIX VERWALTUNGS-GMBH, BEUCHA GERMANY
281 KIES UNION GMBH AUSTRIA
282 KIESWERK "MUHLENSEE" FRANKENFELD GMBH & CO.KG, PADERBORN GERMANY
283 KIESWERK "MUHLENSEE" FRANKENFELD VERWALTUNGS-GMBH, PADERBORN GERMANY
284 KIESWERK GMBH & CO. IMMELBORN BETRIEBS-KG, IMMELBORN GERMANY
285 KIESWERK GMBH IMMELBORN, IMMELBORN GERMANY
286 KIESWERK HERRMANN GMBH & CO. KG, KIRCHHAIN GERMANY
287 KIESWERK HERRMANN VERWALTUNGS-GMBH, KIRCHHAIN GERMANY
288 KIESWERK LEINETAL GMBH & CO. KG GERMANY
289 KIESWERK LEINETAL VERWALTUNGSGESELLSCHAFT MBH GERMANY
290 KIESWERK MONDORF GMBH & CO. KG, NIEDERKASSEL-MONDORF GERMANY
291 KIESWERK MONDORF GMBH, NIEDERKASSEL-MONDORF GERMANY
292 KIESWERK RHEINAU-HONAU GMBH, RHEINAU GERMANY
293 KIESWERK RHEINAU-HONAU KIES UND SPLITT KG, RHEINAU GERMANY
294 KIESWERK ROITH WOLF GMBH & CO. KG, STRAUBING GERMANY
295 KIESWERK ROITH WOLF VERWALTUNGS-GMBH, STRAUBING GERMANY
296 KIESWERK RUTHE GMBH & CO. KG GERMANY
297 KIESWERK RUTHE VERWALTUNGS-GMBH GERMANY
298 KIESWERK TUNDERN GMBH, TUNDERN GERMANY
299 KIESWERK WERNSHAUSEN GMBH & CO. KG, IMMELBORN GERMANY
300 KIESWERK WERNSHAUSEN VERWALTUNGS-GMBH, IMMELBORN GERMANY
301 KREHLING INDUSTRIES, INC. FLORIDA
302 KOKOSZKI POLAND
303 KOLBL BAUSTOFFE GMBH & CO. KG, MULHEIM A. D. RUHR GERMANY
304 KOLBL GMBH & CO. KG, ESSEN GERMANY
305 KONDOMINIUM GMBH & CO. KG, IFFEZHEIM GERMANY
306 KONDOMINIUM GMBH, IFFEZHEIM GERMANY
307 KRK KIES BETEILIGUNGS- UND VERWALTUNGS-GMBH, IMMELBORN GERMANY
308 KSG KIES UND SAND GRUNDSTUCKSVERWERTUNG VERWALTUNGS-GMBH GERMANY
309 KSG KIES UND SAND GRUNDSTUCKSVERWERTUNGS GMBH & CO. KG GERMANY
310 KSV KIES UND SPLITT GMBH RHEIN-RUHR, WUPPERTAL GERMANY
311 KULM-TRANSPORTBETON GMBH & CO. KG, ERBENDORF GERMANY
312 KULM-TRANSPORTBETON VERWALTUNGSGESELLSCHAFT MBH, NUDDERSDORF GERMANY
313 KW TRANSPORTBETON GMBH AUSTRIA
314 L WATKINSON AND SONS LIMITED UNITED KINGDOM
315 LAFARGE BETON RHEINLAND GMBH & CO. KG, KOLN GERMANY
316 LAFARGE BETON RHEINLAND GMBH, KOLN GERMANY
317 LAHN-BETON MITTELHESSEN GMBH, WETZLAR GERMANY
318 LAHN-KALKSTEIN GMBH, MUNZENBERG/GAMBACH GERMANY
319 LANGUEDOC GRANULATS (SNC) FRANCE
320 LEISURE SPORT LIMITED UNITED KINGDOM
321 LES GRANULATS MARINS DE NORMANDIE (GIE) FRANCE
322 LES GRAVES DE L'ESTUAIRE (SAS) FRANCE
323 LES SABLES DE BREVANNES (SA) FRANCE
324 LIEFERBETON GMBH AUSTRIA
325 LIEFERBETON VORDERTAUNUS GMBH & CO. KG, OBERURSEL GERMANY
326 LIEFERBETON VORDERTAUNUS GMBH, FRANKFURT GERMANY
327 LIEFERBETON WOLFSBURG GMBH AUSTRIA
328 LIME AND STONE PRODUCTION COMPANY LTD. ISRAEL
329 LIME AND STONE CONCRETE (READYMIX GROUP) LTD. ISRAEL
330 LINCS. SURFACING CONTRACTORS LIMITED UNITED KINGDOM
331 LONE STAR CALIFORNIA, INC. DELAWARE
332 LOSCH SYSTEMBAUTEILE GMBH & CO. KG, BAD DURKHEIM GERMANY
333 LOSCH SYSTEMBAUTEILE VERWALTUNGS-GMBH, BAD DURKHEIM GERMANY
334 LUBARTOW POLAND
335 LYTAG LIMITED UNITED KINGDOM
336 MAKSIMIR CEMENT D.O.O. CROATIA
337 MANTON STONE LIMITED UNITED KINGDOM
338 MARINE AGGREGATES LIMITED UNITED KINGDOM
339 MAYLANDS LIMITED UNITED KINGDOM
340 McLAREN ROADSTONE LIMITED UNITED KINGDOM
341 MDF MORTEL-DIENST FRANKEN GMBH & CO. KG, NURNBERG GERMANY
342 MDF MORTEL-DIENST FRANKEN VERWALTUNGS-GMBH, NURNBERG GERMANY
343 MDS MORTELDIENST SIEGERLAND GMBH & CO. KG, SIEGEN GERMANY
344 MECKLENBURG-STRELITZER KIESWERKE GMBH, NEUSTRELITZ GERMANY
345 MERSEY SAND SUPPLIERS (a partnership) UNITED KINGDOM
346 MERSEY SAND SUPPLIERS LIMITED UNITED KINGDOM
347 MERTZ BETON GMBH & CO. KG, BERLIN GERMANY
348 MERTZ BETON VERWALTUNGS-GMBH, BERLIN GERMANY
349 METRO-GREENHAM AGGREGATES LIMITED UNITED KINGDOM
350 METROPOLITAN CONCRETE LIMITED UNITED KINGDOM
351 METROVILLA SDN BHD MALAYSIA
352 MFE MAINFRANKEN FLIE(beta)ESTRICH GMBH & CO. KG, BERGRHEINFELD GERMANY
353 MFE MAINFRANKEN FLIE(beta)ESTRICH VERWALTUNGS-GMBH, BERGRHEINFELD GERMANY
354 MGM SABLIERES REUNIES (SNC) FRANCE
355 MICROSILICA LIMITED UNITED KINGDOM
356 MID-NORFOLK CONCRETE COMPANY LIMITED UNITED KINGDOM
357 MILL HOLDINGS PTY LIMITED AUSTRALIA
358 MINERAL & ENERGY RESOURCES CORPORATION LIMITED UNITED KINGDOM
359 MINERAL AND ENERGY RESOURCES (UK) LIMITED UNITED KINGDOM
360 MINICRETE LIMITED UNITED KINGDOM
361 MINIMIX DIRECT LIMITED UNITED KINGDOM
362 MISSOURI ASPHALT PRODUCTS, LLC MISSOURI
363 MIXBETON VERMOGENSGESELLSCHAFT MBH & CO. KG, BERLIN GERMANY
364 MKB MORTELDIENST KOLN-BONN GMBH & CO. KG, KOLN-MARSDORF GERMANY
365 MKB MORTELDIENST KOLN-BONN VERWALTUNGS-GMBH GERMANY
366 MOBI BETON (SNC) FRANCE
367 MONOMET GEOTEXTILES LIMITED UNITED KINGDOM
368 MONOPOLINK TRANSPORT SDN BHD MALAYSIA
369 MORILLON CORVOL RHONE MEDITERRANNEE (SAS) FRANCE
370 MORILLON CORVOL SUD OUEST (SAS) FRANCE
371 MORTELDIENST CHEMNITZ GMBH & CO. KG GERMANY
372 MORTELDIENST CHEMNITZ VERWALTUNGS-GMBH GERMANY
373 MORTELDIENST SAALE - ELSTER GMBH & CO. KG, WACHAU GERMANY
374 MORTELDIENST SAALE - ELSTER VERWALTUNGS-GMBH, WACHAU GERMANY
375 MORTELDIENST SIEGERLAND GMBH, SIEGEN GERMANY
376 MOUNTFIELD ROADSTONE LIMITED UNITED KINGDOM
377 MOUNTFIELD ROADSTONE SURFACING LIMITED UNITED KINGDOM
378 MULDE-MORTEL GMBH & CO. KG GERMANY
379 MULDE-MORTEL VERWALTUNGS-GMBH GERMANY
380 MUNCHNER MORTEL GMBH & CO. KG, MUNCHEN GERMANY
381 MUNCHNER MORTEL VERWALTUNGS-GMBH, MUNCHEN GERMANY
382 MULTICOM (SA) FRANCE
383 NEDERLANDSE CEMENT HANDELSMAATSCHAPPIJ B.V., DEN HAAG THE NETHERLANDS
384 NEWDIGATE BRICKWORKS LIMITED UNITED KINGDOM
385 NOR-CAL READY MIX, INC. CALIFORNIA
386 NORTH WEST AGGREGATES LIMITED UNITED KINGDOM
387 NORTH WEST SURFACING LIMITED UNITED KINGDOM
388 NORTHERN AGGREGATES (ISLE OF MAN) LIMITED UNITED KINGDOM (Isle of Man)
389 NORTHERN AGGREGATES LIMITED UNITED KINGDOM
390 NORTHERN ROADSTONE LIMITED UNITED KINGDOM
391 NORWEST HOLDINGS LIMITED UNITED KINGDOM
392 NORWEST SAND AND BALLAST COMPANY (1985) UNITED KINGDOM
393 NORWEST SAND AND BALLAST COMPANY LIMITED UNITED KINGDOM
394 NOTTINGHAM MINI MIXED CONCRETE LIMITED UNITED KINGDOM
395 NOVACASH BETELIGUNGS AG AUSTRIA
396 OBERLAND BETON VERWALTUNGS-GMBH GERMANY
397 ODER-BETON GMBH & CO. KG, FRANKFURT A.D. ODER GERMANY
398 ODER-BETON VERWALTUNGS-GMBH, FRANKFURT A.D.ODER GERMANY
399 OVAL (302) LIMITED UNITED KINGDOM
400 PALLERBETON KFT. HUNGARY
401 PARMELIA HOTEL PTY LIMITED AUSTRALIA
402 PAVIMENT ESTRICH- UND INDUSTRIEBODENSYSTEME GMBH & CO. KG GERMANY
403 PAVIMENT ESTRICH- UND INDUSTRIEBODENSYSTEME VERWALTUNGS-GMBH, GERMANY
BERATZHAUSEN
404 PEAKSTONE BRICK LIMITED UNITED KINGDOM
405 PFALZ-MORTEL GMBH & CO. KG, LANDSTUHL GERMANY
406 PFALZ-MORTEL VERWALTUNGS-GMBH, LANDSTUHL GERMANY
407 PIESBERGER STEINBRUCHTRANSPORTE GMBH, OSNABRUCK (VORMALS: KW J.MARTIN) GERMANY
408 PIESBERGER STEININDUSTRIE GMBH & CO. KG, OSNABRUCK GERMANY
409 PIESBERGER STEININDUSTRIE VERWALTUNGS-GMBH, OSNABRUCK GERMANY
410 POLSKI CEMENT POLAND
411 POLLER BETON GMBH & CO. KG, LAUF GERMANY
412 POLLER BETON VERWALTUNGS-GMBH, LAUF GERMANY
413 POZZOLANIC LYTAG LIMITED UNITED KINGDOM
414 PREMIX-READYMIX CONCRETE INDUSTRIES ISRAEL
415 PROCESSING ASH LLP (a limited liability partnership with Lafarge) UNITED KINGDOM
416 PRZEDSIEBIORSTWO WIELOBRANZOWE "PORTLAND" SP. Z O.O. POLAND
417 PUMPENDIENST NOBA GMBH & CO. KG, NURNBERG GERMANY
418 PUMPENDIENST NOBA VERWALTUNGS-GMBH, NURNBERG GERMANY
419 PURFLEET AGGREGATES LIMITED UNITED KINGDOM
420 QUARTZITE QUARRIES LIMITED UNITED KINGDOM
421 QUARZSANDWERK WELLMERSDORF GMBH & CO. KG, NEUSTADT GERMANY
422 QUARZSANDWERK WELLMERSDORF VERWALTUNGS-GMBH, NEUSTADT GERMANY
423 QUICKBORNER BETONWERKE GMBH, QUICKBORN GERMANY
424 QUICKMIX CONCRETE COMPANY LIMITED UNITED KINGDOM
425 R.P.C. TRANSPORT LIMITED UNITED KINGDOM
426 READICRETE LIMITED UNITED KINGDOM
427 READY MIXED CONCRETE (EAST MIDLANDS) LIMITED UNITED KINGDOM
428 READY MIXED CONCRETE (EASTERN COUNTIES) LIMITED UNITED KINGDOM
429 READY MIXED CONCRETE (LONDON) LIMITED UNITED KINGDOM
430 READY MIXED CONCRETE (MIDLANDS) LIMITED UNITED KINGDOM
431 READY MIXED CONCRETE (NORTH WEST) LIMITED UNITED KINGDOM
432 READY MIXED CONCRETE (NORTHERN) LIMITED UNITED KINGDOM
433 READY MIXED CONCRETE (SOUTH EAST) LIMITED UNITED KINGDOM
434 READY MIXED CONCRETE (SOUTH-COAST) LIMITED UNITED KINGDOM
435 READY MIXED CONCRETE (THAMES VALLEY) LIMITED UNITED KINGDOM
436 READY MIXED CONCRETE (TRANSITE) LIMITED UNITED KINGDOM
437 READY MIXED CONCRETE (UNITED KINGDOM) LIMITED UNITED KINGDOM
438 READY MIXED CONCRETE (WALES) LIMITED UNITED KINGDOM
439 READY MIXED CONCRETE (WEST MIDLANDS) LIMITED UNITED KINGDOM
440 READY MIXED CONCRETE (WESTERN) LIMITED UNITED KINGDOM
441 READY MIXED CONCRETE (YORKSHIRE) LIMITED UNITED KINGDOM
442 READY MIXED CONCRETE LIMITED UNITED KINGDOM
443 READY MIXED CONCRETE SENIOR BENEFITS TRUST LIMITED UNITED KINGDOM
444 READY MIXED CONCRETE SOUTH-WEST) LIMITED UNITED KINGDOM
445 READYMIX (UK) LIMITED UNITED KINGDOM
446 READYMIX AG GERMANY
447 READYMIX ARGENTINA, S.A. ARGENTINA
448 READYMIX ASLAND S.A. SPAIN
449 READYMIX BETON BERLIN GMBH & CO. KG, BERLIN GERMANY
450 READYMIX BETON NORDSACHSEN GMBH & CO. KG, LEIPZIG GERMANY
451 READYMIX BETON NORDSACHSEN VERWALTUNGS-GMBH, LEIPZIG GERMANY
452 READYMIX BETON SAALE GMBH & CO. KG, HALLE/SAALE GERMANY
453 READYMIX BETON SAALE VERW.-GMBH, HALLE/SAALE GERMANY
454 READYMIX BETON VORPOMMERN-STRELITZ GMBH, ROSTOCK GERMANY
455 READYMIX BETONBAUTEILE GMBH, RATINGEN GERMANY
456 READYMIX BOHEMIA S.R.O. CZECH REPUBLIC
457 READYMIX CONCRETE PRODUCTS (ISRAEL) LTD. ISRAEL
458 READYMIX CROATIA D.O.O CROATIA
459 READYMIX DECKENWERK BISCHOFSHEIM VERWALTUNGS- GMBH, BISCHOFSHEIM GERMANY
460 READYMIX DRYPACK LIMITED UNITED KINGDOM
461 READYMIX FERTIGTEILE GMBH AUSTRIA
462 READYMIX HANDEL & TRANSPORT GMBH, RUDERSDORF GERMANY
463 READYMIX HANDEL & TRANSPORT GMBH, WULFRATH GERMANY
464 READYMIX HUTTENZEMENT GMBH, DORTMUND GERMANY
465 READYMIX IBERIA S.A.. SPAIN
466 READYMIX INDUSTRIES (ISRAEL) LTD. ISRAEL
467 READYMIX KIES GMBH SUD-OST, DRESDEN GERMANY
468 READYMIX KIES GMBH, RATINGEN (701) GERMANY
469 READYMIX KIES SAAR-PFALZ-HESSEN GMBH, HEUCHELHEIM GERMANY
470 READYMIX KIES UNION AG AUSTRIA
471 READYMIX KIESWERK LAU(beta)IG GMBH, LAU(beta)IG GERMANY
472 READYMIX KLOSTERS VERTRIEBSGESELLSCHAFT MBH, BERLIN GERMANY
473 READYMIX MINI-MIX LIMITED UNITED KINGDOM
474 READYMIX MORTARS LIMITED UNITED KINGDOM
475 READYMIX ORADEA ROMANIA
476 READYMIX PARTNERSHIPS (1982) LTD. ISRAEL
477 READYMIX PRAHA-MALESICE S.R.O. CZECH REPUBLIC
478 READYMIX RAPID BETON KFT. HUNGARY
479 READYMIX SCHOENECK S.A.R.L., SCHOENECK FRANCE
480 READYMIX SERVICES LIMITED UNITED KINGDOM
481 READYMIX SLOVAKIA SLOVAKIA
482 READYMIX SUROWCE MINERALNE POLSKA SP. Z O.O. POLAND
483 READYMIX TRANSPORTBETON BREMERHAVEN GMBH, BREMERHAVEN GERMANY
484 READYMIX TRANSPORTBETON GMBH & CO. KG, DORTMUND GERMANY
485 READYMIX TRANSPORTBETON GMBH & CO. KG, HENSTEDT-ULZBURG GERMANY
486 READYMIX TRANSPORTBETON GMBH & CO. KG, HEUCHELHEIM GERMANY
487 READYMIX TRANSPORTBETON GMBH BERLIN, BERLIN GERMANY
488 READYMIX TRANSPORTBETON GMBH, HENSTEDT-ULZBURG GERMANY
489 READYMIX TRANSPORTBETON VERWALTUNGS-GMBH, HEUCHELHEIM GERMANY
490 READYMIX TRANSPORTBETON VERWALTUNGS-GMBH, MOERS GERMANY
491 READYMIX WESTZEMENT GMBH, BECKUM GERMANY
492 READYMIX VERSICHERUNGSMAKLER GMBH AUSTRIA
493 READYMIX ZALA KFT. HUNGARY
494 RECICLAJES Y DERRIBOS SANTA BARBARA S.A. SPAIN
495 REDICON LIMITED UNITED KINGDOM
496 REMS BETON GMBH AUSTRIA
497 RENO-SPARKS READY MIX, INC. NEVADA
498 RESERVOIR AGGREGATES LIMITED UNITED KINGDOM
499 RESZVETEL KFT. HUNGARY
500 RGN KIESGEWINNUNGS GMBH, DRESDEN GERMANY
501 RHEIN-NAHE-MORTEL GMBH, WIESBADEN GERMANY
502 RICHMOND CEMENT LIMITED UNITED KINGDOM
503 RICHTER GMBH & CO. KG SPLITT- UND SCHOTTERWERK, HAMMERUNTERWIESENTHAL GERMANY
504 RICHTER VERWALTUNGS-GMBH, HAMMERUNTERWIESENTHAL GERMANY
505 RICKMANSWORTH GRAVEL COMPANY LIMITED UNITED KINGDOM
506 RM KIESWERKE ROGATZ-PAREY GMBH, ROGATZ GERMANY
507 RMC VI (SA) FRANCE
508 RMC VII (SA) FRANCE
509 RMC (DBP) NO 1 LIMITED UNITED KINGDOM
510 RMC (DBP) NO 2 LIMITED UNITED KINGDOM
511 RMC (GB) LIMITED UNITED KINGDOM
512 RMC (GM) NO 1 LIMITED UNITED KINGDOM
513 RMC (GM) NO 2 LIMITED UNITED KINGDOM
514 RMC (GM) NO 3 LIMITED UNITED KINGDOM (N. Ireland)
515 RMC (GM) NO 4 LIMITED UNITED KINGDOM
516 RMC (GM) NO 5 LIMITED UNITED KINGDOM
517 RMC (GM) NO 6 LIMITED UNITED KINGDOM
518 RMC (GM) NO 7 LIMITED UNITED KINGDOM
519 RMC (GM) NO 8 LIMITED UNITED KINGDOM
520 RMC (HW) NO 1 LIMITED UNITED KINGDOM
521 RMC (HW) NO 2 LIMITED UNITED KINGDOM
522 RMC (HW) NO 3 LIMITED UNITED KINGDOM
523 RMC (HW) NO 4 LIMITED UNITED KINGDOM (N. Ireland)
524 RMC (SO) LIMITED UNITED KINGDOM
525 RMC (UK) LIMITED UNITED KINGDOM
526 RMC AGGREGATES (BUKIT TAMBUN) SDN BHD MALAYSIA
527 RMC AGGREGATES (DOVE HOLES) LIMITED UNITED KINGDOM
528 RMC AGGREGATES (EASTERN) LIMITED UNITED KINGDOM
529 RMC AGGREGATES (GREATER LONDON) LIMITED UNITED KINGDOM
530 RMC AGGREGATES (LUMUT) SDN BHD MALAYSIA
531 RMC AGGREGATES (SOUTH WALES) LIMITED UNITED KINGDOM
532 RMC AGGREGATES (UK) LIMITED UNITED KINGDOM
533 RMC AGGREGATES LIMITED UNITED KINGDOM
534 RMC ATLANTA LTD. UNITED KINGDOM
535 RMC ARIZONA, INC. ARIZONA
536 RMC AUSTRALIA UNITED KINGDOM
537 SIA CEMEX LATVIA
538 RMC BETON SLASK SP. Z O.O. POLAND
539 RMC BUILDING PRODUCTS (BORNEO) SDN BHD MALAYSIA
540 RMC BUILDING PRODUCTS (UK) LIMITED UNITED KINGDOM
541 RMC CATHERWOOD TRANSPORT LIMITED UNITED KINGDOM (N. Ireland)
542 RMC CENTRAL EUROPE GMBH GERMANY
543 RMC CONCRETE FLOORS LIMITED UNITED KINGDOM
544 RMC CONCRETE PRODUCTS (UK) LIMITED UNITED KINGDOM
545 RMC CONCRETE (MALAYSIA) SDN BHD MALAYSIA
546 RMC CONCRETE (SINGAPORE) PTE LTD SINGAPORE
547 RMC CONSTRUCTION SERVICES LIMITED UNITED KINGDOM
548 RMC DOLLARS UNITED KINGDOM
549 RMC DORMANT NO 1 LIMITED UNITED KINGDOM
550 RMC ENGINEERING & TRANSPORT LIMITED UNITED KINGDOM
551 RMC ENVIRONMENTAL SERVICES LIMITED UNITED KINGDOM
552 RMC EUROLAND LIMITED UNITED KINGDOM
553 RMC EUROPE LIMITED UNITED KINGDOM
554 RMC EXPLORATIONS LIMITED UNITED KINGDOM
555 RMC EURO (SAS) FRANCE
556 RMC EWELL, INC. FLORIDA
557 RMC FINANCE LIMITED UNITED KINGDOM
558 RMC FLORIDA GROUP LTD. UNITED KINGDOM
559 RMC FORMATION (SAS) FRANCE
560 RMC FRANCE (SAS) FRANCE
561 RMC-FRANCE INTERNATIONAL (SAS) FRANCE
562 RMC GEORGIA UNITED KINGDOM
563 RMC GROUP LIMITED UNITED KINGDOM
564 RMC GROUP SECRETARIES LIMITED UNITED KINGDOM
565 RMC GROUP SERVICES GERMANY
566 RMC GROUPE SERVICES (GIE) FRANCE
567 RMC GROUP SERVICES LIMITED UNITED KINGDOM
568 RMC HBM TRADING HUB LIMITED UNITED KINGDOM
569 RMC HOLDINGS B.V. THE NETHERLANDS
570 RMC HOLDINGS ISRAEL LTD ISRAEL
571 RMC HOMECARE LIMITED UNITED KINGDOM
572 RMC INCA LIMITED UNITED KINGDOM
573 RMC INDUSTRIAL MINERALS LIMITED UNITED KINGDOM
574 RMC INDUSTRIES (MALAYSIA) SDN BHD MALAYSIA
575 RMC INTERNATIONAL CEMENT LIMITED UNITED KINGDOM
576 RMC INTERNATIONAL HOLDINGS LIMITED UNITED KINGDOM
577 RMC INTERNATIONAL HOLDINGS LTD FRANCE
578 RMC KEEGAN LIMITED UNITED KINGDOM
579 RMC KEEGAN LIMITED UNITED KINGDOM
580 RMC LEASING LIMITED UNITED KINGDOM
581 RMC LEISURE LIMITED UNITED KINGDOM
582 RMC LIMITED UNITED KINGDOM
583 RMC LOGISTICS EASTERN LIMITED UNITED KINGDOM
584 RMC LOGISTICS NORTH EAST LIMITED UNITED KINGDOM
585 RMC LOGISTICS NORTHERN LIMITED UNITED KINGDOM
586 RMC LOGISTICS SCOTLAND LIMITED UNITED KINGDOM
587 RMC LOGISTICS SOUTH EAST LIMITED UNITED KINGDOM
588 RMC LOGISTICS WESTERN LIMITED UNITED KINGDOM
589 RMC MARINE (EUROPE) LIMITED UNITED KINGDOM
590 RMC MARINE (GUERNSEY) LIMITED UNITED KINGDOM (Guernsey)
591 RMC MARINE LIMITED UNITED KINGDOM
592 RMC MATERIALS LIMITED UNITED KINGDOM
593 RMC MID-ATLANTIC, LLC SOUTH CAROLINA
594 RMC MONEY PURCHASE PENSION TRUST LIMITED UNITED KINGDOM
595 RMC MORTARS LIMITED UNITED KINGDOM
596 RMC NEVADA, INC. NEVADA
597 RMC NEW MEXICO, LLC NEW MEXICO
598 RMC OVERSEAS LIMITED UNITED KINGDOM
599 RMC PACIFIC MATERIALS, INC. DELAWARE
600 RMC PACKED PRODUCTS LIMITED UNITED KINGDOM
601 RMC PENSION TRUST LIMITED UNITED KINGDOM
602 RMC PLANT LIMITED UNITED KINGDOM
603 RMC PLANT SALES LIMITED UNITED KINGDOM
604 RMC POLSKA SP. Z O.O. POLAND
605 RMC PROPERTIES LIMITED UNITED KINGDOM
606 RMC PROPERTY INVESTMENTS LIMITED UNITED KINGDOM
607 RMC READYMIX (MALAYSIA) SDN BHD MALAYSIA
608 RMC READYMIX EAST ANGLIA LIMITED UNITED KINGDOM
609 RMC READYMIX LIMITED UNITED KINGDOM
610 RMC READYMIX SOUTH WEST LIMITED UNITED KINGDOM
611 RMC RESERVE NO 1 LIMITED UNITED KINGDOM
612 RMC RETAIL AND MERCHANTING LIMITED UNITED KINGDOM
613 RMC ROADSTONE LIMITED UNITED KINGDOM
614 RMC ROMBUS MATERIALS LIMITED UNITED KINGDOM
615 RMC RUSSELL plc UNITED KINGDOM
616 RMC SOUTH FLORIDA, INC. FLORIDA
617 RMC SPECIALIST PRODUCTS LIMITED UNITED KINGDOM
618 RMC SUPERMIX UAE
619 RMC SURFACING LIMITED UNITED KINGDOM
620 RMC TOPMIX LLC UAE
621 RMC TRAINING SERVICES LIMITED UNITED KINGDOM
622 RMC TRANSPORT POLSKA SP. Z O.O. POLAND
623 RMC TREASURY LIMITED UNITED KINGDOM
624 RM TRIPPL STEINBRUCH GMBH AUSTRIA
625 RMC TRUSTEES (LTIP) LIMITED UNITED KINGDOM (Jersey)
626 RMC TRUSTEES (QUEST) LIMITED UNITED KINGDOM
627 RMC USA HOLDINGS, INC. DELAWARE
628 RMC USA HOLDINGS LIMITED UNITED KINGDOM
629 RMC USA FRANCE
630 RMC USA, INC. DELAWARE
631 RM LESENCE KFT. HUNGARY
632 RM VIGVAM KFT. HUNGARY
633 ROADE AGGREGATES LIMITED UNITED KINGDOM
634 ROFA BETON GMBH GERMANY
635 ROMBUS FINANCE LIMITED UNITED KINGDOM
636 ROMBUS INSURANCE BROKERS LIMITED UNITED KINGDOM
637 ROMBUS LEASING LIMITED UNITED KINGDOM
638 ROMBUS LIMITED UNITED KINGDOM
639 ROMBUS MATERIALS LIMITED UNITED KINGDOM
640 ROMBUS SAND AND GRAVEL LIMITED UNITED KINGDOM
641 ROMEY DECKEN BETRIEBSGESELLSCHAFT MBH, PLAIDT GERMANY
642 ROTHERVALE JOINERY LIMITED UNITED KINGDOM
643 RUDERSDORFER ZEMENT GMBH, RUDERSDORF GERMANY
644 ROSEMANN ERDBAU GMBH AUSTRIA
645 RUGBY ADELAIDE PTY LIMITED AUSTRALIA
646 RUGBY ANKOBET POLAND
647 RUGBY AUSTRALIA INVESTMENTS PTY LTD AUSTRALIA
648 RUGBY BUILDING SYSTEMS LIMITED UNITED KINGDOM
649 RUGBY CEMENT CONSULTANTS LIMITED UNITED KINGDOM
650 RUGBY CO-EXTRUDED PLASTICS LIMITED UNITED KINGDOM
651 RUGBY DORMANT NO. 1 LIMITED UNITED KINGDOM
652 RUGBY DORMANT NO. 16 LIMITED UNITED KINGDOM
653 RUGBY DORMANT NO. 2 LIMITED UNITED KINGDOM
654 RUGBY DORMANT NO. 3 LIMITED UNITED KINGDOM
655 RUGBY FARMS LIMITED UNITED KINGDOM
656 RUGBY HOLDING B.V. THE NETHERLANDS
657 RUGBY HOLDINGS LIMITED AUSTRALIA
658 RUGBY JAMAICA LIME AND MINERALS, LIMITED JAMAICA
659 RUGBY JOINERY LIMITED UNITED KINGDOM
660 RUGBY LIMITED UNITED KINGDOM
661 RUGBY PERTH PTY LIMITED AUSTRALIA
662 RUSSELL BUILDING MATERIALS LIMITED UNITED KINGDOM
663 RUSSELL COAL LIMITED UNITED KINGDOM
664 RUSSELL CONCRETE PRODUCTS LIMITED UNITED KINGDOM
665 RUSSELL DESIGN & ENGINEERING LIMITED UNITED KINGDOM
666 RUSSELL DEVELOPMENTS LIMITED UNITED KINGDOM
667 RUSSELL MASONRY PRODUCTS LIMITED UNITED KINGDOM
668 RUSSELL PLASTIC MOULDINGS LIMITED UNITED KINGDOM
669 RUSSELL QUARRY PRODUCTS (SOUTHERN) LIMITED UNITED KINGDOM
670 RUSSELL QUARRY PRODUCTS LIMITED UNITED KINGDOM
671 RUSSELL ROOF TILES LIMITED UNITED KINGDOM
672 RUSSLATE LIMITED UNITED KINGDOM
673 RUV TRANSPORTBETON MAXHUTTE GMBH, MAXHUTTE-HAIDHOF GERMANY
674 S & J QUARRIES LIMITED UNITED KINGDOM
675 S.M. TIDY (HAULAGE) LIMITED UNITED KINGDOM
676 SABLES ET GRAVIERS DE L'ORLEANAIS (SNC) FRANCE
678 SABLES ET GRAVIERS WILLERSINN S.A.R.L., FORT-LOUIS FRANCE
679 SABLIERES ET ENTREPRISES MORILLON CORVOL (SA)(SEMC in the FRANCE
organizational chart)
680 SAGRAMO (SAS) FRANCE
681 SAKRET HAMBURG-BERLIN GMBH & CO. KG GERMANY
682 SAKRET POLSCA POLNOC SP. Z O.O. POLAND
683 SAKRET TROCKENBAUSTOFFE GMBH & CO. KG, GIE(beta)EN GERMANY
684 SAKRET TROCKENBAUSTOFFE GMBH, GIE(beta)EN GERMANY
685 SAMIC BUILDERS MERCHANTS LIMITED UNITED KINGDOM
686 SAND- UND KIESWERK PECHGRABEN GMBH & CO. KG GERMANY
687 SAND- UND KIESWERK PECHGRABEN VERWALTUNGS-GMBH GERMANY
688 SANTA CLARA SAND & GRAVEL CO. CALIFORNIA
689 SARI BETONPUMPENDIENST GMBH & CO. KG GERMANY
690 SARI BETONPUMPENDIENST VERWALTUNGS-GMBH GERMANY
691 SAS DES GRESILLONS (SAS) FRANCE
692 SBS SPEZIALBAUSTOFFE GMBH & CO. KG, DRESDEN GERMANY
693 SBS SPEZIALBAUSTOFFE VERWALTUNGS-GMBH, DRESDEN GERMANY
694 SCHAFER NATURSTEIN GMBH & CO. KG, SINDELFINGEN GERMANY
695 SCHAFER NATURSTEIN VERW.-GMBH, SINDELFINGEN GERMANY
696 SCHOTTER-BETONWERK DONNERSDORF GMBH AUSTRIA
697 SCI CHATEAUNEUF DU RHONE (SCI) FRANCE
698 SCI LES HAUTS TERRIERS (SCI) FRANCE
699 SCI GRAND VOYEUX DE CONGIS (SCI) FRANCE
(SCI CONGIS in the organizational chart)
700 SCI CHARLEMAGNE (SCI) FRANCE
701 SCI D'ENCAULET (SCI) FRANCE
702 SCI DU BOIS DE LA PECHERIE (SCI) FRANCE
703 SCI DU COLOMBIER (SCI) FRANCE
704 SCI CHANGIS (SCI) FRANCE
705 SCI IMMOPAR (SCI) FRANCE
706 SCI MORET CONIE (SCI) FRANCE
707 SCI SAUTS DE L'AIGLE (SCI) FRANCE
708 SCOTTISH AGGREGATES LIMITED UNITED KINGDOM
709 SCOTTISH AND NORTHERN AGGREGATES LIMITED UNITED KINGDOM
710 SEA ENERGY ASSOCIATES LIMITED UNITED KINGDOM
711 SEAMENT (UK) LIMITED UNITED KINGDOM
712 SEAMENT LIMITED UNITED KINGDOM
713 SECURITY ALARMS (NORTHERN) LIMITED UNITED KINGDOM
714 SHAP CONCRETE PRODUCTS LIMITED UNITED KINGDOM
715 SIMPSON CONSTRUCTION MATERIALS, LLC MISSOURI
716 SIPOREX LIMITED UNITED KINGDOM
717 SKG GMBH AUSTRIA
718 SLO, SPOL S.R.O. CZECH REPUBLIC
719 SOCIEDADES DE BRITAS E CALCAREOS DA CARAPINHA DE ALENQUER LTD. PORTUGAL
720 SOCIETE BRIGNOLAISE DE BETON ET D'AGGLOMERES (SARL) FRANCE
721 SOCIETE D'EXPLOITAION DE CARRIERES (SAS) FRANCE
722 SOCIETE MERIDIONALE DE CARRIERES (SAS) FRANCE
723 SOCIETE PARISIENNE DE SABLIERES (SAS) FRANCE
724 SOL RAD ISRAEL
725 SONDERBETON GMBH AUSTRIA
726 SOUTH COAST SAND AND BALLAST COMPANY LIMITED UNITED KINGDOM
727 SOUTH COAST SHIPPING COMPANY LIMITED UNITED KINGDOM
728 SOUTHERN ROADSTONE LIMITED UNITED KINGDOM
729 SOUTHERN SECURITY SERVICES (SHEPWAY) LIMITED UNITED KINGDOM
730 SPOONER AVIATION (ENGINEERING) LIMITED UNITED KINGDOM
731 SPRINGETT COATED STONE LIMITED UNITED KINGDOM
732 ST. ALBANS SAND AND GRAVEL COMPANY LIMITED UNITED KINGDOM
733 STADTMARKETING UND WIRTSCHAFTSFORDERUNGSGES.MBH GERMANY
734 STAFF NOMINEES LIMITED UNITED KINGDOM
735 STB SAUERLANDER TRANSPORTBETON GMBH & CO. KG, LUDENSCHEID GERMANY
736 STB SAUERLANDER TRANSPORTBETON GMBH, LUDENSCHEID GERMANY
737 STEEPHOLME INVESTMENTS LIMITED UNITED KINGDOM (Jersey)
738 STEINWERKE WILHELM KOSTER GMBH & CO. KG, HAGEN GERMANY
739 STEYRTAL BETON GMBH AUSTRIA
740 STEYRTAL BETON GMBH & CO. KG. AUSTRIA
741 STOCKTON TIMBER PRODUCTS PTY LIMITED AUSTRALIA
742 STONE HILL QUARRIES LIMITED UNITED KINGDOM
743 SUDBAYERISCHER BETONPUMPEN-VERLEIH GMBH & CO. KG, UNTERSCHLEI(beta)HEIM GERMANY
744 SUNDERMEYER FRISCHBETON GMBH & CO. KG, BISSENDORF GERMANY
745 SUNDERMEYER GMBH, BISSENDORF GERMANY
746 SWIFT 258 LIMITED UNITED KINGDOM
747 SWK GMBH & CO. KG SUDWESTDEUTSCHE KIESHANDELSGES., IFFEZHEIM GERMANY
748 SWK GMBH, IFFEZHEIM GERMANY
749 TAUNUS-QUARZIT-WERKE GMBH & CO. KG, FRIEDRICHSDORF/TS. (WERHEIM) GERMANY
750 TAUNUS-QUARZIT-WERKE-VERWALTUNGS GMBH, FRIEDRICHSDORF/TS. GERMANY
751 TB HAMM GMBH & CO. KG, HAMM GERMANY
752 TB HAMM VERWALTUNGS-GMBH, HAMM GERMANY
753 TB REISINGER & CO., GEISENFELD GERMANY
754 TB WESTFALIA BAUSTOFFHANDEL GMBH & CO. KG, HAMM GERMANY
755 TB WESTFALIA BAUSTOFFHANDEL VERWALTUNGS-GMBH, HAMM GERMANY
756 TBE TRANSPORTBETON EISERN GMBH, SIEGEN GERMANY
757 TBG PFAFFENHOFEN GMBH & CO. KG, PFAFFENHOFEN GERMANY
758 TBG SZEGED KFT. HUNGARY
759 TBG TRANSPORTBETON GMBH & CO. KG, BAYREUTH GERMANY
760 TBG TRANSPORTBETON GOHFELD GMBH & CO. KG, LOHNE GERMANY
761 TBG TRANSPORTBETON GOHFELD VERWALTUNGS-GMBH, LOHNE GERMANY
762 TBG TRANSPORTBETON MUNCHBERG GMBH & CO. KG, MUNCHBERG GERMANY
763 TBG TRANSPORTBETON VERWALTUNGSGESELLSCHAFT MBH, PFAFFENHOFEN GERMANY
764 TBG TRANSPORTBETON VERWALTUNGS-GMBH, BAYREUTH GERMANY
765 TBL TRANSPORTBETON LUNEN GMBH & CO. KG, LUNEN GERMANY
766 TBL TRANSPORTBETON LUNEN VERWALTUNGS-GMBH, LUNEN GERMANY
767 TBM TRANSPORTBETON GMBH & CO. KG, MALLERSDORF GERMANY
768 TBM TRANSPORTBETON MUNSTER GMBH & CO. KG, MUNSTER GERMANY
769 TBM TRANSPORTBETON MUNSTER VERWALTUNGS-GMBH, MUNSTER GERMANY
770 TBM TRANSPORTBETON VERWALTUNGS-GMBH, MALLERSDORF GERMANY
771 TBN TRANSPORTBETON NORDTHURINGEN GMBH & CO. KG, ERFURT GERMANY
772 TBN TRANSPORTBETON NORDTHURINGEN VERWALTUNGS-GMBH, ERFURT GERMANY
773 TBR TRANSPORTBETON GMBH & CO. KG, ASCHHEIM GERMANY
774 TBR TRANSPORTBETON GMBH & CO. KG, REGENSBURG GERMANY
775 TBR TRANSPORTBETON REGEN GMBH & CO. KG, REGEN GERMANY
776 TBR TRANSPORTBETON REGENSBURG GMBH, PENTLING GERMANY
777 TBR TRANSPORTBETON VERWALTUNGS-GMBH, ASCHHEIM GERMANY
778 TBU TRANSPORTBETON UNNA GMBH & CO. KG, UNNA GERMANY
779 TBU TRANSPORTBETON UNNA VERWALTUNGS-GMBH, UNNA GERMANY
780 TBW TRANSPORTBETON WORTH / ISAR GMBH & CO. KG, LANDSHUT GERMANY
781 TEMPERED SAFETY GLASS LIMITED UNITED KINGDOM
782 TESTING SERVICES LIMITED UNITED KINGDOM
783 THAMES CEMENT LIMITED UNITED KINGDOM
784 THE BARRINGTON LIGHT RAILWAY COMPANY UNITED KINGDOM
785 THE BURRY SAND COMPANY LIMITED UNITED KINGDOM
786 THE FIFE SAND AND GRAVEL COMPANY LIMITED UNITED KINGDOM
787 THE LONDON GRANITE COMPANY LIMITED UNITED KINGDOM
788 THE RUGBY GROUP LIMITED UNITED KINGDOM
789 THE RUGBY PORTLAND CEMENT COMPANY LIMITED UNITED KINGDOM
790 THE SHAP GRANITE COMPANY LIMITED UNITED KINGDOM
791 TIMOR BARAT BATU SDN BHD MALAYSIA
792 TLALIM ISRAEL
793 TONGRUBE ULMITZ GMBH AUSTRIA
794 TRENT GRAVELS LIMITED UNITED KINGDOM
795 TRANSBETON GMBH AUSTRIA
796 TRANSMOBIL BAUSTOFF GMBH & CO. KG, RATINGEN GERMANY
797 TRANSMOBIL VERWALTUNGS-GMBH, RATINGEN GERMANY
798 TRANSPORT- UND FRISCHBETON GMBH & CO. KG, AACHEN GERMANY
799 TRANSMOBILGMBH AUSTRIA
800 TRANSPORTBETON GMBH AUSTRIA
801 TRANSBETON HUNGARIA KFT. HUNGARY
801 TRANSPORTBETON MORAVA S.R.O. CZECH REPUBLIC
802 TRANSPORTBETON BREMERHAVEN GMBH & CO. KG, BREMERHAVEN GERMANY
803 TRANSPORTBETON DORTMUND GMBH & CO. KG, DORTMUND GERMANY
804 TRANSPORTBETON DORTMUND VERWALTUNGS-GMBH, DORTMUND GERMANY
805 TRANSPORTBETON GMBH & CO. KG, WUPPERTAL GERMANY
806 TRANSPORTBETON GMBH, WUPPERTAL GERMANY
807 TRANSPORTBETON HENNHOFEN GMBH & CO. KG, ALTENMUNSTER-HENNHOFEN GERMANY
808 TRANSPORTBETON HENNHOFEN VERWALTUNGS-GMBH, ALTENMUNSTER-HENNHOFEN GERMANY
809 TRANSPORTBETON HUTTEN GMBH & CO. KG, IRCHENRIETH GERMANY
810 TRANSPORTBETON HUTTEN VERWALTUNGS GMBH, IRCHENRIETH GERMANY
811 TRANSPORTBETON INGOLSTADT GMBH & CO. KG, INGOLSTADT GERMANY
812 TRANSPORTBETON INGOLSTADT GMBH, INGOLSTADT GERMANY
813 TRANSPORTBETON PLAUEN GMBH & CO. KG GERMANY
814 TRANSPORTBETON PLAUEN VERWALTUNGS-GMBH GERMANY
815 TRANSPORTBETON REGEN VERWALTUNGS-GMBH, REGEN GERMANY
816 TRANSPORTBETON SCHLESWIG-HOLSTEIN GMBH, KIEL GERMANY
817 TRANSPORTBETON-WERK AHLEN GMBH, AHLEN GERMANY
818 TRANSPORT-BETONWERK HEIDENHEIM GMBH & CO. KG, HEIDENHEIM A.D. BRENZ GERMANY
819 TRANSPORTBETON-WERK MARK GMBH & CO. KG, DORTMUND GERMANY
820 TRANSPORTBETON-WERK MARK GMBH, HAMM GERMANY
821 TRANSPORTCOMMERCE D.D. 39,04% in share capital CROATIA
822 TRANSBIC - TRANSPORTES DE BETAO INERTES ET CIMENTO UNIPESSOAL LTD. PORTUGAL
823 TUCSON READY-MIX, INC. ARIZONA
824 TUNDERNSEE GMBH & CO. KG, HAMELN-TUNDERN GERMANY
825 TUNDERNSEE VERWALTUNGSGESELLSCHAFT MBH, HAMELN-TUNDERN GERMANY
826 UNION BETON BETTELS & CO. TRANSPORTBETONGESELLSCHAFT MBH KG GERMANY
827 UNION BETON BETTELS & CO. VERWALTUNGSGESELLSCHAFT GERMANY
828 UNION BETON NIEDERSACHSEN GMBH & CO. KG, HANNOVER GERMANY
829 UNION BETON NIEDERSACHSEN VERWALTUNGS-GMBH, HANNOVER GERMANY
830 UNION GERMANIA BETON GMBH & CO. KG GERMANY
831 UNION GERMANIA BETON VERWALTUNGS-GMBH GERMANY
832 VALENSEINE (SOCIETE D'ECONOMIE MIXTE) FRANCE
833 VEGRAD FEBAU SLOVENIA
834 VEREINIGTE KIESWERKE SCHLADEN GMBH & CO. KG GERMANY
835 VEREINIGTE KIESWERKE SCHLADEN VERWALTUNGSGESELLSCHAFT MBH GERMANY
836 VIRTUAL EARNINGS SDN BHD MALAYSIA
837 VONDEL UNLIMITED UNITED KINGDOM (Jersey)
838 VS DECKENVERTRIEB GMBH AUSTRIA
839 WALDHEIM-BETON GMBH & CO. KG, WALDHEIM GERMANY
840 WALDHEIM-BETON VERWALTUNGS-GMBH, WALDHEIM GERMANY
841 WANLIP GRAVELS LIMITED UNITED KINGDOM
842 WARD SURFACING LIMITED UNITED KINGDOM
843 WASCHKIESWERK EICH GMBH & CO. KG, EICH GERMANY
844 WASCHKIESWERK EICH VERWALTUNGS-GMBH, EICH GERMANY
845 WENCKER GMBH & CO. KG, DORTMUND GERMANY
846 WENCKER VERWALTUNGS-GMBH, DORTMUND GERMANY
847 WEST LONDON AGGREGATES LIMITED UNITED KINGDOM
848 WESTERN AGGREGATES LIMITED UNITED KINGDOM
849 WESTERN ROADSTONE LIMITED UNITED KINGDOM
850 WETTERN BROTHERS LIMITED UNITED KINGDOM
851 WF-MORTEL GMBH, HERFORD GERMANY
852 WICKWAR QUARRIES LIMITED UNITED KINGDOM
853 WILLERSINN KIES UND SPLITT GMBH & CO. KG, LUDWIGSHAFEN GERMANY
854 WILLERSINN KIES UND SPLITT VERWALTUNGS-GMBH, LUDWIGSHAFEN GERMANY
855 WILLIAM COOPER & SONS (DREDGING) LIMITED UNITED KINGDOM
856 WILLSDOWN FARMS LIMITED UNITED KINGDOM
857 WIRTZ NATURSTEINE UND STRA(beta)ENBAUSTOFFHANDELS-GMBH, ATTERSHEIM GERMANY
858 WOLF-ROTERMUND GMBH GERMANY
859 WONDERTEX LIMITED UNITED KINGDOM
860 WOODSIDE WASTE SERVICES LIMITED UNITED KINGDOM
861 WORCESTERSHIRE MINIMIX LIMITED UNITED KINGDOM
862 WOTTON BROS., LIMITED UNITED KINGDOM
863 WOTTON ROADSTONE LIMITED UNITED KINGDOM
864 WONDERTEX LIMITED UNITED KINGDOM
865 WUNDER KIES GMBH & CO. KG, SCHWARZENBEK GERMANY
866 WUNDER KIESVERWALTUNGS-GMBH, SCHWARZENBEK GERMANY
867 X. BUCHENRIEDER GMBH & CO. TRANSPORTBETON KG, LANDSHUT GERMANY
868 X. BUCHENRIEDER GMBH, LANDSHUT GERMANY
869 YORK COATED STONE LIMITED UNITED KINGDOM
870 ZEMENT UNION GMBH AUSTRIA
871 ZORAN ISRAEL
872 ZUTER POLAND
873 ZWIROWNIA KSM SP. Z O.O. POLAND
---------------------------------------------------------------------------------------------------------------
(1) This company is owned by Simpson Construction Materials, LLC.
(2) This is a 50% Joint Venture between RMC USA, Inc. and Simpson Sand and Gravel Company an unrelated party.
SCHEDULE 5.5
FINANCIAL STATEMENTS
Consolidated Annual Accounts December 31, 2004, 2003, 2002, 2001 and 2000 and
2004 Director's Report (With Auditors Report Thereon).
The financial statements of Cemex Espana and its Subsidiaries delivered to each
Purchaser pursuant to Section 5.5 and listed herein do not reflect the
acquisition of RMC Group Limited, which occurred on March 1, 2005, or asset
sales subsequent to December 31, 2004.
SCHEDULE 5.8
LITIGATION
None.
SCHEDULE 5.11
LICENSE, ETC. EXCEPTIONS
None.
SCHEDULE 5.15
FINANCIAL INDEBTEDNESS
As of 03.31.05
Figures in millions of (euro)*
- --------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING FINAL
BORROWER INSTRUMENT AMOUNT MATURITY
- --------------------------------------------------------------------------------------------------------------------------------
CEMEX ESPANA, S.A. Bilateral Lines 285 April 2005-January 2007
(euro)250 M & (Y)19.308 M Syndicated Loan 289 Between 2006-2009
$2,300 M Syndicated Loan (Acq. Financ.) 1,769 Between 2007-2009
Others 28 Between 2005-2006
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 2,371
- --------------------------------------------------------------------------------------------------------------------------------
CEMEX ESPANA FINANCE, LLC. Priv. Plac. ($103 M) 80 June 2010
Priv. Plac. ($96 M) 75 June 2013
Priv. Plac. ($201 M) 157 June 2015
Priv. Plac. ((Y)4,981 M) 36 April 2010
Priv. Plac. ((Y)6,087 M) 44 April 2011
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 393
- --------------------------------------------------------------------------------------------------------------------------------
CEMEX FINANCE EUROPE, B.V. EMTN 101 July 2006
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 101
- --------------------------------------------------------------------------------------------------------------------------------
CEMEX UK, LTD Loan Notes (1) 33 June 2005-December 2009
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 33
- --------------------------------------------------------------------------------------------------------------------------------
RMC GROUP, LTD (pound)604 M Term & Revolving Credit
Facilities 803 October 2005-October 2008
Priv. Plac. ((pound)70 M) (2) 102 Between 2009-2019
Priv. Plac. ($75 M) (3) 58 July 2006
Priv. Plac. ($255 M) (4) 197 Between 2010-2020
Priv. Plac. ($222 M) (5) 171 Between 2009-2014
Other debt (6) 100 Between 2005-2014
- --------------------------------------------------------------------------------------------------------------------------------
RMC USA Priv. Plac. ($155 M) (7) 120 Between 2008-2018
Line of Credit 5 December 2005
- --------------------------------------------------------------------------------------------------------------------------------
Other debt at RMC subsidiary level 66 Between 2005-2016
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 1,622
- --------------------------------------------------------------------------------------------------------------------------------
CEMEX, INC. Priv. Plac. ((euro)50 M) 50 March 2006
Priv. Plac. ($315 M) 244 March 2006
Priv. Plac. ($396 M) 306 March 2008
SBLC (8) 38 Dec 2006-April 2025
- -------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 638
- --------------------------------------------------------------------------------------------------------------------------------
PUERTO RICAN CEMENT COMPANY $40 M Credit Line 23 June 2005
$50 M Credit Line 21 January 2006
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 44
- --------------------------------------------------------------------------------------------------------------------------------
APO CEMENT CORP. ECA Loan 10 July 2005-March 2006
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 10
- --------------------------------------------------------------------------------------------------------------------------------
OTHER COMPANIES Credit Lines 30
- --------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 30
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DEBT 5.242
---------- -----
* Exchange rates
$/(euro)=1.2965
(Y)/(euro)=138.97
(euro)/(pound)=1.4575
(1) Held by RMC Shareholders who elected to receive Loan Notes instead of cash
as payment for their RMC's shares.
(2) On May 17, 2005 this issuance was fully prepaid
(3) On May 17, 2005 Notes for an amount of $55.0 M were prepaid
(4) On May 17, 2005 Notes for an amount of $0.7 M were prepaid
(5) On May 17, 2005 Notes for an amount of $119.5 M were prepaid
(6) This caption basically includes Bank Loans, Overdraft Facilities and
Financial Leases.
(7) On May 17, 2005 Notes for an amount of $11.0 M were prepaid
(8) Stand By Letters of Credit over tax-exempt bonds. Maturities shown
correspond to these bonds. SBLC renewed on an annual basis.
SCHEDULE 10.3
EXISTING LIENS
- ------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED GROUP
LIEN SCHEDULE
(Figure In million. of Euros)
- ------------------------------------------------------------------------------------------------------------------------
COMPANY LENDER LIEN CONCEPT BALANCE (euro)
- ------------------------------------------------------------------------------------------------------------------------
CEMEX, Inc. GE Capital (FKIT 279, 280) Equipment related with the credit 0.63
Kosmos Cement Company First Corp (FKIT 101649) Equipment related with the credit 0.01
CEMEX, Inc. Hampton Land related with the credit 0.18
Mineral Resource Technologies, Inc Met-South, Inc Ash storage facility 0.13
Cementownia Rudniki S.A. SOCIETE GENERALE Plant Equipment 11.42
BETON PRET DE L'EST SOCIETE GENERALE Equipment related with the credit 0.12
A Beton Viacolor Terko Rt. Raiffeisen Bank Mortgage 1.35
Danubiusbeton Dunantul Kft. Raiffeisen Bank Mortgage 1.16
4K Beton (Cemex) A/S, Denmark Nordea Leasing; Denmark Leased equipment 1.10
Cemex, Latvia Disko Leasing GMBH truck finance lease 0.17
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit 0.39
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit 0.34
Transbeton Lieferbeton Raiffeisen Bank Equipment related with the credit 0.25
Betonring Sud Raiffeisen Bank Equipment related with the credit 0.45
Transportbeton Hutten GmbH & Co. KG Dresdner Bank AG Land related with the credit 0.28
X. Buchanrieder GmbH & Co.
Transportbeton KG Raiffeisenbank Land related with the credit 0.93
Wunder Kies GmbH & Co. KG (7724) Kreissparkasse Schwarzenbek Land related with the credit 0.24
Wunder Kies GmbH & Co. KG (7725) Kreissparkasse Schwarzenbek Land related with the credit 0.09
Wunder Kies GmbH & Co. KG (7725) Landesbank Kiel Land related with the credit 0.09
Wunder Kies GmbH & Co. KG (7726) Kreissparkasse Schwarzenbek Land related with the credit 0.24
Wunder Kies GmbH & Co. KG (7726) Landesbank Kiel Land related with the credit 0.24
Wunder Kies GmbH & Co. KG (7727) Kreissparkasse Schwarzenbek Land related with the credit 0.16
Quarzsandwerk Wellmersdorf GmbH & Co. KG Raiffeisenbank Land related with the credit 0.23
Wunder Kies GmbH & Co. KG LGS Sparkassen Leasing Finance Lease for aggregates washing unit 0.44
Rudersdorfer Zement GmbH Rudersdorfer Logistik GmbH Finance Lease for mixing facility 0.20
Betonforderung Nordwest Hanseatische Leasing Finance Lease for concrete pump 0.21
Cemex Deutschland AG KGAL Asset Rental Equipment related with the credit 11.27
ROMBUS LEASING/RMC (UK) ING HP equipment finance 1.33
Cemex Co, UK ING Equipment related with the credit 16.82
Cemex Co, UK ING Equipment related with the credit 48.45
Cemex Co. UK Lloyds t.s.b. Equipment related with the credit 5.35
-------------
104.27
- ------------------------------------------------------------------------------------------------------------------------
EXHIBIT 1(a)
FORM OF SERIES A NOTE
CEMEX ESPANA FINANCE LLC
5.18% SENIOR NOTE, SERIES A, DUE 2010
No.[_____] [DATE]
$[____________] PPN 15128@ AF 0
FOR VALUE RECEIVED, the undersigned, CEMEX ESPANA FINANCE LLC (herein
called the "Company"), a limited liability company organized and existing under
the laws of Delaware, hereby promises to pay to [_________________________], or
registered assigns, the principal sum of [_______________________________]
DOLLARS on June 13, 2010, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
5.18% per annum from the date hereof, payable semiannually, on the 13th day of
June and December in each year, commencing with the June 13th or December 13th
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
Note Purchase Agreement referred to below), payable semiannually as aforesaid
(or, at the option of the registered holder hereof, on demand), at a rate per
annum from time to time equal to the greater of (i) 7.18% or (ii) 2% over the
rate of interest publicly announced by Citibank, N.A. from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Citibank, N.A, 111 Wall Street, 14th Floor, New York, New York
10043, Corporate Agency and Trust Department or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to the Note Purchase Agreement, dated as of June 13,
2005 (as from time to time amended, supplemented or modified, the "Note
Purchase Agreement"), among the Company, Cemex Espana, S.A. and the respective
Purchasers named therein and is entitled to the benefits thereof. Each holder
of this Note will be deemed, by its acceptance hereof, (i) to have agreed to
the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representations set forth in USections 6.1
and 6.2 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
Payment of the Principal of, Make-Whole Amount, if any, and interest
on this Note has been guaranteed by Cemex Espana, S.A. and certain other
Guarantors (as defined in the Note Purchase Agreement) pursuant to a Note
Guarantee (as defined in the Note Purchase Agreement).
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than
such State.
CEMEX ESPANA FINANCE LLC
By______________________
[Title]
EXHIBIT 1(b)
FORM OF SERIES B NOTE
CEMEX ESPANA FINANCE LLC
5.62% SENIOR NOTE, SERIES B, DUE 2015
No.[_____] [DATE]
$[____________] PPN 15128@ AG 8
FOR VALUE RECEIVED, the undersigned, CEMEX ESPANA FINANCE LLC (herein
called the "Company"), a limited liability company organized and existing under
the laws of Delaware, hereby promises to pay to [_________________________], or
registered assigns, the principal sum of [_______________________________]
DOLLARS on June 13, 2015, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of
5.62% per annum from the date hereof, payable semiannually, on the 13th day of
June and December in each year, commencing with the June 13th or December 13th
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Make-Whole Amount (as defined in the
Note Purchase Agreement referred to below), payable semiannually as aforesaid
(or, at the option of the registered holder hereof, on demand), at a rate per
annum from time to time equal to the greater of (i) 7.62% or (ii) 2% over the
rate of interest publicly announced by Citibank, N.A. from time to time in New
York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Citibank, N.A, 111 Wall Street, 14th Floor, New York, New York
10043, Corporate Agency and Trust Department or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to the Note Purchase Agreement, dated as of June 13,
2005 (as from time to time amended, supplemented or modified, the "Note
Purchase Agreement"), among the Company, Cemex Espana, S.A. and the respective
Purchasers named therein and is entitled to the benefits thereof. Each holder
of this Note will be deemed, by its acceptance hereof, (i) to have agreed to
the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representations set forth in Sections 6.1
and 6.2 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
Payment of the Principal of, Make-Whole Amount, if any, and interest
on this Note has been guaranteed by Cemex Espana, S.A. and certain other
Guarantors (as defined in the Note Purchase Agreement) pursuant to a Note
Guarantee (as defined in the Note Purchase Agreement).
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than
such State.
CEMEX ESPANA FINANCE LLC
By______________________
[Title]
EXHIBIT 4.4(a)
FORM OF OPINION OF COUNSEL
FOR CEMEX ESPANA
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL NEW YORK
COUNSEL TO THE COMPANY
Matters To Be Covered In
Opinion of Special New York Counsel To the Company
1. The Company being duly formed, validly existing and in good
standing and having requisite limited liability company power and authority to
issue and sell the Notes and to execute and deliver the documents.
2. Due authorization and execution of the documents by the Company,
and such documents being legal, valid, binding and enforceable against the
Company and the Guarantors.
3. No conflicts with US or NY laws or other material English language
debt agreements.
4. All US and NY consents required to issue and sell the Notes and to
execute and deliver the documents having been obtained.
5. The Notes not requiring registration under the Securities Act of
1933, as amended; no need to qualify an indenture under the Trust Indenture Act
of 1939, as amended.
6. Company not an "investment company", or a company "controlled" by
an "investment company", under the Investment Company Act of 1940, as amended.
EXHIBIT 4.4(c)
FORM OF OPINION OF SPECIAL
NETHERLANDS COUNSEL
EXHIBIT 4.4(d)
FORM OF OPINION OF SPECIAL US COUNSEL
TO THE PURCHASERS
EXHIBIT 4.4(e)
FORM OF OPINION OF SPECIAL SPANISH COUNSEL
TO THE PURCHASERS
Exhibit 4.17
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CEMEX SOUTHEAST LLC,
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"LLC Agreement") of CEMEX SOUTHEAST LLC, a Delaware limited liability company
(the "Company"), effective as of July 1, 2005, is by and among the Company,
CEMEX SOUTHEAST HOLDINGS, LLC, a Delaware limited liability company ("Cemex"),
and READY MIX USA, INC., an Alabama corporation ("RMUSA") (Cemex and RMUSA are
hereinafter sometimes collectively referred to as the "Members"), and, solely
for the purposes set forth in Section 9.6, CEMEX, INC., a Louisiana corporation
("Cemex, Inc.")
W I T N E S S E T H:
WHEREAS, the Company was formed for the purpose of engaging in the
Primary Business (as defined herein) and now desire to set forth the agreement
among the Members and the Company regarding the governance of the affairs of
the Company and the conduct of its business; and
WHEREAS, Cemex, Inc. has agreed to enter into this LLC Agreement
solely for the purposes set forth in Section 9.6 hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and undertakings of the Members and the Company contained
herein, it is agreed as follows:
1. Name, Office, Agent for Service of Process and Members' Names and
Mailing Addresses.
1.1 Name. The name of the Company shall be CEMEX SOUTHEAST LLC.
1.2 Office. The address of the registered office and the mailing
address of the Company shall be c/o The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware,
19801, or such other address(es) as the Manager may hereafter determine.
1.3 Agent for Service of Process. The name and address of the
Company's initial registered agent for service of process shall be c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware, 19801.
1.4 Initial Members' Names, Mailing Addresses and Percentage and
Voting Interests. The name and mailing address of each of the initial Members
of the Company, and the Percentage Interest and Voting Interest of each such
Member, are as set forth on Exhibit A attached hereto. The Manager shall update
Exhibit A from time to time as necessary to accurately reflect the information
therein, including any adjustment of the Percentage Interests required by this
LLC Agreement, and to reflect the admission of additional Members in accordance
with this LLC Agreement. Any such amendment or revisions to Exhibit A shall not
be deemed an amendment to this LLC Agreement requiring approval of the Board.
2. Duration. The existence of the Company shall commence on the date
of the filing of the Certificate of Formation in the Office of the Secretary of
State of Delaware, and shall continue in perpetuity until dissolved pursuant to
Section 12.1 hereof.
3. Purpose and Definitions.
3.1 Purpose. The Company is organized for the following purposes:
(a) to engage in the production and sale of Portland cement (excluding
white cement), blended cement and masonry products within the Cement Boundaries
(as defined in Section 3.2 hereof) (the "Primary Business"); and
(b) to engage in such additional activities that are necessary or
appropriate to conduct the Primary Business.
3.2 Definitions. Capitalized terms used in this LLC Agreement and not
otherwise defined herein shall have the meanings set forth below:
"Acquired Business" has the meaning set forth in Section 9.6.3.(c)
hereof.
"Acquisition Date" has the meaning set forth in Section 9.6.3.(c)
hereof.
"Additional Capital Contributions" has the meaning set forth in
Section 4.1(b)(i) hereof.
"Adjusted Book Value" means total assets less total liabilities as
determined under GAAP, as consistently applied and as reflected on the
Company's balance sheet as of the date of the event giving rise to the
calculation of Adjusted Book Value, plus the aggregate depreciation expense
reflected in net income during the measurement period minus the Put Option
Depreciation amount for the measurement period. For the avoidance of doubt, and
as reflected in the Contribution Agreement, the assets contributed to the
Company by RMUSA and Cemex on the Contribution Date will be valued for book
purposes at $8,000,000.00 and $398,193,477.60, respectively, subject to
adjustment as provided in Section 2.3 of the Contribution Agreement. An example
of this calculation is shown in Exhibit B-3.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts which such
Member is obligated to restore or is deemed to be obligated to restore
pursuant to the penultimate sentence of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adverse Act" means, with respect to a particular Member or Cemex,
Inc., any of the following:
(i) the occurrence of an Event of Bankruptcy with respect to
such Member or Cemex, Inc.;
(ii) any dissolution of such Member that is a corporation,
partnership, limited liability company or other entity, or any
dissolution of Cemex, Inc., without the prior written consent of the
Manager, provided that if the Member to be dissolved, or Cemex, Inc.,
as the case may be, is also the Manager, or an Affiliate of the
Manager, such consent shall be required to be obtained from the Board;
(iii) any failure by Cemex, Inc. to tender the Purchase Price
as and when due in accordance with Section 9.6 hereof; provided, that
RMUSA and each of its Affiliates has tendered its Percentage Interest
or Membership Interest, as the case may be, free of any Liens at the
Put Option Closing or such later closing on the first anniversary or
second anniversary of the Put Option Closing, as the case may be.
(iv) at the election of the Transferring Member, the failure
of a Non-Transferring Member who gives an Offer Acceptance Notice
within the Offer Option Period to consummate the contemplated
transaction within one (1) year after it gives such Offer Acceptance
Notice, as provided in Section 9.3(a) hereof;
(v) at the election of the Contribution Complying Members,
the failure of a Delinquent Member to make an Additional Capital
Contribution pursuant to Section 4.1 hereof if the aggregate
outstanding amount of (i) Additional Capital Contributions that the
Delinquent Member and its Affiliates have failed to make under this
Agreement and (ii) "Additional Capital Contributions" under the Ready
Mix LLC Agreement with respect to such Member or any of its Affiliates
is a "Delinquent Member" under Section 4.1 of the Ready Mix LLC
Agreement, exceeds $10 million; or
(vi) at the election of the Transferring Member, a breach by
a Non-Transferring Member who gives a Tag Along Notice within the
Offer Option Period to Transfer its entire Membership Interest
pursuant to the transaction set forth in the Offer Notice of any of
its obligations to the purchaser under the Non-Transferring Member's
agreement with the purchaser related to such transaction, which breach
causes the contemplated transaction to be terminated, as provided in
Section 9.4 hereof.
"Adverse Act Exercise Date" has the meaning set forth in Section
11.1(d)(i) hereof.
"Adverse Member" means, with respect to a particular Adverse Act, the
Member with respect to which such Adverse Act has occurred.
"Adverse Member Buyout Closing" has the meaning set forth in Section
11.1(d) hereof.
"Affiliate" when used with respect to a specified Person, means a
Person that:
(i) directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control
with such specified Person;
(ii) is a director, officer, employee, trustee, member or
general partner of, or an owner of an equity interest of more than
fifty percent (50%), or a beneficiary of a trust owning an equity
interest of more than fifty percent (50%) in, such specified Person or
any Person specified in clause (i) of this definition; or
(iii) is a member of the immediate family of such specified
Person or any Person specified in clause (i) or (ii) of this
definition, and any partnership, corporation, trust, limited liability
company, association or other entity or organization that is
controlled by such immediate family member. For purposes hereof, the
members of a Person's "immediate family" shall include such Person's
parents, grandparents, spouse, children (natural or adopted),
grandchildren (natural or adopted), siblings (natural or adopted) and
children of siblings (natural or adopted). For purposes of this
definition, the term "control" (and any derivative thereof) means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting stock, by contract or otherwise.
"Approved Extraordinary Required Additional Capital Contribution" has
the meaning set forth in Section 4.1(b) hereof.
"Applicable Tax Rate" means the then maximum current statutory
corporate federal tax rate (currently 35%) plus 65% of the maximum statutory
corporate state tax rate of the states in which the joint venture transacts
business, both rates to be adjusted annually for changes in the tax rates and
the states in which the Company operates.
"Back-Up Supply Agreement" means the Cement Supply Agreement of even
date herewith between the Company and Cemex, Inc., as such agreement may be
amended or modified from time to time.
"Base Member" has the meaning set forth in Section 9.1(c) hereof.
"Board" means a group of eight (8) individuals, four (4) of whom shall
be appointed by each Member pursuant to Section 8.1(e) hereof.
"Budgeted Additional Capital Contribution" has the meaning set forth
in Section 4.1(b) hereof.
"Business Day" means a day (other than a Saturday) on which banks
generally are open in New York City, Houston, Texas and Birmingham, Alabama,
for a full range of business.
"Buyout Option" has the meaning set forth in Section 11.1(d) hereof.
"Buyout Purchase Price" has the meaning set forth in Section 11.1(d)
hereof.
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with Section 4.5 hereof.
"Capital Contributions" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any assets (other than money)
contributed to the Company with respect to the Membership Interests in the
Company held or purchased by such Member, including additional Capital
Contributions.
"Certificate of Formation" means the Certificate of Formation of the
Company which was filed on March 1, 2005 (the "Effective Date"), in the Office
of the Secretary of State of Delaware, and all amendments thereto.
"Cemex" has the meaning set forth in the Introduction hereof.
"Cemex. Inc." has the meaning set forth in the Introduction hereof.
"Cement Boundaries" means the states of Alabama, Georgia and
Mississippi, the Cement Florida Panhandle (as defined herein) and the Cement
Limited Tennessee Area (as defined herein).
"Cement Florida Panhandle" means the following counties in the State
of Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington,
Jackson, Bay, Calhoun, Gulf and Franklin. The Cement Florida Panhandle shall
exclude the City of Tallahassee, Florida.
"Cement Limited Tennessee Area" means the Metropolitan Statistical
Areas of Chattanooga and Memphis, Tennessee.
"Cemex Post-Exercise Regular Cash Distribution" has the meaning set
forth in Section 9.6.4(c) hereof.
"Cemex Post-Exercise Special Cash Distribution" has the meaning set
forth in Section 9.6.4(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any federal laws of similar import, and to the extent applicable,
any Regulations promulgated thereunder.
"Company" means CEMEX SOUTHEAST LLC, a Delaware limited liability
company, and any successor limited liability company.
"Company Minimum Gain" has the meaning of "partnership minimum gain"
as set forth in Section 1.704-2(d) of the Regulations.
"Company's Accounting Firm" has the meaning set forth in Section 7.1
hereof.
"Competitive Business" means any business that sells Portland cement
(excluding white cement), blended cement and/or masonry products within the
Cement Boundaries and which is owned, operated or controlled by any Person
other than the Company or any of its Subsidiaries.
"Competitive Business Approval" has the meaning set forth in Section
19(a) hereof.
"Contribution Agreement" means the Asset and Capital Contribution
Agreement by and among the Members and the Company dated July 1, 2005.
"Contribution Complying Member" has the meaning set forth in Section
4.1(b)(iii) hereof.
"Contribution Date" means the later of (a) the date upon which the
Company is legally formed and (b) the date upon which initial Capital
Contributions are made pursuant to Section 4.1(a) hereof.
"Contributing Member" has the meaning set forth in Section 19(a)
hereof.
"DGCL" means the Delaware General Corporation Law, as the same may be
amended from time to time.
"Damages" has the meaning set forth in the Contribution Agreement.
"Debt(s)" means all borrowed funds of the Company or any of its
Subsidiaries and all other obligations or liabilities of the Company or any of
its Subsidiaries under Statement of Financial Accounting Standards No. 5,
including, for the avoidance of doubt, capital leases but not operating leases;
provided, however, that "Debt" shall not include any current liabilities.
"Debt Reduction Capital Contribution" has the meaning set forth in
Section 4.1(b)(ii) hereof.
"Delinquent Member" has the meaning set forth in Section 4.1(b)(iv)
hereof.
"EBITDA" means with respect to a particular Person for a particular
period, the consolidated operating income plus depreciation and amortization of
such Person for such period and refers to the earnings of continuing operations
and shall not include the effect of cumulative changes in accounting principles
and material nonrecurring items for such entities on a combined basis for such
period.
"Event of Bankruptcy" means, with respect to any Member, or Cemex,
Inc., any of the following:
(i) making a general assignment for the benefit of creditors;
(ii) filing a voluntary petition in bankruptcy;
(iii) filing a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any bankruptcy, insolvency or
other similar law;
(iv) seeking, consenting to, or acquiescing in the
appointment of a trustee, receiver or liquidator of such Member, or
Cemex, Inc., or of all or any substantial part of its properties or
assets under any bankruptcy, insolvency or other similar law; or
(v) the passage of one hundred twenty (120) days after the
commencement of any involuntary proceeding against such Member, or
Cemex, Inc., seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy, insolvency or other similar law, if the proceeding has not
been dismissed, or the passage of ninety (90) days after the
appointment without its consent or acquiescence of a trustee, receiver
or liquidator of such Member, or Cemex, Inc., or of all or any
substantial part of its properties or assets, if the appointment is
not vacated or stayed, or the passage of ninety (90) days after the
expiration of any such stay, if the appointment is not vacated.
"Excess Amount" has the meaning set forth in Section 4.1(b)(ii)
hereof.
"Excess Distribution Amount" has the meaning set forth in Section
6.1(b)(i) hereof.
"Exercise Date" means the date upon which the Put Notice is actually
or constructively delivered to Cemex, Inc.
"External Competitive Business" means a Competitive Business where
less than fifty percent (50%) of such Competitive Business' consolidated total
revenues during the most recently completed calendar year were derived from
sales of Portland cement (excluding white cement), blended cement and masonry
products within the Cement Boundaries.
"Extraordinary Required Additional Capital Contribution" has the
meaning set forth in Section 4.1(b)(i) hereof.
"Fiscal Year" means (i) the period commencing on the Contribution Date
and ending on December 31, 2005, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Section 5 hereof.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means (i) any domestic or foreign national,
state or local government, any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, court, department, bureau or entity,
or (ii) any arbitrator with authority to legally bind a party or any of its
Affiliates.
"Gross Asset Depreciation" means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year, Gross Asset
Depreciation shall be an amount that bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation amortization or other
cost recovery deduction for such Fiscal Year bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Fiscal Year is zero, Gross Asset
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Manager.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such
asset, as determined by the Board; provided that the initial Gross
Asset Values of the assets contributed to the Company pursuant to
Section 4.1 hereof shall be as set forth in such section;
(ii) the Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking
Code Section 7701(g) into account), as determined by the Board as of
the following times: (A) the acquisition of an additional Membership
Interest or other interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution;
(B) the distribution by the Company to a Member of more than a de
minimis amount of Company property or assets as consideration for a
Membership Interest or other interest in the Company; and (C) the
liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, provided that an adjustment
described in clauses (A) and (B) of this paragraph shall be made only
if the Board reasonably determines that such adjustment is necessary
to reflect the relative economic interests of the Members in the
Company;
(iii) the Gross Asset Value of any item of the Company assets
distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset
on the date of distribution as determined by the Board; and
(iv) the Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations and subparagraph (vi) of the
definition of "Profits" and "Losses" or Section 5.2(g) hereof;
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subparagraph (iv) to the extent that an adjustment
pursuant to subparagraph (ii) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to
this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset,
for purposes of computing Profits and Losses.
"HSR Act" has the meaning set forth in Section 9.6.6(c) hereof.
"Indemnified Party" has the meaning set forth in Section 21.1 hereof.
"Indemnifying Party" has the meaning set forth in Section 21.1 hereof.
"Indirect Sale" has the meaning set forth in Section 9.3(f) hereof.
"Initial Payment" has the meaning set forth in Section 9.6.4(b)(i)
hereof.
"Internal Boundaries Assets" has the meaning set forth in Section
19(a) hereof.
"Internal Boundaries Assets Value" has the meaning set forth in
Section 19(a) hereof.
"Investment" shall mean, for any Person: (a) the acquisition (whether
for cash, property, services or securities or otherwise) of equity interests,
equity rights, bonds, notes, debentures or other securities of any other
Person, together with all items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP, but excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business; (b) the making of any deposit with, or advance, loan or
other extension of credit (including without limitation a guarantee) to, any
other Person (including the purchase of property from another Person subject to
an understanding or agreement, contingent or otherwise, to resell such property
to such Person); and (c) any 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) any other Person. "Investment" shall exclude
extensions of trade credit by the Company and its Subsidiaries in accordance
with normal trade practices of the Company and such Subsidiary, as the case may
be.
"Law" means all applicable provisions of any constitution, statute,
law, ordinance, code, rule, regulation, decision, order, decree, judgment,
release, license, permit, stipulation or other official pronouncement enacted
or issued by any Governmental Authority.
"Lien" mean liens (whether statutory or otherwise), mortgages,
pledges, charges, security interest, sureties, options, easements, covenants,
restrictions or other encumbrances.
"Liquidating Event" has the meaning set forth in Section 12.1 hereof.
"Liquidating Member" has the meaning set forth in Section 12.2 hereof.
"LLC Act" means the Delaware Limited Liability Company Act, as the
same may be amended from time to time.
"LLC Agreement" has the meaning set forth in the Introduction hereof.
"Major Acquisition" means the acquisition (whether by merger,
consolidation, share or asset acquisition, joint venture or similar
transaction) of any business, in a single transaction or series of related
transactions, the cost of which shall exceed US$10,000,000.
"Major Investment" means any Investment in any Person (other than a
wholly owned Subsidiary), in a single transaction or series of related
transactions, the cost of which shall exceed US$10,000,000.
"Majority-in-Interest" means, with respect to a particular matter,
Members holding in excess of fifty percent (50%) of the Voting Interests at the
time of the vote or action with respect to such matter.
"Majority Member" means, as of a particular time, any Member, or group
of Affiliated Members that collectively hold in excess of fifty percent (50%)
of the Voting Interests at such time.
"Manager" means CEMEX, or any replacement Manager elected pursuant to
Section 8.6 hereof.
"Member Nonrecourse Debt" has the meaning of "partner nonrecourse
debt" as set forth in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount with respect to
each Member Nonrecourse Debt equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the meaning of "partner
nonrecourse deductions" as set forth in Section 1.704-2(i)(2) of the
Regulations.
"Members" means the Persons designated as Members in the first
paragraph of this LLC Agreement, together with any Person(s) who become
substituted or additional Members as provided herein, in such Person(s)
capacities as Members of the Company. Any Member that transfers its entire
Membership Interest in the Company pursuant to the terms of this LLC Agreement
shall be deemed to have retired and shall cease to be a Member as of the
effective date of such transfer. "Member" means any one of the Members.
"Member Shortfall Amount" shall have the meaning set forth in Section
6.1(b)(ii) hereof.
"Membership Interest" shall mean, with respect to a Member at any
particular time, such Member's entire equity and beneficial interest in the
Company, including, without limitation, such Member's Percentage Interest,
Voting Interest, and the right of such Member to any and all other benefits to
which a Member may be entitled as provided in this LLC Agreement, together with
the obligations of such Member to comply with all the terms and provisions of
this LLC Agreement.
"Minor Acquisition" means the acquisition (whether by merger,
consolidation, share or asset acquisition, joint venture or similar
transaction) of any business, in a single transaction or series of related
transactions, the cost of which shall be in excess of US$1,000,000, but less
than US$10,000,000.
"Minor Acquisition Criteria" has the meaning set forth in Section
8.2(b)(iv) hereof.
"Minor Investment" means any Investment in any Person (other than a
wholly owned Subsidiary), in a single transaction or series of related
transactions, the cost of which shall be in excess of US$1,000,000, but less
than US$10,000,000.
"Minor Investment Criteria" has the meaning set forth in Section
8.2(b)(xxv) hereof.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Sections
1.704-2(b)(3) and 1.752-1(a)(2) of the Regulations.
"Non-Transferring Member" has the meaning set forth in Section 9.3(a)
hereof.
"Notice" has the meaning set forth in Section 9.6.2 hereof.
"Offer Acceptance Notice" has the meaning set forth in Section 9.3(a)
hereof.
"Offer Notice" has the meaning set forth in Section 9.3(a) hereof.
"Offer Option Period" has the meaning set forth in Section 9.3(a)
hereof.
"Offer Price" has the meaning set forth in Section 9.3(a) hereof.
"Offer Sale Reference Date" has the meaning set forth in Section
9.3(e) hereof.
"Overlapping Members" has the meaning set forth in Section 4.1(b)(ii)
hereof.
"Paid Services" means any and all administrative and corporate support
services provided by or procured by the Manager or any Affiliate thereof,
including, without limitation, the following services: (a) the administration,
management and preparation of the Company's and its Subsidiaries' payroll,
compensation and benefits plans, customer billing and collections; (b) the
corporate arrangement, management, administration and coordination of the
Company's and its Subsidiaries' employee and labor relations and credit
analysis; and (c) the corporate management and administration of the following
support services: accounting, safety, information technology, logistics,
procurement, legal and technical services. For purposes of this definition,
none of Cemex, RMUSA or any of their respective Affiliates shall be deemed to
be Affiliates of the Company or any of its Subsidiaries.
"Parties" has the meaning set forth in Section 7.2 hereof.
"Percentage Interest" means a Member's relative share of the Company's
Profits and Losses and other allocations and distributions which are to be
shared in proportion to Percentage Interests under the terms of this LLC
Agreement, as set forth opposite such Member's name on Exhibit A attached
hereto, as shall be amended from time to time in accordance with Section 1.4
hereof.
"Permitted Affiliate Transaction" means (i) the provision of the Paid
Services and the payment of the Services Fee, (ii) transactions pursuant to the
Back-Up Supply Agreement, and (iii) transactions listed on Schedule 3.2
attached hereto, and (iv) payments made by the Company pursuant to Section 20
hereof.
"Permitted Transfer" has the meaning set forth in Section 9.5 hereof.
"Permitted Transferee" has the meaning set forth in Section 9.5
hereof.
"Person" means any individual, partnership, corporation, trust,
limited liability company, association or other entity or organization,
including any government or political subdivision or any agency or
instrumentality thereof.
"Primary Business" has the meaning set forth in Section 3.1 hereof.
"Profits" and "Losses" mean, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses pursuant to this definition of "Profits" and "Losses" shall
be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing Profits
or Losses pursuant to this definition of "Profits" and "Losses" shall
be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset
is adjusted pursuant to subparagraphs (ii) or (iii) of the definition
of Gross Asset Value, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the Gross Asset Value
of the asset) or an item of loss (if the adjustment decreases the
Gross Asset Value of the asset) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from any disposition of assets
with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value
of the assets disposed of, notwithstanding that the adjusted tax basis
of such assets differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Gross Asset
Depreciation for such Fiscal Year, computed in accordance with the
definition of Gross Asset Depreciation;
(vi) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required,
pursuant to Section 1.704-(b)(2)(iv)(m)(4) of the Regulations, to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's Membership
Interest in the Company, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) from the
disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses; and
(vii) notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section 5.2 or
Section 5.3 hereof shall not be taken into account in computing
Profits or Losses.
The amounts of the items of the Company income, gain, loss or
deduction available to be specially allocated pursuant to Sections 5.2 and 5.3
hereof shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
"Prorata EBITDA" has the meaning set forth in Section 9.6.3 hereof.
"Prorata Portion" has the meaning set forth in Section 9.4(a) hereof.
"Purchase Price" has the meaning set forth in Section 9.6.3 hereof.
"Purchased Interests" has the meaning set forth in Section 11.1(d)
hereof.
"Put Option" has the meaning as set forth in Section 9.6 hereof.
"Put Option Closing" has the meaning set forth in Section 9.6.5
hereof.
"Put Option Depreciation Amount" means, with respect to a particular
period, an amount equal to a ten percent (10%) per annum reduction in the value
of the Company's fixed assets on a declining basis during such period.
Acquisitions of fixed assets and capital investments will also be depreciated
with a ten percent (10%) per annum declining basis. These shall be adjusted on
a prorated basis with respect to the date of closing in the case of an
acquisition or the date of purchase in the case of a capital investment.
"Ready Mix Contribution Agreement" means that certain Asset and
Capital Contribution Agreement, dated July 1, 2005, by and among Ready Mix LLC
and the Members.
"Ready Mix Distribution" has the meaning set forth in Section
4.1(b)(ii) hereof.
"Ready Mix LLC" means READY MIX USA, LLC, a Delaware limited liability
company, and any successor limited liability company.
"Ready Mix LLC Agreement" means that certain Limited Liability Company
Agreement by and among RMUSA, Cemex and Ready Mix LLC dated July 1, 2005.
"Ready Mix LLC Percentage Interest" means, with respect to a
particular member of Ready Mix LLC, the "Percentage Interest" of such member as
defined in the Ready Mix LLC Agreement.
"Regulations" means the federal income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3
hereof.
"RMUSA" has the meaning set forth in the Introduction hereof.
"Ready Mix Boundaries" means the states of Alabama, Arkansas, Georgia,
excluding the Metropolitan Statistical Area of Brunswick, Georgia, Mississippi
and Tennessee and the Ready Mix Florida Panhandle (as defined herein).
"Ready Mix Florida Panhandle" means the following counties in the
State of Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington,
Jackson, Bay, Calhoun, Gulf, Franklin, Liberty, Gadsden, Leon, Wakulla,
Jefferson, Madison and Taylor.
"Second Installment" has the meaning set forth in Section 9.6.4(b)(ii)
hereof.
"Services Fee" has the meaning set forth in Section 8.8(a) hereof.
"Significant Prepayment" has the meaning set forth in Section 9.6.5(c)
hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture or other legal entity in which such Person
(either directly or through or together with other Subsidiaries) owns more than
fifty percent (50%) of the voting securities of such corporation, partnership,
limited liability company, joint venture or other legal entity.
"Supply Agreement" means that certain Supply Agreement dated July 1,
2005, by and between the Company and Ready Mix LLC.
"Tag Along Notice" has the meaning set forth in Section 9.4(a) hereof.
"Tag Along Right" has the meaning set forth in Section 9.4(a) hereof.
"Tax Distributions" has the meaning set forth in Section 6.2 hereof.
"Tax Matter Member" has the meaning set forth in Section 8.3 hereof.
"Third Installment" has the meaning set forth in Section 9.6.4(b)(iii)
hereof.
"Transaction Documents" means this LLC Agreement, the Contribution
Agreement and all other agreements entered into in connection herewith or
therewith.
"Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation or other disposition, and, as a verb,
voluntarily or involuntarily to transfer, sell, assign, pledge, hypothecate or
otherwise dispose of, in each case, including, but not limited to, any
involuntary transfer or transfer by operation of law in bankruptcy or otherwise
or by way of execution, seizure or sale by legal process.
"Transfer Closing" has the meaning set forth in Section 9.3(b) hereof.
"Transferring Member" has the meaning set forth in Section 9.3(a)
hereof.
"Ultimate Percent" has the meaning set forth in Section 9.1(b) hereof.
"Unfunded Portion" has the meaning set forth in Section 4.1(b)(iii)
hereof.
"Voting Interest" means the relative right of a Member to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members required or permitted pursuant to this LLC Agreement or the LLC
Act, as set forth opposite such Member's name on Exhibit A attached hereto, as
shall be amended from time to time in accordance with Section 1.4 hereof.
"Working Capital" means the sum of the Company's inventory, accounts
receivable, prepaid expenses and cash minus the current liabilities of the
Company, as such current liabilities are reflected by the most recent balance
sheet prepared by or for the Company.
4. Capital Contributions and Capital Accounts.
4.1 Members' Capital Contributions.
(a) The Members shall initially contribute to the capital of the
Company upon or prior to the execution of this LLC Agreement the contributions
specified in the Contribution Agreement.
(b) If, subsequent to the making of the initial Capital Contributions
referred to in Section 4.1(a) hereof, the annual business plan and the annual
budget of the Company specifically provide for additional contributions to
capital in order to fund the Company's business, the Manager may from time to
time give written notice to each Member of the amount(s) and date(s) on which
such additional contributions are required (a "Budgeted Additional Capital
Contribution"). If, subsequent to the making of the initial Capital
Contributions referred to in Section 4.1(a) hereof, the Manager determines that
the Company requires additional contributions to capital in order to pay when
due the obligations or expenses of the Company, or to fund the Company's
business, and such contributions to capital are not provided for in the annual
business plan and annual budget for the Company, the Manager shall give written
notice to each Member of the amount(s) and date(s) on which such additional
contributions are required (an "Extraordinary Required Additional Capital
Contribution"); provided that any such Extraordinary Required Additional
Capital Contribution shall require the prior approval of the Board (an approved
Extraordinary Required Additional Capital Contribution being hereinafter
sometimes referred to as an "Approved Extraordinary Required Additional Capital
Contribution"). Each Member's respective share of each Budgeted Additional
Capital Contribution or Approved Extraordinary Required Additional Capital
Contribution (an "Additional Capital Contribution") specified in a notice from
the Manager shall be in proportion to each Member's Percentage Interest
immediately prior to the request for the Additional Capital Contribution and
shall be specified in such notice and shall be contributed no later than thirty
(30) days from the date of such notice. Each Member shall contribute to the
capital of the Company its share (based on its Percentage Interest) of the
Additional Capital Contribution in cash on or before the due date specified in
such notice. A Member's obligation to make Additional Capital Contributions
shall be enforceable by the Company or by any other Member, or by the Manager,
against a Member, but the Company may not assign a Member's obligation to make
Additional Capital Contributions to any creditor or other third party nor may
any creditor or other third party enforce such a Member's obligation, as the
Member's obligations hereunder are not for the benefit of any creditor or third
party.
(ii) The foregoing provisions of paragraph (i)
notwithstanding, in the event that (A) the Manager determines that an
additional contribution to the capital of the Company in an amount not
to exceed $2,000,000 is necessary or desirable in order to pay
indebtedness of the Company (including indebtedness to a Member), and
(B) Ready Mix LLC is at such time maintaining cash in an amount in
excess of the sum of (x) the average current liabilities of Ready Mix
LLC for the preceding twelve (12) months, plus (y) its projected
distributions for the then current quarter to be made pursuant to
Section 6.1 of the Ready Mix LLC Agreement, plus (z) its budgeted
capital expenditures through the next quarter (the amount in excess of
the sum of (x), (y) and (z) being hereinafter referred to as the
"Excess Amount"), and (1) such Excess Amount, when multiplied by the
Overlapping Members' (as herein defined) combined Percentage Interest
in Ready Mix LLC (as such term is defined in the Ready Mix LLC
Agreement), produces a product in excess of the proposed additional
capital contribution (a "Debt Reduction Capital Contribution"), and
(2) such Overlapping Members together hold or control a
Majority-in-Interest in Ready Mix LLC, the Manager may give written
notice to each Member who is also a member of Ready Mix LLC or an
Affiliate of a Member of Ready Mix LLC (the "Overlapping Members")
setting forth the amount(s) and date(s) on which such Debt Reduction
Capital Contributions are required and, within thirty (30) days of the
giving of such notice, the Overlapping Members shall take all
commercially reasonable action (including directing their respective
board members of Ready Mix LLC to vote in favor of such action) to
require Ready Mix LLC to make a distribution to its members in an
aggregate amount at least equal to the Debt Reduction Capital
Contribution (the "Ready Mix Distribution") and such Overlapping
Members shall, within five (5) business days after such distribution
is made by Ready Mix LLC, contribute to the capital of the Company the
lesser of (i) its share of the Debt Reduction Capital Contribution, or
(ii) the portion of the Ready Mix Distribution received by it. In the
event the amount of the Ready Mix Distribution received by an
Overlapping Member is less than its share of the Debt Reduction
Capital Contribution, such Member shall have the right, but not the
obligation to contribute an additional amount to fund its share of the
Debt Reduction Capital Contribution. In the event such Overlapping
Member elects not to fund such shortfall, the other Member(s) shall
have the rights set forth in paragraphs (iii) and (iv) below. A
Member's obligation hereunder shall be enforceable by the Company or
by any other Member, or by the Manager, but the Company may not assign
such Member's obligation to any creditor or other third party nor may
any creditor or other third party enforce such a Member's obligation,
as the Member's obligations hereunder are not for the benefit of any
creditor or third party. The Manager shall not be authorized to call
for more than one (1) Debt Reduction Capital Contribution per fiscal
quarter pursuant to this subsection (ii).
(iii) In addition to the right of the Company, a Member
and/or the Manager to enforce another Member's obligation to fund an
Additional Capital Contribution or Debt Reduction Capital Contribution
as provided in subsections (i) and (ii) above, the Member(s) which
have fully funded their Additional Capital Contribution(s) or Debt
Reduction Capital Contribution(s), as the case may be (the
"Contribution Complying Members"), shall have the right, but not the
obligation, to contribute all or any portion of any such Additional
Capital Contribution or Debt Reduction Capital Contribution not funded
as required above (the "Unfunded Portion") as additional capital to
the Company.
(iv) In addition to the rights set forth in paragraph (iii)
above, the Contribution Complying Members shall have the right, but
not the obligation, to deliver to the Company all or any portion of
any Unfunded Portion and have such amount treated as a loan to the
Member who failed to fulfill its obligation to make an Additional
Capital Contribution or Debt Reduction Capital Contribution as
required herein (such Member, a "Delinquent Member"), which loan shall
be repaid in a maximum term of five (5) years, in monthly
installments, on the first (1st) business day of each month commencing
immediately following the date on which the Contribution Complying
Members contributed the Unfunded Portion to the Company, based on
level principal amortization, and shall bear interest at the rate of
ten percent (10%) per annum, or, if lower, the highest rate permitted
by applicable law.
(v) In addition to other remedies available under this
Agreement or otherwise, in the event that all of the obligations of a
Delinquent Member are not fulfilled by another Member in accordance
with paragraph (iv) above, the Percentage Interest of the Contribution
Complying Member shall be increased, and the Percentage Interest of
the Delinquent Member shall be reduced, as follows:
(A) the Percentage Interest of the Contribution
Complying Member shall be increased to the amount obtained by
dividing (x) an amount equal to the sum of (1) the product of
the Percentage Interest of the Contribution Complying Member
prior to such adjustment and the Adjusted Book Value
immediately prior to such Additional Capital Contribution or
Debt Reduction Capital Contribution, as the case may be, and
(2) the amount of the Additional Capital Contribution or Debt
Reduction Capital Contribution, as the case may be, actually
made by the Contribution Complying Member, including any
amount contributed by such Member pursuant to paragraph (iii)
above (but excluding for the avoidance of doubt any amount
loaned by such Member to a Delinquent Member pursuant to
paragraph (iv) above), by (y) the Adjusted Book Value
immediately after such Additional Capital Contribution or
Debt Reduction Capital Contribution, as the case may be; and
(B) the Percentage Interest of the Delinquent Member
shall be reduced to the amount obtained by dividing (x) an
amount equal to the sum of (1) the product of the Percentage
Interest of the Delinquent Member prior to such adjustment
and the Adjusted Book Value immediately prior to such
Additional Capital Contribution or Debt Reduction Capital
Contribution, as the case may be, and (2) the amount of the
Additional Capital Contribution or Debt Reduction Capital
Contribution, as the case may be, actually made by the
Delinquent Member (or on behalf of the Delinquent Member
pursuant to paragraph (iv) above), by (y) the Adjusted Book
Value immediately after such Additional Capital Contribution
or Debt Reduction Capital Contribution, as the case may be.
For purposes of making any calculation pursuant to this paragraph (v),
references to "such Additional Capital Contribution or Debt Reduction
Capital Contribution" shall mean all amounts contributed by all
Members with respect to a particular required Additional Capital
Contribution or Debt Reduction Capital Contribution, as the case may
be.
(vi) In the event a Contribution Complying Member shall elect
to fulfill the obligation of a Delinquent Member pursuant to
paragraphs (iii) or (iv) of this Section 4.1(b), the failure of the
Delinquent Member to make such an Additional Capital Contribution
shall not constitute an Adverse Act, notwithstanding anything to the
contrary contained in this LLC Agreement.
4.2 Additional Members. The Company shall not admit additional Members
to the Company unless either (x) one hundred percent (100%) of the Members or
(y) the Board shall consent to the same in writing. The Company may, however,
if either of the above written consents are obtained, admit additional Members
upon such terms and conditions as may be set forth in such written consent. In
the event that upon the admission of an additional Member, the Company shall
make an election under Section 743(b) of the Code, such additional Member shall
pay all expenses incurred by the Company in the making of such election,
including, but not limited to, legal and accounting expenses.
4.3 Execute Adoption Agreement. Any additional Member who makes a
Capital Contribution to the Company and who is admitted to the Company after
the execution of this LLC Agreement shall execute and deliver an Adoption
Agreement substantially in the form of Exhibit D attached hereto.
4.4 Summary of Capital Contributions. For the purposes of this LLC
Agreement, the capital of the Company shall be deemed to include the initial
Capital Contributions to the Company made by the Members at the values referred
to in the Contribution Agreement and any other amounts subsequently contributed
to the capital by the Members.
4.5 Capital Accounts. A separate capital account ("Capital Account")
shall be maintained in the name of each Member. The Capital Account shall
reflect the capital interest of each Member as defined below and shall be
maintained in accordance with Section 1.704-1(b)(2)(iv) of the Regulations. The
Capital Contributions actually paid into the Company (which for this purpose
shall include "deemed" contributions of property to the Company under Code
Section 708) shall be credited to each Member's Capital Account. The Capital
Account of each Member shall be increased by (1) the amount of money
contributed by that Member to the Company, (2) the fair market value of
property or assets contributed by that Member to the Company (net of
liabilities secured by such contributed property or assets that the Company is
considered to assume or take subject to under Code Section 752), and (3)
allocations to that Member of Company income and gain (or items thereof),
including income and gain exempt from tax and income and gain as computed for
book purposes, in accordance with Section 1.704-1(b)(2)(iv)(g) of the
Regulations, but excluding income and gain described in Section
1.704-1(b)(4)(i) of the Regulations; and shall be decreased by (a) the amount
of money distributed to that Member by the Company, (b) the fair market value
of property or assets distributed to that Member by the Company (net of
liabilities secured by such distributed property or assets that such Member is
considered to assume or take subject to under Code Section 752), (c)
allocations to that Member of expenditures of the Company described in Code
Section 705(a)(2)(B), and (d) allocations of the Company loss and deduction (or
items thereof), including loss and deduction computed for book purposes, as
described in Section 1.704-1(b)(2)(iv)(g) of the Regulations, but excluding
items of expenditures of the Company described in Code Section 705(a)(2)(B)
allocated to that Member and loss or deduction described in Section
1.704-1(b)(4)(i) or (b)(4)(iii) of the Regulations.
4.6 Interest on Capital Contributions. In no event shall any Member
receive any interest on such Member's contribution to the capital of the
Company, and no Member shall have the right to withdraw or to demand the return
of all or any part of its capital contribution, except as specifically provided
in this LLC Agreement.
4.7 Limited Liability. Except as required by law, no Member or Manager
shall be personally liable for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or
otherwise.
4.8 Members are not Agents. Pursuant to Section 8.2 hereof, the
management of the Company is vested in the Manager, subject to the limitations
set forth therein. The Members shall have no power to participate in the
management of the Company except as expressly authorized by this LLC Agreement
and except as expressly required by the LLC Act. No Member, acting solely in
the capacity of a Member, is an agent of the Company nor does any Member,
unless expressly and duly authorized in writing to do so by the Manager, have
any power or authority to bind or act on behalf of the Company in any way, to
pledge its credit, to execute any instrument on its behalf or to render it
liable for any purpose.
5. Allocation of Profits and Losses.
5.1 Profits and Losses. After giving effect to the special allocations
set forth in Sections 5.2 and 5.3 hereof, and notwithstanding any provision to
the contrary contained herein, all Profits and Losses derived from the Company,
and each item of income, gain, loss, deduction and credit entering into the
computation thereof, shall be allocated among the Members in accordance with
their respective Percentage Interests in the Company.
5.1.1. Loss Limitation. Losses allocated pursuant to Section 5.1
hereof shall not exceed the maximum amount of Losses that can be allocated
without causing any Member to have an Adjusted Capital Account Deficit at the
end of any Fiscal Year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 5.1 hereof, the limitation set forth in this Section 5.1.1
shall be applied on a Member by Member basis and Losses not allocable to any
Member as a result of such limitation shall be allocated to the other Members
in accordance with the positive balances in such Member's Capital Accounts so
as to allocate the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
5.2 Special Allocations. The special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 5, if there is a net decrease in Company Minimum Gain during any Fiscal
Year of the Company, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Section 1.704-2(g) of the
Regulations. Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-1(j)(2) of the Regulations.
This Section 5.2(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-1(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision
of this Section 5, if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year
of the Company, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Member's share
of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.
This Section 5.2(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible,
provided that an allocation pursuant to this Section 5.2(c) shall be made only
if and to the extent that such Member would have an adjusted Capital Account
Deficit after all other allocations provided for this Section 5 have been
tentatively made as if this Section 5.2(c) were not in the LLC Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this LLC Agreement, and (ii) the amount such Member is deemed to be obligated
to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations, each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 5.2(d) shall be
made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Section 5 have been made as if Section 5.2(c) hereof and this Section 5.2(d)
were not in this LLC Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be specially allocated among the Members in proportion to their
respective Percentage Interests in the Company.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Fiscal Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(g) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of its Membership Interest in the Company, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event Section
1.704-1(b)(2)(iv)(m)(2) of the Regulations applies, or to the Member to whom
such distribution was made in the event Section 1.704-1(b)(2)(iv)(m)(4) of the
Regulations applies.
5.3 Curative Allocations. The allocations set forth in Sections 5.1.1
and 5.2 hereof (collectively, the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations. It is the intent of the
Members that, to the extent possible, all Regulatory Allocations shall be
offset either by other Regulatory Allocations or with special allocations of
other items of Company income, gain, loss, or deduction pursuant to this
Section 5.3. Therefore, notwithstanding any other provisions of this Section 5
(other than the Regulatory Allocations), the Manager shall make such offsetting
special allocations in whatever manner they determine appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of this LLC
Agreement and all Company items were allocated pursuant to Section 5.1 hereof;
provided, however, that the Manager and the manager of Ready Mix LLC shall use
the same allocation methodology with respect thereto. In exercising its
discretion under this Section 5.3, the Manager shall take into account future
Regulatory Allocations under Sections 5.2(a) and 5.2(b) hereof that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 5.2(e) and 5.2(f) hereof.
5.4 Other Allocation Rules.
(a) The Members are aware of the federal, state, and local income tax
consequences of the allocations made by this Section 5 and hereby agree to be
bound by the provisions of this Section 5 in reporting their shares of Company
income and loss for income tax purposes.
(b) For purposes of determining the Profits, Losses, or any other
items allocable to any period, profits, losses, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Manager
using any permissible method under Code Section 706 and the Regulations
thereunder.
5.5 Priority Tax Allocation Rules Where Property Was Contributed To
Company With Tax Basis Different From Value (704(c)). Notwithstanding any
provision of this LLC Agreement to the contrary, but solely for tax purposes,
any gain or loss with respect to property or assets contributed to the Company
by a Member shall be allocated among the Members so as to take account of the
variation between the adjusted basis and the fair market value of contributed
property or assets at the time of contribution. The appreciation or diminution
in value represented by the difference between the adjusted basis and the fair
market value of the contributed property or assets at the time of the
contribution will thus be attributed to the contributing Member upon a
subsequent sale or exchange of the property or assets by the Company as
required by Section 704(c) of the Code. The appreciation or diminution will
also be used in allocating the allowable depreciation or depletion with respect
to the property or assets among the contributing Member and the noncontributing
Member(s) as required by Section 704(c) of the Code. Furthermore, any gain,
loss, depreciation, depletion or amortization, as computed for tax purposes,
with respect to property or assets which are revalued pursuant to Section
1.704-1(b)(2)(iv)(f) of the Regulations shall be allocated so as to take
account of the variation between the adjusted tax basis and book value of the
property or assets as required by Section 704(c) of the Code and Section
1.704-1(b)(4)(i) of the Regulations. Any elections or other decisions relating
to allocations under this Section 5.5 will be made in any manner that the
Members determine reasonably reflects the purpose and intention of this LLC
Agreement; provided, however, that the same allocation methodology shall be
used at Ready Mix LLC. Allocations under this Section 5.5 are solely for
purposes of federal, state and local taxes and will not affect, or in any way
be taken into account in computing, any Member's Capital Account or share of
income, losses or other items or distributions under any provision of this LLC
Agreement.
6. Distributions.
6.1 Required EBITDA Distributions.
(a) Except as provided in Section 12 hereof relating to the
liquidation of the Company, the Manager shall make quarterly distributions to
the Members in an amount which shall be at least fifty percent (50%) of EBITDA
for such period, but which may, in the sole discretion of the Manager, be as
much as seventy-five percent (75%) of EBITDA for such period. For example, if
EBITDA shall be US$5,000,000 for the applicable period, each Member's required
distribution shall be at least an amount equal to US$2,500,000 multiplied by
the Member's respective Percentage Interest, but, if the Manger so determines,
the distribution may be as much as US$3,750,000 multiplied by each Member's
respective Percentage Interest. Such distributions shall be in proportion to
each Member's respective Percentage Interest and shall be made at such times
and with such frequency as shall be determined by the Manager, in its
discretion, provided that such distributions shall be made not less than on a
quarterly basis.
(b) The Manager shall determine the Company's EBITDA for the period
with respect to which the distribution is to be made (i.e., month, quarter or
other multi-month period) from the regular internal financial reports of the
Company prepared by the Manager. Upon the close of each Fiscal Year the Manager
shall determine within thirty (30) days following receipt of the audited
financial statements for such Fiscal Year (as required by Section 7 hereof) the
Company's EBITDA for the Fiscal Year, as reflected by such audited financial
statements and:
(i) in the event the total of all periodic distributions made
to Members during the Fiscal Year exceeds seventy-five percent (75%)
of the EBITDA of the Company for the Fiscal Year, the Manager shall
determine the amount of each Member's respective distribution received
in excess of said Member's Percentage Interest in seventy-five percent
(75%) of the Company's EBITDA (the "Excess Distribution Amount") and
the Company shall retain all future distributions to the Member until
the Member's Excess Distribution Amount has been recouped by the
Company; or
(ii) in the event the total of all periodic distributions
made to the Members during the Fiscal Year is less than fifty percent
(50%) of the EBITDA of the Company for the Fiscal Year, the Manager
shall determine the amount of the shortfall and each Member's
Percentage Interest in such shortfall amount (the "Member Shortfall
Amount") and, within ten (10) days of such determination, shall cause
the Company to distribute to each Member the Member Shortfall Amount.
6.2 Tax Distributions. If for any reason the distributions of EBITDA
pursuant to Section 6.1 hereof are not adequate for such purpose, the Manager
shall distribute sufficient amounts of cash to the Members to permit the
Members to discharge their obligations to pay federal, state, and local taxes
(including estimated taxes) with regard to the Profits and Losses of the
Company, if any, calculated at the highest combined local, state and federal
marginal income tax rates ("Tax Distributions") applicable to each Member. In
the case of Members which are pass through entities, tax distributions shall be
computed on the basis of the estimated taxes of the owners of such pass through
entities which are attributable to the Profits and Losses of the Company. The
Manager shall have the discretion to estimate the amount of taxable income
applicable to each Member during the applicable quarter, and to determine the
tax rate to be applied to such income; provided, however, that the Manager and
the manager of Ready Mix LLC shall use the same methodology to make such
estimates.
6.3 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Section 6 for all purposes under this LLC Agreement.
The Manager may allocate any such amounts among the Members in any manner that
is in accordance with applicable law.
7. Fiscal Matters; Books of Account.
7.1 Books and Records. The Company books shall be maintained by the
Manager at the office of the Company in accordance with the LLC Act. Each
Member, Member's agent or attorney shall, upon reasonable request and at the
expense of the Member or the Member's agent or attorney during regular business
hours, have the right to inspect and copy or be sent copies of all such books
and records and any other books and records of the Company. In addition, the
Company shall maintain at its offices the following records: (a) a current list
of the full name and last known business or residence address of each Member
and Manager (which address shall be a street address); (b) a copy of the filed
Certificate of Formation, together with executed copies of any powers of
attorney pursuant to which any documents have been executed pursuant to the LLC
Act; (c) copies of the Company's federal, state, and local income tax returns
and reports, if any, for the three (3) most recent years; (d) copies of any
then effective limited liability company agreement of the Company, including
any amendments thereto; (e) copies of the Company's financial statements for at
least the three (3) most recent years; and (f) a copy of the Minor Acquisition
Criteria and Minor Investment Criteria, as such criteria may be amended from
time to time by the Board. The books shall be closed and balanced at the end of
each Fiscal Year and shall be audited for each Fiscal Year by a certified
public accounting firm selected by the Manager, subject to the approval of the
Board pursuant to Section 8.2(b) (the "Company's Accounting Firm"). The Manager
shall be authorized, but not required, to establish reserves for annual
accounting and legal fees, real estate taxes, insurance, and any other item for
which reserves should be established, as determined by Manager or upon advice
of accountants.
7.2 Confidentiality. Except as otherwise required by law or judicial
order or decree or by any governmental agency or authority, each Member agrees
that any information obtained by such Member with respect to the Company and
its Subsidiaries shall be treated with the same degree of care (and in no event
less than reasonable care) that such Member uses to protect its other
confidential information; provided that each such Member may (a) disclose such
information to legal counsel, consultants, financial advisors, professionals
advising it on matters relating to the Transaction Documents where (i) such
disclosure is related to the performance or enforcement of obligations under
the Transaction Documents or the consummation of transactions contemplated
under the Transaction Documents and (ii) such Member informs the Person to
which it is making such disclosure that the disclosed information is
confidential, instructs such Person to keep such information confidential and
not disclose it to any third party (other than those persons to whom it has
already been disclosed in accordance with this Section 7.2), or (b) in
connection with the sale or transfer of any Membership Interest, if such
Member's transferee or prospective transferee agrees with the Company in
writing to be bound by the provisions hereof. In addition, confidential
information shall not include information that (i) is or becomes generally
available to the public other than as a result of any disclosure or other
action or inaction by such Member or anyone to whom such Member or any of its
representatives transmit or have transmitted any information, (ii) is or
becomes known or available to such Member on a nonconfidential basis from a
source (other than the other Company), or (iii) was independently developed by
such Member, provided such independent development can reasonably be proven by
the Member's written records. Notwithstanding anything to the contrary in this
LLC Agreement, the Company and the Members (collectively, the "Parties") (and
each of their employees, representatives, or other agents) may disclose to any
and all persons, without limitation of any kind, the tax treatment and tax
structure of the transaction, provided, however, that neither Party (nor any of
its employees, representatives, or other agents) may disclose any information
that is not necessary to understanding the tax treatment and tax structure of
the transaction (including the identity of any Party and any information that
could lead another to determine the identity of any Party), or any other
information to the extent that such disclosure could result in a violation of
any federal or state securities law.
8. Management and Operations of the Company; Powers, and Duties of the
Manager.
8.1 Various Matters Relating to Members and the Board.
(a) Unless otherwise provided in this LLC Agreement or by nonwaivable
provisions of the LLC Act, all Members who have not ceased to be a Member shall
be entitled to vote on any matter submitted to a vote of the Members. Except as
otherwise provided in this LLC Agreement or by nonwaivable provisions of the
LLC Act, all decisions concerning the business and affairs of the Company shall
be made by the Manager in accordance with this LLC Agreement. Any action which
requires the approval of the Members under this LLC Agreement or by applicable
law shall require the approval of a Majority-in-Interest of the Members present
or represented by proxy at a meeting at which a quorum is present, or such
other proportion of the Members as may be specified in the particular provision
of this LLC Agreement which requires any such approval.
(b) Any meeting of the Members shall be held at a location which shall
be suggested by Manager and reasonably satisfactory to the Board. Members may
be present at any meeting of the Members by telephone or other means of
communication, provided that each Member can hear all other present Members.
Members may also attend a meeting, and be represented at such meeting, by proxy
executed in writing by such Member. The presence (in person, by a
representative thereof or by proxy) of one hundred percent (100%) of the
Members shall constitute a quorum. In case a quorum shall not be present at any
meeting, a Majority-in-Interest present (in person or by proxy) at the meeting
shall have the power to adjourn the meeting from time to time until a quorum is
present.
(c) Any action which may be taken by the Members at a meeting may be
taken in writing without a meeting if approved by the unanimous written consent
of all Members.
(d) Notice of any meeting of the Members may be waived by a Member in
writing, signed by the designated representative of the Member entitled to the
notice, whether before, at or after the time stated for the meeting. Attendance
of a Member at any meeting, whether in person, by proxy as provided above or by
telephone or other means of communication as provided above, shall constitute
waiver of notice of such meeting. Any waiver of notice of a meeting by a Member
hereunder shall be equivalent to the giving of such notice for all purposes.
(e) Appointment of Board.
(i) The Board shall consist of eight individuals, four of
whom shall be appointed by Cemex and four of whom shall be appointed
by RMUSA. The Chairman of the Board shall be a member of the Board
appointed by Cemex as determined by the members of the Board appointed
by Cemex. Each member of the Board shall serve until the earlier of
(i) the appointment of such Board member's successor, (ii) the removal
of such Board member in accordance with the terms of this LLC
Agreement, (iii) such Board member's resignation, and (iv) such Board
member's death.
(ii) Any Board member may resign at any time by giving
written notice to the Company or the Member who appointed such Board
member and the remaining Board members. The resignation of any Board
member shall take effect upon receipt of that notice or at such later
time as shall be specified in the notice. Unless otherwise specified
in the notice, the acceptance of the resignation shall not be
necessary to make it effective. Upon the resignation of any Board
member, a successor may be appointed by the Member who appointed such
Board member.
(iii) Any Board member may be removed at any time and with or
without cause only by the Member who appointed such Board member. Upon
the removal of any Board member with or without cause, a successor may
be appointed by the Member who appointed such removed Board member.
(iv) Upon the vacancy of any Board member for any reason, a
successor shall be appointed by the Member who appointed such Board
member.
(f) Action by Board.
(i) A meeting of the Board shall be held at least quarterly,
at such time and place as shall be designated by the Chairman of the
Board or by a majority of the Board. Other meetings of the Board may
be called by the Manager, by the Chairman of the Board or by any Board
member. All meetings shall be held upon at least two business days'
written notice (with confirmed receipt) to all Board members. Notice
of a meeting need not be given to any Board member who signs a waiver
of notice or a consent to holding the meeting (which waiver or consent
need not specify the purpose of the meeting) or an approval of the
minutes thereof, whether before or after the meeting, or who attends
the meeting without protesting, prior to its commencement, the lack of
notice to such Board member. All such waivers, consents and approvals
shall be filed with the Company records or made a part of the minutes
of the meeting. Meetings of the Board may be held at any place within
or without the State of Delaware which has been designated in the
notice of the meeting or at such place as may be approved by the
Board. Notwithstanding the foregoing provisions of this paragraph (i),
any meetings of the Board shall be held in Houston, Texas or
Birmingham, Alabama unless otherwise required by law or agreed to by
the Board. Board members may participate in a meeting through use of
conference telephone, electronic video screen communication, or other
communications equipment, so long as all Board members participating
in such meeting can hear one another. Participation in a meeting in
such manner constitutes a presence in person at such meeting. The
presence of a majority of the members of the entire Board constitutes
a quorum of the Board for the transaction of business with respect to
such matter.
(ii) Except as otherwise specifically set forth herein, the
vote of a majority of the Board members present shall constitute the
act of the Board; provided, that such majority of the Board members
voting (which vote constitutes the act of the Board) includes at least
one Board member appointed by each Member.
(iii) Any action required or permitted to be taken by the
Board may be taken by the Board without a meeting. Such action by
written consent shall have the same force and effect as if taken at a
meeting of the Board. The text of any such proposed action shall be
sent to all members of the Board.
8.2 Management and Operations.
(a) Subject to the provisions of this LLC Agreement, including
Sections 8.2(b) and (c), the business, property and affairs of the Company
shall be managed and all powers of the Company shall be exercised by or under
the direction of the Manager. Without limiting the generality of the foregoing,
but subject to Sections 8.2(b) and (c), and subject to the express limitations
set forth elsewhere in this LLC Agreement, the Manager shall have full
authority and discretion and all necessary powers to (i) take any actions it
deems necessary or advisable for the administration of the Company's affairs
and (ii) manage and carry out the purposes, business, property, and affairs of
the Company, including, the power to exercise, on behalf and in the name of the
Company, all of the powers described in the LLC Act. The Members shall from
time to time at the request of the Manager execute a resolution or other
appropriate document which shall evidence the rights and duties of the Manager
hereunder.
(b) Notwithstanding any other provisions of this LLC Agreement,
without the prior approval of the Board in accordance with Section 8.1(f), the
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
(i) Adopt or amend in any material respect the annual
business plan and the annual budget, including the capital expenditure
budget;
(ii) Make a single capital investment or series of related
capital investments in plants, equipment or other capital assets in
excess of US$1,000,000, other than (x) Minor Acquisitions that meet
the Minor Acquisition Criteria (as defined below) and, (y) a single
capital investment or series of related capital investments in plants,
equipment or other capital assets which (I) do not, individually or in
the aggregate, exceed $10,000,000, and (II) are required by Law or a
Governmental Authority or are embodied in an order or settlement
agreement with a Governmental Authority in a proceeding not initiated
by the Company or its Affiliates, provided that, in the case of this
clause (y), such investment or series of investments are --------
undertaken by the Company in a manner so as to cause the cost to the
Company to be the lowest cost investment(s) that meets the
requirements of the applicable Law, are acceptable to the applicable
Governmental Authority, or comply with the applicable order or
settlement agreement.
(iii) Make any Major Acquisition;
(iv) Make any Minor Acquisition which shall not be in
compliance with the criteria set forth in Exhibit B-1 (the "Minor
Acquisition Criteria"), as such criteria may be amended by the Board
from time to time;
(v) Other than the sale of inventory in the ordinary course
of business, make any sale, lease, exchange, transfer or other
disposition of assets in any Fiscal Year where the aggregate value of
all such assets during such Fiscal Year would exceed US$2,000,000;
(vi) Incur any indebtedness for borrowed money where the
amount of such indebtedness incurred, together with all other
indebtedness of the Company and its Subsidiaries, exceeds US$1,000,000
in the aggregate, provided that (x) the incurring of indebtedness
pursuant to Section 19(a)(ii) or Section 19(c)(ii) shall not require
approval of the Board so long as the incurring of such indebtedness,
after giving effect thereto, shall not cause the Company's ratio of
indebtedness for borrowed money to EBITDA to exceed 3.5:1. and (y) the
incurring of indebtedness pursuant to Section 19(a)(iii) or Section
19(c)(iii) shall not require approval of the Board;
(vii) Issue any equity;
(viii) Make aggregate distributions to any Member of cash at
any level above seventy-five percent (75%) or below fifty percent
(50%) of EBITDA for any given Fiscal Year;
(ix) Amend the Cement Boundaries;
(x) Change, modify or amend this LLC Agreement;
(xi) Make any determination of the gross fair market value of
any property or assets contributed to the Company;
(xii) Make any request for an Extraordinary Required
Additional Capital Contribution pursuant to Section 4.1(b)(i) hereof;
(xiii) Enter into any material joint venture, partnership or
consortium;
(xiv) Redeem, repurchase, retire or otherwise acquire for
value any equity interest in the Company;
(xv) Engage in any material business activity outside the
general scope of the Primary Business, taken as a whole;
(xvi) Approve the selection of any independent accounting
firm to audit the Company's financial statements if such firm is not a
"Global Six" accounting firm;
(xvii) Engage in any merger, consolidation or similar
transaction;
(xviii) Engage in any transaction or series of related
transactions (other than any Permitted Affiliate Transaction) with or
for the benefit of the Manager or any of its Affiliates with a value
in excess of US$ 1,000,000; provided, that (x) this paragraph (xviii)
shall not apply to any swap or other sale transaction with or for the
benefit of the Manager or any of its Affiliates (which are the subject
of paragraph (xix) below); (y) in any event, any such transaction or
series of related transactions, shall be entered on terms no less
favorable to the Company than those which it could obtain at that time
on an arm's length basis from an unaffiliated third party; and (z) for
purposes of this paragraph, none of Cemex, RMUSA or any of their
respective Affiliates shall be deemed to be Affiliates of the Company
or any of its Subsidiaries;
(xix) Engage in any swap or other sale transaction with or
for the benefit of the Manager or any of its Affiliates; provided,
that (a) in any event, any such swap or other sale transaction shall
be entered on terms no less favorable to the Company than those which
it could obtain at that time on an arm's length basis from an
unaffiliated third party; (b) no Board approval shall be required with
respect to: (I) purchases of Cement by the Company under the Back-Up
Supply Agreement; or (II) any swap or other sale of Cement with, to or
for the benefit of Cemex or any of its Affiliates where (A) the
Company or one or more of its Subsidiaries either (1) receives (or
directs the receipt for its account) a like quantity of cement or (2)
receives payment in an amount not less than the applicable
Most-Favored Nation Price (as defined in the Supply Agreement) for the
Cement it delivers, and (B) the quantities of Cement involved in such
swap or sale do not affect the Company's ability to supply Ready Mix
LLC the Required Amount (as defined in the Supply Agreement); and (c)
for purposes of this paragraph, none of Cemex, RMUSA or any of their
respective Affiliates shall be deemed to be Affiliates of the Company
or any of its Subsidiaries;
(xx) Guarantee or otherwise provide any financial
accommodation with respect to any indebtedness for borrowed money of
any other Person;
(xxi) Make any proposal to cause the Company to wind up,
dissolve, liquidate or file for, or consent to, any bankruptcy or
similar proceeding with respect to the Company;
(xxii) Make any non-cash distribution to the Members;
(xxiii) Grant any lien or encumbrance with respect to any
asset of the Company or any of its Subsidiaries;
(xxiv) Make any Major Investment;
(xxv) Make any Minor Investment which shall not be in
compliance with the criteria set forth in Exhibit B-2 (the "Minor
Investment Criteria"), as such criteria may be amended by the Board
from time to time;
(xxvi) Adopt any equity or other incentive plans for
officers, directors or employees of the Company or any of its
Subsidiaries; and
(xxvii) Make any payments to Cemex or any of its Affiliates
to pay the Company's pro rata share of any rebate payable to national
accounts of Cemex, Inc. where the amount to be paid by the Company
exceeds ten percent (10%) of the purchase price subject to such rebate
on a per ton basis; provided that for purposes of this paragraph, none
of Cemex, RMUSA or any of their respective Affiliates shall be deemed
to be Affiliates of the Company or any of its Subsidiaries.
(c) For so long as the Manager is a Member or an Affiliate of a
Member, the other Member(s) shall have the right to reasonably direct the
Company's prosecution or defense of any litigation or claim with, by or against
the Member that is the Manager or any of such Member's Affiliates (other than
the Company and any of its Subsidiaries).
(d) Officers.
(i) The Manager may, in its sole discretion, from time to
time, appoint officers who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be
determined from time to time by the Manager. A single person may hold
multiple offices. If appointed, the officers listed below shall have
the following duties and authority, unless otherwise determined by the
Manager, in connection with the management and operations of the
Primary Business (provided that if an officer enters into a written
employment agreement with the Company, such officer shall also have
the duties and authority described in such employment agreement;
provided further, that if there are any inconsistencies between such
employment agreement and this Section 8.2(d), the provisions set forth
in the employment agreement shall control).
(ii) President. The president shall be the chief executive
officer of the Company and, subject to the general supervision by the
Manager, shall have the general and active management, supervision and
control of the business and all operations of the Company. The
president shall, when present, preside at all meetings of the Members,
Board and of the Manager. The president may sign and deliver deeds,
mortgages, bonds, contracts, or other instruments on behalf of the
Company, except where required by law to be otherwise signed and
executed and except where the signing and execution thereof shall be
expressly delegated by the Manager to some other officer or agent of
the Company. In general, the president shall perform all duties and
shall have the authority incident to the office of president and such
other duties and authority as may be prescribed by the Manager from
time to time.
(iii) Vice-Presidents. In the absence of the president or in
the event of the president's death or inability to act, the
vice-president (or in the event there be more than one vice-president,
the vice-presidents acting in the order determined by the Manager)
shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. Any vice-president shall perform such other duties as from
time to time may be assigned to the vice-president by the president or
by the Manager.
(iv) Secretary. The secretary shall prepare and keep the
minutes of the proceedings of the Members and of the Manager in one or
more books provided for that purpose; have responsibility for
authenticating records of the Company; see that all notices are duly
given in accordance with the provisions of this LLC Agreement or as
required by law; be custodian of the records of the Company; keep a
register of the post office address of each Member and Manager which
shall be furnished to the secretary by such Member or Manager; and in
general perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to the
secretary by the president, any vice president or the Manager. If
there is no treasurer of the Company, the secretary shall assume the
authority and duties of treasurer.
(v) Treasurer. The treasurer shall have charge and custody of
and be responsible for all funds and securities of the Company,
receive and give receipts for moneys due and payable to the Company
from any source whatsoever, and deposit all such moneys in the name of
the Company in such banks, trust companies or other depositories as
may be designated by the Manager, and in general perform all of the
duties incident to the office of treasurer and such other duties as
from time to time may be assigned to the treasurer by the president,
any vice-president or the Manager.
(vi) Assistant Secretaries and Assistant Treasurers. The
assistant secretary, or if there shall be more than one, the assistant
secretaries acting in the order determined by the Manager, shall, in
the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary. The assistant treasurer, or, if
there shall be more than one, the assistant treasurers acting in the
order determined by the Manager, shall, in the absence or disability
of the treasurer, perform the duties and exercise the powers of the
treasurer. The assistant secretaries and assistant treasurers shall
all perform such other duties as shall be assigned to them by the
secretary and treasurer, respectively, or by the president, any
vice-president or the Manager.
(vii) Additional Officers. The Manager may appoint such other
officers and agents as it shall deem necessary who shall hold their
offices for such term and shall exercise such powers and perform such
duties as shall be determined from time to time by the Manager.
All actions taken by the foregoing officers of the Company in
accordance with the authority granted to them in this Section 8.2(d)
shall be binding on the Company and may be relied upon by third
parties, except to the extent any such third party has actual
knowledge that such action is in contravention of a resolution passed
by the Manager.
8.3 Tax Matter and Elections. The Manager shall, without any further
consent of the Members being required (except as specifically required herein),
make any and all elections for federal, state, local, and foreign tax purposes
including, without limitation, any election, if permitted by applicable law:
(i) to adjust the basis of Company assets pursuant to Code Sections 754, 734(b)
and 743(b), or comparable provisions of state, local or foreign law, in
connection with Transfers of Membership Interests and Company distributions;
(ii) with the consent of all of the Members, to extend the statute of
limitations for assessment of tax deficiencies against the Members with respect
to adjustments to the Company's federal, state, local or foreign tax returns;
and (iii) to the extent provided in Code Sections 6221 through 6231 and similar
provisions of federal, state, local, or foreign law, to represent the Company
and the Members before taxing authorities or courts of competent jurisdiction
in tax matters affecting the Company or the Members in their capacities as
Members, and to file any tax returns and execute any agreements or other
documents relating to or affecting such tax matters, including agreements or
other documents that bind the Members with respect to such tax matters or
otherwise affect the rights of the Company and the Members. Cemex is
specifically authorized to act as the "Tax Matters Member" under the Code and
in any similar capacity under state or local law.
8.4 Cash Deposits. All funds of the Company shall be deposited in a
United States national or state bank with federal deposit insurance, or in a
national brokerage house with deposit insurance. However, the Manager shall not
have a duty to seek the highest possible yield for Company funds. Only the
Manager (or, in the case of a corporate Manager, its authorized officers or
officers of the Company authorized by the Manager) may sign checks and drafts
on such account or accounts.
8.5 General Duties. The Manager shall take all action that may be
necessary or appropriate for the continuation of the Company's valid existence
as a limited liability company under the laws of the State of Delaware (and
each other jurisdiction in which such existence is necessary to protect the
limited liability of the Members or to enable the Company to conduct the
business in which it is engaged).
8.6 Removal.
(a) In the event the Manager is the Majority Member or an Affiliate
thereof, the Majority Member shall have the right to remove and replace the
Manager at any time with any Affiliate of the Majority Member (other than the
Company and any of its Subsidiaries), provided that at the time of appointment
as Manager, such Affiliate shall have, as of the end of the most recently
completed fiscal quarter, and maintain a net worth of at least US $350,000,000
and a debt to equity ratio not to exceed 1.75, in each case, based on the most
recent consolidated balance sheet of such Affiliate prepared in accordance with
GAAP.
(b) In the event the Manager is not the Majority Member or an
Affiliate thereof, at a meeting of the Members called expressly for that
purpose, the Manager may be removed at any time, with or without cause, by the
affirmative vote of Members holding a Majority-in-Interest in the Company. A
successor Manager may be elected by the affirmative vote of Members holding a
Majority-in-Interest in the Company.
(c) In the event of a Transfer of Membership Interests by one or more
Members that results in a change in the Majority Member, the new Majority
Member shall have the power to remove the Manager and appoint itself or any of
its Affiliates as Manager.
8.7 Indemnification of Manager(s), Members, Officers and Employees.
(a) Every Person (and the heirs, executors and administrators of such
Person) who serves, or has served as a manager (including the Manager), member
(including the Members), officer, member of the Board, director or employee of
the Company, or of any other entity when requested by the Company, and of which
the Company directly or indirectly is or was a security holder or creditor, or
otherwise interested, or in the stocks, bonds, securities or other obligations
of which it is in any way interested, shall be indemnified by the Company
against any and all liability and reasonable expense that may be incurred by
such Person in connection with or resulting from any claim, action, suit or
proceeding (whether brought by or in the right of the Company or such other
entity or otherwise), civil or criminal, or in connection with an appeal
relating thereto, in which such Person may become involved, as a party or
otherwise, by reason of such Person being or having been a manager, member,
officer, member of the Board, director or employee of the Company or such other
entity, or by reason of any action taken or not taken by such Person in such
capacity, whether such Person continues to be such manager, member, officer,
member of the Board, director or employee at the time such liability or expense
shall have been incurred, provided such Person acted in good faith and within
the scope of such Person's authority in the course of the Company's or such
other entity's business and, in addition, in any criminal action or proceeding,
had no reasonable cause to believe that such Person's conduct was unlawful.
(b) As used herein, the terms "liability" and "expense" shall include,
but shall not be limited to, counsel fees and disbursements and amounts of
judgments, fines or penalties against, and amounts paid and settlements by or
for such Person. The termination of any claim, action, suit or proceedings,
civil or criminal by judgment, settlement (whether with or without court
approval) or conviction shall not create a presumption that such person does
not meet the standards of conduct set forth herein. Except in the case of an
action or suit by or in the right of the Company to procure a judgment in its
favor, no indemnification shall be made in respect of any claim, issue or
matter as to which such Person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of such Person's duties to
the Company unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
(c) Expenses incurred with respect to any such claim, action, suit or
proceeding may be advanced by the Company prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of such Person to repay
such amount if and to the extent that it shall ultimately be determined that
such Person is not entitled to indemnification hereunder.
(d) The Manager shall be fully protected in relying in good faith upon
the records of the Company and its Subsidiaries and upon such information,
opinions, reports or statements presented to the Company and its Subsidiaries
by any of its other Members, or any of the officers, employees or committees of
the Company or any of its Subsidiaries, or by any other person, as to matters
the Manager reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Company or any of its Subsidiaries (including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, or losses of the Company or any of its Subsidiaries or
any other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid). In addition, the Manager may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisors selected by them, and any
opinion of any such person as to matters which the Manager reasonably believe
to be within such person's professional or expert competence shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by the Manager hereunder in good faith and in accordance
with such opinion.
(e) The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was a manager, member, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, partner, employee or agent of another company,
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against such Person and incurred by such Person in any such
capacity, or arising out of his status as such, whether or not the Company
would have the power to indemnify him against such liability under the
provisions of this LLC Agreement.
(f) The indemnification authorized in and provided by this Section 8.7
shall not be deemed exclusive of and shall be in addition to any other right to
which those indemnified may be entitled under any statute, rule of law,
provision of the Certificate of Formation, this LLC Agreement, other agreement,
vote or action of Members or by the Manager, or otherwise, and shall continue
as to a Person who has ceased to be a Member or Manager and shall inure to the
benefit of the heirs, executors and administrators of such a Person.
8.8 Paid Services.
(a) The Company shall pay the Manager a management fee equal to one
and one-half percent (1.5%) of gross revenues of the Company (the "Services
Fee") for the performance by Manager of the Paid Services, and neither Manager
nor any Affiliate of Manager shall be entitled to the payment of any other fees
from the Company with respect to the Paid Services. The Company shall pay the
Services Fee on a monthly basis, and the amount of each monthly installment of
such fee shall be based on the gross revenues of the Company in the immediately
preceding month. The Manager shall have the right to subcontract with an
Affiliate of Manager, to provide the Paid Services to the Company.
Notwithstanding the foregoing, the Manager shall be responsible, and neither
the Company nor RMUSA shall be responsible, for (i) any costs or expenses of
the Paid Services, and (ii) making any payments to providers of the Paid
Services. Cemex, RMUSA and the Company acknowledge and agree that the Paid
Services include and require the provision of substantive administrative and
corporate support services (as enumerated in the definition of Paid Services)
and not merely the procurement of such administrative and corporate support
services from other unaffiliated parties; provided, however, that
notwithstanding anything in this LLC Agreement to the contrary and for the
avoidance of doubt (i) Paid Services shall not be deemed to include any
non-administrative or non-corporate support services or functions (e.g.,
without limitation, legal and engineering services provided by non-affiliated
third parties or transportation services regardless of whether provided by
Affiliates or by third parties), notwithstanding that the administration or
management of such function is a Paid Service and (ii) the cost and expense of
any such non-administrative or non-corporate support services or functions
(other than the costs of administrating or managing such service or function)
shall be borne by the Company. For purposes of this Section 8.8, none of Cemex,
RMUSA or any of their respective Affiliates shall be deemed to be Affiliates of
the Company or any of its Subsidiaries.
(b) With respect to the Paid Services, the Manager shall only be
liable to the Company for any loss, liability, damage, claim, expense, fine,
penalty, interest cost, or other obligation of any nature arising out of this
LLC Agreement to the extent caused by the Manager's, its Affiliates', and their
respective directors', officers', employees', and agents' gross negligence,
willful misconduct or fraud with respect to the Paid Services under this LLC
Agreement. The Company hereby releases the Manager and its Affiliates, and
their respective directors, officers, employees, and agents from, and the
Company shall indemnify such Persons against, any claim, loss, damage,
liability or obligation (including reasonable attorneys' fees and expenses)
claimed or asserted in connection with the Paid Services by the Company or any
third party attributable to causes other than such Persons' gross negligence,
willful misconduct, fraud, or intentional breach of the Manager's obligations
with respect to the Paid Services under this LLC Agreement. It is the intention
of the parties hereto that the release by, and indemnity obligations of, the
Company under this Section 8.8(b) hold the Manager and its Affiliates, and
their respective directors, officers, employees, and agents harmless from and
against the consequences of their own ordinary negligence with respect to the
Paid Services under this LLC Agreement, including to the extent such ordinary
negligence is the sole, concurrent, or joint cause of any such claim, loss,
damage, liability or obligation.
8.9 Fiduciary Duties.
(a) Duty of Loyalty. The purposes of this Section 8.9(a) are (i) to
set forth the agreement among the Members with respect to the duty of loyalty
that the Manager owes to the Members and the Members owe to each other and (ii)
to identify the types and categories of activities by the Manager and the
Members that do not violate such duty of loyalty. The Members hereby agree that
the duty of loyalty consists solely of the duty of the Manager (in its capacity
as such) to act in good faith in a manner the Manager reasonably believes to be
in the best interest of the Company and the Members. Except as expressly
provided in Section 19, the Members and their Affiliates (including, if
applicable, the Manager) may engage or invest in, independently or with others,
any business activity of any type or description, including those that might be
the same as or similar to the Company's business and that might be in direct or
indirect competition with the Company. Except as expressly provided in Section
19, neither the Company nor any other Member shall have any right in or to such
other ventures or activities or to the income or proceeds derived therefrom.
Except as expressly provided in Section 19, neither any Member nor the Manager
shall be obligated to present any investment opportunity or prospective
economic advantage to the Company, even if the opportunity is of the character
that, if presented to the Company, could be taken by the Company. Except as
expressly provided in Section 19, the Members and the Manager shall have the
right to hold any investment opportunity or prospective economic advantage for
their own account or to recommend such opportunity to Persons other than the
Company. Each Member acknowledges that the other Members and their Affiliates
(including, if applicable, the Manager) conduct other businesses, including
businesses that may compete with the Company and for the Members' time. Each
Member hereby waives any and all rights and claims that it may otherwise have
against the other Members and their Affiliates (including, if applicable, the
Manager) as a result of any of such activities. No Member or officer of the
Company shall be required to manage the Company as such Member's or officer's
sole and exclusive function. The parties hereby agree and acknowledge that the
members of the Board shall be entitled to act solely in the interest of the
Member that appointed them. For purposes of this paragraph, neither the Company
nor any of its Subsidiaries shall be deemed an Affiliate of any Member.
(b) Duty of Care. The purpose of this Section 8.9(b) is to set forth
the agreement among the Members with respect to the duty of care that the
Manager owes to the Members and to the Company. The Members hereby agree that
such duty of care consists solely of the duty to act with such care as an
ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs such duty of care shall not be liable
to the Company or to any other Member for any loss or damage sustained by the
Company or any other Member.
(c) Totality of Duties. Without limiting the generality of the
foregoing, the Members agree that the foregoing subsections (a) and (b)
describe in its totality the fiduciary duties of the Manager to the Company and
its Members, and that the fiduciary duties of the Manager to the Company and
its Members shall not be those of a director to a corporation and its
shareholders under the DGCL or those of a partner to a partnership and its
partners. Any Manager who performs the duties of a Manager in compliance with
this Section 8.9 shall not have any liability by reason of being or having been
a Manager of the Company. In any action challenging any action or determination
of the Board of Managers, the party challenging such action or determination
shall have the burden of proving its allegations, and nothing shall shift the
burden of proof with respect to the satisfaction of the standard set forth
above to the Manager.
8.10 Antitrust Compliance. The Members agree and will adhere to the
appropriate competitive rules and firewalls set forth herein.
(a) RMUSA personnel who sit on the Company's Board shall not be
involved in or privy to any decision making regarding customers or the price,
terms, or conditions at which Cement is sold to other ready mix companies in
the Cement Boundaries or Concrete Boundaries nor shall they have access to any
such information.
(b) The Company agrees to develop and implement antitrust compliance
programs to assure its compliance with all applicable antitrust and competition
laws.
8.11 Cemex Intellectual Property. Notwithstanding anything contained
herein to the contrary, at such time as Cemex and its Affiliates no longer hold
Majority-In-Interest, the Company will cease using any Cemex, Inc., Cemex S.A.
de C.V., Cemex Trademark Worldwide, Ltd. or any of their Affiliates' owned
intellectual property, including trademarks, software and know-how.
9. Transfers of Membership Interest.
9.1 Transfer Restrictions.
(a) No Member shall Transfer all or any portion of its Membership
Interest in the Company except in strict compliance with the terms and
conditions of this Section 9. The foregoing notwithstanding, neither RMUSA nor
any of its Affiliates shall Transfer (other than a Permitted Transfer or upon
exercise of the Put Option or pursuant to Section 9.4) all or any portion of
its Membership Interest in the Company for a period commencing on the date
hereof and ending on the date on which the Put Option is no longer exercisable
by RMUSA pursuant to Section 9.6 hereof. Any attempted Transfer in violation of
this Article 9 shall be null and void and of no effect whatsoever. Each Member
hereby acknowledges the reasonableness of the restrictions on Transfer imposed
by this LLC Agreement in view of the Company's purposes and the relationship
between the Members. Accordingly, the restrictions on Transfer contained herein
shall be specifically enforceable. Each Member hereby further agrees to hold
the Company and each other Member (and each such Member's successors and
permitted assigns) wholly and completely harmless from any cost, liability, or
damage (including, without limitation, liabilities for income taxes, legal
fees, expenses and other costs of enforcing this indemnity) incurred by any of
such other Members and indemnified Persons as a result of a Transfer or an
attempted Transfer by the Member in violation of this LLC Agreement. A Member
shall not be entitled to Transfer all or any portion of its Membership Interest
in the Company unless such Member is also transferring a pro rata portion of
its membership interest in Ready Mix LLC.
(b) With respect to each Member, any transaction or series of related
transactions that results in any holder of the Membership Interests no longer
being an Affiliate of the ultimate parent of such Member on the Contribution
Date (with respect to such Member, the "Ultimate Parent") shall constitute a
Transfer of the Membership Interest held by such holder for all purposes of
this Section 9.
(c) If a Member is a Member by virtue of the fact that an Affiliate of
such Member (the "Base Member") has transferred any of the Membership Interest
owned by such Base Member to such Member, but as a result of a proposed
transaction such Member will no longer be an Affiliate of the Ultimate Parent
of such Base Member then unless the consent contemplated by Section 9.2(c)(i)
hereof is obtained prior to the consummation of such proposed transaction, any
Membership Interest beneficially owned by such Member must be transferred to an
Affiliate of the Ultimate Parent of such Base Member prior to such Member's
loss of Affiliate status in respect of the Ultimate Parent of such Base Member,
provided that if such transfer does not occur prior to such loss of such
Affiliate status, in addition to any remedy available to the Company for the
breach of this LLC Agreement resulting therefrom, such Member shall
automatically cease to be a Member, and the Company shall be entitled to treat
the Ultimate Parent of such Base Member as the holder of the Membership
Interest held by such Member for all purposes hereunder, notwithstanding any
prior registration or recognition of the transfer of such Membership Interest
to such Member.
(d) For purposes of this Section 9.1, the "Ultimate Parent" of each
Member shall be as set forth on Schedule 9.1(d) hereof.
9.2 Consent and Other Requirements. Neither Member will Transfer
(other than a Permitted Transfer) all or any portion of its Membership Interest
in the Company, unless:
(a) prior to the Transfer, the Company receives, unless waived by the
non-transferring Member, in writing, an opinion of counsel reasonably
satisfactory to the non-transferring Member that such Transfer is not subject
to registration under, or is exempt from the registration requirements of, the
applicable state and federal securities laws;
(b) contemporaneously with the Transfer, the transferee shall execute
the Adoption Agreement in the form of Exhibit D and the transferee shall pay
all reasonable expenses, including attorneys' fees, incurred by the Company in
connection with such Transfer; and
(c) the transferring Member shall either:
(i) first obtain the written consent to such Transfer by each
of the non-transferring Members; or
(ii) comply with the provisions of Sections 9.3 and 9.4
hereof, as applicable.
9.3 Right of First Refusal.
(a) Subject to the second sentence of Section 9.1(a) hereof, in the
event any Member (the "Transferring Member") receives a bona fide third party
offer to acquire any or all of such Transferring Member's Membership Interest
or any interest therein (other than a Permitted Transfer), including any
transaction that constitutes a Transfer under Section 9.1(b) or (c), which
offer such Transferring Member wishes to accept, such Transferring Member shall
promptly notify the other Member (the "Non-Transferring Member") in writing of
such offer (the "Offer Notice"), setting forth the name and address of the
prospective purchaser or acquiror, the amount of the Transferring Member's
Membership Interests to be Transferred, the price or method of determining such
price as designated by the Transferring Member and the prospective purchaser or
acquiror (the "Offer Price"), and the material terms and conditions of such
proposed Transfer, subject to Section 9.3(f). The Non-Transferring Member shall
have a period of thirty (30) days (the "Offer Option Period") after the receipt
of the Offer Notice within which to notify such Transferring Member in writing
that it wishes to acquire all (but not less than all) of such Membership
Interests that are proposed to be Transferred at a price equal to the Offer
Price and, upon the same terms and conditions set forth in the Offer Notice
(the "Offer Acceptance Notice"), subject to Section 9.3(f); provided, however,
that the Non-Transferring Member shall not be entitled to provide both an Offer
Acceptance Notice under this Section 9.3 and a Tag Along Notice pursuant to the
terms of Section 9.4 hereof.
(b) If the Non-Transferring Member gives the Transferring Member an
Offer Acceptance Notice within the Offer Option Period, then it shall be
obligated to purchase all (but not less than all) of such Membership Interests
that are proposed to be Transferred at a price equal to the Offer Price and
upon the same terms and conditions set forth in the Offer Notice, subject to
Section 9.3(f), and shall have up to one (1) year after it gives such Offer
Acceptance Notice to do all the things necessary to consummate the transaction,
including, but not limited to, receiving consents and entering into agreements.
If the Non-Transferring Member receives such consents and enters into such
agreements as are necessary to consummate the transactions, then such
Transferring Member shall be obligated to Transfer to the Non-Transferring
Member, and the Non-Transferring Member shall be obligated to acquire from such
Transferring Member, such Membership Interests at the Offer Price and, on the
terms and conditions set forth in the Offer Notice, subject to Section 9.3(f).
Within thirty (30) days following the closing of the purchase by the
Non-Transferring Member of the Transferring Member's Membership Interests (the
"Transfer Closing"), the Company shall distribute to the Transferring Member
(A) an amount equal to the product of (x) the Percentage Interest of the
Transferring Member immediately prior to the Transfer Closing and (y) all
EBITDA earned by the Company from the date of the Offer Acceptance Notice
through the date of the Transfer Closing that has not been distributed to the
Members pursuant to and in accordance with Section 6.1(a) hereof and (B) an
amount equal to the product of (x) the Percentage Interest of the Transferring
Member immediately prior to the Transfer Closing and (y) all cash in excess of
the sum of (i) the average current liabilities of the Company for the preceding
twelve (12) months and (ii) the aggregate amount of cash necessary to fund
budgeted capital expenditures.
(c) Subject to Section 9.4 hereof, if the Non-Transferring Member does
not give an Offer Acceptance Notice to such Transferring Member within such
Offer Option Period, such Transferring Member shall be free to Transfer such
Membership Interests to the party named in the Offer Notice, provided that such
Transfer is consummated within one (1) year after the Offer Sale Reference Date
(as defined below) at a price equal to or greater than the Offer Price and upon
substantially the same terms and conditions (other than the price, which may be
higher than the Offer Price) as are set forth in the Offer Notice.
(d) If the Non-Transferring Member gives an Offer Acceptance Notice
within the Offer Option Period and fails to consummate the transaction within
one (1) year after it gives such Offer Acceptance Notice, in addition to other
available remedies in respect of such failure, the Transferring Member shall be
free to Transfer its Membership Interest to the party named in the Offer Notice
at a price and on terms determined by the Transferring Member (which shall not
be required to be the terms set forth in the Offer Notice), provided that such
Transfer is consummated within one (1) year after the Offer Sale Reference
Date. In addition to the foregoing, such failure by the Non-Transferring Member
to consummate the transaction within the one (1) year period after it gives the
Offer Acceptance Notice shall, at the election of the Transferring Member,
constitute an Adverse Act; provided, however, that notwithstanding anything to
the contrary in Section 11.1 hereof, the Transferring Member must make such
election within one (1) year after the Offer Sale Reference Date. The right of
the Transferring Member to elect an Adverse Act shall not be assignable to the
purchaser in the proposed Transfer transaction and in the event the
Transferring Member elects to have the failure by the Non-Transferring Member
constitute an Adverse Act, the subsequent Transfer by the Transferring Member
of its Membership Interest as contemplated in the first sentence of this
paragraph shall result in the Non-Transferring Member no longer being an
Adverse Member. If the Transferring Member elects to cause the Non-Transferring
Member to be an Adverse Member, as provided above, the Non-Transferring Member
will be an Adverse Member until the earliest to occur of (i) a Transfer by the
Transferring Member of its Membership Interest as contemplated in the first
sentence of this paragraph, (ii) the purchase by the Transferring Member of the
Membership Interest of the Non-Transferring Member pursuant to Section 11.1(d),
or (iii) in the event that the Non-Transferring Member makes a bona fide tender
to the Transferring Member of the Offer Price set forth in the Offer Notice in
immediately available funds against delivery of the Membership Interest of the
Transferring Member then, (x) if the Transferring Member accepts such tender
(which it shall be entitled to accept or reject in its sole discretion), the
date of the transfer of such Membership Interest to the Non-Transferring Member
or (y) if the Non-Transferring Member does not accept such tender, the 60th day
after such tender.
(e) The "Offer Sale Reference Date" shall mean (i) the date on which
the Offer Option Period expires or (ii) if the Non-Transferring Member shall
have given the requisite written notice during the Offer Option Period but
shall have failed to consummate such transaction within the one (1) year period
provided above, the date on which such one year period shall end; provided,
that if during such one year period the Non-Transferring Member shall have
notified such Transferring Member in writing that the Non-Transferring Member
will not consummate such transaction and that the Non-Transferring Member
waives its rights under this Section 9.3 with respect to that particular Offer
Notice, then the Offer Sale Reference Date shall be the date of such notice
from the Non-Transferring Member.
(f) For purposes of this Section 9.3 and Section 9.4 hereof, with
respect to any transaction that constitutes a Transfer under Section 9.1(b) or
(c) (an "Indirect Sale"):
(i) the Offer Price shall be the amount designated by the
Transferring Member and the prospective purchaser or acquiror;
(ii) the "terms and conditions" of such Indirect Sale shall
be deemed to contemplate a direct transfer of the Membership Interest
on the other terms and conditions of such Indirect Sale; provided,
however, that for purposes of this Section 9.3 any such terms and
conditions that relate solely to the form of transaction which are not
applicable to such deemed form shall be disregarded (for example, if
the Indirect Sale is a merger, and a condition to such merger is the
filing of a certificate of merger with the applicable secretary of
state, such condition shall be disregarded for purposes of this
Section 9.3); and
(iii) with respect to this Section 9.3, at the election of
the Transferring Member, the sale of the Membership Interest pursuant
to Section 9.3(b) shall be conditioned upon the closing of the
Indirect Sale that gave rise to the obligation to provide the Offer
Notice with respect to such sale.
(g) For the avoidance of doubt, for purposes of this Section 9.3, with
respect to any transaction that constitutes a Transfer under Section 9.1(b) or
(c), the only right of the Non-Transferring Member shall be to purchase the
Membership Interest of the Transferring Member, and not any other assets or
securities being transferred by the Transferring Member or any of its
Affiliates.
9.4 Tag Along Right.
(a) In lieu of delivering an Offer Acceptance Notice, the
Non-Transferring Member shall have the right (the "Tag Along Right"), during
the Offer Option Period, to deliver a written notice (the "Tag Along Notice")
to the Transferring Member, requesting to include in such Transfer a percentage
of its Membership Interest equal to or less than the Prorata Portion (as
hereinafter defined) of the Membership Interest of the Non-Transferring Member.
The "Prorata Portion" with respect to the Non-Transferring Member shall equal
the product of (i) the Membership Interest of the Non-Transferring Member, and
a fraction (x) the numerator of which shall be equal to the amount of the
Transferring Member's Membership Interests to be Transferred and (y) the
denominator of which shall be equal to the total Membership Interests of the
Transferring Member.
(b) In the event the Non-Transferring Member shall have delivered a
Tag Along Notice to the Transferring Member prior to the expiration of the
Offer Option Period, the Transferring Member, shall include in any such
Transfer upon the same terms and conditions, the Pro Rata Portion of the
Non-Transferring Member's Membership Interest. Such terms and conditions shall
include, without limitation, (i) the Transfer consideration and (ii) the
provision of information, representations, warranties, covenants and requisite
indemnifications. Any Tag Along Notice shall be irrevocable once received by
the Transferring Member.
(c) If the Non-Transferring Member shall not have delivered the Tag
Along Notice during the Offer Option Period, it shall be deemed to have
irrevocably waived its rights under this Section 9.4 with respect to the
Transfer contemplated by the Offer Notice.
(d) In addition to any other available remedies, in the event that the
Non-Transferring Member who gives a Tag Along Notice within the Offer Option
Period to Transfer its Membership Interest pursuant to the transaction set
forth in the Offer Notice breaches any of its obligations to the purchaser
under the Non-Transferring Member's agreement with the purchaser related to
such transaction, where (i) such transaction involves the Transfer of all of
the Membership Interest of the Non-Transferring Member as well as all of such
Member's membership interest in Ready Mix LLC, and (ii) such breach causes the
contemplated transaction to be terminated by the purchaser, shall, at the
election of the Transferring Member, constitute an Adverse Act; provided,
however, that notwithstanding anything to the contrary in Section 11.1 hereof,
the Transferring Member must make such election within sixty (60) days after
the date on which the Transfer subject to such Tag Along Notice would have
occurred but for the failure of the Non-Transferring Member. The right of the
Transferring Member to elect an Adverse Act shall not be assignable to the
purchaser in the proposed Transfer transaction. If the Transferring Member
elects to cause the Non-Transferring Member to be an Adverse Member, as
provided above, the Non-Transferring Member will be an Adverse Member until the
earliest to occur of (i) the purchase by the Transferring Member of the
Membership Interest of the Non-Transferring Member pursuant to Section 11.1(d),
or (ii) the Non-Transferring Member has fully indemnified the Transferring
Member from and against any and all Damages incurred by the Transferring Member
arising out of or relating to the Non-Transferring Member's failure to
consummate such transaction.
9.5 Certain Permitted Transfers. Subject to Sections 9.1(a), (b) and
(c) hereof, each Member shall be entitled to Transfer all or any portion of its
Membership Interest in the Company to such Member's Affiliates (a "Permitted
Transfer"); provided, however, that such transferee(s) (the "Permitted
Transferee(s)") shall become parties to, and shall be subject to the terms and
conditions of, this LLC Agreement; provided, further, that if any such Transfer
shall result in a termination of the Company within the meaning of ss. 708 of
the Code, such Transfer shall be prohibited and not constitute a Permitted
Transfer. Any such Permitted Transferee shall automatically and without further
action of the Board, the Manager or the Members become an additional or
substitute member of the Company, as applicable. For purposes of this Section
9.5, none of Cemex, RMUSA or any of their respective Affiliates shall be deemed
to be Affiliates of the Company or Ready Mix LLC or any of their respective
Subsidiaries.
9.6 Option of RMUSA to Put Membership Interest. Notwithstanding any
provision herein to the contrary, RMUSA shall have the option, exercisable at
its sole and absolute discretion, to require Cemex, Inc. to purchase all, but
not less than all, of the Membership Interest in the Company held by RMUSA and
its Affiliates on the terms and conditions contained in this Section 9.6 (the
"Put Option"). RMUSA and Cemex, Inc. acknowledge and agree that the Put Option
may only be exercised by RMUSA together with an exercise of its similar right
to require Cemex, Inc. to purchase all of the membership interests of RMUSA and
its Affiliates in Ready Mix LLC pursuant to the Ready Mix LLC Operating
Agreement. For purposes of this Section 9.6, neither the Company nor any of its
Subsidiaries shall be deemed an Affiliate of any Member.
9.6.1 Put Option Term.
(a) Subject to paragraph (b) below, the Put Option may be exercised by
RMUSA at any time during the period commencing on the expiration of three (3)
years from the Contribution Date and expiring twenty-five (25) years from the
Contribution Date. The foregoing notwithstanding, in the event Cemex or any of
its Affiliates receives a bona fide third party offer to acquire any or all of
its Membership Interest or any interest therein (other than a Permitted
Transfer), including any transaction that constitutes a Transfer under Section
9.1(b) or (c), which results in Cemex or an Affiliate thereof giving an Offer
Notice as contemplated in Section 9.3 prior to the third (3rd) anniversary of
the Contribution Date, the Put Option shall become exercisable immediately and
shall remain exercisable, subject to paragraph (b) below, until (i) the
proposed Transfer is consummated, or (ii) the proposed Transfer is abandoned by
Cemex or its Affiliates or the proposed purchaser (unless such event occurs on
or following the date which is the third (3rd) anniversary of the Contribution
Date, in which case the Put Option shall remain exercisable subject to the
other terms and conditions of this LLC Agreement).
(b) Notwithstanding anything in this LLC Agreement to the contrary,
(i) in the event either RMUSA delivers an Offer Acceptance
Notice or a Tag Along Notice with respect to a proposed Transfer by
Cemex or any of its Affiliates in accordance with Section 9.3 or 9.4,
as the case may be, or RMUSA fails to deliver a Notice pursuant to
Section 9.6.2 during any Offer Option Period with respect to a
Transfer Notice concerning a Transfer by Cemex or any of its
Affiliates of all of the Membership Interest in the Company held by
Cemex and its Affiliates, then RMUSA's right to exercise the Put
Option shall be suspended as of the date of such Offer Acceptance
Notice or Tag Along Notice, or at the end of such Option Offer Period,
as the case may be, and either (x) the Put Option shall terminate and
be of no further effect (1) upon the consummation of the purchase by
RMUSA of all of the Membership Interest of Cemex and its Affiliates in
the Company pursuant to Section 9.3 whereupon neither Cemex nor any of
its Affiliates remain as Members of the Company, or (2) upon the
consummation of the sale by RMUSA (or its Affiliates) of all of the
Membership Interest of RMUSA (or its Affiliates, as the case may be)
in the Company pursuant to Section 9.4 whereupon neither RMUSA nor any
of its Affiliates remain as Members of the Company, or (y) RMUSA's
right to exercise the Put Option shall be reinstated from and after
(A) the termination of the proposed Transfer by
Cemex (or its Affiliates) of all of the Membership Interest
of Cemex (and its Affiliates) pursuant to Section 9.3 where
such termination is due to the failure of Cemex (or its
Affiliates) to consummate such Transfer in breach of its
obligations with respect thereto,
(B) the consummation of the purchase by RMUSA of the
Membership Interest of Cemex and its Affiliates in the
Company pursuant to Section 9.3 which constitutes a Transfer
of less than all of the Membership Interest of Cemex and its
Affiliates in the Company and whereupon following such
purchase Cemex or its Affiliates continue to hold a
Membership Interest in the Company, or
(C) the abandonment of the proposed Transfer that
was the subject of the Tag Along Notice and the termination
of any definitive agreement with respect to such proposed
Transfer; provided however, that in the event the proposed
Transfer giving rise to rights in RMUSA under Section 9.4 is
with respect to a transfer of less than all of Cemex's (or
its Affiliate's) Membership Interest, the suspension
contemplated above shall apply only to the Put Option as it
concerns the Membership Interests proposed to be transferred
by RMUSA (or its Affiliate) pursuant to Section 9.4 and RMUSA
shall retain its rights to exercise the Put Option with
respect to any remaining portion of its Membership Interest;
(ii) in the event that RMUSA is the Non-Transferring Member
who failed to consummate the Transfer pursuant to the terms of Section
9.3(b), then RMUSA's right to exercise the Put Option shall remain
suspended as of the Offer Sale Reference Date and the Put Option shall
terminate and be of no further effect upon the Transfer of all of
Cemex's (or its Affiliate's) Membership Interests in accordance with
Section 9.3(d) hereof;
(iii) in the event RMUSA or any of its Affiliates is the
Non-Transferring Member and Cemex or any of its Affiliates is the
Transferring Member, as contemplated in Section 9.3, and the proposed
Transfer will result in the Transfer of all of the remaining
Membership Interest of Cemex and all of its Affiliates (and a Transfer
of all of the remaining Membership Interest of Cemex and all of its
Affiliates in Ready Mix LLC, if any), and upon receiving the Offer
Notice neither RMUSA nor any of its Affiliates gives an Offer
Acceptance Notice or Tag Along Notice to Cemex within the Offer Option
Period, and RMUSA does not exercise its Put Option, and Cemex and any
of its Affiliates, as the case may be, thereafter consummates the
Transfer of all of the remaining Membership Interest of Cemex and its
Affiliates (and a Transfer of all of the remaining Membership Interest
of Cemex and all of its Affiliates in Ready Mix LLC, if any), as
contemplated herein, upon the consummation of the Transfer the Put
Option shall terminate and be of no further effect;
(iv) in the event RMUSA is an Adverse Member pursuant to
clauses (ii) or (v) of the definition of Adverse Act, then RMUSA's
right to exercise the Put Option shall be suspended until RMUSA is no
longer an Adverse Member; and
(v) in the event RMUSA or any of its Affiliates is an Adverse
Member pursuant to clause (i) of the definition of Adverse Act, then,
in the event RMUSA exercises the Put Option following the sixtieth
(60th) day after the Non-Adverse Member gives the written notice set
forth in Section 11.1 to RMUSA or any of such Affiliates, the Purchase
Price shall be reduced to the Buyout Purchase Price.
9.6.2 Exercise. RMUSA may exercise the Put Option by delivering to
Cemex, Inc. a written notice of such exercise (the "Notice").
9.6.3 Purchase Price. (a) Except as provided in Section 9.6.1(b)(v)
above, the price which Cemex, Inc. shall pay to RMUSA for RMUSA's Membership
Interest pursuant to the Put Option (the "Purchase Price") shall be determined
based on one of the following formulas in accordance with paragraph (b) below:
(i) an amount equal to the product of (x) RMUSA's Percentage
Interest as of the Exercise Date and (y) the Adjusted Book Value as of
the Exercise Date;
(ii) an amount equal to (x) (A) eight (8) times the average
EBITDA of the Company over the three (3) Fiscal Years immediately
preceding the Exercise Date minus (B) the Company's Debt as of the
Exercise Date, multiplied by (y) RMUSA's Percentage Interest as of the
Exercise Date [(A - B) * y]; or
(iii) an amount equal to (x) (A) eight (8) times the EBITDA
of the Company during the Fiscal Year immediately preceding the
Exercise Date minus (B) the Company's Debt as of the Exercise Date,
multiplied by (y) RMUSA's Percentage Interest as of the Exercise Date
[(A - B) * y].
For the avoidance of doubt, the Purchase Price shall be determined as
set forth above and there shall be no adjustment to the amounts so determined
for Working Capital (although the parties acknowledge that the amount of
Working Capital will affect the calculation pursuant to clause (i) above). The
parties acknowledge that Cemex shall be entitled to retain all Working Capital
in the Company as of the Put Option Closing.
(b) RMUSA and Cemex, Inc. acknowledge and agree that the pricing
methodology which shall apply to the sale of the Membership Interests of RMUSA
and its Affiliates in the Company shall be the same methodology as applies to
the sale by RMUSA and its Affiliates of their Membership Interests in Ready Mix
LLC and shall be the methodology that yields the highest result for the
combined companies even if the methodology utilized results in a negative
number under this Section 9.6.3 or under Section 9.6.3 of the Ready Mix LLC
Agreement. In the event that the pricing methodology utilized under this
Agreement pursuant to the immediately preceding sentence results in a negative
Purchase Price, then Cemex, Inc. shall be entitled to a credit in an amount
equal to the absolute value of the Purchase Price against any amounts due from
Cemex, Inc. to RMUSA pursuant to Section 9.6.3 of the Ready Mix LLC Agreement.
In the event that the pricing methodology utilized under the Ready Mix LLC
Agreement results in a negative purchase price thereunder, then Cemex, Inc.
shall be entitled to a credit in an amount equal to the absolute value of such
purchase price against any amounts due from Cemex, Inc. to RMUSA pursuant to
this Section 9.6.3, such credit to be applied as of the Put Option Closing. In
the event that the pricing methodology utilized results in a negative Purchase
Price and a negative purchase price under the Ready Mix LLC Agreement (an
absolute negative number), then RMUSA shall pay to Cemex, Inc. the amount equal
to the absolute value of such total negative amount at the Put Option Closing
by wire transfer of immediately available funds.
(c) For purposes of determining the Purchase Price under this Section
9.6.3, to the extent the Company shall acquire any business(es) or assets
associated therewith ("Acquired Business"), which shall have been owned by the
Company for less than twelve (12) calendar months during the Fiscal Year
immediately preceding the Exercise Date, EBITDA of the Company for the Fiscal
Year immediately preceding the Exercise Date shall be increased by an amount
which shall consist of the Prorata EBITDA, as such term is defined below, in
connection with such Acquired Business. For purposes hereof, the term "Prorata
EBITDA" shall mean, with respect to a particular Acquired Business, the EBITDA
of the Acquired Business for the twelve (12) month period immediately preceding
the date of the acquisition of the Acquired Business ("Acquisition Date") by
the Company multiplied by a fraction, the numerator of which shall be equal to
(x) twelve (12) less (y) the number of months that have elapsed from the
Acquisition Date to the end of the Fiscal Year immediately preceding the
Exercise Date, or, with respect to Section 11, the Adverse Act Exercise Date,
and the denominator of which shall be twelve (12). For example, if the EBITDA
of the Acquired Business for the twelve (12) month period prior to the
Acquisition Date shall be US$1,000,000 and the Acquisition Date shall be three
(3) months prior to the end of the Fiscal Year immediately preceding the
Exercise Date, EBITDA shall increase by US$750,000, or US$1,000,000 x 9/12.
(d) For purposes of the calculations of clauses (a)(ii) and (iii)
above, in the event that EBITDA of the Company includes EBITDA of assets that
have been divested by the Company at any time prior to the Exercise Date,
EBITDA of the Company shall be adjusted to subtract the EBITDA attributable to
the divested assets during the period of time referred to in clauses (a)(ii)
and (iii), respectively.
9.6.4 Payment Terms.
(a) Within sixty (60) days after the Exercise Date, the Company shall
distribute to the Members all cash, if any, in excess of the sum of (i) the
average current liabilities of the Company for the preceding twelve (12) months
and (ii) the aggregate amount of cash necessary to fund budgeted capital
expenditures. A percentage of the portion of such distribution to which Cemex
would otherwise be entitled equal to one minus the Applicable Tax Rate shall be
paid to RMUSA (the amount so paid to RMUSA is referred to herein as the "Cemex
Post-Exercise Special Cash Distribution") and credited against the Initial
Payment (as defined below).
(b) Cemex, Inc. shall pay the Purchase Price as follows:
(i) at the Put Option Closing, Cemex, Inc. shall pay by wire
transfer of immediately available funds an amount (the "Initial
Payment") equal to the greater of $200,000,000 or forty percent (40%)
of the Purchase Price;
(ii) on the first (1st) anniversary of the Put Option
Closing, Cemex, Inc. shall pay by wire transfer of immediately
available funds an amount (the "Second Installment") equal to thirty
percent (30%) of the Purchase Price; and
(iii) on the second (2nd) anniversary of the Put Option
Closing, Cemex, Inc. shall pay by wire transfer of immediately
available funds an amount (the "Third Installment") equal to the
remainder of the Purchase Price.
provided, however, that notwithstanding the foregoing in no event shall the
aggregate amount paid (and deemed paid) by Cemex, Inc. pursuant to clauses (i),
(ii) and (iii) exceed the Purchase Price. For purposes of the foregoing, Cemex,
Inc. shall be deemed to have paid to RMUSA (and shall be credited against the
amounts payable pursuant to the immediately preceding sentence), the Cemex
Post-Exercise Special Cash Distribution (which shall be credited against the
Initial Payment) and any Cemex Post-Exercise Regular Cash Distributions (each
of which shall be credited against the immediately following installment).
Notwithstanding the foregoing, Cemex, Inc. shall have the right to prepay all
or any part of the remaining amount of the Purchase Price at any time. For
example, if the Purchase Price is $700,000,000 and the Cemex Post-Exercise
Special Cash Distribution is $5,001,000, and assuming no Cemex Post-Exercise
Regular Cash Distributions or prepayments are made, then $274,999,000 shall be
paid by Cemex, Inc. to RMUSA at the Put Option Closing, $210,000,000 shall be
paid by Cemex, Inc. to RMUSA on the first anniversary of the Put Option Closing
and $210,000,000 shall be paid by Cemex, Inc. to RMUSA on the second
anniversary of the Put Option Closing.
(c) Beginning on the Exercise Date and continuing until the Purchase
Price is paid in full to RMUSA, a percentage of the portion of each cash
distribution made by the Company to which Cemex would otherwise be entitled
(other than the distribution contemplated by Section 9.6.4(a)) equal to one
minus the Applicable Tax Rate shall be paid to RMUSA (the amount so paid to
RMUSA is referred to herein as the "Cemex Post-Exercise Regular Cash
Distributions") and credited against the next installment of the Purchase
Price.
(d) In the event as of the Put Option Closing RMUSA owes an
outstanding indemnity obligation to Cemex or its Affiliates or to the Company
or Ready Mix LLC or any of their respective Subsidiaries pursuant to Section
9.2 of the Contribution Agreement or Section 9.2 of the Ready Mix Contribution
Agreement, which indemnity obligation has been finally determined and
quantified (whether through agreement of the parties or final, non-appealable
judgment) pursuant to the terms and procedures set forth in Article 9 of the
Contribution Agreement or the Ready Mix Contribution Agreement, as the case may
be, the amount of such indemnity obligation shall be offset against the
Purchase Price, and the amount thereof shall be deemed paid at the Put Option
Closing.
9.6.5 Closing. (a) The closing of the transaction contemplated by this
Section 9.6 (the "Put Option Closing") shall occur on a date chosen by Cemex,
Inc., in no event later than twelve (12) months after the Exercise Date, at a
time and place mutually agreeable to RMUSA and Cemex, Inc. At the Put Option
Closing:
(i) Cemex, Inc. shall deliver to RMUSA:
(x) the balance of the Initial Payment in
immediately available funds; and
(y) a release(s) and indemnity(ies) of RMUSA from
any and all guaranty(ies) with respect to which RMUSA may
have guaranteed debts, obligations or liabilities of the
Company.
(ii) RMUSA shall deliver to Cemex, Inc., or at its direction:
(x) duly executed assignment of that certain portion
of its Percentage Interest determined in accordance with
Section 9.6.5(b);
(y) a certificate, dated as of the closing date,
containing a representation and warranty that on the closing
date RMUSA has transferred, or caused to be transferred, to
Cemex, Inc. (or its Affiliate) good and marketable title to
the portion of its Percentage Interest being transferred,
free and clear of all claims, equities, liens, charges and
encumbrances; and
(z) any other documents or agreements required by
this LLC Agreement or necessary to effectuate the intended
transfer.
(b) In connection with the sale of its Membership Interest pursuant to
the Put Option, RMUSA shall assign and transfer its Membership Interest to
Cemex, Inc. (or its designated Affiliate) as follows:
(i) At the Put Option Closing, and upon the receipt by RMUSA
of payment in full of the Initial Payment, RMUSA shall assign and
transfer to Cemex, Inc. (or its designated Affiliate) a portion of the
Percentage Interest owned by RMUSA immediately prior to the Put Option
Closing equal to the product of the total amount of the Percentage
Interest owned by RMUSA immediately prior to the Put Option Closing
multiplied by a fraction, the numerator of which is the amount of the
Purchase Price paid or deemed paid by Cemex, Inc. and received by
RMUSA at or prior to the Put Option Closing and the denominator of
which is the Purchase Price.
(ii) In the event that RMUSA still owns a Percentage Interest
in the Company as of the first (1st) anniversary of the Put Option
Closing, on such anniversary and upon the receipt by RMUSA of payment
in full of the Second Installment, RMUSA shall assign and transfer to
Cemex, Inc. (or its designated Affiliate) a portion of the Percentage
Interest owned by RMUSA immediately prior to the Put Option Closing
equal to the product of the total amount of Percentage Interest owned
by RMUSA immediately prior to the Put Option Closing multiplied by a
fraction, the numerator of which is the amount of the Purchase Price
paid or deemed paid by Cemex, Inc. and received by RMUSA after the Put
Option Closing and at or prior to the first Anniversary of the Put
Option Closing, other than any other Significant Prepayment made
during such period for which a Percentage Interest was delivered under
Section 9.6.5(c) and the denominator of which is the Purchase Price.
RMUSA shall also deliver to Cemex, Inc. (or its designated Affiliate)
a certificate as referenced in Section 9.6.5(a)(ii)(y) related to the
Percentage Interest being assigned and transferred pursuant to this
Section 9.6.5(b)(ii).
(iii) In the event that RMUSA still owns a Percentage
Interest in the Company immediately prior to the second (2nd)
anniversary of the Put Option Closing, on such anniversary and upon
the receipt by RMUSA of payment of the balance of the Purchase Price,
RMUSA shall assign and transfer to Cemex, Inc. (or its designated
Affiliate) the remainder of the Membership Interest owned by RMUSA
(which shall include the Voting Interest of RMUSA) immediately prior
to the Put Option Closing. RMUSA shall also deliver to Cemex, Inc. (or
its designated Affiliate) a certificate, dated as of such date,
containing a representation and warranty that on the date of such
assignment and transfer RMUSA has transferred, or caused to be
transferred, to Cemex, Inc. (or its designated Affiliate) good and
marketable title to such Membership Interest, free and clear of all
claims, equities, liens, charges and encumbrances as referenced in
Section 9.6.5(a)(ii)(y).
In the event Cemex, Inc. prepays to RMUSA the outstanding amount of the
Purchase Price, upon receipt of such payment in full of the Purchase Price
RMUSA shall assign and transfer to Cemex, Inc. (or its designated Affiliate)
the remainder of the Membership Interest then owned by RMUSA and shall deliver
to Cemex, Inc. (or its designated Affiliate) a certificate as contemplated in
paragraph (b)(iii) above. Notwithstanding any provision herein to the contrary,
RMUSA shall retain its full Voting Interest until the Purchase Price has been
paid in full.
(c) If at any time prior to any scheduled payment date pursuant to
Section 9.6.5(b), Cemex, Inc. pays or is deemed to have paid an amount under
the Put Option equal to or greater than US$ 10 million (a "Significant
Prepayment"), within three (3) Business Days after receipt by RMUSA or any of
its Affiliates of such Significant Prepayment, RMUSA shall (or shall cause one
or more of its Affiliates to) assign and transfer to Cemex, Inc. (or its
designated Affiliate) a portion of the Percentage Interest owned by RMUSA and
its Affiliates immediately prior to the Put Option Closing multiplied by a
fraction, the numerator of which is the amount of the Significant Prepayment
and the denominator of which is the Purchase Price. RMUSA shall also deliver to
Cemex, Inc. (or its designated Affiliate) a certificate as referenced in
Section 9.6.5(a)(ii)(y) related to the Percentage Interest being assigned and
transferred pursuant to this Section 9.6.5(c).
(d) At or prior to any installment payment date pursuant to Section
9.6.5(b) or any Significant Prepayment pursuant to Section 9.6.5(c), RMUSA or
its Affiliate, as may be the case, shall deliver to Cemex, Inc. a certificate,
in the form described in Treasury Regulation Section 1.1445-2(b)(2)(iv)(B),
certifying its compliance with Treasury Regulation Section 1.1445-2(b) that, as
of the date of such installment payment or Significant Prepayment, RMUSA or its
Affiliate is not a "foreign person" within the meaning of Section 1445 of the
Code. If RMUSA does not deliver such certificate to Cemex, Inc., Cemex, Inc.
shall be permitted to withhold from the payment amount, the amount required to
be withheld pursuant to Section 1445 of the Code, as calculated by Cemex, Inc.
in good faith, and (i) Cemex, Inc. shall not be deemed to be in default of any
of its obligations under this LLC Agreement (including this Section 9.6) by
virtue of having withheld such amount and (ii) the amount so withheld and
remitted to Department of Treasury shall be deemed to have been paid to RMUSA
or its Affiliates on the date that any amounts not so withheld were paid for
all purposes under this LLC Agreement. If RMUSA or its Affiliate does deliver
such certificate to Cemex, Inc., Cemex, Inc. shall not withhold under Section
1445 of the Code.
9.6.6 Regulatory and Other Authorizations; Cooperation.
(a) Upon the exercise by RMUSA of the Put Option, Cemex, Inc. shall
use its best efforts to promptly obtain (and, in the event Cemex, Inc. is or
its Affiliates are the Manager or Majority Member of the Company, to cause the
Company to obtain) all authorizations, consents, orders and approvals of all
governmental authorities and officials and third parties that may be or become
necessary for its performance of its obligations pursuant to the Put Option;
provided, however, that notwithstanding the foregoing, prior to the date which
is twelve (12) months after the Exercise Date, Cemex, Inc. shall not be
required to accept, as a condition to obtaining any required approval or
resolving any objection of any governmental authority, any requirement to
divest or hold separate or in trust (or the imposition of any other condition
or restriction with respect to) any of the respective businesses of Cemex,
Inc., Cemex, the Company, Ready Mix LLC or any of their respective subsidiaries
or assets.
(b) Upon the exercise by RMUSA of the Put Option, RMUSA shall use its
best efforts to promptly obtain all authorizations, consents, orders and
approvals of all governmental authorities and officials and third parties that
may be or become necessary for its performance of its obligations pursuant to
the Put Option.
(c) Each of RMUSA and Cemex, Inc. agrees to make, and to cause its
Affiliates, as necessary, to make its filing pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or any successor law (the "HSR Act"), with
respect to the acquisition and sale pursuant to the exercise of the Put Option
within forty-five (45) days after the Exercise Date and to supply as promptly
as practicable to the appropriate governmental authorities any information and
documentary material that may be requested pursuant to the HSR Act. Each of
RMUSA and Cemex, Inc. further agrees to make, and to cause its Affiliates, as
necessary, to make responses (including providing required information) to the
Federal Trade Commission or the United States Department of Justice, as the
case may be, and state antitrust regulators as required of such party by any
such regulators with respect to the Put Option transaction.
(d) RMUSA agrees that, in its capacity as "Manager" of Ready Mix LLC
(or, if an Affiliate of RMUSA is then the "Manager" of Ready Mix LLC it will
cause such Affiliate, in such capacity, to), it will provide reasonable access
to the books, records and properties to Cemex's potential financing sources,
and shall cause the officers and employees of Ready Mix LLC to provide
reasonable cooperation to Cemex in obtaining financing in order to consummate
the transactions contemplated by this Section 9.6.
(e) From and after exercise of the Put Option, RMUSA agrees that it
shall not, directly or indirectly, create, incur, assume or suffer to exist any
Lien of any kind upon its Membership Interest.
9.7 Effect of Transfer. Any Member that Transfers its entire
Membership Interest in the Company to an un-Affiliated third party pursuant to
the terms of this LLC Agreement shall be deemed to have retired and shall cease
to be a Member as of the effective date of such Transfer, and shall cease to
have any rights or obligations under this LLC Agreement; provided, however,
that the foregoing shall not limit or modify (i) any rights of such Member
under Sections 8.7, 8.8, 8.9 and 9.3(d) hereof with respect to matters
occurring prior to such transaction; (ii) the obligations of such Member under
this LLC Agreement arising prior to or in connection with such transaction or
the obligations of such Member under Sections 7.2 and 19(h) hereof; or (iii)
the rights of such Member under this LLC Agreement arising as a result of a
breach of the other Member's obligations under this LLC Agreement prior to such
transaction. The Transfer of any Membership Interest pursuant to Section 9.5
shall not relieve the transferring Member from any of its obligations under
this Agreement.
10. Substituted Members. Notwithstanding any other provision of this
LLC Agreement to the contrary, no permitted assignee or permitted transferee of
the whole or any portion of any Membership Interest in the Company shall have
the right to become a substituted Member in place of his assignor unless all of
the following conditions are satisfied:
10.1 Written Assignment. The assignor and assignee shall have executed
and acknowledged a written instrument of assignment, together with such other
instruments as the Manager may deem necessary or desirable to effect the
admission of the assignee as a Member.
10.2 Assignment Delivered. Such instrument of assignment provided for
herein shall have been delivered to and received by the Manager.
10.3 Approval by Members. The written consent or approval of a
Majority-In-Interest shall have been first obtained.
10.4 Transfer Fee Paid. A transfer fee (in an amount determined by the
Manager) has been paid to the Company which is sufficient to cover all
reasonable expenses connected with such assignment and admission.
11. Adverse Action.
11.1 Remedies. Upon receipt of written notice from a non-Adverse
Member, an Adverse Member shall have thirty (30) days to cure an Adverse Act.
Thereafter, provided that the non-Adverse Member giving notice (i) is also a
non-adverse Member under this Agreement and the Ready Mix LLC Agreement and
(ii) with respect to clause (iii) of the definition of Adverse Act, the
non-Adverse Member (RMUSA) has complied with its obligations under Sections
9.6.6(b) and (c), the failure of which to be performed would have an adverse
effect on Cemex's ability to close the Put Option, the non-Adverse Member may,
in its sole discretion, elect one or more of the following remedies:
(a) during the continuance of the Adverse Act, the Adverse Member
shall cease to be represented on the Board and the size of the Board shall be
reduced to four (4) individuals, all of whom shall be appointed by the
non-Adverse Member;
(b) during the continuance of the Adverse Act, the Adverse Member will
have all of its voting rights under this LLC Agreement and applicable Law, in
its capacity as a Member, a Manager or otherwise, suspended, and the
non-Adverse Member will have the voting rights of the Majority Member;
(c) during the continuance of the Adverse Act, the Adverse Member
shall not be entitled to receive any distributions of cash or property from the
Company and the non-Adverse Member will be entitled to receive and retain all
distributions of cash or property that otherwise would have been made to the
Adverse Member, but the Adverse Member shall continue to be liable for its
obligations as a Member under this LLC Agreement; or
(d) the non-Adverse Member shall have the right, exercisable in its
sole and absolute discretion from the thirtieth (30th) day following the
expiration of the Adverse Member's right to cure and thereafter for the period
that the Adverse Act continues, to purchase all of the Adverse Member's
Membership Interest in the Company (a "Buyout Option") at a purchase price (the
"Buyout Purchase Price") equal to seventy-five percent (75%) of the amount
which is the highest of the following:
(i) an amount equal to the product of (x) the Adverse
Member's Percentage Interest as of the date the non-Adverse Member
gives written notice of its election to exercise its rights under this
paragraph (d) (the "Adverse Act Exercise Date") and (y) the Adjusted
Book Value as of the date of the Adverse Exercise Date;
(ii) an amount equal to (x) (A) eight (8) times the average
EBITDA of the Company over the three (3) Fiscal Years immediately
preceding the Adverse Act Exercise Date minus (B) the Company's Debt
as of the Adverse Act Exercise Date, multiplied by (y) the Adverse
Member's Percentage Interest as of the Adverse Act Exercise Date [(A -
B) * y]; or
(iii) an amount equal to (x) (A) eight (8) times the EBITDA
of the Company during the Fiscal Year immediately preceding the
Adverse Act Exercise Date minus (B) the Company's Debt as of the
Adverse Act Exercise Date, multiplied by (y) the Adverse Member's
Percentage Interest as of the Adverse Act Exercise Date [(A - B) * y].
For the avoidance of doubt, the Buyout Purchase Price shall be determined as
set forth above and there shall be no adjustment to the amounts so determined
for Working Capital (although the parties acknowledge that the amount of
Working Capital will affect the calculation pursuant to clause (i) above). The
parties acknowledge that the non-Adverse Member shall be entitled to retain all
Working Capital in the Company as of the Adverse Member Buyout Closing.
The parties acknowledge and agree that, in the event the non-Adverse Member
that exercises its right to purchase the Membership Interest of the Adverse
Member pursuant to this Section 11.1(d) also exercises its similar right to
purchase the Membership Interest of the Adverse Member (or its Affiliate)
pursuant to the Ready Mix LLC Agreement, the pricing methodology which shall
apply to the sale of the Membership Interest of the Adverse Member in the
Company shall be the same methodology as applies to its sale of its Membership
Interest in Ready Mix LLC and shall be the methodology that yields the highest
result for the combined companies even if the methodology utilized results in a
negative number under this Section 11.1(d) or under Section 11.1(d) of the
Ready Mix LLC Agreement. In the event that the methodology utilized under this
Agreement pursuant to the immediately preceding sentence results in a negative
Purchase Price, then the non-Adverse Member shall be entitled to a credit in an
amount equal to the absolute value of the Buyout Purchase Price against any
amounts due from the non-Adverse Member to the Adverse Member pursuant to
Section 11.1(d) of the Ready Mix LLC Agreement. In the event that the pricing
methodology utilized under the Ready Mix LLC Agreement results in a negative
purchase price thereunder, then the non-Adverse Member shall be entitled to a
credit in an amount equal to the absolute value of such purchase price against
any amounts due from the non-Adverse Member to the Adverse Member pursuant to
this Section 11.1(d), such credit to be applied as of the Adverse Member Buyout
Closing.
In the event that the Buyout Option is exercised by RMUSA as a result of a
breach by Cemex of Section 9.6 hereof, at the Adverse Member Buyout Closing
RMUSA shall (i) repurchase the Percentage Interests purchased by Cemex prior to
its Adverse Act pursuant to RMUSA's exercise of the Put Option (the "Purchased
Interests") for the amount paid by Cemex to RMUSA for such Purchased Interests
and the purchase price paid by RMUSA for the remaining Percentage Interest of
Cemex shall be the Buyout Purchase Price as determined above and (ii) refund to
Cemex any amounts paid or deemed paid by Cemex in respect of the Put Option for
which no Percentage Interest has been transferred whether before or after the
Adverse Act.
For purposes of determining the Buyout Purchase Price under this Section 11.1,
to the extent the Company shall acquire any Acquired Business, which shall have
been owned by the Company for less than twelve (12) calendar months during the
Fiscal Year immediately preceding the Adverse Act Exercise Date, EBITDA of the
Company for the Fiscal Year immediately preceding the Adverse Act Exercise Date
shall be increased by an amount which shall consist of the Prorata EBITDA in
connection with such Acquired Business.
For purposes of the calculations of clauses (ii) and (iii) above, in the event
that Adverse Act EBITDA of the Company includes EBITDA of assets that have been
divested by the Company at any time prior to the Exercise Date, EBITDA of the
Company shall be adjusted to subtract the EBITDA attributable to the divested
assets during the period of time referred to in clauses (ii) and (iii),
respectively.
The closing of such transaction (the "Adverse Member Buyout Closing") shall
occur at a time and place mutually agreeable to the non-Adverse Member and the
Adverse Member, provided that the closing date shall be no later than six (6)
months after the date on which the Buyout Option is exercised. At the closing
of such transaction:
(i) the non-Adverse Member shall deliver to the Adverse
Member:
(A) the amount of the Buyout Purchase Price in
immediately available funds; and
(B) a release(s) and indemnity(ies) of the Adverse
Member from any and all guaranty(ies) with respect to which
the Adverse Member may have guaranteed debts, obligations or
liabilities of the Company.
(ii) the Adverse Member shall deliver to the non-Adverse
Party:
(A) a duly exercised assignment of its Membership
Interest in the Company;
(B) a certificate, dated as of the closing date,
containing a representation and warranty that on the closing
date the Adverse Member has transferred, or caused to be
transferred, to the non-Adverse Member good and marketable
title to its Membership Interest, free and clear of all
claims, equities, liens, charges and encumbrances; and
(C) any other documents or agreements required by
this LLC Agreement or necessary to effectuate the intended
transfer.
11.2 Notwithstanding the foregoing, the remedies provided in this
Section 11 are cumulative and are not exclusive, and the Company and the
non-Adverse Member shall be entitled to all other remedies available at law or
equity.
12. Dissolution of Company.
12.1 Events of Dissolution. (a) The Company shall be dissolved and its
affairs shall be wound up upon the happening of the first to occur of the
following (a "Liquidating Event"):
(i) the unanimous written consent of all of the Members of
the Company; or
(ii) an entry of a final decree of dissolution of the Company
by a court of competent jurisdiction.
(b) In the event of dissolution of the Company, Cemex shall be
entitled to elect to receive, to the extent of its interest, and subject to the
order of priority set forth in Section 12.4, the cement plants and other assets
contributed by Cemex pursuant to the Contribution Agreement. In addition, in
the event of dissolution of the Company, notwithstanding anything in this LLC
Agreement to the contrary, Cemex shall have the right to purchase all of the
remaining assets of the Company not distributed to Cemex pursuant to the
immediately preceding sentence for a price equal the Purchase Price.
(c) In the event that (x) the Company is dissolved, (y) Ready Mix LLC
is not dissolved contemporaneously and (z) Cemex exercises its right under
paragraph (b) above, Cemex shall cause Cemex, Inc. to assume all of the
obligations of the Company under the Cement Supply Agreement.
12.2 Special Meeting to Appoint Liquidating Member. In the event that
the Company is dissolved by reason of the occurrence of a Liquidating Event and
the Manager has been removed, disqualified, or resigned, then a special meeting
of all the Members shall be held at the office of the Company for the purpose
of appointing a liquidating Member (the "Liquidating Member") to wind up the
affairs of the Company, to liquidate its assets and distribute the proceeds
therefrom. Such special meeting shall be held, without notice, on the fifteenth
(15th) day after the happening of the Liquidating Event causing dissolution of
the Company, or if such day is a Sunday or a legal holiday, then on the first
day immediately following the fifteenth (15th) day which is not a Sunday or a
legal holiday. In the event the Manager has not been removed, disqualified or
resigned, the Manager shall wind up the affairs of the Company and it shall not
be necessary to call a special meeting to appoint a Liquidating Member.
12.3 Statement of Assets and Liabilities. Upon the happening of a
Liquidating Event under Section 12.1 hereof, a statement shall be prepared
under the direction of the Manager or the Liquidating Member, as the case may
be, setting forth the assets and liabilities of the Company, and a copy of such
statement shall be furnished to all Members within thirty (30) days after such
Liquidating Event. The Manager or the Liquidating Member, as the case may be,
shall promptly take such action as is necessary so that the Company's business
shall be terminated, its liabilities discharged and its assets distributed as
hereinafter described. A reasonable period of time shall be allowed for the
orderly termination of the Company's business, the discharge of its liabilities
and the distribution of its remaining assets so as to enable the Company to
minimize the normal losses incurred in the liquidation process.
12.4 Sale of Assets and Distribution of Proceeds. Upon the dissolution
and winding up of the Company, either, as determined by a Majority-in-Interest
of the Members, (x) the Company's assets and properties shall be distributed or
(y) the assets and properties of the Company shall be sold for cash or a cash
equivalent and any gain or loss resulting therefrom shall be allocated among
the Members as provided in Section 5 hereof. Such assets and property or cash
proceeds, as applicable, shall be distributed in the following order of
priority:
(a) to creditors (other than Members who are creditors) in
satisfaction of the liabilities of the Company;
(b) to Members in satisfaction of liabilities owed to them as
creditors of the Company; and
(c) the balance, if any, to the Members in accordance with their
positive Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
12.5 Contributions Upon Liquidation. The provisions of this Section 12
shall be applied only after giving full effect to all distributions pursuant to
Sections 5.2 and 12.4 hereof. Notwithstanding anything contained in this LLC
Agreement or in applicable state law to the contrary, no Member shall have any
liability to the Company or to any other Member or Person with respect to any
deficit balance in such Person's Capital Account and any such deficit shall not
be considered a debt owed to the Company or to any other Person for any purpose
whatsoever.
13. Notices. Any notices or document required or desired to be given
to the Manager or the Members, as the case may be, shall be in writing (which
may include facsimile) and will be deemed to have been given and received when
(a) delivered to the address specified by the party to receive the notice, if
delivered personally, (b) five (5) days after deposited with the U.S. postal
service for delivery by first class mail or, an internationally recognized
express courier, (c) immediately upon delivery by facsimile if a confirmation
is received and (d) one (1) day after deposit with a nationally recognized
overnight carrier for next-day delivery. Such notices shall be given to Members
at their respective addresses set forth on Exhibit A and to the Manager at its
address set forth on Exhibit C as may be updated from time to time. Any party
may, at any time by giving five (5) business days' prior written notice to the
other parties, designate any other address in substitution of the foregoing
address to which such notice will be given.
14. Certain Member Representations and Warranties. Each Member, and in
the case of an organization, the Person(s) executing this LLC Agreement on
behalf of the organization, hereby represents and warrants to the Company and
each other Member that: (a) that if such Member is an organization, it is duly
organized, validly existing, and in good standing under the law of its state of
organization and has full organizational power and authority to execute this
LLC Agreement and to perform its obligations hereunder; (b) that the Member is
acquiring its Membership Interest in the Company for such Member's own account
as an investment and without an intent to distribute the same; (c) the Member
acknowledges that the Membership Interests in the Company have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws, and may not be resold or transferred by the Member without
appropriate registration or the availability of an exemption from such
requirements.
15. Disclaimer. The Members agree that their Membership Interests in
the Company are not being sold by any one or more Members, but that the Company
is being formed, and the Membership Interests are being sold, as a private
offering under applicable federal and state securities laws, and that there is
no sponsor, promoter or seller of such securities. To induce the Manager to
serve as a Manager of the Company, and to induce the Manager to take an active
role in procuring properties and business opportunities for the Company, all
Members agree that neither the Manager nor any Member is a sponsor, promoter or
seller of any securities, and neither the Manager nor any Member shall be
liable for any disclosures or failures to disclose any matters pertaining to
any new properties purchased, or relating to the formation of the Company or
issuance of any Membership Interests. Each Member agrees that it is each
Member's responsibility to obtain full information concerning the Company, the
Membership Interests therein, and any acquisition, sale, or business
transaction entered into by the Company, and each Member acknowledges that
decisions of the Company are made by the Manager or the Members, as applicable.
Accordingly, each Member hereby disclaims any right to assert that any other
Member violated any federal or state securities laws in connection with the
formation of this Company, the acquisition of such Member's Membership
Interest, or in connection with any acquisition or sale by the Company in the
conduct of its business.
16. No Right to Dissolve or Demand Partition. Except as otherwise
expressly permitted by the terms and conditions of this LLC Agreement, until
such time as the Company is dissolved pursuant to the provisions of this LLC
Agreement, no Member shall have, and each such Member hereby expressly waives,
any right or power to: (i) maintain an action for partition; or (ii) in any way
cause a dissolution of the Company.
17. No Partnership Intended for Non-tax Purposes. The Members have
formed the Company under the LLC Act, and expressly do not intend hereby to
form a partnership under either the Delaware Revised Uniform Partnership Act or
the Delaware Uniform Limited Partnership Act. The Members do not intend to be
partners one to another, or partners as to any third party.
18. Rights of Creditors and Third Parties under this LLC Agreement.
This LLC Agreement is entered into among the Company and the Members for the
exclusive benefit of the Company, its Members, and their successors and
permitted assigns. This LLC Agreement is expressly not intended for the benefit
of any creditor of the Company or any other Person. Except and only to the
extent provided by applicable statute, no such creditor or third party shall
have any rights under this LLC Agreement or any agreement between the Company
and any Member with respect to any Capital Contribution or Additional Capital
Contribution, or otherwise.
19. Non-Competition Agreement. (a) Without the prior written consent
of the Board ("Competitive Business Approval"), neither Member shall, and each
Member shall cause each of its Affiliates not to, directly or indirectly, own
or operate a Competitive Business, unless the Competitive Business shall be an
External Competitive Business. In the event a Member or any of its Affiliates
acquires or otherwise operates an External Competitive Business, or in the
event a Member or any of its Affiliates acquires or otherwise operates a
Competitive Business that is not an External Competitive Business, but the
required Competitive Business Approval shall have been obtained, the operating
and other assets associated therewith that are located or operated within the
Cement Boundaries ("Internal Boundaries Assets") shall, subject to receipt of
any required governmental consents or approvals, be contributed or sold by the
Member or its Affiliate, as the case may be (the "Contributing Member"), to the
Company as provided herein. Within thirty (30) days after the acquisition of
Internal Boundaries Assets by the Contributing Member, the value of the
Internal Boundaries Assets shall be determined by the Board based on the
applicable multiples of EBITDA of the predecessor business during the last
Fiscal Year immediately prior to the acquisition as set forth on Schedule 19
attached hereto. In the event that the EBITDA of the Internal Boundaries Assets
takes into account acquisitions or divestitures of certain assets of the
Internal Boundaries Assets during the Fiscal Year immediately prior to such
acquisition, then such EBITDA shall be adjusted to reflect such acquisitions
and divestitures. Upon the determination by the Board of the value of the
Internal Boundaries Assets (the "Internal Boundaries Assets Value"), the Board
shall notify the Members in writing of the Board's determination of the
Internal Boundaries Assets Value and the Non-Contributing Member shall elect,
within thirty (30) days after its receipt of such notice, one of the following
options by giving written notice of such election to the Contributing Member:
(i) that the Contributing Member shall contribute the
Internal Boundaries Assets to the Company (whereupon the Internal
Boundaries Assets Value shall be credited to the contributing Member's
Capital Account) and the Non-Contributing Member shall simultaneously
make a Capital Contribution to the Company in cash in an amount equal
to the Internal Boundaries Assets Value (which shall be credited to
such Member's Capital Account);
(ii) subject to Section 8.2(b)(vi) and paragraph (b) below,
that the Company shall borrow from a third party the funds necessary
to purchase the Internal Boundaries Assets from the Contributing
Member for the Internal Boundaries Assets Value and shall purchase the
Internal Boundaries Assets from the Contributing Member;
(iii) that the Company shall borrow the funds, as
contemplated in (ii) above, from the Contributing Member and purchase
the Internal Boundaries Assets from the Contributing Member, in which
case, at the closing of the purchase of the Internal Boundaries
Assets, the Company shall execute a promissory note payable to the
Contributing Member which provides for the payment of interest at an
annual rate of ten percent (10%), and which is amortized and payable
(principal and interest) over five (5) years; or
(iv) that the Contributing Member shall contribute the
Internal Boundaries Assets to the Company and the Non-Contributing
Member shall make no Capital Contribution to the Company, in which
case the Percentage Interest of the Contributing Member shall be
increased to the amount determined by dividing (x) an amount equal to
the sum of (1) the product of the Percentage Interest of the
Contributing Member prior to such adjustment and the Adjusted Book
Value immediately prior to the contribution of such Internal
Boundaries Assets and (2) the Internal Boundaries Assets Value with
respect to such Internal Boundaries Assets, by (y) the Adjusted Book
Value immediately after contribution of such Internal Boundaries
Assets, and the Percentage Interest of the Non-Contributing Member
shall be reduced to the amount obtained by dividing (x) an amount
equal to the product of the Percentage Interest of the Non
Contributing Member prior to such adjustment and the Adjusted Book
Value immediately prior to the contribution of such Internal
Boundaries Assets by (y) the Adjusted Book Value immediately after
contribution of such Internal Boundaries Assets.
(b) Notwithstanding any provision in the foregoing paragraph (a) to
the contrary, in the event the Non-Contributing Member elects the option set
forth in paragraph (a)(ii) above and the incurring of the indebtedness by the
Company as contemplated in such paragraph (a)(ii) above, after giving effect
thereto, would cause the ratio of indebtedness for borrowed money to EBITDA to
be greater than 2.5:1, then upon the making of such election by the
Non-Contributing Member the Contributing Member shall have the option (which
must be exercised within thirty (30) days after the Non-Contributing Member
makes its election or shall be deemed to be waived) to loan to the Company the
funds necessary to purchase the Internal Boundaries Assets, which loan shall
bear interest at an annual rate equal to the lesser of (i) the best rate
available to the Company from its proposed third party lender, or (ii) ten
percent (10%), and be amortized and payable (principal and interest) over five
(5) years.
(c) In the event the Non-Contributing Member fails to make its
election within the thirty (30) day period, such Member shall be deemed to have
waived its right to make an election, and the Contributing Member shall elect,
within thirty (30) days thereafter, one of the following options by giving
written notice of such election to the Non-Contributing Member.
(i) that the Contributing Member shall contribute the
Internal Boundaries Assets to the Company in which case the Percentage
Interest of the Contributing Member shall be increased to the amount
obtained by dividing (x) an amount equal to the sum of (1) the product
of the Percentage Interest of the Contributing Member prior to such
adjustment and the Adjusted Book Value immediately prior to the
contribution of such Internal Boundaries Assets and (2) the Internal
Boundaries Assets Value with respect to such Internal Boundaries
Assets, by (y) the Adjusted Book Value immediately after contribution
of such Internal Boundaries Assets, and the Percentage Interest of the
Non-Contributing Member shall be reduced to the amount obtained by
dividing (x) an amount equal to the product of the Percentage Interest
of the Non-Contributing Member prior to such adjustment and the
Adjusted Book Value immediately prior to the contribution of such
Internal Boundaries Assets by (y) the Adjusted Book Value immediately
after contribution of such Internal Boundaries Assets;
(ii) subject to Section 8.2(b)(vi), that the Company shall
borrow from a third party the funds necessary to purchase the Internal
Boundaries Assets from the Contributing Member for the Internal
Boundaries Assets Value and shall purchase the Internal Boundaries
Assets from the Contributing Member; or
(iii) that the Company shall borrow the funds, as
contemplated in (ii) above, from the Contributing Member and purchase
the Internal Boundaries Assets from the Contributing Member, in which
case, at the closing of the purchase of the Internal Boundaries
Assets, the Company shall execute a promissory note payable to the
Contributing Member which provides for the payment of interest at an
annual rate of ten percent (10%), and which is amortized and payable
(principal and interest) over five (5) years.
(d) After the election has been made by the Non-Contributing Member or
the Contributing Member, as the case may be, as contemplated above, the
Company, the Manager and Members shall use their good faith efforts to
consummate the contribution or sale by the Contributing Member of the Internal
Boundaries Assets to the Company, and, if applicable, the financing of such
transaction, as soon as is reasonably practicable, but in any event within one
hundred eighty (180) days after acquisition of the Internal Boundaries Assets
by the Contributing Member. Without limiting the generality of the foregoing,
each of the Members and their Affiliates shall use its best efforts to promptly
obtain (and to cause the Company to obtain) all authorizations, consents,
orders and approvals of all governmental authorities and officials that may be
or become necessary to permit the contribution or sale to the Company of the
Internal Boundaries Assets, and will cooperate fully with the other party in
promptly seeking to obtain all such authorizations, consents, orders and
approvals, including making any required filing pursuant to the HSR Act, with
respect to the contribution or sale, and to supply as promptly as practicable
to the appropriate governmental authorities any information and documentary
material that may be requested pursuant to the HSR Act. In the event that the
Contributing Member or the Company shall not have consummated the contribution
or sale of the Internal Boundaries Assets to the Company in accordance with
this Section 19 prior to the end of such 180-day period for any reason,
including any failure to obtain any necessary authorization, consent, order or
approval, other than a breach by the Company, the Manager or any of the Members
of this Section 19, then the Non-Contributing Member shall have the right,
exercisable for a period of three hundred sixty-five (365) days thereafter, to
require the Contributing Member to sell or otherwise transfer the Internal
Boundaries Assets to an un-Affiliated third party. Upon the exercise by the
Non-Contributing Member of its right to require a sale of the Internal
Boundaries Assets, the Contributing Member shall use its best efforts to sell
or otherwise transfer such Internal Boundaries Assets to an un-Affiliated third
party as soon as reasonably practicable, and in no event more than one hundred
eighty (180) days after the Non-Contributing Member gives written notice to the
Contributing Member of its election. In the event the Non-Contributing Member
does not exercise its right to require the Contributing Member to sell the
Internal Boundaries Assets as contemplated in the foregoing sentence and the
Internal Boundaries Assets have not been purchased or otherwise contributed to
the Company as of the expiration of the 365-day period, then the Contributing
Member shall be entitled to own and operate or sell the said Assets without
such being a breach of this Section 19. In the event the Contributing Member
does not consummate a sale or transfer to an un-Affiliated third party within
the time allotted following the giving of written notice by the
Non-Contributing Member, in addition to other remedies available to the Company
and the Non-Contributing Member, the Contributing Member shall cease operation
of the Internal Boundaries Assets.
(e) Notwithstanding anything in this Agreement to the contrary,
pending consummation of the contribution or sale of the Internal Boundaries
Assets to the Company pursuant to this Section 19, or to an un-Affiliated third
party in accordance with the fourth sentence of Section 19(d), ownership and
operation of the Internal Boundaries Assets by the Contributing Member or its
Affiliates shall not constitute a breach of this Section 19.
(f) Notwithstanding anything to the contrary in this LLC Agreement,
this Section 19 shall not apply to a passive minority investment made by a
Member or any of its Affiliates or (ii) any sales by Cemex or any of its
Affiliates under the Back-up Supply Agreement. Further, notwithstanding
anything to the contrary in this LLC Agreement, this Section 19 shall not apply
to (y) a Person (and any of its Affiliates) that is not an Affiliate of the
Member prior to the transaction and that acquires (i) a majority of the equity
interests in a Member, or (ii) a majority of the equity interests in a
controlling Person of a Member; provided, that the provisions of this Section
19 shall continue to apply to such Member and such Persons that were Affiliates
of such Member prior to such transaction; nor shall this Section 19 apply to
(z) a Person (and any of its Affiliates) purchasing any assets or business from
a Member, which assets include the Membership Interest held by such Member,
where such Member's share of the revenues of the Company during the Fiscal Year
preceding such transaction represent less than 20% of the consolidated total
revenues during such Fiscal Year of the assets or business being transferred;
provided, that the Transferring Member complied with its obligations under
Sections 9.3 and 9.4 with respect to such transfer.
(g) In the event a Member acquires the Membership Interest of the
other Member pursuant to the exercise of such Member's right of first refusal
under Section 9.3(a) or pursuant to Section 11.1(d), the Member whose
Membership Interest is acquired shall at the closing of the acquisition execute
and deliver to the acquiring Member an agreement whereby such Transferring
Member covenants and agrees that it shall not, and shall cause its Affiliates
not to, directly or indirectly, own or operate a Competitive Business for a
period of five (5) years following the date of such closing. In the event Cemex
acquires the Membership Interest of RMUSA pursuant to the exercise by RMUSA of
its Put Option, at the Put Option Closing or upon the payment in full of the
Purchase Price, whichever is the later to occur, RMUSA shall execute and
deliver to Cemex an agreement whereby RMUSA covenants and agrees that it shall
not, and shall cause its Affiliates not to, directly or indirectly, own or
operate a Competitive Business for a period of five (5) years following the
delivery of such agreement.
(h) For purposes of this Section 19, none of Cemex, RMUSA or any of
their respective Affiliates shall be deemed to be Affiliates of the Company or
any of its Subsidiaries.
20. Cemex National Accounts. Notwithstanding anything to the contrary
in this LLC Agreement, in the event that the Company or any of its Subsidiaries
shall sell any products to customers who have national accounts with Cemex or
any of its Affiliates, the Company shall pay to Cemex, the Company's pro rata
share, on a per ton basis, of the rebates payable to such national accounts
based on the amount of the Company's and its Subsidiaries' sales to such
account, provided that, in no event shall the rebate amount to be paid by the
Company to Cemex, on a per ton basis, exceed the rebate amount to be paid by
Cemex or any of its Affiliates to such national account, on a per ton basis.
Notwithstanding the foregoing, except as approved by the Board pursuant to
Section 8.2(b)(xxvii) hereof, the amount that the Company is required to pay to
Cemex or any of its Affiliates for any rebate with respect to any national
account as provided herein, shall not exceed ten percent (10%) of the per ton
purchase price subject to such rebate. For purposes of this Section 20, neither
the Company nor any of its Subsidiaries shall be deemed an Affiliate of any
Member.
21. Contribution Agreement Indemnification Obligations.
21.1 Notwithstanding anything in this LLC Agreement to the contrary,
each of Cemex and RMUSA hereby agrees (and any Permitted Transferee of either
of the foregoing shall agree) that any Damages for which it or any of its
Affiliates (the "Indemnifying Party") owes the other party (or its Affiliates)
or the Company or Ready Mix LLC (the "Indemnified Party") an indemnification
obligation under the Contribution Agreement or the Ready Mix Contribution
Agreement shall be paid from any distributions that otherwise would be paid by
the Company to the Indemnifying Party pursuant to Section 6.1 or otherwise, and
each party hereby irrevocably waives all rights and title it would otherwise
have to, and irrevocably instructs the Manager to pay to the Indemnified Party,
all distributions that otherwise would be paid by the Company to the
Indemnifying Party under this LLC Agreement, until all such Damages have been
paid in full to the Indemnified Party. For purposes of this Section 21.1, each
party acknowledges that to the extent any distributions are paid to the
Indemnified Party under Section 21.1 of the Ready Mix LLC Agreement in respect
of a particular indemnification claim, such payments will also reduce the
amount of such Damages. In the event of multiple claims, the distributions
shall be applied against such claims in the order in which the amount of the
indemnification obligation in respect thereof is finally determined.
Notwithstanding anything in this LLC Agreement to the contrary, in no event
shall any amount of damages withheld by the Company under this Section 21.1 as
a payment of indemnified Damages incurred by the Company be treated as (i)
EBITDA for purposes of (x) calculating the amount of any required distribution
(including pursuant to Section 6.1) or (y) determining the Purchase Price or
the Buyout Purchase Price, or (ii) available cash for purposes of determining
the amount of any distribution under Section 9.6.4(a).
21.2 Notwithstanding anything in this LLC Agreement to the contrary,
prior to making any distribution to the Members, if there is any Net Indemnity
Obligation owed by any Member immediately prior to such distribution, each of
Cemex and RMUSA hereby agrees that the Percentage Interests of the Net
Indemnifying Party (and any Member that is an Affiliate of the Net Indemnifying
Party), on the one hand, and the Net Zero Indemnifying Party (and any Member
that is an Affiliate of the Net Zero Indemnifying Party), on the other hand,
shall be adjusted as follows:
(a) the aggregate Percentage Interest of the Net Indemnifying Party
and its Affiliates shall be adjusted to the amount obtained by dividing (i) an
amount equal to (1) the product of the aggregate Notional Pre-Damage Percentage
Interest of the Net Indemnifying Party and its Affiliates as of the time of
such adjustment and the Adjusted Book Value as of the time of such adjustment
(without regard to any adjustment for such Net Indemnity Obligation or any
component thereof), minus (2) the Net Indemnity Obligation as of such time, by
(ii) the Adjusted Book Value as of the time of such adjustment (without regard
to any adjustment for such Net Indemnity Obligation or any component thereof)
minus the Net Indemnity Obligation as of such time;
(b) the aggregate Percentage Interest of the Net Zero Indemnifying
Party and its Affiliates shall be adjusted to the amount obtained by dividing
(i) an amount equal to the product of the aggregate Notional Pre-Damage
Percentage Interest of the Net Zero Indemnifying Party and its Affiliates at
the time of such adjustment and the Adjusted Book Value as of the time of such
adjustment (without regard to any adjustment for such Net Indemnity Obligation
or any component thereof), by (ii) the Adjusted Book Value as of the time of
such adjustment (without regard to any adjustment for such Net Indemnity
Obligation or any component thereof) minus the Net Indemnity Obligation as of
such time; and
(c) If immediately prior to making any distribution to the Members,
there is no Net Indemnity Obligation owed by any Member, then immediately prior
to such distribution, each of Cemex and RMUSA hereby agrees that the Percentage
Interests of each Member shall be adjusted, if necessary, to equal such
Member's Notional Pre-Damage Percentage Interest as of such time.
21.3 Notwithstanding anything in this LLC Agreement to the contrary,
in the event that the aggregate Ready Mix Percentage Interest of Cemex and its
Affiliates or RMUSA and its Affiliates, as the case may be, under the Ready Mix
LLC Agreement is zero, then the amount of any Damages under the Ready Mix
Contribution Agreement that otherwise would have resulted in an adjustment to
the Ready Mix Percentage Interest under Section 21.2 of the Ready Mix LLC
Agreement shall be deemed to be Damages arising under the Contribution
Agreement for purposes of Section 21.2 hereof.
21.4 For purposes of this Section 21, the following terms shall have
the meanings set forth below:
"Net Zero Indemnifying Party" means, as of a particular time,
a Member (and its Affiliates) with a Net Indemnity Obligation at such
time of zero.
"Net Indemnifying Party" means, as of a particular time, an
Indemnified Party with a positive Net Indemnity Obligation at such
time.
"Net Indemnity Obligation" means, with respect to a
particular Indemnifying Party as of a particular time, the amount, if
any, by which (i) the aggregate Damages for which it and its
Affiliates owes the Indemnified Party and any of its Affiliates an
indemnification obligation under the Contribution Agreement as of such
time exceeds (ii) the aggregate Damages for which the other
Indemnifying Party (or Member, as the case may be) and any of its
Affiliates owes the Indemnified Party and any of its Affiliates an
indemnification obligation under the Contribution Agreement as of such
time. For purposes of determining the Net Indemnity Obligation, only
Damages which have been finally determined (whether by agreement of
the parties or by any final, non-appealable determination of any
tribunal with jurisdiction) shall be taken into account.
"Notional Pre-Damage Percentage Interest" of a Member as of a
particular time means the Percentage Interest of such Member as set
forth on Exhibit A as of the date of this Agreement, as adjusted
through such time pursuant to Section 1.4, other than any adjustments
pursuant to Section 21.2, which shall be disregarded for purposes of
determining the Notional Pre-Damage Percentage Interest.
22. Miscellaneous.
22.1 Applicable Law. This LLC Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of
Delaware, without regard to conflicts of laws principles.
22.2 Consent to Jurisdiction. All disputes, litigation, proceedings or
other legal actions by any party to this Agreement in connection with or
relating to this LLC Agreement or any matters described or contemplated in this
LLC Agreement shall be instituted in the courts of the State of Georgia, or of
the United States in the State of Georgia, in either case, sitting in Atlanta,
Georgia. Each party to this LLC Agreement irrevocably submits to the exclusive
jurisdiction of the courts of the State of Georgia, and of the United States
sitting in the State of Georgia, in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this LLC
Agreement. Each party to this LLC Agreement may receive the service of any
process or summons in connection with any such dispute, litigation, action or
proceeding brought in any such court by a mailed copy of such process or
summons sent to it at its address set forth, and in the manner provided, in
Section 13 hereof. Each party to this LLC Agreement irrevocably waives, to the
fullest extent permitted by applicable law, any defense or objection it may now
or hereafter have to the laying of venue of any proceeding under this LLC
Agreement brought in the courts of the State or of the United States in the
State of Georgia, in either case, sitting in Atlanta, Georgia, and any claim
that any proceeding under this LLC Agreement brought in any such court has been
brought in an inconvenient forum.
22.3 Entire Agreement. This LLC Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior understandings or agreements among the parties
with respect to that subject matter. There are no representations,
arrangements, understandings or agreements, oral or written, among the parties
hereto relating to the subject matter hereof, except those fully expressed
herein.
22.4 Transaction Agreements. The Members hereby authorize the Company
to execute and deliver this LLC Agreement, the Contribution Agreement, the
Supply Agreement and the Back-Up Supply Agreement, and to consummate the
transactions contemplated hereby and thereby.
22.5 Specific Performance. The parties to this LLC Agreement agree
that irreparable damage would occur in the event that any provision of this LLC
Agreement was not performed in accordance with the terms of this LLC Agreement
and that the parties shall be entitled to specific performance of the terms of
this LLC Agreement in addition to any other remedy at law or equity.
22.6 Assignment; Successors in Interests; No Third Party Rights.
Except as otherwise provided herein, all provisions of this LLC Agreement shall
be binding upon, inure to the benefit of and be enforceable by and against the
respective successors and permitted assigns of any of the parties to this LLC
Agreement. Except as otherwise provided herein, no Member may assign, by
operation of law or otherwise, any of its rights or obligations under this LLC
Agreement without the prior written consent of all of the other Members.
Nothing expressed or referred to in this LLC Agreement will be construed to
give any Person other than the parties to this LLC Agreement any legal or
equitable right, remedy, or claim under or with respect to this LLC Agreement
or any provision of this LLC Agreement.
22.7 Counterparts. This LLC Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. Execution and delivery by facsimile shall constitute
good and valid execution and delivery unless and until replaced or substituted
by an original executed instrument.
22.8 Captions. The captions or headings in this LLC Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this LLC
Agreement.
22.9 Construction.
(a) Whenever the singular number is used in this LLC Agreement and
when required by the context, the same shall include the plural and vice versa,
and the masculine gender shall include the feminine and neuter genders and vice
versa.
(b) In the event any claim is made by any Member relating to any
conflict, omission or ambiguity in this LLC Agreement, no presumption or burden
of proof or persuasion shall be implied by virtue of the fact that this LLC
Agreement was prepared by or at the request of a particular Member or its
counsel.
(c) Whenever the words "include," "includes" or "including" are used
in this LLC Agreement, they shall be deemed to be followed by the words
"without limitation." The phrases "the date of this LLC Agreement," "the date
hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to July 1, 2005.
(d) If a payment hereunder is scheduled to be made on a date that is
not a Business Day, payment shall be made on the next succeeding day that is a
Business Day.
22.10 Severability. If any provision of this LLC Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this LLC Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
22.11 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions, and conditions of this LLC Agreement and
the transactions contemplated hereby.
[Signature Pages Follow]
MEMBER:
CEMEX SOUTHEAST HOLDINGS LLC
By /s/ Gilberto Perez
----------------------------------
Name Gilberto Perez
---------------------------------
Its President
---------------------------------
MEMBER:
READY MIX USA, INC.
By /s/ Marc Bryant Tyson
-----------------------------------
Name Marc Bryant Tyson
----------------------------------
Its President
----------------------------------
THE COMPANY:
CEMEX SOUTHEAST LLC
By /s/ Gilberto Perez
----------------------------------
Name Gilberto Perez
---------------------------------
Its President
---------------------------------
SOLELY FOR PURPOSES OF SECTION 9.6:
CEMEX, INC.
By /s/ Gilberto Perez
----------------------------------
Name Gilberto Perez
---------------------------------
Its President
---------------------------------
Schedule 3.2
------------
Permitted Affiliate Transactions
1) MRT, an indirect subsidiary of Cemex, Inc., pays a throughput charge
(based on market rates) to use Company terminals for the distribution
of fly ash. Chattanooga is currently the only contributed terminal
which distributes fly ash.
2) Company will pay the monthly lease rates of rail cars used in the
Company network to Cemex, Inc. This payment will be based on the
number of cars used in the Company network on a month to month basis.
3) Lease Agreement, dated as of July 1, 2005, between Company and Ready
Mix USA, LLC for the Ready Mix USA, LLC portion of the property
located in Freeport, Florida.
4) Company will pay insurance premiums to Cemex, Inc. Insurance premiums
and deductibles will be allocated in a manner consistent with
comparable Cemex, Inc. operating units.
5) Until the assignment date, necessary payments under the following
leases will be made by Cemex, Inc., and Company will reimburse Cemex,
Inc. for such payments:
a. BTM Master Lease Agreement, dated as of August 7, 2000,
between BTM Capital Corporation (Bank of Tokyo-Mitsubishi), as
Lessor, and Southdown, Inc., as Lessee, as it pertains to Schedule
#81[4]31902.
b. Master Lease Agreement 287309-000-001, dated as of January
28, 2004, between Caterpillar Financial Services Corporation, as
Lessor, and Cemex, Inc., as Lessee, as it pertains to Schedules
001-0287309-000 113277 and 001-0287309-000 113278.
c. Equipment Lease, dated as of May 17, 2002, between First
Union Commercial Corporation, as Lessor, and Cemex, Inc., as Lessee,
as it pertains to Schedule No. XXV (2030019-014).
d. Master Equipment Lease Agreement No. 34574, dated as of
March 26, 2001, between Fleet Capital Corporation, as Lessor, and
Cemex, Inc., as Lessee, as it pertains to Schedule No. 34574-00036.
e. Master Lease Agreement, dated as of August 1, 1997,
between General Electric Capital Corporation, as Lessor, and Sunbelt
Asphalt & Materials, Inc., as Lessee, as it pertains to Schedules No.
078(4045017-078), No. B-5 (4088542-005) and No. 058 (4045017-091).
f. Master Lease Finance Agreement, dated as of April 19,
1999, between STI Credit Corporation, as Lessor, and Southdown, Inc.,
as Lessee, as it pertains to Schedule No. 139-9500364-031.
Schedule 9.1(d)
---------------
Member Ultimate Parent
Member
Name and
Mailing Address Ultimate Parent
--------------- ---------------
CEMEX SOUTHEAST CEMEX, INC.
HOLDINGS LLC 840 Gressner, Suite 1400
840 Gessner, Suite 1400 Houston, TX 77024
Houston, TX 77024
READY MIX USA, INC. Paul W. Bryant, Jr.
P.O. Box 020152 Sam M. Phelps
Tuscaloosa, AL 35402
Schedule 19
-----------
EBITDA Multiples
8x EBITDA
Exhibit A
---------
Initial Members' Names, Mailing Addresses, Initial Capital Contributions
and Initial Percentage and Voting Interests
Member Initial Initial Initial
Name and Capital Percentage Voting
Mailing Address Contribution Interest Interest
CEMEX SOUTHEAST $398,193,477.60 50.01% 50.01%
HOLDINGS LLC
840 Gessner, Suite 1400
Houston, TX 77024
READY MIX USA, INC. $8,000,000.00 49.99% 49.99%
P.O. Box 020152
Tuscaloosa, AL 35402
--------- --------
Total 100.00% 100.00%
Exhibit B-1
-----------
"Minor Acquisition Criteria"
----------------------------
1) 5x EBITDA multiple for the respective business type times the
previous year EBITDA of the operations to be acquired.
Or
2) 5x EBITDA multiple for the respective business type times the
previous 3 year average EBITDA of the operations to be acquired.
Equity investments that do not represent 100% ownership shall be
subject to the Minor Acquisition criteria requirements of 1) or 2)
above, on a prorated basis, in accordance with the percent equity
share of the investment.
Exhibit B-2
-----------
"Minor Investment Criteria"
---------------------------
1) Margin Improvement or Growth Investments - minimum of 20% IRR (on a
free cash flow basis) for minor strategic capital investments.
2) Mandatory Investments - letter, report or notice from the applicable
governmental or legal authority in regards to the required
investment.
Exhibit B-3
-----------
"Adjusted Book Value Calculation"
---------------------------------
Attached.
Exhibit C
---------
Name and Mailing Address of Manager
CEMEX SOUTHEAST HOLDINGS LLC
840 Gessner, Suite 1400
Houston, TX 77024
Exhibit D
---------
Form of Adoption Agreement
This Adoption Agreement (this "Adoption Agreement") is executed by the
undersigned Person (the "New Member") pursuant to the terms of that Limited
Liability Company Agreement of CEMEX SOUTHEAST LLC (the "Company") dated
[_______], 20[__] (as may be amended from time to time, the "LLC Agreement").
By the execution of this Adoption Agreement, the New Member agrees as follows:
1. Adoption. On the date of this Adoption Agreement, the New Member is
[acquiring Membership Interests from the Company]\[acquiring Membership
Interests from [identify transferor]]. The New Member hereby agrees to be bound
by the terms and conditions of the LLC Agreement to the same extent as if the
New Member had executed the LLC Agreement as an original Member thereto.
2. Representations and Warranties. The representations and warranties set forth
in Section 14 of the LLC Agreement are incorporated herein mutatis mutandis,
and the New Member hereby makes such representations and warranties as of the
date of this Adoption Agreement.
3. Notice. Any notice required as permitted by the LLC Agreement shall be given
to the New Member at the address listed below the New Member's signature below.
4. Definitions. Capitalized terms used in this Adoption Agreement which are not
otherwise defined have the meaning set forth in the LLC Agreement.
5. Counterparts. This Adoption Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
6. Governing Law. This Adoption Agreement shall be governed by the laws of the
State of Delaware, without reference to the principles of conflicts of law
thereof.
EXECUTED AND DATED this _____ day of _____ _____
[NEW MEMBER]
By:____________________
Name:
Title:
Address:
Attention:
Telecopy:
Agreed to and accepted by the Company:
CEMEX SOUTHEAST LLC
By:______________________
Name:
Title:
Exhibit 4.17.1
AMENDMENT NO. 1
TO AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
AMENDMENT NO. 1 TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT OF CEMEX SOUTHEAST, LLC, a Delaware limited liability company
("Company"), effective as of September 1, 2005 (this "Amendment"), by and
between Company, CEMEX SOUTHEAST HOLDINGS, LLC, a Delaware limited liability
company ("Cemex"), READY MIX USA, INC., an Alabama corporation ("RMUSA"), and
solely for the purposes set forth in Section 9.6 thereof, CEMEX, INC., a
Louisiana corporation. Capitalized terms used herein but not otherwise defined
shall have the meaning ascribed to such terms in the LLC Agreement (as defined
below).
WITNESSETH:
WHEREAS, the Company, Cemex and RMUSA desire to amend the Amended and
Restated Limited Liability Company Agreement of the Company, effective as of
July 1, 2005 (the "LLC Agreement");
WHEREAS, Ready Mix USA, LLC, a Delaware limited liability company and
an Affiliate of RMUSA ("Ready Mix LLC"), and RMC Mid-Atlantic, LLC, a South
Carolina limited liability company and an Affiliate of Cemex ("RMC"), have
entered into an Asset Purchase Agreement, dated September 1, 2005 (the "Asset
Purchase Agreement"), whereby (a) Ready Mix LLC will purchase from RMC, and RMC
will assign and delegate to Ready Mix LLC, certain assets and liabilities of
RMC in accordance with the terms of the Asset Purchase Agreement and (b) Ready
Mix LLC will be indemnified;
WHEREAS, Section 8.2(b)(x) of the LLC Agreement provides that the LLC
Agreement may be amended with prior Board approval, which approval has been
granted by the Board; and
WHEREAS, the Company, Cemex and RMUSA have agreed to amend certain
provisions of the LLC Agreement on the terms and conditions set forth in this
Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in the LLC Agreement and this Amendment, the
receipt, adequacy and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Company, Cemex and RMUSA hereby agree
as follows:
ARTICLE I
AMENDMENTS, ACKNOWLEDGEMENT AND COVENANTS
SECTION 1.1 Amendments to Section 3.2
(a) Section 3.2 of the LLC Agreement is amended to include a
definition of the "Asset Purchase Agreement" as follows:
"Asset Purchase Agreement" means that certain Asset
Purchase Agreement entered by and between Ready Mix LLC and RMC
Mid-Atlantic, LLC, a South Carolina limited liability company and an
Affiliate of Cemex, dated September 1, 2005.
SECTION 1.2 Amendments to Section 21
(a) Section 21.1 of the LLC Agreement is amended and restated in its
entirety to read as follows:
21.1 Notwithstanding anything in this LLC Agreement
to the contrary, each of Cemex and RMUSA hereby agrees (and any
Permitted Transferee of either of the foregoing shall agree) that any
Damages for which it or any of its Affiliates (the "Indemnifying
Party") owes the other party (or its Affiliates) or the Company or
Cemex Southeast LLC (the "Indemnified Party") an indemnification
obligation under the Contribution Agreement, the Cemex Contribution
Agreement or the Asset Purchase Agreement shall be paid from any
distributions that otherwise would be paid by the Company to the
Indemnifying Party and its Affiliates pursuant to Section 6.1 or
otherwise, and each party hereby irrevocably waives all rights and
title it would otherwise have to, and irrevocably instructs the
Manager to pay to the Indemnified Party, all distributions that
otherwise would be paid by the Company to the Indemnifying Party and
its Affiliates under this LLC Agreement, until all such Damages have
been paid in full to the Indemnified Party. For purposes of this
Section 21.1, each party acknowledges that to the extent any
distributions are paid to the Indemnified Party under Section 21.1 of
the Ready Mix LLC Agreement in respect of a particular indemnification
claim, such payments will also reduce the amount of such Damages. In
the event of multiple claims, the distributions shall be applied
against such claims in the order in which the amount of the
indemnification obligation in respect thereof is finally determined.
Notwithstanding anything in this LLC Agreement to the contrary, in no
event shall any amount of damages withheld by the Company under this
Section 21.1 as a payment of indemnified Damages incurred by the
Company be treated as (i) EBITDA for purposes of (x) calculating the
amount of any required distribution (including pursuant to Section
6.1) or (y) determining the Purchase Price or the Buyout Purchase
Price, or (ii) available cash for purposes of determining the amount
of any distribution under Section 9.6.4(a). The parties acknowledge
and agree that in the event RMC Mid-Atlantic, LLC is no longer an
Affiliate of Cemex such change in status shall not affect the
obligations under this Section 21.1 and any Damages for which RMC
Mid-Atlantic, LLC owes Ready Mix LLC (or its Affiliates) an
indemnification obligation under the Asset Purchase Agreement shall be
paid as provided in this Section 21.1 as if RMC Mid-Atlantic, LLC
remained an Affiliate of Cemex. For purposes of this Section 21, none
of Cemex, RMUSA or any of their respective Affiliates shall be deemed
to be Affiliates of the Company or any of its Subsidiaries or Ready
Mix LLC or any of its Subsidiaries.
SECTION 1.3 Amendments to Exhibit A
(a) The first column of Exhibit A of the LLC Agreement titled "Member
Name and Mailing Address" is amended and restated in its entirety to read as
follows:
CEMEX SOUTHEAST HOLDINGS LLC
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
Fax: (713) 722-5110
READY MIX USA, INC.
1300 McFarland Blvd NE
Tuscaloosa, AL 35406
Attn: Scott Phelps
Fax: (205) 345-5772
ARTICLE II
REPRESENTATIONS
Each of Company, Cemex and RMUSA hereby represents to the other that
(a) it has full organizational power and authority to execute and deliver this
Amendment and to consummate the transactions contemplated hereby, (b) the
execution and delivery of this Amendment by such party have been duly and
validly authorized by all necessary corporate action on the part of such party
and (c) this Amendment has been duly and validly executed and delivered by such
party and constitutes a valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of equity and the
discretion of the court before which any proceedings seeking injunctive relief
or specific performance may be brought.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 Headings. The headings contained in this Amendment are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Amendment.
SECTION 3.2 Counterparts. This Amendment may be executed in two or
more counterparts, each of which when executed shall be deemed to be an
original but all of which shall constitute one and the same agreement.
SECTION 3.3 Governing Law. This Amendment shall be governed, construed
and enforced in accordance with the Laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
SECTION 3.4 No Other Effect on the LLC Agreement. Except as modified
by this Amendment, all of the terms of the LLC Agreement are hereby ratified
and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, Company, Cemex and RMUSA have caused this
Amendment to be signed by their respective officers thereunto duly authorized
as of the date first written above.
CEMEX SOUTHEAST LLC
By: /s/ Gilberto Perez
------------------------------
Name: Gilberto Perez
Title: President
READY MIX USA, INC.
By: /s/ Marc Bryant Tyson
------------------------------
Marc Bryant Tyson
Its President
CEMEX SOUTHEAST HOLDINGS LLC
By: /s/ Gilberto Perez
------------------------------
Name: Gilberto Perez
Title: President
Exhibit 4.18
LIMITED LIABILITY COMPANY AGREEMENT
OF
READY MIX USA, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "LLC Agreement") of
READY MIX USA, LLC, a Delaware limited liability company (the "Company"),
effective as of July 1, 2005, is by and among the Company, CEMEX SOUTHEAST
HOLDINGS, LLC, a Delaware limited liability company ("Cemex"), and READY MIX
USA, INC., an Alabama corporation ("RMUSA") (Cemex and RMUSA are hereinafter
sometimes collectively referred to as the "Members"), and, solely for the
purposes set forth in Section 9.6, CEMEX, INC., a Louisiana corporation ("Cemex,
Inc.").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Members have formed the Company for the purpose of
engaging in the Primary Business (as defined herein) and now desire to set forth
the agreement among the Members and the Company regarding the governance of the
affairs of the Company and the conduct of its business; and
WHEREAS, Cemex, Inc. has agreed to enter into this LLC Agreement solely
for the purposes set forth in Section 9.6 hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and undertakings of the Members and the Company contained
herein, it is agreed as follows:
1. Name, Office, Agent for Service of Process and Members' Names and
Mailing Addresses.
1.1 Name. The name of the Company shall be Ready Mix USA, LLC.
1.2 Office. The address of the registered office and the
mailing address of the Company shall be P.O. Box 101868, Birmingham, Alabama
35210 or such other address(es) as the Manager may hereafter determine.
1.3 Agent for Service of Process. The name and address of the
Company's initial registered agent for service of process shall be Ready Mix
USA, Inc., c/o Scott M. Phelps, P.O. Box 020152, Tuscaloosa, Alabama 35402.
1.4 Initial Members' Names, Mailing Addresses and Percentage
and Voting Interests. The name and mailing address of each of the initial
Members of the Company, and the Percentage Interest and Voting Interest of each
such Member, are as set forth on Exhibit A attached hereto. The Manager shall
update Exhibit A from time to time as necessary to accurately reflect the
information therein, including any adjustment of the Percentage Interests
required by this LLC Agreement, and to reflect the admission of additional
Members in accordance with this LLC Agreement. Any such amendment or revisions
to Exhibit A shall not be deemed an amendment to this LLC Agreement requiring
approval of the Board.
2. Duration. The existence of the Company shall commence on the date of
the filing of the Certificate of Formation in the Office of the Secretary of
State of Delaware, and shall continue in perpetuity until dissolved pursuant to
Section 12.1 hereof.
3. Purpose and Definitions.
3.1 Purpose. The Company is organized for the following
purposes:
(a) to engage in the production and sale of ready-mix
concrete and concrete block, pavers and septic tanks, and materials used to
produce the same, such as aggregates and sand, within the Ready Mix Boundaries
(as defined in Section 3.2 hereof) (the "Primary Business"); and
(b) to engage in such additional activities that are
necessary or appropriate to conduct the Primary Business.
3.2 Definitions. Capitalized terms used in this LLC Agreement
and not otherwise defined herein shall have the meanings set forth below:
"Acquired Business" has the meaning set forth in Section 9.6.3(c)
hereof.
"Acquisition Date" has the meaning set forth in Section 9.6.3(c)
hereof.
"Additional Capital Contributions" has the meaning set forth in Section
4.1(b)(i) hereof.
"Adjusted Book Value" means total assets less total liabilities as
determined under GAAP, as consistently applied and as reflected on the Company's
balance sheet as of the date of the event giving rise to the calculation of
Adjusted Book Value, plus the aggregate depreciation expense reflected in net
income during the measurement period minus the Put Option Depreciation amount
for the measurement period. For the avoidance of doubt, and as reflected in the
Contribution Agreement, the assets contributed to the Company by RMUSA and Cemex
on the Contribution Date will be valued for book purposes at $433,401,939.05 and
$43,208,461.45, respectively, subject to adjustment as provided in Section 2.3
of the Contribution Agreement. An example of this calculation is shown in
Exhibit B-3.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts which such
Member is obligated to restore or is deemed to be obligated to restore
pursuant to the penultimate sentence of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adverse Act" means, with respect to a particular Member or Cemex,
Inc., any of the following:
(i) the occurrence of an Event of Bankruptcy with respect to
such Member or Cemex, Inc.;
(ii) any dissolution of such Member that is a corporation,
partnership, limited liability company or other entity, or any
dissolution of Cemex, Inc., without the prior written consent of the
Manager, provided that if the Member to be dissolved or Cemex, Inc., is
also the Manager, or an Affiliate of the Manager, such consent shall be
required to be obtained from the Board;
(iii) any failure by Cemex, Inc. to tender the Purchase Price
as and when due in accordance with Section 9.6 hereof; provided, that
RMUSA and each of its Affiliates has tendered its Percentage Interest
or Membership Interest, as the case may be, free of any Liens at the
Put Option Closing or such later closing on the first anniversary or
second anniversary of the Put Option Closing, as the case may be;
(iv) at the election of the Transferring Member, the failure
of a Non-Transferring Member who gives an Offer Acceptance Notice
within the Offer Option Period to consummate the contemplated
transaction within one (1) year after it gives such Offer Acceptance
Notice, as provided in Section 9.3(a) hereof;
(v) at the election of the Contribution Complying Members, the
failure of a Delinquent Member to make an Additional Capital
Contribution pursuant to Section 4.1 hereof if the aggregate
outstanding amount of (i) Additional Capital Contributions that the
Delinquent Member and its Affiliates have failed to make under this
Agreement and (ii) "Additional Capital Contributions" under the Cemex
Southeast LLC Agreement with respect to such Member or any of its
Affiliates is a "Delinquent Member" under Section 4.1 of the Cemex
Southeast LLC Agreement, exceeds $10 million; or
(vi) at the election of the Transferring Member, a breach by a
Non-Transferring Member who gives a Tag Along Notice within the Offer
Option Period to Transfer its entire Membership Interest pursuant to
the transaction set forth in the Offer Notice of any of its obligations
to the purchaser under the Non-Transferring Member's agreement with the
purchaser related to such transaction, which breach causes the
contemplated transaction to be terminated, as provided in Section 9.4
hereof.
"Adverse Act Exercise Date" has the meaning set forth in Section
11.1(d)(i) hereof.
"Adverse Member" means, with respect to a particular Adverse Act, the
Member with respect to which such Adverse Act has occurred.
"Adverse Member Buyout Closing" has the meaning set forth in Section
11.1(d) hereof.
"Affiliate" when used with respect to a specified Person, means a
Person that:
(i) directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control
with such specified Person;
(ii) is a director, officer, employee, trustee, member or
general partner of, or an owner of an equity interest of more than
fifty percent (50%), or a beneficiary of a trust owning an equity
interest of more than fifty percent (50%) in, such specified Person or
any Person specified in clause (i) of this definition; or
(iii) is a member of the immediate family of such specified
Person or any Person specified in clause (i) or (ii) of this
definition, and any partnership, corporation, trust, limited liability
company, association or other entity or organization that is controlled
by such immediate family member. For purposes hereof, the members of a
Person's "immediate family" shall include such Person's parents,
grandparents, spouse, children (natural or adopted), grandchildren
(natural or adopted), siblings (natural or adopted) and children of
siblings (natural or adopted). For purposes of this definition, the
term "control" (and any derivative thereof) means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting stock, by contract or otherwise.
"Aggregates Assets" has the meaning set forth in Section 19(f) hereof.
"Allied Asset" means the certain assets of Cemex, Inc. set forth in
that certain Allied Ready Mix, Concrete Products and Resale Business Information
Package, dated May 2005, which is attached as Exhibit B-4 to this LLC Agreement.
"Approved Extraordinary Required Additional Capital Contribution" has
the meaning set forth in Section 4.1(b) hereof.
"Applicable Tax Rate" means the then maximum current statutory
corporate federal tax rate (currently 35%) plus 65% of the maximum statutory
corporate state tax rate of the states in which the joint venture transacts
business, both rates to be adjusted annually for changes in the tax rates and
the states in which the Company operates.
"Base Member" has the meaning set forth in Section 9.1(c) hereof.
"Board" means a group of eight (8) individuals, four (4) of whom shall
be appointed by each Member pursuant to Section 8.1(e) hereof.
"Budgeted Additional Capital Contribution" has the meaning set forth in
Section 4.1(b) hereof.
"Business Day" means a day (other than a Saturday) on which banks
generally are open in New York City, Houston, Texas and Birmingham, Alabama, for
a full range of business.
"Buyout Option" has the meaning set forth in Section 11.1(d) hereof.
"Buyout Purchase Price" has the meaning set forth in Section 11.1(d)
hereof.
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with Section 4.5 hereof.
"Capital Contributions" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any assets (other than money)
contributed to the Company with respect to the Membership Interests in the
Company held or purchased by such Member, including additional Capital
Contributions.
"Cement Boundaries" means the states of Alabama, Georgia and
Mississippi, the Cement Florida Panhandle (as defined herein) and the Cement
Limited Tennessee Area (as defined herein).
"Cement Florida Panhandle" means the following counties in the State of
Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington, Jackson,
Bay, Calhoun, Gulf and Franklin. The Cement Florida Panhandle shall exclude the
City of Tallahassee, Florida.
"Cement Limited Tennessee Area" means the Metropolitan Statistical
Areas of Chattanooga and Memphis, Tennessee.
"Cemex" has the meaning set forth in the Introduction hereof.
"Cemex Contribution Agreement" means that certain Asset and Capital
Contribution Agreement, dated July 1, 2005, by and among Cemex Southeast LLC and
the Members.
"Cemex Post-Exercise Regular Cash Distributions" has the meaning set
forth in Section 9.6.4(c) hereof.
"Cemex Post-Exercise Special Cash Distribution" has the meaning set
forth in Section 9.6.4(a) hereof.
"Cemex Southeast LLC" means Cemex Southeast LLC, a Delaware limited
liability company, and any successor limited liability company.
"Cemex Southeast LLC Percentage Interest" means, with respect to a
particular member of Cemex Southeast LLC, the "Percentage Interest" of such
member as defined in the Cemex Southeast LLC Agreement.
"Cemex Southeast LLC Agreement" means that certain Amended and Restated
Limited Liability Company Agreement by and among RMUSA, Cemex and Cemex
Southeast LLC dated July 1, 2005.
"Cemex, Inc." has the meaning set forth in the Introduction hereof.
"Certificate of Formation" means the Certificate of Formation of the
Company which was filed on June 3, 2005 (the "Effective Date"), in the Office of
the Secretary of State of Delaware, and all amendments thereto.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any federal laws of similar import, and to the extent applicable, any
Regulations promulgated thereunder.
"Company" means Ready Mix USA, LLC, a Delaware limited liability
company, and any successor limited liability company.
"Company Minimum Gain" has the meaning of "partnership minimum gain" as
set forth in Section 1.704-2(d) of the Regulations.
"Company's Accounting Firm" has the meaning set forth in Section 7.1
hereof.
"Competitive Business" means any business that sells ready-mix concrete
and concrete block, pavers and septic tanks, and materials used to produce the
same, such as aggregates and sand, within the Ready Mix Boundaries, and which is
owned, operated or controlled by any Person other than the Company or any of its
Subsidiaries.
"Competitive Business Approval" has the meaning set forth in Section
19(a) hereof.
"Contribution Agreement" means the Asset and Capital Contribution
Agreement by and among the Members and the Company dated July 1, 2005.
"Contribution Complying Members" has the meaning set forth in Section
4.1(b)(iii) hereof.
"Contribution Date" means the later of (a) the date upon which the
Company is legally formed and (b) the date upon which initial Capital
Contributions are made pursuant to Section 4.1(a) hereof.
"Contributing Member" has the meaning set forth in Section 19(a)
hereof.
"DGCL" means the Delaware General Corporation Law, as the same may be
amended from time to time.
"Damages" has the meaning set forth in the Contribution Agreement.
"Debt(s)" means all borrowed funds of the Company or any of its
Subsidiaries and all other obligations or liabilities of the Company or any of
its Subsidiaries under Statement of Financial Accounting Standards No. 5,
including, for the avoidance of doubt, capital leases but not operating leases;
provided, however, that "Debt" shall not include any current liabilities.
"Debt Reduction Capital Contribution" has the meaning set forth in
Section 4.1(b)(ii) hereof.
"Delinquent Member" has the meaning set forth in Section 4.1(b)(iv)
hereof.
"EBITDA" means with respect to a particular Person for a particular
period, the consolidated operating income plus depreciation and amortization of
such Person for such period and refers to the earnings of continuing operations
and shall not include the effect of cumulative changes in accounting principles
and material nonrecurring items for such entities on a combined basis for such
period.
"Event of Bankruptcy" means, with respect to any Member or Cemex, Inc.,
any of the following:
(i) making a general assignment for the benefit of creditors;
(ii) filing a voluntary petition in bankruptcy;
(iii) filing a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any bankruptcy, insolvency or other
similar law;
(iv) seeking, consenting to, or acquiescing in the appointment
of a trustee, receiver or liquidator of such Member, or Cemex, Inc., or
of all or any substantial part of its properties or assets under any
bankruptcy, insolvency or other similar law; or
(v) the passage of one hundred twenty (120) days after the
commencement of any involuntary proceeding against such Member, or
Cemex, Inc., seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy, insolvency or other similar law, if the proceeding has not
been dismissed, or the passage of ninety (90) days after the
appointment without its consent or acquiescence of a trustee, receiver
or liquidator of such Member, or Cemex, Inc., or of all or any
substantial part of its properties or assets, if the appointment is not
vacated or stayed, or the passage of ninety (90) days after the
expiration of any such stay, if the appointment is not vacated.
"Excess Amount" has the meaning set forth in Section 4.1(b)(ii) hereof.
"Excess Distribution Amount" has the meaning set forth in Section
6.1(b)(i) hereof.
"Exercise Date" means the date upon which the Put Notice is actually or
constructively delivered to Cemex, Inc.
"External Competitive Business" means a Competitive Business where less
than fifty percent (50%) of such Competitive Business' consolidated total
revenues during the most recently completed calendar year were derived from
sales of ready-mix concrete and concrete block, pavers and septic tanks, and
materials used to produce the same, such as aggregates and sand, within the
Ready Mix Boundaries.
"Extraordinary Required Additional Capital Contribution" has the
meaning set forth in Section 4.1(b)(i) hereof.
"Fiscal Year" means (i) the period commencing on the Contribution Date
and ending on December 31, 2005, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Section 5 hereof.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means (i) any domestic or foreign national,
state or local government, any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, court, department, bureau or entity, or (ii) any
arbitrator with authority to legally bind a party or any of its Affiliates.
"Gross Asset Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Gross Asset Depreciation shall be
an amount that bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation amortization or other cost recovery deduction
for such Fiscal Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Fiscal Year is zero, Gross Asset Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Manager.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such
asset, as determined by the Board; provided that the initial Gross
Asset Values of the assets contributed to the Company pursuant to
Section 4.1 hereof shall be as set forth in such section;
(ii) the Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking
Code Section 7701(g) into account), as determined by the Board as of
the following times: (A) the acquisition of an additional Membership
Interest or other interest in the Company by any new or existing Member
in exchange for more than a de minimis Capital Contribution; (B) the
distribution by the Company to a Member of more than a de minimis
amount of Company property or assets as consideration for a Membership
Interest or other interest in the Company; and (C) the liquidation of
the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, provided that an adjustment described in clauses (A) and
(B) of this paragraph shall be made only if the Board reasonably
determines that such adjustment is necessary to reflect the relative
economic interests of the Members in the Company;
(iii) the Gross Asset Value of any item of the Company assets
distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset
on the date of distribution as determined by the Board; and
(iv) the Gross Asset Values of the Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations and subparagraph (vi) of the
definition of "Profits" and "Losses" or Section 5.2(g) hereof;
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subparagraph (iv) to the extent that an adjustment
pursuant to subparagraph (ii) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to
this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset,
for purposes of computing Profits and Losses.
"HSR Act" has the meaning set forth in Section 9.6.6(c) hereof.
"Indemnified Party" has the meaning set forth in Section 21.1 hereof.
"Indemnifying Party" has the meaning set forth in Section 21.1 hereof.
"Indirect Sale" has the meaning set forth in Section 9.3(f) hereof.
"Initial Payment" has the meaning set forth in Section 9.6.4(b)(i)
hereof.
"Internal Boundaries Assets" has the meaning set forth in Section 19(a)
hereof.
"Internal Boundaries Assets Value" has the meaning set forth in Section
19(a) hereof.
"Investment" shall mean, for any Person: (a) the acquisition (whether
for cash, property, services or securities or otherwise) of equity interests,
equity rights, bonds, notes, debentures or other securities of any other Person,
together with all items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP, but excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business; (b) the making of any deposit with, or advance, loan or other
extension of credit (including without limitation a guarantee) to, any other
Person (including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such Person); and (c) any 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) any other Person. "Investment" shall exclude
extensions of trade credit by the Company and its Subsidiaries in accordance
with normal trade practices of the Company and such Subsidiary, as the case may
be.
"Law" means all applicable provisions of any constitution, statute,
law, ordinance, code, rule, regulation, decision, order, decree, judgment,
release, license, permit, stipulation or other official pronouncement enacted or
issued by any Governmental Authority.
"Lien" means liens (whether statutory or otherwise), mortgages,
pledges, charges, security interests, sureties, options, easements, covenants,
restrictions or other encumbrances.
"Liquidating Event" has the meaning set forth in Section 12.1(a)
hereof.
"Liquidating Member" has the meaning set forth in Section 12.2 hereof.
"LLC Act" means the Delaware Limited Liability Company Act, as the same
may be amended from time to time.
"LLC Agreement" has the meaning set forth in the Introduction hereof.
"Major Acquisition" means the acquisition (whether by merger,
consolidation, share or asset acquisition, joint venture or similar transaction)
of any business, in a single transaction or series of related transactions, the
cost of which shall exceed US$10,000,000.
"Major Investment" means any Investment in any Person (other than a
wholly owned Subsidiary), in a single transaction or series of related
transactions, the cost of which shall exceed US$10,000,000.
"Majority-in-Interest" means, with respect to a particular matter,
Members holding in excess of fifty percent (50%) of the Voting Interests at the
time of the vote or action with respect to such matter.
"Majority Member" means, as of a particular time, any Member, or group
of Affiliated Members, that collectively hold in excess of fifty percent (50%)
of the Voting Interests at such time.
"Manager" means READY MIX USA, INC., or any replacement Manager elected
pursuant to Section 8.6 hereof.
"Member Nonrecourse Debt" has the meaning of "partner nonrecourse debt"
as set forth in Section 1.704-2(b)(4) of the Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount with respect to
each Member Nonrecourse Debt equal to the Company Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
"Member Nonrecourse Deductions" has the meaning of "partner nonrecourse
deductions" as set forth in Section 1.704-2(i)(2) of the Regulations.
"Members" means the Persons designated as Members in the first
paragraph of this LLC Agreement, together with any Person(s) who become
substituted or additional Members as provided herein, in such Person(s)
capacities as Members of the Company. Any Member that transfers its entire
Membership Interest in the Company pursuant to the terms of this LLC Agreement
shall be deemed to have retired and shall cease to be a Member as of the
effective date of such transfer. "Member" means any one of the Members.
"Member Shortfall Amount" shall have the meaning set forth in Section
6.1(b)(ii) hereof.
"Membership Interest" shall mean, with respect to a Member at any
particular time, such Member's entire equity and beneficial interest in the
Company, including, without limitation, such Member's Percentage Interest,
Voting Interest, and the right of such Member to any and all other benefits to
which a Member may be entitled as provided in this LLC Agreement, together with
the obligations of such Member to comply with all the terms and provisions of
this LLC Agreement.
"Minor Acquisition" means the acquisition (whether by merger,
consolidation, share or asset acquisition, joint venture or similar transaction)
of any business, in a single transaction or series of related transactions, the
cost of which shall be in excess of US$1,000,000, but less than US$10,000,000.
"Minor Acquisition Criteria" has the meaning set forth in Section
8.2(b)(iv) hereof.
"Minor Investment" means any Investment in any Person (other than a
wholly owned Subsidiary), in a single transaction or series of related
transactions, the cost of which shall be in excess of US$1,000,000, but less
than US$10,000,000.
"Minor Investment Criteria" has the meaning set forth in Section
8.2(b)(xxiv) hereof.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Sections
1.704-2(b)(3) and 1.752-1(a)(2) of the Regulations.
"Non-Transferring Member" has the meaning set forth in Section 9.3(a)
hereof.
"Notice" has the meaning set forth in Section 9.6.2 hereof.
"Offer Acceptance Notice" has the meaning set forth in Section 9.3(a)
hereof.
"Offer Notice" has the meaning set forth in Section 9.3(a) hereof.
"Offer Option Period" has the meaning set forth in Section 9.3(a)
hereof.
"Offer Price" has the meaning set forth in Section 9.3(a) hereof.
"Offer Sale Reference Date" has the meaning set forth in Section 9.3(e)
hereof.
"Overlapping Members" has the meaning set forth in Section 4.1(b)(ii)
hereof.
"Paid Services" means the administration and oversight by the Manager
of the following functions: payroll; compensation and benefits; employee and
labor relations; customer billing and collection; credit analysis; accounting;
safety; information technology; logistics; and legal and technical support
services.
"Parties" has the meaning set forth in Section 7.2 hereof.
"Percentage Interest" means a Member's relative share of the Company's
Profits and Losses and other allocations and distributions which are to be
shared in proportion to Percentage Interests under the terms of this LLC
Agreement, as set forth opposite such Member's name on Exhibit A attached
hereto, as shall be amended from time to time in accordance with Section 1.4
hereof.
"Permitted Affiliate Transaction" means (i) the provision of the Paid
Services and the payment of the Services Fee, (ii) transactions listed on
Schedule 3.2 attached hereto, and (iii) payments made by the Company pursuant to
Section 20 hereof.
"Permitted Transfer" has the meaning set forth in Section 9.5 hereof.
"Permitted Transferee" has the meaning set forth in Section 9.5 hereof.
"Person" means any individual, partnership, corporation, trust, limited
liability company, association or other entity or organization, including any
government or political subdivision or any agency or instrumentality thereof.
"Primary Business" has the meaning set forth in Section 3.1(a) hereof.
"Profits" and "Losses" mean, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition of "Profits" and "Losses" shall be
added to such taxable income or loss;
(ii) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition of "Profits" and "Losses" shall be subtracted from such
taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset
is adjusted pursuant to subparagraphs (ii) or (iii) of the definition
of Gross Asset Value, the amount of such adjustment shall be treated as
an item of gain (if the adjustment increases the Gross Asset Value of
the asset) or an item of loss (if the adjustment decreases the Gross
Asset Value of the asset) from the disposition of such asset and shall
be taken into account for purposes of computing Profits or Losses;
(iv) gain or loss resulting from any disposition of assets
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
assets disposed of, notwithstanding that the adjusted tax basis of such
assets differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Gross Asset Depreciation for
such Fiscal Year, computed in accordance with the definition of Gross
Asset Depreciation;
(vi) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required, pursuant
to Section 1.704-(b)(2)(iv)(m)(4) of the Regulations, to be taken into
account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Member's Membership Interest in the
Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) from the disposition of such asset
and shall be taken into account for purposes of computing Profits or
Losses; and
(vii) notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section 5.2 or
Section 5.3 hereof shall not be taken into account in computing Profits
or Losses.
The amounts of the items of the Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 5.2 and 5.3 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
"Prorata EBITDA" has the meaning set forth in Section 9.6.3(c) hereof.
"Prorata Portion" has the meaning set forth in Section 9.4(a) hereof.
"Purchase Price" has the meaning set forth in Section 9.6.3(a) hereof.
"Purchased Interests" has the meaning set forth in Section 11.1 hereof.
"Purchasing Member" has the meaning set forth in Section 9.6.3(e)
hereof.
"Put Option" has the meaning as set forth in Section 9.6 hereof.
"Put Option Closing" has the meaning set forth in Section 9.6.5 hereof.
"Put Option Depreciation Amount" means, with respect to a particular
period, an amount equal to a ten percent (10%) per annum reduction in the value
of the Company's fixed assets on a declining basis during such period.
Acquisitions of fixed assets and capital investments will also be depreciated
with a ten percent (10%) per annum declining basis. These shall be adjusted on a
prorated basis with respect to the date of closing in the case of an acquisition
or the date of purchase in the case of a capital investment.
"RCI Marine" means RCI Marine, L.L.C., an Alabama limited liability
company.
"RCI Marine Operating Agreement" means that certain Operating Agreement
of RCI Marine, effective as of April 17, 1996, as may be amended from time to
time.
"Ready Mix Boundaries" means the states of Alabama, Arkansas, Georgia,
excluding the Metropolitan Statistical Area of Brunswick, Georgia, Mississippi
and Tennessee and the Ready Mix Florida Panhandle (as defined herein).
"Ready Mix Florida Panhandle" means the following counties in the State
of Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington, Jackson,
Bay, Calhoun, Gulf, Franklin, Liberty, Gadsden, Leon, Wakulla, Jefferson,
Madison and Taylor.
"Regulations" means the federal income tax regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3
hereof.
"Reynolds" shall mean Reynolds Ready Mix, L.L.C., an Alabama limited
liability company.
"Reynolds Operating Agreement" means that certain Amended and Restated
Operating Agreement of Reynolds, effective as of September 1, 1995, as further
amended by that certain Amendment effective as of October 1, 1995, and that
certain Amendment effective as of January 1, 2001, as may be amended from time
to time.
"River City" means River City Industries, L.L.C., an Alabama limited
liability company.
"River City Operating Agreement" means that certain Operating Agreement
of River City, effective as of April 17, 1996, as may be amended from time to
time.
"RMUSA" has the meaning set forth in the Introduction hereof.
"Second Installment" has the meaning set forth in Section 9.6.4(b)(ii)
hereof.
"Services Fee" has the meaning set forth in Section 8.8(a) hereof.
"Significant Prepayment" has the meaning set forth in Section 9.6.5(c)
hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture or other legal entity in which such Person
(either directly or through or together with other Subsidiaries) owns more than
fifty percent (50%) of the voting securities of such corporation, partnership,
limited liability company, joint venture or other legal entity.
"Tag Along Notice" has the meaning set forth in Section 9.4(a) hereof.
"Tag Along Right" has the meaning set forth in Section 9.4(a) hereof.
"Tax Distributions" has the meaning set forth in Section 6.2 hereof.
"Tax Matters Member" has the meaning set forth in Section 8.3 hereof.
"Third Installment" has the meaning set forth in Section 9.6.4(b)(iii)
hereof.
"Transaction Documents" means this LLC Agreement, the Contribution
Agreement and all other agreements entered into in connection herewith or
therewith.
"Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation or other disposition, and, as a verb,
voluntarily or involuntarily to transfer, sell, assign, pledge, hypothecate or
otherwise dispose of, in each case, including, but not limited to, any
involuntary transfer or transfer by operation of law in bankruptcy or otherwise
or by way of execution, seizure or sale by legal process.
"Transfer Closing" has the meaning set forth in Section 9.3(b) hereof.
"Transferring Member" has the meaning set forth in Section 9.3(a)
hereof.
"Ultimate Parent" has the meaning set forth in Section 9.1(b) hereof.
"Unfunded Portion" has the meaning set forth in Section 4.1(b)(iii)
hereof.
"Voting Interest" means the relative right of a Member to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members required or permitted pursuant to this LLC Agreement or the LLC Act,
as set forth opposite such Member's name on Exhibit A attached hereto, as shall
be amended from time to time in accordance with Section 1.4 hereof.
"Working Capital" means the sum of the Company's inventory, accounts
receivable, prepaid expenses and cash minus the current liabilities of the
Company, as such current liabilities are reflected by the most recent balance
sheet prepared by or for the Company.
4. Capital Contributions and Capital Accounts.
4.1 Members' Capital Contributions.
(a) The Members shall initially contribute to the
capital of the Company upon or prior to the execution of this LLC Agreement the
contributions specified in the Contribution Agreement.
(b) (i) If, subsequent to the making of the
initial Capital Contributions referred to in Section 4.1(a) hereof, the
annual business plan and the annual budget of the Company specifically
provide for additional contributions to capital in order to fund the
Company's business, the Manager may from time to time give written
notice to each Member of the amount(s) and date(s) on which such
additional contributions are required (a "Budgeted Additional Capital
Contribution"). If, subsequent to the making of the initial Capital
Contributions referred to in Section 4.1(a) hereof, the Manager
determines that the Company requires additional contributions to
capital in order to pay when due the obligations or expenses of the
Company, or to fund the Company's business, and such contributions to
capital are not provided for in the annual business plan and annual
budget for the Company, the Manager shall give written notice to each
Member of the amount(s) and date(s) on which such additional
contributions are required (an "Extraordinary Required Additional
Capital Contribution"); provided that any such Extraordinary Required
Additional Capital Contribution shall require the prior approval of the
Board (an approved Extraordinary Required Additional Capital
Contribution being hereinafter sometimes referred to as an "Approved
Extraordinary Required Additional Capital Contribution"). Each Member's
respective share of each Budgeted Additional Capital Contribution or
Approved Extraordinary Required Additional Capital Contribution (an
"Additional Capital Contribution") specified in a notice from the
Manager shall be in proportion to each Member's Percentage Interest
immediately prior to the request for the Additional Capital
Contribution and shall be specified in such notice and shall be
contributed no later than thirty (30) days from the date of such
notice. Each Member shall contribute to the capital of the Company its
share (based on its Percentage Interest) of the Additional Capital
Contribution in cash on or before the due date specified in such
notice. A Member's obligation to make Additional Capital Contributions
shall be enforceable by the Company or by any other Member, or by the
Manager, against a Member, but the Company may not assign a Member's
obligation to make Additional Capital Contributions to any creditor or
other third party nor may any creditor or other third party enforce
such a Member's obligation, as the Member's obligations hereunder are
not for the benefit of any creditor or third party.
(ii) The foregoing provisions of paragraph
(i) notwithstanding, in the event that (A) the Manager determines that
an additional contribution to the capital of the Company in an amount
not to exceed $2,000,000 is necessary or desirable in order to pay
indebtedness of the Company (including indebtedness to a Member), and
(B) Cemex Southeast LLC is at such time maintaining cash in an amount
in excess of the sum of (x) the average current liabilities of Cemex
Southeast LLC for the preceding twelve (12) months, plus (y) its
projected distributions for the then current quarter to be made
pursuant to Section 6.1 of the Cemex Southeast LLC Agreement plus (z)
its budgeted capital expenditures through the next quarter (the amount
in excess of the sum of (x), (y) and (z) being hereinafter referred to
as the "Excess Amount", and (1) such Excess Amount, when multiplied by
the Overlapping Members' (as herein defined) combined Percentage
Interest in Cemex Southeast LLC (as such term is defined in the Cemex
Southeast LLC Agreement), produces a product in excess of the proposed
additional capital contribution (a "Debt Reduction Capital
Contribution"), and (2) such Overlapping Members together hold or
control a Majority-in-Interest in Cemex Southeast LLC, the Manager may
give written notice to each Member who is also a member of Cemex
Southeast LLC or an Affiliate of a Member of Cemex Southeast LLC (the
"Overlapping Members") setting forth the amount(s) and date(s) on which
such Debt Reduction Capital Contributions are required and, within
thirty (30) days of the giving of such notice, the Overlapping Members
shall take all commercially reasonable action (including directing
their respective board members of Cemex Southeast LLC to vote in favor
of such action) to require Cemex Southeast LLC to make a distribution
to its members in an aggregate amount at least equal to the Debt
Reduction Capital Contribution (the "Cemex Distribution") and such
Overlapping Members shall, within five (5) business days after such
distribution is made by Cemex Southeast LLC, contribute to the capital
of the Company the lesser of (i) its share of the Debt Reduction
Capital Contribution, or (ii) the portion of the Cemex Distribution
received by it. In the event the amount of the Cemex Distribution
received by an Overlapping Member is less than its share of the Debt
Reduction Capital Contribution, such Member shall have the right, but
not the obligation to contribute an additional amount to fund its share
of the Debt Reduction Capital Contribution. In the event such
Overlapping Member elects not to fund such shortfall, the other
Member(s) shall have the rights set forth in subsections (iii) and (iv)
below. A Member's obligation hereunder shall be enforceable by the
Company or by any other Member, or by the Manager, but the Company may
not assign such Member's obligation to any creditor or other third
party nor may any creditor or other third party enforce such a Member's
obligation, as the Member's obligations hereunder are not for the
benefit of any creditor or third party. The Manager shall not be
authorized to call for more than one (1) Debt Reduction Capital
Contribution per fiscal quarter pursuant to this subsection (ii).
(iii) In addition to the right of the
Company, a Member and/or the Manager to enforce another Member's
obligation to fund an Additional Capital Contribution or Debt Reduction
Capital Contribution as provided in subsections (i) and (ii) above, the
Member(s) which have fully funded their Additional Capital
Contribution(s) or Debt Reduction Capital Contribution(s), as the case
may be (the "Contribution Complying Members"), shall have the right,
but not the obligation, to contribute all or any portion of any such
Additional Capital Contribution or Debt Reduction Capital Contribution
not funded as required above (the "Unfunded Portion") as additional
capital to the Company.
(iv) In addition to the rights set forth in
subsection (iii) above, the Contribution Complying Members shall have
the right, but not the obligation, to deliver to the Company all or any
portion of any Unfunded Portion and have such amount treated as a loan
to the Member who failed to fulfill its obligation to make an
Additional Capital Contribution or Debt Reduction Capital Contribution
as required herein (such Member, a "Delinquent Member"), which loan
shall be repaid in a maximum term of five (5) years, in monthly
installments, on the first (1st) business day of each month commencing
immediately following the date on which the Contribution Complying
Members contributed the Unfunded Portion to the Company, based on level
principal amortization, and shall bear interest at the rate of ten
percent (10%) per annum, or, if lower, the highest rate permitted by
applicable law.
(v) In addition to other remedies available
under this Agreement or otherwise, in the event that all of the
obligations of a Delinquent Member are not fulfilled by another Member
in accordance with subsection (iv) above, the Percentage Interest of
the Contribution Complying Member shall be increased, and the
Percentage Interest of the Delinquent Member shall be reduced, as
follows:
(A) the Percentage Interest of the
Contribution Complying Member shall be increased to the amount
obtained by dividing (x) an amount equal to the sum of (1) the
product of the Percentage Interest of the Contribution
Complying Member prior to such adjustment and the Adjusted
Book Value immediately prior to such Additional Capital
Contribution or Debt Reduction Capital Contribution, as the
case may be, and (2) the amount of the Additional Capital
Contribution or Debt Reduction Capital Contribution, as the
case may be, actually made by the Contribution Complying
Member, including any amount contributed by such Member
pursuant to subsection (iii) above (but excluding for the
avoidance of doubt any amount loaned by such Member to a
Delinquent Member pursuant to subsection (iv) above), by (y)
the Adjusted Book Value immediately after such Additional
Capital Contribution or Debt Reduction Capital Contribution,
as the case may be; and
(B) the Percentage Interest of the
Delinquent Member shall be reduced to the amount obtained by
dividing (x) an amount equal to the sum of (1) the product of
the Percentage Interest of the Delinquent Member prior to such
adjustment and the Adjusted Book Value immediately prior to
such Additional Capital Contribution or Debt Reduction Capital
Contribution, as the case may be, and (2) the amount of the
Additional Capital Contribution or Debt Reduction Capital
Contribution, as the case may be, actually made by the
Delinquent Member (or on behalf of the Delinquent Member
pursuant to subsection (iv) above), by (y) the Adjusted Book
Value immediately after such Additional Capital Contribution
or Debt Reduction Capital Contribution, as the case may be.
For purposes of making any calculation pursuant to this subsection (v),
references to "such Additional Capital Contribution or Debt Reduction
Capital Contribution" shall mean all amounts contributed by all Members
with respect to a particular required Additional Capital Contribution
or Debt Reduction Capital Contribution, as the case may be.
(vi) In the event a Contribution Complying
Member shall elect to fulfill the obligation of a Delinquent Member
pursuant to subsections (iii) or (iv) above, the failure of the
Delinquent Member to make such an Additional Capital Contribution shall
not constitute an Adverse Act, notwithstanding anything to the contrary
contained in this LLC Agreement.
4.2 Additional Members. The Company shall not admit additional
Members to the Company unless either (x) one hundred percent (100%) of the
Members or (y) the Board shall consent to the same in writing. The Company may,
however, if either of the above written consents are obtained, admit additional
Members upon such terms and conditions as may be set forth in such written
consent. In the event that upon the admission of an additional Member, the
Company shall make an election under Section 743(b) of the Code, such additional
Member shall pay all expenses incurred by the Company in the making of such
election, including, but not limited to, legal and accounting expenses.
4.3 Execute Adoption Agreement. Any additional Member who
makes a Capital Contribution to the Company and who is admitted to the Company
after the execution of this LLC Agreement shall execute and deliver an Adoption
Agreement substantially in the form of Exhibit D attached hereto.
4.4 Summary of Capital Contributions. For the purposes of this
LLC Agreement, the capital of the Company shall be deemed to include the initial
Capital Contributions to the Company made by the Members at the values referred
to in the Contribution Agreement and any other amounts subsequently contributed
to the capital by the Members.
4.5 Capital Accounts. A separate capital account ("Capital
Account") shall be maintained in the name of each Member. The Capital Account
shall reflect the capital interest of each Member as defined below and shall be
maintained in accordance with Section 1.704-1(b)(2)(iv) of the Regulations. The
Capital Contributions actually paid into the Company (which for this purpose
shall include "deemed" contributions of property to the Company under Code
Section 708) shall be credited to each Member's Capital Account. The Capital
Account of each Member shall be increased by (1) the amount of money contributed
by that Member to the Company, (2) the fair market value of property or assets
contributed by that Member to the Company (net of liabilities secured by such
contributed property or assets that the Company is considered to assume or take
subject to under Code Section 752), and (3) allocations to that Member of
Company income and gain (or items thereof), including income and gain exempt
from tax and income and gain as computed for book purposes, in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations, but excluding income and gain
described in Section 1.704-1(b)(4)(i) of the Regulations; and shall be decreased
by (a) the amount of money distributed to that Member by the Company, (b) the
fair market value of property or assets distributed to that Member by the
Company (net of liabilities secured by such distributed property or assets that
such Member is considered to assume or take subject to under Code Section 752),
(c) allocations to that Member of expenditures of the Company described in Code
Section 705(a)(2)(B), and (d) allocations of the Company loss and deduction (or
items thereof), including loss and deduction computed for book purposes, as
described in Section 1.704-1(b)(2)(iv)(g) of the Regulations, but excluding
items of expenditures of the Company described in Code Section 705(a)(2)(B)
allocated to that Member and loss or deduction described in Section
1.704-1(b)(4)(i) or (b)(4)(iii) of the Regulations.
4.6 Interest on Capital Contributions. In no event shall any
Member receive any interest on such Member's contribution to the capital of the
Company, and no Member shall have the right to withdraw or to demand the return
of all or any part of its capital contribution, except as specifically provided
in this LLC Agreement.
4.7 Limited Liability. Except as required by law, no Member or
Manager shall be personally liable for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or
otherwise.
4.8 Members are not Agents. Pursuant to Section 8.2 hereof,
the management of the Company is vested in the Manager, subject to the
limitations set forth therein. The Members shall have no power to participate in
the management of the Company except as expressly authorized by this LLC
Agreement and except as expressly required by the LLC Act. No Member, acting
solely in the capacity of a Member, is an agent of the Company nor does any
Member, unless expressly and duly authorized in writing to do so by the Manager,
have any power or authority to bind or act on behalf of the Company in any way,
to pledge its credit, to execute any instrument on its behalf or to render it
liable for any purpose.
5. Allocation of Profits and Losses.
5.1 Profits and Losses. After giving effect to the special
allocations set forth in Sections 5.2 and 5.3 hereof, and notwithstanding any
provision to the contrary contained herein, all Profits and Losses derived from
the Company, and each item of income, gain, loss, deduction and credit entering
into the computation thereof, shall be allocated among the Members in accordance
with their respective Percentage Interests in the Company.
5.1.1. Loss Limitation. Losses allocated pursuant to
Section 5.1 hereof shall not exceed the maximum amount of Losses that can be
allocated without causing any Member to have an Adjusted Capital Account Deficit
at the end of any Fiscal Year. In the event some but not all of the Members
would have Adjusted Capital Account Deficits as a consequence of an allocation
of Losses pursuant to Section 5.1 hereof, the limitation set forth in this
Section 5.1.1 shall be applied on a Member by Member basis and Losses not
allocable to any Member as a result of such limitation shall be allocated to the
other Members in accordance with the positive balances in such Member's Capital
Accounts so as to allocate the maximum permissible Losses to each Member under
Section 1.704-1(b)(2)(ii)(d) of the Regulations.
5.2 Special Allocations. The special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(f) of the Regulations, notwithstanding any other
provision of this Section 5, if there is a net decrease in Company Minimum Gain
during any Fiscal Year of the Company, each Member shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Member's share of the net
decrease in Company Minimum Gain, determined in accordance with Section
1.704-2(g) of the Regulations. Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-1(j)(2) of the
Regulations. This Section 5.2(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-1(f) of the Regulations and shall be
interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding
any other provision of this Section 5, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any Fiscal Year of the Company, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the Regulations shall be
specially allocated items of Company income and gain for such Fiscal Year (and,
if necessary, subsequent Fiscal Years) in an amount equal to such Member's share
of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section
5.2(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 5.2(c) shall be made only if and to the
extent that such Member would have an adjusted Capital Account Deficit after all
other allocations provided for this Section 5 have been tentatively made as if
this Section 5.2(c) were not in the LLC Agreement.
(d) Gross Income Allocation. In the event any Member
has a deficit Capital Account at the end of any Fiscal Year which is in excess
of the sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this LLC Agreement, and (ii) the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.2(d) shall be made only if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 5 have been made as if Section 5.2(c) hereof and
this Section 5.2(d) were not in this LLC Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year shall be specially allocated among the Members in proportion
to their respective Percentage Interests in the Company.
(f) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the
Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i)(1).
(g) Code Section 754 Adjustment. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its Membership Interest in
the Company, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members in accordance with their interests in the
Company in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations applies,
or to the Member to whom such distribution was made in the event Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
5.3 Curative Allocations. The allocations set forth in
Sections 5.1.1 and 5.2 hereof (collectively, the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all Regulatory Allocations
shall be offset either by other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss, or deduction pursuant
to this Section 5.3. Therefore, notwithstanding any other provisions of this
Section 5 (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations in whatever manner they determine appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of this LLC
Agreement and all Company items were allocated pursuant to Section 5.1 hereof;
provided, however, that the Manager and the manager of Cemex Southeast LLC shall
use the same allocation methodology with respect thereto. In exercising its
discretion under this Section 5.3, the Manager shall take into account future
Regulatory Allocations under Sections 5.2(a) and 5.2(b) hereof that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 5.2(e) and 5.2(f) hereof.
5.4 Other Allocation Rules.
(a) The Members are aware of the federal, state, and
local income tax consequences of the allocations made by this Section 5 and
hereby agree to be bound by the provisions of this Section 5 in reporting their
shares of Company income and loss for income tax purposes.
(b) For purposes of determining the Profits, Losses,
or any other items allocable to any period, profits, losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined by
the Manager using any permissible method under Code Section 706 and the
Regulations thereunder.
5.5 Priority Tax Allocation Rules Where Property Was
Contributed To Company With Tax Basis Different From Value (704(c)).
Notwithstanding any provision of this LLC Agreement to the contrary, but solely
for tax purposes, any gain or loss with respect to property or assets
contributed to the Company by a Member shall be allocated among the Members so
as to take account of the variation between the adjusted basis and the fair
market value of contributed property or assets at the time of contribution. The
appreciation or diminution in value represented by the difference between the
adjusted basis and the fair market value of the contributed property or assets
at the time of the contribution will thus be attributed to the contributing
Member upon a subsequent sale or exchange of the property or assets by the
Company as required by Section 704(c) of the Code. The appreciation or
diminution will also be used in allocating the allowable depreciation or
depletion with respect to the property or assets among the contributing Member
and the noncontributing Member(s) as required by Section 704(c) of the Code.
Furthermore, any gain, loss, depreciation, depletion or amortization, as
computed for tax purposes, with respect to property or assets which are revalued
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations shall be allocated
so as to take account of the variation between the adjusted tax basis and book
value of the property or assets as required by Section 704(c) of the Code and
Section 1.704-1(b)(4)(i) of the Regulations. Any elections or other decisions
relating to allocations under this Section 5.5 will be made in any manner that
the Members determine reasonably reflects the purpose and intention of this LLC
Agreement; provided, however, that the same allocation methodology shall be used
at Cemex Southeast LLC. Allocations under this Section 5.5 are solely for
purposes of federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Member's Capital Account or share of
income, losses or other items or distributions under any provision of this LLC
Agreement.
6. Distributions.
6.1 Required EBITDA Distributions.
(a) Except as provided in Section 12 hereof relating
to the liquidation of the Company, the Manager shall make quarterly
distributions to the Members in an amount which shall be at least fifty percent
(50%) of EBITDA for such period, but which may, in the sole discretion of the
Manager, be as much as seventy-five percent (75%) of EBITDA for such period. For
example, if EBITDA shall be US$5,000,000 for the applicable period, each
Member's required distribution shall be at least an amount equal to US$2,500,000
multiplied by the Member's respective Percentage Interest, but, if the Manger so
determines, the distribution may be as much as US$3,750,000 multiplied by each
Member's respective Percentage Interest. Such distributions shall be in
proportion to each Member's respective Percentage Interest and shall be made at
such times and with such frequency as shall be determined by the Manager, in its
discretion, provided that such distributions shall be made not less than on a
quarterly basis.
(b) The Manager shall determine the Company's EBITDA
for the period with respect to which the distribution is to be made (i.e.,
month, quarter or other multi-month period) from the regular internal financial
reports of the Company prepared by the Manager. Upon the close of each Fiscal
Year, the Manager shall determine within thirty (30) days following receipt of
the audited financial statements for such Fiscal Year (as required by Section 7
hereof) the Company's EBITDA for the Fiscal Year, as reflected by such audited
financial statements and:
(i) in the event the total of all periodic
distributions made to Members during the Fiscal Year exceeds
seventy-five percent (75%) of the EBITDA of the Company for the Fiscal
Year, the Manager shall determine the amount of each Member's
respective distribution received in excess of said Member's Percentage
Interest in seventy-five percent (75%) of the Company's EBITDA (the
"Excess Distribution Amount") and the Company shall retain all future
distributions to the Member until the Member's Excess Distribution
Amount has been recouped by the Company; or
(ii) in the event the total of all periodic
distributions made to the Members during the Fiscal Year is less than
fifty percent (50%) of the EBITDA of the Company for the Fiscal Year,
the Manager shall determine the amount of the shortfall and each
Member's Percentage Interest in such shortfall amount (the "Member
Shortfall Amount") and, within ten (10) days of such determination,
shall cause the Company to distribute to each Member the Member
Shortfall Amount.
6.2 Tax Distributions. If for any reason the distributions of
EBITDA pursuant to Section 6.1 hereof are not adequate for such purpose, the
Manager shall distribute sufficient amounts of cash to the Members to permit the
Members to discharge their obligations to pay federal, state, and local taxes
(including estimated taxes) with regard to the Profits and Losses of the
Company, if any, calculated at the highest combined local, state and federal
marginal income tax rates ("Tax Distributions") applicable to each Member. In
the case of Members which are pass through entities, tax distributions shall be
computed on the basis of the estimated taxes of the owners of such pass through
entities which are attributable to the Profits and Losses of the Company. The
Manager shall have the discretion to estimate the amount of taxable income
applicable to each Member during the applicable quarter, and to determine the
tax rate to be applied to such income; provided, however, that the Manager and
the manager of Cemex Southeast LLC shall use the same methodology to make such
estimates.
6.3 Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any payment
or distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Section 6 for all purposes under this LLC Agreement.
The Manager may allocate any such amounts among the Members in any manner that
is in accordance with applicable law.
7. Fiscal Matters; Books of Account.
7.1 Books and Records. The Company books shall be maintained
by the Manager at the office of the Company in accordance with the LLC Act. Each
Member, Member's agent or attorney shall, upon reasonable request and at the
expense of the Member or the Member's agent or attorney during regular business
hours, have the right to inspect and copy or be sent copies of all such books
and records and any other books and records of the Company. In addition, the
Company shall maintain at its offices the following records: (a) a current list
of the full name and last known business or residence address of each Member and
Manager (which address shall be a street address); (b) a copy of the filed
Certificate of Formation, together with executed copies of any powers of
attorney pursuant to which any documents have been executed pursuant to the LLC
Act; (c) copies of the Company's federal, state, and local income tax returns
and reports, if any, for the three (3) most recent years; (d) copies of any then
effective limited liability company agreement of the Company, including any
amendments thereto; (e) copies of the Company's financial statements for at
least the three (3) most recent years; and (f) a copy of the Minor Acquisition
Criteria and Minor Investment Criteria, as such criteria may be amended from
time to time by the Board. The books shall be closed and balanced at the end of
each Fiscal Year and shall be audited for each Fiscal Year by a certified public
accounting firm selected by the Manager, subject to the approval of the Board
pursuant to Section 8.2(b) (the "Company's Accounting Firm"). The Manager shall
be authorized, but not required, to establish reserves for annual accounting and
legal fees, real estate taxes, insurance, and any other item for which reserves
should be established, as determined by Manager or upon advice of accountants.
7.2 Confidentiality. Except as otherwise required by law or
judicial order or decree or by any governmental agency or authority, each Member
agrees that any information obtained by such Member with respect to the Company
and its Subsidiaries shall be treated with the same degree of care (and in no
event less than reasonable care) that such Member uses to protect its other
confidential information; provided that each such Member may (a) disclose such
information to legal counsel, consultants, financial advisors, professionals
advising it on matters relating to the Transaction Documents where (i) such
disclosure is related to the performance or enforcement of obligations under the
Transaction Documents or the consummation of transactions contemplated under the
Transaction Documents and (ii) such Member informs the Person to which it is
making such disclosure that the disclosed information is confidential, instructs
such Person to keep such information confidential and not disclose it to any
third party (other than those persons to whom it has already been disclosed in
accordance with this Section 7.2), or (b) in connection with the sale or
transfer of any Membership Interest , if such Member's transferee or prospective
transferee agrees with the Company in writing to be bound by the provisions
hereof. In addition, confidential information shall not include information that
(i) is or becomes generally available to the public other than as a result of
any disclosure or other action or inaction by such Member or anyone to whom such
Member or any of its representatives transmit or have transmitted any
information, (ii) is or becomes known or available to such Member on a
nonconfidential basis from a source (other than the other Company), or (iii) was
independently developed by such Member, provided such independent development
can reasonably be proven by the Member's written records. Notwithstanding
anything to the contrary in this LLC Agreement, the Company and the Members
(collectively, the "Parties") (and each of their employees, representatives, or
other agents) may disclose to any and all persons, without limitation of any
kind, the tax treatment and tax structure of the transaction, provided, however,
that neither Party (nor any of its employees, representatives, or other agents)
may disclose any information that is not necessary to understanding the tax
treatment and tax structure of the transaction (including the identity of any
Party and any information that could lead another to determine the identity of
any Party), or any other information to the extent that such disclosure could
result in a violation of any federal or state securities law.
8. Management and Operations of the Company; Powers, and Duties of the
Manager.
8.1 Various Matters Relating to Members and the Board.
(a) Unless otherwise provided in this LLC Agreement
or by nonwaivable provisions of the LLC Act, all Members who have not ceased to
be a Member shall be entitled to vote on any matter submitted to a vote of the
Members. Except as otherwise provided in this LLC Agreement or by nonwaivable
provisions of the LLC Act, all decisions concerning the business and affairs of
the Company shall be made by the Manager in accordance with this LLC Agreement.
Any action which requires the approval of the Members under this LLC Agreement
or by applicable law shall require the approval of a Majority-in-Interest of the
Members present or represented by proxy at a meeting at which a quorum is
present, or such other proportion of the Members as may be specified in the
particular provision of this LLC Agreement which requires any such approval.
(b) Any meeting of the Members shall be held at a
location which shall be suggested by Manager and reasonably satisfactory to the
Board. Members may be present at any meeting of the Members by telephone or
other means of communication, provided that each Member can hear all other
present Members. Members may also attend a meeting, and be represented at such
meeting, by proxy executed in writing by such Member. The presence (in person,
by a representative thereof or by proxy) of one hundred percent (100%) of the
Members shall constitute a quorum. In case a quorum shall not be present at any
meeting, a Majority-in-Interest present (in person or by proxy) at the meeting
shall have the power to adjourn the meeting from time to time until a quorum is
present.
(c) Any action which may be taken by the Members at a
meeting may be taken in writing without a meeting if approved by the unanimous
written consent of all Members.
(d) Notice of any meeting of the Members may be
waived by a Member in writing, signed by the designated representative of the
Member entitled to the notice, whether before, at or after the time stated for
the meeting. Attendance of a Member at any meeting, whether in person, by proxy
as provided above or by telephone or other means of communication as provided
above, shall constitute waiver of notice of such meeting. Any waiver of notice
of a meeting by a Member hereunder shall be equivalent to the giving of such
notice for all purposes.
(e) Appointment of Board.
(i) The Board shall consist of eight
individuals, four of whom shall be appointed by Cemex and four of whom
shall be appointed by RMUSA. The Chairman of the Board shall be a
member of the Board appointed by RMUSA as determined by the members of
the Board appointed by RMUSA. Each member of the Board shall serve
until the earlier of (i) the appointment of such Board member's
successor, (ii) the removal of such Board member in accordance with the
terms of this LLC Agreement, (iii) such Board member's resignation, and
(iv) such Board member's death.
(ii) Any Board member may resign at any time
by giving written notice to the Company or the Member who appointed
such Board member and the remaining Board members. The resignation of
any Board member shall take effect upon receipt of that notice or at
such later time as shall be specified in the notice. Unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective. Upon the resignation of any Board
member, a successor may be appointed by the Member who appointed such
Board member.
(iii) Any Board member may be removed at any
time and with or without cause only by the Member who appointed such
Board member. Upon the removal of any Board member with or without
cause, a successor may be appointed by the Member who appointed such
removed Board member.
(iv) Upon the vacancy of any Board member
for any reason, a successor shall be appointed by the Member who
appointed such Board member.
(f) Action by Board.
(i) A meeting of the Board shall be held at
least quarterly, at such time and place as shall be designated by the
Chairman of the Board or by a majority of the Board. Other meetings of
the Board may be called by the Manager, by the Chairman of the Board or
by any Board member. All meetings shall be held upon at least two
business days' written notice (with confirmed receipt) to all Board
members. Notice of a meeting need not be given to any Board member who
signs a waiver of notice or a consent to holding the meeting (which
waiver or consent need not specify the purpose of the meeting) or an
approval of the minutes thereof, whether before or after the meeting,
or who attends the meeting without protesting, prior to its
commencement, the lack of notice to such Board member. All such
waivers, consents and approvals shall be filed with the Company records
or made a part of the minutes of the meeting. Meetings of the Board may
be held at any place within or without the State of Delaware which has
been designated in the notice of the meeting or at such place as may be
approved by the Board. Notwithstanding the foregoing provisions of this
paragraph (i), any meetings of the Board shall be held in Houston,
Texas or Birmingham, Alabama unless otherwise required by law or agreed
to by the Board. Board members may participate in a meeting through use
of conference telephone, electronic video screen communication, or
other communications equipment, so long as all Board members
participating in such meeting can hear one another. Participation in a
meeting in such manner constitutes a presence in person at such
meeting. The presence of a majority of the members of the entire Board
constitutes a quorum of the Board for the transaction of business with
respect to such matter.
(ii) Except as otherwise specifically set
forth herein, the vote of a majority of the Board members present shall
constitute the act of the Board; provided, that such majority of the
Board members voting (which vote constitutes the act of the Board)
includes at least one Board member appointed by each Member.
(iii) Any action required or permitted to be
taken by the Board may be taken by the Board without a meeting. Such
action by written consent shall have the same force and effect as if
taken at a meeting of the Board. The text of any such proposed action
shall be sent to all members of the Board.
8.2 Management and Operations.
(a) Subject to the provisions of this LLC Agreement,
including Sections 8.2(b) and (c), the business, property and affairs of the
Company shall be managed and all powers of the Company shall be exercised by or
under the direction of the Manager. Without limiting the generality of the
foregoing, but subject to Sections 8.2(b) and (c), and subject to the express
limitations set forth elsewhere in this LLC Agreement, the Manager shall have
full authority and discretion and all necessary powers to (i) take any actions
it deems necessary or advisable for the administration of the Company's affairs
and (ii) manage and carry out the purposes, business, property, and affairs of
the Company, including, the power to exercise, on behalf and in the name of the
Company, all of the powers described in the LLC Act. The Members shall from time
to time at the request of the Manager execute a resolution or other appropriate
document which shall evidence the rights and duties of the Manager hereunder.
(b) Notwithstanding any other provisions of this LLC
Agreement, without the prior approval of the Board in accordance with Section
8.1(f), the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
(i) Adopt or amend in any material respect
the annual business plan and the annual budget, including the capital
expenditure budget;
(ii) Make a single capital investment or
series of related capital investments in plants, equipment or other
capital assets in excess of US$1,000,000, other than (x) Minor
Acquisitions that meet the Minor Acquisition Criteria (as defined
below) and, (y) a single capital investment or series of related
capital investments in plants, equipment or other capital assets which
(I) do not, individually or in the aggregate, exceed $10,000,000, and
(II) are required by Law or a Governmental Authority or are embodied in
an order or settlement agreement with a Governmental Authority in a
proceeding not initiated by the Company or its Affiliates, provided
that, in the case of this clause (y), such investment or series of
investments are undertaken by the Company in a manner so as to cause
the cost to the Company to be the lowest cost investment(s) that meets
the requirements of the applicable Law, are acceptable to the
applicable Governmental Authority, or comply with the applicable order
or settlement agreement;
(iii) Make any Major Acquisition;
(iv) Make any Minor Acquisition which shall
not be in compliance with the criteria set forth in Exhibit B-1 (the
"Minor Acquisition Criteria"), as such criteria may be amended by the
Board from time to time;
(v) Other than the sale of inventory in the
ordinary course of business, make any sale, lease, exchange, transfer
or other disposition of assets in any Fiscal Year where the aggregate
value of all such assets during such Fiscal Year would exceed
US$2,000,000;
(vi) Incur any indebtedness for borrowed
money where the amount of such indebtedness incurred, together with all
other indebtedness of the Company and its Subsidiaries, exceeds
US$1,000,000 in the aggregate; provided that (x) the incurring of
indebtedness pursuant to Section 19(a)(ii) or Section 19(c)(ii) shall
not require approval of the Board so long as the incurring of such
indebtedness, after giving effect thereto, shall not cause the
Company's ratio of indebtedness for borrowed money to EBITDA to exceed
3.5:1 and (y) the incurring of indebtedness pursuant to Section
19(a)(iii) or Section 19(c)(iii) shall not require approval of the
Board;
(vii) Issue any equity;
(viii) Make aggregate distributions to any
Member of cash at any level above seventy-five percent (75%) or below
fifty percent (50%) of EBITDA for any given Fiscal Year;
(ix) Amend the Ready Mix Boundaries;
(x) Change, modify or amend this LLC
Agreement;
(xi) Make any determination of the gross
fair market value of any property or assets contributed to the Company;
(xii) Make any request for an Extraordinary
Required Additional Capital Contribution pursuant to Section 4.1(b)(i)
hereof;
(xiii) Enter into any material joint
venture, partnership or consortium;
(xiv) Redeem, repurchase, retire or
otherwise acquire for value of any equity interest in the Company;
(xv) Engage in any material business
activity outside the general scope of the Primary Business, taken as a
whole;
(xvi) Approve the selection of any
independent accounting firm to audit the Company's financial statements
if such firm is not a "Global Six"
accounting firm;
(xvii) Engage in any merger, consolidation
or similar transaction;
(xviii) Engage in any transaction or series
of related transactions (other than any Permitted Affiliate
Transaction) with or for the benefit of the Manager or any of its
Affiliates with a value in excess of US$1,000,000; provided, that in
any event, any such transaction or series of related transactions,
shall be entered on terms no less favorable to the Company than those
which it could obtain at that time on an arm's length basis from an
unaffiliated third party; provided further, however, that, for purposes
of this paragraph, none of Cemex, RMUSA or any of their respective
Affiliates shall be deemed to be Affiliates of the Company or any of
its Subsidiaries;
(xix) Guarantee or otherwise provide any
financial accommodation with respect to any indebtedness for borrowed
money of any other Person;
(xx) Make any proposal to cause the Company
to wind up, dissolve, liquidate or file for, or consent to, any
bankruptcy or similar proceeding with respect to the Company;
(xxi) Make any non-cash distribution to the
Members;
(xxii) Grant any lien or encumbrance with
respect to any asset of the Company or any of its Subsidiaries;
(xxiii) Make any Major Investment;
(xxiv) Make any Minor Investment which shall
not be in compliance with the criteria set forth in Exhibit B-2 (the
"Minor Investment Criteria"), as such criteria may be amended by the
Board from time to time; and
(xxv) Adopt any equity or other incentive
plans for officers, directors or employees of the Company or any of its
Subsidiaries.
(c) For so long as the Manager is a Member or an
Affiliate of a Member, the other Member(s) shall have the right to reasonably
direct the Company's prosecution or defense of any litigation or claim with, by
or against the Member that is the Manager or any of such Member's Affiliates
(other than the Company and any of its Subsidiaries).
(d) Officers.
(i) The Manager may, in its sole discretion,
from time to time, appoint officers who shall hold their offices for
such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Manager. A single person
may hold multiple offices. If appointed, the officers listed below
shall have the following duties and authority, unless otherwise
determined by the Manager, in connection with the management and
operations of the Primary Business (provided that if an officer enters
into a written employment agreement with the Company, such officer
shall also have the duties and authority described in such employment
agreement; provided further, that if there are any inconsistencies
between such employment agreement and this Section 8.2(d), the
provisions set forth in the employment agreement shall control).
(ii) President. The president shall be the
chief executive officer of the Company and, subject to the general
supervision by the Manager, shall have the general and active
management, supervision and control of the business and all operations
of the Company. The president shall, when present, preside at all
meetings of the Members, Board and of the Manager. The president may
sign and deliver deeds, mortgages, bonds, contracts, or other
instruments on behalf of the Company, except where required by law to
be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Manager to some
other officer or agent of the Company. In general, the president shall
perform all duties and shall have the authority incident to the office
of president and such other duties and authority as may be prescribed
by the Manager from time to time.
(iii) Vice-Presidents. In the absence of the
president or in the event of the president's death or inability to act,
the vice-president (or in the event there be more than one
vice-president, the vice-presidents acting in the order determined by
the Manager) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the president. Any vice-president shall perform such
other duties as from time to time may be assigned to the vice-president
by the president or by the Manager.
(iv) Secretary. The secretary shall prepare
and keep the minutes of the proceedings of the Members and of the
Manager in one or more books provided for that purpose; have
responsibility for authenticating records of the Company; see that all
notices are duly given in accordance with the provisions of this LLC
Agreement or as required by law; be custodian of the records of the
Company; keep a register of the post office address of each Member and
Manager which shall be furnished to the secretary by such Member or
Manager; and in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to
the secretary by the president, any vice president or the Manager. If
there is no treasurer of the Company, the secretary shall assume the
authority and duties of treasurer.
(v) Treasurer. The treasurer shall have
charge and custody of and be responsible for all funds and securities
of the Company, receive and give receipts for moneys due and payable to
the Company from any source whatsoever, and deposit all such moneys in
the name of the Company in such banks, trust companies or other
depositories as may be designated by the Manager, and in general
perform all of the duties incident to the office of treasurer and such
other duties as from time to time may be assigned to the treasurer by
the president, any vice-president or the Manager.
(vi) Assistant Secretaries and Assistant
Treasurers. The assistant secretary, or if there shall be more than
one, the assistant secretaries acting in the order determined by the
Manager, shall, in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary. The assistant
treasurer, or, if there shall be more than one, the assistant
treasurers acting in the order determined by the Manager, shall, in the
absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer. The assistant secretaries and assistant
treasurers shall all perform such other duties as shall be assigned to
them by the secretary and treasurer, respectively, or by the president,
any vice-president or the Manager.
(vii) Additional Officers. The Manager may
appoint such other officers and agents as it shall deem necessary who
shall hold their offices for such term and shall exercise such powers
and perform such duties as shall be determined from time to time by the
Manager.
All actions taken by the foregoing officers of the Company in
accordance with the authority granted to them in this Section 8.2(d) shall be
binding on the Company and may be relied upon by third parties, except to the
extent any such third party has actual knowledge that such action is in
contravention of a resolution passed by the Manager.
8.3 Tax Matter and Elections. The Manager shall, without any
further consent of the Members being required (except as specifically required
herein), make any and all elections for federal, state, local, and foreign tax
purposes including, without limitation, any election, if permitted by applicable
law: (i) to adjust the basis of Company assets pursuant to Code Sections 754,
734(b) and 743(b), or comparable provisions of state, local or foreign law, in
connection with Transfers of Membership Interests and Company distributions;
(ii) with the consent of all of the Members, to extend the statute of
limitations for assessment of tax deficiencies against the Members with respect
to adjustments to the Company's federal, state, local or foreign tax returns;
and (iii) to the extent provided in Code Sections 6221 through 6231 and similar
provisions of federal, state, local, or foreign law, to represent the Company
and the Members before taxing authorities or courts of competent jurisdiction in
tax matters affecting the Company or the Members in their capacities as Members,
and to file any tax returns and execute any agreements or other documents
relating to or affecting such tax matters, including agreements or other
documents that bind the Members with respect to such tax matters or otherwise
affect the rights of the Company and the Members. RMUSA is specifically
authorized to act as the "Tax Matters Member" under the Code and in any similar
capacity under state or local law.
8.4 Cash Deposits. All funds of the Company shall be deposited
in a United States national or state bank with federal deposit insurance, or in
a national brokerage house with deposit insurance. However, the Manager shall
not have a duty to seek the highest possible yield for Company funds. Only the
Manager (or, in the case of a corporate Manager, its authorized officers or
officers of the Company authorized by the Manager) may sign checks and drafts on
such account or accounts.
8.5 General Duties. The Manager shall take all action that may
be necessary or appropriate for the continuation of the Company's valid
existence as a limited liability company under the laws of the State of Delaware
(and each other jurisdiction in which such existence is necessary to protect the
limited liability of the Members or to enable the Company to conduct the
business in which it is engaged).
8.6 Removal.
(a) In the event the Manager is the Majority Member
or an Affiliate thereof, the Majority Member shall have the right to remove and
replace the Manager at any time with any Affiliate of the Majority Member (other
than the Company and any of its Subsidiaries), provided that such Affiliate
shall own a majority interest of the Membership Interest held by the Majority
Member and all of its Affiliates.
(b) In the event the Manager is not the Majority
Member or an Affiliate thereof, at a meeting of the Members called expressly for
that purpose, the Manager may be removed at any time, with or without cause, by
the affirmative vote of Members holding a Majority-in-Interest in the Company. A
successor Manager may be elected by the affirmative vote of Members holding a
Majority-in-Interest in the Company.
(c) In the event of a Transfer of Membership
Interests by one or more Members that results in a change in the Majority
Member, the new Majority Member shall have the power to remove the Manager and
appoint itself or any of its Affiliates as Manager.
8.7 Indemnification of Manager(s), Members, Officers and
Employees.
(a) Every Person (and the heirs, executors and
administrators of such Person) who serves, or has served as a manager (including
the Manager), member (including the Members), officer, member of the Board,
director or employee of the Company, or of any other entity when requested by
the Company, and of which the Company directly or indirectly is or was a
security holder or creditor, or otherwise interested, or in the stocks, bonds,
securities or other obligations of which it is in any way interested, shall be
indemnified by the Company against any and all liability and reasonable expense
that may be incurred by such Person in connection with or resulting from any
claim, action, suit or proceeding (whether brought by or in the right of the
Company or such other entity or otherwise), civil or criminal, or in connection
with an appeal relating thereto, in which such Person may become involved, as a
party or otherwise, by reason of such Person being or having been a manager,
member, officer, member of the Board, director or employee of the Company or
such other entity, or by reason of any action taken or not taken by such Person
in such capacity, whether such Person continues to be such manager, member,
officer, member of the Board, director or employee at the time such liability or
expense shall have been incurred, provided such Person acted in good faith and
within the scope of such Person's authority in the course of the Company's or
such other entity's business and, in addition, in any criminal action or
proceeding, had no reasonable cause to believe that such Person's conduct was
unlawful.
(b) As used herein, the terms "liability" and
"expense" shall include, but shall not be limited to, counsel fees and
disbursements and amounts of judgments, fines or penalties against, and amounts
paid and settlements by or for such Person. The termination of any claim,
action, suit or proceedings, civil or criminal by judgment, settlement (whether
with or without court approval) or conviction shall not create a presumption
that such person does not meet the standards of conduct set forth herein. Except
in the case of an action or suit by or in the right of the Company to procure a
judgment in its favor, no indemnification shall be made in respect of any claim,
issue or matter as to which such Person shall have been adjudged to be liable
for gross negligence or willful misconduct in the performance of such Person's
duties to the Company unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
(c) Expenses incurred with respect to any such claim,
action, suit or proceeding may be advanced by the Company prior to the final
disposition thereof upon receipt of an undertaking by or on behalf of such
Person to repay such amount if and to the extent that it shall ultimately be
determined that such Person is not entitled to indemnification hereunder.
(d) The Manager shall be fully protected in relying
in good faith upon the records of the Company and its Subsidiaries and upon such
information, opinions, reports or statements presented to the Company and its
Subsidiaries by any of its other Members, or any of the officers, employees or
committees of the Company or any of its Subsidiaries, or by any other person, as
to matters the Manager reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Company or any of its Subsidiaries (including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, or losses of the Company or any of its
Subsidiaries or any other facts pertinent to the existence and amount of assets
from which distributions to Members might properly be paid). In addition, the
Manager may consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors selected by
them, and any opinion of any such person as to matters which the Manager
reasonably believe to be within such person's professional or expert competence
shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by the Manager hereunder in good faith and in
accordance with such opinion.
(e) The Company shall have the power to purchase and
maintain insurance on behalf of any Person who is or was a manager, member,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, partner, employee or agent of another
company, corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such Person and incurred by such Person
in any such capacity, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of this LLC Agreement.
(f) The indemnification authorized in and provided by
this Section 8.7 shall not be deemed exclusive of and shall be in addition to
any other right to which those indemnified may be entitled under any statute,
rule of law, provision of the Certificate of Formation, this LLC Agreement,
other agreement, vote or action of Members or by the Manager, or otherwise, and
shall continue as to a Person who has ceased to be a Member or Manager and shall
inure to the benefit of the heirs, executors and administrators of such a
Person.
8.8 Paid Services.
(a) The Company shall pay the Manager a monthly
management fee in the amount of $50,000 (the "Services Fee") for the performance
by Manager of the Paid Services. The Manager shall have the right to subcontract
with an Affiliate of Manager, to provide the Paid Services to the Company.
Notwithstanding the foregoing, the Manager shall be responsible, and neither the
Company nor Cemex shall be responsible, for (i) any costs or expenses of the
Paid Services, and (ii) making any payments to providers of the Paid Services.
Cemex, RMUSA and the Company acknowledge and agree that the Paid Services
include and require the provision of substantive administrative and oversight
services (as enumerated in the definition of Paid Services) and not merely the
procurement of such administrative and oversight services from other
unaffiliated parties. The amount of the Service Fee shall be increased annually,
effective January 1 of each year, by the percentage increase, if any, in the
Consumer Price Index - All Urban Consumers (Area: South Urban), as prepared by
the U.S. Department of Labor, Bureau of Labor Statistics, from the immediately
prior January 1.
(b) With respect to the Paid Services, the Manager
shall only be liable to the Company for any loss, liability, damage, claim,
expense, fine, penalty, interest cost, or other obligation of any nature arising
out of this LLC Agreement to the extent caused by the Manager's, its
Affiliates', and their respective directors', officers', employees', and agents'
gross negligence, willful misconduct or fraud with respect to the Paid Services
under this LLC Agreement. The Company hereby releases the Manager and its
Affiliates, and their respective directors, officers, employees, and agents
from, and the Company shall indemnify such Persons against, any claim, loss,
damage, liability or obligation (including reasonable attorneys' fees and
expenses) claimed or asserted in connection with the Paid Services by the
Company or any third party attributable to causes other than such Persons' gross
negligence, willful misconduct, fraud, or intentional breach of the Manager's
obligations with respect to the Paid Services under this LLC Agreement. It is
the intention of the parties hereto that the release by, and indemnity
obligations of, the Company under this Section 8.8(b) hold the Manager and its
Affiliates, and their respective directors, officers, employees, and agents
harmless from and against the consequences of their own ordinary negligence with
respect to the Paid Services under this LLC Agreement, including to the extent
such ordinary negligence is the sole, concurrent, or joint cause of any such
claim, loss, damage, liability or obligation.
8.9 Fiduciary Duties.
(a) Duty of Loyalty. The purposes of this Section
8.9(a) are (i) to set forth the agreement among the Members with respect to the
duty of loyalty that the Manager owes to the Members and the Members owe to each
other and (ii) to identify the types and categories of activities by the Manager
and the Members that do not violate such duty of loyalty. The Members hereby
agree that the duty of loyalty consists solely of the duty of the Manager (in
its capacity as such) to act in good faith in a manner the Manager reasonably
believes to be in the best interest of the Company and the Members. Except as
expressly provided in Section 19, the Members and their Affiliates (including,
if applicable, the Manager) may engage or invest in, independently or with
others, any business activity of any type or description, including those that
might be the same as or similar to the Company's business and that might be in
direct or indirect competition with the Company. Except as expressly provided in
Section 19, neither the Company nor any other Member shall have any right in or
to such other ventures or activities or to the income or proceeds derived
therefrom. Except as expressly provided in Section 19, neither any Member nor
the Manager shall be obligated to present any investment opportunity or
prospective economic advantage to the Company, even if the opportunity is of the
character that, if presented to the Company, could be taken by the Company.
Except as expressly provided in Section 19, the Members and the Manager shall
have the right to hold any investment opportunity or prospective economic
advantage for their own account or to recommend such opportunity to Persons
other than the Company. Each Member acknowledges that the other Members and
their Affiliates (including, if applicable, the Manager) conduct other
businesses, including businesses that may compete with the Company and for the
Members' time. Each Member hereby waives any and all rights and claims that it
may otherwise have against the other Members and their Affiliates (including, if
applicable, the Manager) as a result of any of such activities. No Member or
officer of the Company shall be required to manage the Company as such Member's
or officer's sole and exclusive function. The parties hereby agree and
acknowledge that the members of the Board shall be entitled to act solely in the
interest of the Member that appointed them. For purposes of this paragraph,
neither the Company nor any of its Subsidiaries shall be deemed an Affiliate of
any Member.
(b) Duty of Care. The purpose of this Section 8.9(b)
is to set forth the agreement among the Members with respect to the duty of care
that the Manager owes to the Members and to the Company. The Members hereby
agree that such duty of care consists solely of the duty to act with such care
as an ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs such duty of care shall not be liable
to the Company or to any other Member for any loss or damage sustained by the
Company or any other Member.
(c) Totality of Duties. Without limiting the
generality of the foregoing, the Members agree that the foregoing subsections
(a) and (b) describe in its totality the fiduciary duties of the Manager to the
Company and its Members, and that the fiduciary duties of the Manager to the
Company and its Members shall not be those of a director to a corporation and
its shareholders under the DGCL or those of a partner to a partnership and its
partners. Any Manager who performs the duties of a Manager in compliance with
this Section 8.9 shall not have any liability by reason of being or having been
a Manager of the Company. In any action challenging any action or determination
of the Board of Managers, the party challenging such action or determination
shall have the burden of proving its allegations, and nothing shall shift the
burden of proof with respect to the satisfaction of the standard set forth above
to the Manager.
8.10 Antitrust Compliance. The Members agree and will adhere
to the appropriate competitive rules and firewalls set forth herein.
(a) Until Cemex, Inc. divests its ownership of the
Allied Assets, Cemex, Inc. personnel who sit on the Company's Board shall not be
involved in or privy to any decision making regarding customers or the price,
terms or conditions at which ready mix is sold by the Company, nor shall they
have access to any such information.
(b) No Cemex, Inc. personnel involved in the sale or
distribution of cement to ready mix companies in the Cement Boundaries or the
Ready Mix Boundaries shall be appointed to the Board of the Company, nor shall
such persons have access to any competitively sensitive information pertaining
to the sale of ready mix by the Company.
(c) The Company agrees to develop and implement
antitrust compliance programs to assure its compliance with all applicable
antitrust and competition laws.
9. Transfers of Membership Interest.
9.1 Transfer Restrictions.
(a) No Member shall Transfer all or any portion of
its Membership Interest in the Company except in strict compliance with the
terms and conditions of this Section 9. The foregoing notwithstanding, neither
RMUSA nor any of its Affiliates shall Transfer (other than a Permitted Transfer
or upon exercise of the Put Option or pursuant to Section 9.4) all or any
portion of its Membership Interest in the Company for a period commencing on the
date hereof and ending on the date on which the Put Option is no longer
exercisable by RMUSA pursuant to Section 9.6 hereof. Any attempted Transfer in
violation of this Section 9 shall be null and void and of no effect whatsoever.
Each Member hereby acknowledges the reasonableness of the restrictions on
Transfer imposed by this LLC Agreement in view of the Company's purposes and the
relationship between the Members. Accordingly, the restrictions on Transfer
contained herein shall be specifically enforceable. Each Member hereby further
agrees to hold the Company and each other Member (and each such Member's
successors and permitted assigns) wholly and completely harmless from any cost,
liability, or damage (including, without limitation, liabilities for income
taxes, legal fees, expenses and other costs of enforcing this indemnity)
incurred by any of such other Members and indemnified Persons as a result of a
Transfer or an attempted Transfer by the Member in violation of this LLC
Agreement. A Member shall not be entitled to Transfer all or any portion of its
Membership Interest in the Company unless such Member is also transferring a pro
rata portion of its membership interest in Cemex Southeast LLC.
(b) With respect to each Member, any transaction or
series of related transactions that results in any holder of the Membership
Interests no longer being an Affiliate of the ultimate parent of such Member on
the Contribution Date (with respect to such Member, the "Ultimate Parent") shall
constitute a Transfer of the Membership Interest held by such holder for all
purposes of this Section 9.
(c) If a Member is a Member by virtue of the fact
that an Affiliate of such Member (the "Base Member") has transferred any of the
Membership Interest owned by such Base Member to such Member, but as a result of
a proposed transaction such Member will no longer be an Affiliate of the
Ultimate Parent of such Base Member, then unless the consent contemplated by
Section 9.2(c)(i) hereof is obtained prior to the consummation of such proposed
transaction, any Membership Interest beneficially owned by such Member must be
transferred to an Affiliate of the Ultimate Parent of such Base Member prior to
such Member's loss of Affiliate status in respect of the Ultimate Parent of such
Base Member, provided that if such transfer does not occur prior to such loss of
such Affiliate status, in addition to any remedy available to the Company for
the breach of this LLC Agreement resulting therefrom, such Member shall
automatically cease to be a Member, and the Company shall be entitled to treat
the Ultimate Parent of such Base Member as the holder of the Membership Interest
held by such Member for all purposes hereunder, notwithstanding any prior
registration or recognition of the transfer of such Membership Interest to such
Member.
(d) For purposes of this Section 9.1, the "Ultimate
Parent" of each Member shall be as set forth on Schedule 9.1(d) hereof.
9.2 Consent and Other Requirements. Neither Member will
Transfer (other than a Permitted Transfer) all or any portion of its Membership
Interest in the Company, unless:
(a) prior to the Transfer, the Company receives,
unless waived by the non-transferring Member, in writing, an opinion of counsel
reasonably satisfactory to the non-transferring Member that such Transfer is not
subject to registration under, or is exempt from the registration requirements
of, the applicable state and federal securities laws;
(b) contemporaneously with the Transfer, the
transferee shall execute the Adoption Agreement in the form of Exhibit D and the
transferee shall pay all reasonable expenses, including attorneys' fees,
incurred by the Company in connection with such Transfer; and
(c) the transferring Member shall either:
(i) first obtain the written consent to such
Transfer by each of the non-transferring Members; or
(ii) comply with the provisions of Sections
9.3 and 9.4 hereof as applicable.
9.3 Right of First Refusal.
(a) Subject to the second sentence of Section 9.1(a)
hereof, in the event any Member (the "Transferring Member") receives a bona fide
third party offer to acquire any or all of such Transferring Member's Membership
Interest or any interest therein (other than a Permitted Transfer), including
any transaction that constitutes a Transfer under Section 9.1(b) or (c), which
offer such Transferring Member wishes to accept, such Transferring Member shall
promptly notify the other Member (the "Non-Transferring Member") in writing of
such offer (the "Offer Notice"), setting forth the name and address of the
prospective purchaser or acquiror, the amount of the Transferring Member's
Membership Interests to be Transferred, the price or method of determining such
price as designated by the Transferring Member and the prospective purchaser or
acquiror (the "Offer Price"), and the material terms and conditions of such
proposed Transfer, subject to Section 9.3(f). The Non-Transferring Member shall
have a period of thirty (30) days (the "Offer Option Period") after the receipt
of the Offer Notice within which to notify such Transferring Member in writing
that it wishes to acquire all (but not less than all) of such Membership
Interests that are proposed to be Transferred at a price equal to the Offer
Price and, upon the same terms and conditions set forth in the Offer Notice (the
"Offer Acceptance Notice"), subject to Section 9.3(f); provided, however, that
the Non-Transferring Member shall not be entitled to provide both an Offer
Acceptance Notice under this Section 9.3 and a Tag Along Notice pursuant to the
terms of Section 9.4 hereof.
(b) If the Non-Transferring Member gives the
Transferring Member an Offer Acceptance Notice within the Offer Option Period,
then it shall be obligated to purchase all (but not less than all) of such
Membership Interests that are proposed to be Transferred at a price equal to the
Offer Price and upon the same terms and conditions set forth in the Offer
Notice, subject to Section 9.3(f), and shall have up to one (1) year after it
gives such Offer Acceptance Notice to do all the things necessary to consummate
the transaction, including, but not limited to, receiving consents and entering
into agreements. If the Non-Transferring Member receives such consents and
enters into such agreements as are necessary to consummate the transactions,
then such Transferring Member shall be obligated to Transfer to the
Non-Transferring Member, and the Non-Transferring Member shall be obligated to
acquire from such Transferring Member, such Membership Interests at the Offer
Price and, on the terms and conditions set forth in the Offer Notice, subject to
Section 9.3(f). Within thirty (30) days following the closing of the purchase by
the Non-Transferring Member of the Transferring Member's Membership Interests
(the "Transfer Closing"), the Company shall distribute to the Transferring
Member (A) an amount equal to the product of (x) the Percentage Interest of the
Transferring Member immediately prior to the Transfer Closing and (y) all EBITDA
earned by the Company from the date of the Offer Acceptance Notice through the
date of the Transfer Closing that has not been distributed to the Members
pursuant to and in accordance with Section 6.1(a) hereof and (B) an amount equal
to the product of (x) the Percentage Interest of the Transferring Member
immediately prior to the Transfer Closing and (y) all cash in excess of the sum
of (i) the average current liabilities of the Company for the preceding twelve
(12) months and (ii) the aggregate amount of cash necessary to fund budgeted
capital expenditures.
(c) Subject to Section 9.4 hereof, if the
Non-Transferring Member does not give an Offer Acceptance Notice to such
Transferring Member within such Offer Option Period, such Transferring Member
shall be free to Transfer such Membership Interests to the party named in the
Offer Notice, provided that such Transfer is consummated within one (1) year
after the Offer Sale Reference Date (as defined below) at a price equal to or
greater than the Offer Price and upon substantially the same terms and
conditions (other than the price, which may be higher than the Offer Price) as
are set forth in the Offer Notice.
(d) If the Non-Transferring Member gives an Offer
Acceptance Notice within the Offer Option Period and fails to consummate the
transaction within one (1) year after it gives such Offer Acceptance Notice, in
addition to other available remedies in respect of such failure, the
Transferring Member shall be free to Transfer its Membership Interest to the
party named in the Offer Notice at a price and on terms determined by the
Transferring Member (which shall not be required to be the terms set forth in
the Offer Notice), provided that such Transfer is consummated within one (1)
year after the Offer Sale Reference Date. In addition to the foregoing, such
failure by the Non-Transferring Member to consummate the transaction within the
one (1) year period after it gives the Offer Acceptance Notice shall, at the
election of the Transferring Member, constitute an Adverse Act; provided,
however, that notwithstanding anything to the contrary in Section 11.1 hereof,
the Transferring Member must make such election within one (1) year after the
Offer Sale Reference Date. The right of the Transferring Member to elect an
Adverse Act shall not be assignable to the buyer in the proposed Transfer
transaction and in the event the Transferring Member elects to have the failure
by the Non-Transferring Member constitute an Adverse Act, the subsequent
Transfer by the Transferring Member of its Membership Interest as contemplated
in the first sentence of this paragraph shall result in the Non-Transferring
Member no longer being an Adverse Member. If the Transferring Member elects to
cause the Non-Transferring Member to be an Adverse Member, as provided above,
the Non-Transferring Member will be an Adverse Member until the earliest to
occur of (i) a Transfer by the Transferring Member of its Membership Interest as
contemplated in the first sentence of this paragraph, (ii) the purchase by the
Transferring Member of the Membership Interest of the Non-Transferring Member
pursuant to Section 11.1(d), or (iii) in the event that the Non-Transferring
Member makes a bona fide tender to the Transferring Member of the Offer Price
set forth in the Offer Notice in immediately available funds against delivery of
the Membership Interest of the Transferring Member then, (x) if the Transferring
Member accepts such tender (which it shall be entitled to accept or reject in
its sole discretion), the date of the transfer of such Membership Interest to
the Non-Transferring Member or (y) if the Non-Transferring Member does not
accept such tender, the 60th day after such tender.
(e) The "Offer Sale Reference Date" shall mean (i)
the date on which the Offer Option Period expires or (ii) if the
Non-Transferring Member shall have given the requisite written notice during the
Offer Option Period but shall have failed to consummate such transaction within
the one (1) year period provided above, the date on which such one year period
shall end; provided, that if during such one year period the Non-Transferring
Member shall have notified such Transferring Member in writing that the
Non-Transferring Member will not consummate such transaction and that the
Non-Transferring Member waives its rights under this Section 9.3 with respect to
that particular Offer Notice, then the Offer Sale Reference Date shall be the
date of such notice from the Non-Transferring Member.
(f) For purposes of this Section 9.3 and Section 9.4
hereof, with respect to any transaction that constitutes a Transfer under
Section 9.1(b) or (c) (an "Indirect Sale"):
(i) the Offer Price shall be the amount
designated by the Transferring Member and the prospective purchaser or
acquiror;
(ii) the "terms and conditions" of such
Indirect Sale shall be deemed to contemplate a direct transfer of the
Membership Interest on the other terms and conditions of such Indirect
Sale; provided, however, that for purposes of this Section 9.3 any such
terms and conditions that relate solely to the form of transaction
which are not applicable to such deemed form shall be disregarded (for
example, if the Indirect Sale is a merger, and a condition to such
merger is the filing of a certificate of merger with the applicable
secretary of state, such condition shall be disregarded for purposes of
this Section 9.3); and
(iii) with respect to this Section 9.3, at
the election of the Transferring Member, the sale of the Membership
Interest pursuant to Section 9.3(b) shall be conditioned upon the
closing of the Indirect Sale that gave rise to the obligation to
provide the Offer Notice with respect to such sale.
(g) For the avoidance of doubt, for purposes of this
Section 9.3, with respect to any transaction that constitutes a Transfer under
Section 9.1(b) or (c), the only right of the Non-Transferring Member shall be to
purchase the Membership Interest of the Transferring Member, and not any other
assets or securities being transferred by the Transferring Member or any of its
Affiliates.
9.4 Tag Along Right.
(a) In lieu of delivering an Offer Acceptance Notice,
the Non-Transferring Member shall have the right (the "Tag Along Right"), during
the Offer Option Period, to deliver a written notice (the "Tag Along Notice") to
the Transferring Member, requesting to include in such Transfer a percentage of
its Membership Interest equal to or less than the Prorata Portion (as
hereinafter defined) of the Membership Interest of the Non-Transferring Member.
The "Prorata Portion" with respect to the Non-Transferring Member shall equal
the product of (i) the Membership Interest of the Non-Transferring Member, and a
fraction (x) the numerator of which shall be equal to the amount of the
Transferring Member's Membership Interests to be Transferred and (y) the
denominator of which shall be equal to the total Membership Interests of the
Transferring Member.
(b) In the event the Non-Transferring Member shall
have delivered a Tag Along Notice to the Transferring Member prior to the
expiration of the Offer Option Period, the Transferring Member, shall include in
any such Transfer upon the same terms and conditions, the Pro Rata Portion of
the Non-Transferring Member's Membership Interest. Such terms and conditions
shall include, without limitation, (i) the Transfer consideration and (ii) the
provision of information, representations, warranties, covenants and requisite
indemnifications. Any Tag Along Notice shall be irrevocable once received by the
Transferring Member.
(c) If the Non-Transferring Member shall not have
delivered the Tag Along Notice during the Offer Option Period, it shall be
deemed to have irrevocably waived its rights under this Section 9.4 with respect
to the Transfer contemplated by the Offer Notice.
(d) In addition to any other available remedies, in
the event that the Non-Transferring Member who gives a Tag Along Notice within
the Offer Option Period to Transfer its Membership Interest pursuant to the
transaction set forth in the Offer Notice breaches any of its obligations to the
purchaser under the Non-Transferring Member's agreement with the purchaser
related to such transaction, where (i) such transaction involves the Transfer of
all of the Membership Interest of the Non-Transferring Member as well as all of
such Member's membership interest in Cemex Southeast LLC, and (ii) such breach
causes the contemplated transaction to be terminated by the purchaser, shall, at
the election of the Transferring Member, constitute an Adverse Act; provided,
however, that notwithstanding anything to the contrary in Section 11.1 hereof,
the Transferring Member must make such election within sixty (60) days after the
date on which the Transfer subject to such Tag Along Notice would have occurred
but for the failure of the Non-Transferring Member. The right of the
Transferring Member to elect an Adverse Act shall not be assignable to the buyer
in the proposed Transfer transaction. If the Transferring Member elects to cause
the Non-Transferring Member to be an Adverse Member, as provided above, the
Non-Transferring Member will be an Adverse Member until the earliest to occur of
(i) the purchase by the Transferring Member of the Membership Interest of the
Non-Transferring Member pursuant to Section 11.1(d) hereof, or (ii) the
Non-Transferring Member has fully indemnified the Transferring Member from and
against any and all Damages incurred by the Transferring Member arising out of
or relating to the Non-Transferring Member's failure to consummate such
transaction.
9.5 Certain Permitted Transfers. Subject to Sections 9.1(a),
(b) and (c) hereof, each Member shall be entitled to Transfer all or any portion
of its Membership Interest in the Company to such Member's Affiliates (a
"Permitted Transfer"); provided, however, that such transferee(s) (the
"Permitted Transferee(s)") shall become parties to, and shall be subject to the
terms and conditions of, this LLC Agreement; provided, further, that if any such
Transfer shall result in a termination of the Company within the meaning of ss.
708 of the Code, such Transfer shall be prohibited and not constitute a
Permitted Transfer. Any such Permitted Transferee shall automatically and
without further action of the Board, the Manager or the Members become an
additional or substitute member of the Company, as applicable. For purposes of
this Section 9.5, none of Cemex, RMUSA or any of their respective Affiliates
shall be deemed to be Affiliates of the Company or Cemex Southeast LLC or any of
their respective Subsidiaries.
9.6 Option of RMUSA to Put Membership Interest.
Notwithstanding any provision herein to the contrary, RMUSA shall have the
option, exercisable at its sole and absolute discretion, to require Cemex, Inc.
to purchase all, but not less than all, of the Membership Interest in the
Company held by RMUSA and its Affiliates on the terms and conditions contained
in this Section 9.6 (the "Put Option"). RMUSA and Cemex, Inc. acknowledge and
agree that the Put Option may only be exercised by RMUSA together with an
exercise of its similar right to require Cemex, Inc. to purchase all of the
membership interests of RMUSA and its Affiliates in Cemex Southeast LLC pursuant
to the Cemex Southeast LLC Operating Agreement. For purposes of this Section
9.6, neither the Company nor any of its Subsidiaries shall be deemed an
Affiliate of any Member.
9.6.1 Put Option Term.
(a) Subject to paragraph (b) below, the Put Option
may be exercised by RMUSA at any time during the
period commencing on the expiration of three (3) years from the Contribution
Date and expiring twenty-five (25) years from the Contribution Date. The
foregoing notwithstanding, in the event Cemex or any of its Affiliates receives
a bona fide third party offer to acquire any or all of its Membership Interest
or any interest therein (other than a Permitted Transfer), including any
transaction that constitutes a Transfer under Section 9.1(b) or (c) hereof,
which results in Cemex or an Affiliate thereof giving an Offer Notice as
contemplated in Section 9.3 prior to the third (3rd) anniversary of the
Contribution Date, the Put Option shall become exercisable immediately and shall
remain exercisable, subject to paragraph (b) below, until (i) the proposed
Transfer is consummated, or (ii) the proposed Transfer is abandoned by Cemex or
its Affiliates or the proposed purchaser (unless such event occurs on or
following the date which is the third (3rd) anniversary of the Contribution
Date, in which case the Put Option shall remain exercisable subject to the other
terms and conditions of this LLC Agreement).
(b) Notwithstanding anything in this LLC Agreement to
the contrary,
(i) in the event either RMUSA delivers an
Offer Acceptance Notice or a Tag Along Notice with respect to a
proposed Transfer by Cemex or any of its Affiliates in accordance with
Section 9.3 or 9.4, as the case may be, or RMUSA fails to deliver a
Notice pursuant to Section 9.6.2 during any Offer Option Period with
respect to a Transfer Notice concerning a Transfer by Cemex or any of
its Affiliates of all of the Membership Interests in the Company held
by Cemex and its Affiliates, then RMUSA's right to exercise the Put
Option shall be suspended as of the date of such Offer Acceptance
Notice or Tag Along Notice, or at the end of such Option Offer Period,
as the case may be, and either (x) the Put Option shall terminate and
be of no further effect (1) upon the consummation of the purchase by
RMUSA of all of the Membership Interest of Cemex and its Affiliates in
the Company pursuant to Section 9.3, whereupon neither Cemex nor any of
its Affiliates remain as Members of the Company, or (2) upon the
consummation of the sale by RMUSA (or its Affiliates) of all of the
Membership Interest of RMUSA (or its Affiliates, as the case may be) in
the Company pursuant to Section 9.4, whereupon neither RMUSA nor any of
its Affiliates remain as Members of the Company, or (y) RMUSA's right
to exercise the Put Option shall be reinstated from and after
(A) the termination of the proposed
Transfer by Cemex (or its Affiliates) of all of the Membership
Interest of Cemex (and its Affiliates) pursuant to Section 9.3
where such termination is due to the failure of Cemex (or its
Affiliates) to consummate such Transfer in breach of its
obligations with respect thereto,
(B) the consummation of the
purchase by RMUSA of the Membership Interest of Cemex and its
Affiliates in the Company pursuant to Section 9.3 which
constitutes a Transfer of less than all of the Membership
Interest of Cemex and its Affiliates in the Company and
whereupon following such purchase Cemex or its Affiliates
continue to hold a Membership Interest in the Company, or
(C) the abandonment of the proposed
Transfer that was the subject of the Tag Along Notice and the
termination of any definitive agreement with respect to such
proposed Transfer; provided however, that in the event the
proposed Transfer giving rise to rights in RMUSA under Section
9.4 is with respect to a transfer of less than all of Cemex's
(or its Affiliate's) Membership Interest, the suspension
contemplated above shall apply only to the Put Option as it
concerns the Membership Interests proposed to be transferred
by RMUSA (or its Affiliate) pursuant to Section 9.4 and RMUSA
shall retain its rights to exercise the Put Option with
respect to any remaining portion of its Membership Interest;
(ii) in the event that RMUSA is the
Non-Transferring Member who failed to consummate the Transfer pursuant
to the terms of Section 9.3(b), then RMUSA's right to exercise the Put
Option shall remain suspended as of the Offer Sale Reference Date and
the Put Option shall terminate and be of no further effect upon the
Transfer of all of Cemex's (or its Affiliate's) Membership Interests in
accordance with Section 9.3(d) hereof;
(iii) in the event RMUSA or any of its
Affiliates is the Non-Transferring Member and Cemex or any of its
Affiliates is the Transferring Member, as contemplated in Section 9.3,
and the proposed Transfer will result in the Transfer of all of the
remaining Membership Interest of Cemex and all of its Affiliates (and a
Transfer of all of the remaining Membership Interest of Cemex and all
of its Affiliates in Cemex Southeast LLC, if any), and upon receiving
the Offer Notice neither RMUSA nor any of its Affiliates gives an Offer
Acceptance Notice or Tag Along Notice to Cemex within the Offer Option
Period, and RMUSA does not exercise its Put Option, and Cemex and any
of its Affiliates, as the case may be, thereafter consummates the
Transfer of all of the remaining Membership Interest of Cemex and its
Affiliates (and a Transfer of all of the remaining Membership Interest
of Cemex and all of its Affiliates in Cemex Southeast LLC, if any), as
contemplated herein, upon the consummation of the Transfer the Put
Option shall terminate and be of no further effect;
(iv) in the event RMUSA or any of its
Affiliates is an Adverse Member pursuant to clause (ii) or (v) of the
definition of Adverse Act, then RMUSA's right to exercise the Put
Option shall be suspended until RMUSA is no longer an Adverse Member;
and
(v) in the event RMUSA or any of its
Affiliates is an Adverse Member pursuant to clause (i) of the
definition of Adverse Act, then, in the event RMUSA exercises the Put
Option following the sixtieth (60th) day after the Non-Adverse Member
gives the written notice set forth in Section 11.1 to RMUSA or any of
such Affiliates, the Purchase Price shall be reduced to the Buyout
Purchase Price.
9.6.2 Exercise. RMUSA may exercise the Put Option by
delivering to Cemex, Inc. a written notice of such exercise (the "Notice").
9.6.3 Purchase Price. (a) Except as provided in
Section 9.6.1(b)(v), the price which Cemex, Inc. shall pay to RMUSA for RMUSA's
Membership Interest pursuant to the Put Option (the "Purchase Price") shall be
determined based on one of the following formulas in accordance with paragraph
(b) below:
(i) an amount equal to the product of (x)
RMUSA's Percentage Interest as of the Exercise Date and (y) the
Adjusted Book Value as of the Exercise Date;
(ii) an amount equal to (x) (A) eight (8)
times the average EBITDA of the Company over the three (3) Fiscal Years
immediately preceding the Exercise Date minus (B) the Company's Debt as
of the Exercise Date, multiplied by (y) RMUSA's Percentage Interest as
of the Exercise Date [(A - B) * y]; or
(iii) an amount equal to (x) (A) eight (8)
times the EBITDA of the Company during the Fiscal Year immediately
preceding the Exercise Date minus (B) the Company's Debt as of the
Exercise Date, multiplied by (y) RMUSA's Percentage Interest as of the
Exercise Date [(A - B) * y].
For the avoidance of doubt, the Purchase Price shall
be determined as set forth above and there shall be no
adjustment to the amounts so determined for Working Capital (although the
parties acknowledge that the amount of Working Capital will affect the
calculation pursuant to clause (i) above). The parties acknowledge that Cemex
shall be entitled to retain all Working Capital in the Company as of the Put
Option Closing.
(b) RMUSA and Cemex, Inc. acknowledge and agree that
the pricing methodology which shall apply to the
sale of the Membership Interests of RMUSA and its Affiliates in the Company
shall be the same methodology as applies to the sale by RMUSA and its Affiliates
of their Membership Interests in Cemex Southeast LLC and shall be the
methodology that yields the highest result for the combined companies even if
the methodology utilized results in a negative number under this Section 9.6.3
or under Section 9.6.3 of the Cemex Southeast LLC Agreement. In the event that
the pricing methodology utilized under this Agreement pursuant to the
immediately preceding sentence results in a negative Purchase Price, then Cemex,
Inc. shall be entitled to a credit in an amount equal to the absolute value of
the Purchase Price against any amounts due from Cemex, Inc. to RMUSA pursuant to
Section 9.6.3 of the Cemex Southeast LLC Agreement. In the event that the
pricing methodology utilized under the Cemex Southeast LLC Agreement results in
a negative purchase price thereunder, then Cemex, Inc. shall be entitled to a
credit in an amount equal to the absolute value of such purchase price against
any amounts due from Cemex, Inc. to RMUSA pursuant to this Section 9.6.3, such
credit to be applied as of the Put Option Closing. In the event that the pricing
methodology utilized results in a negative Purchase Price and a negative
purchase price under the Cemex Southeast LLC Agreement (an absolute negative
number), then RMUSA shall pay to Cemex, Inc. the amount equal to the absolute
value of such total negative amount at the Put Option Closing by wire transfer
of immediately available funds.
(c) For purposes of determining the Purchase Price
under this Section 9.6.3, to the extent the Company
shall acquire any business(es) or assets associated therewith ("Acquired
Business"), which shall have been owned by the Company for less than twelve (12)
calendar months during the Fiscal Year immediately preceding the Exercise Date,
EBITDA of the Company for the Fiscal Year immediately preceding the Exercise
Date shall be increased by an amount which shall consist of the Prorata EBITDA,
as such term is defined below, in connection with such Acquired Business. For
purposes hereof, the term "Prorata EBITDA" shall mean, with respect to a
particular Acquired Business, the EBITDA of the Acquired Business for the twelve
(12) month period immediately preceding the date of the acquisition of the
Acquired Business ("Acquisition Date") by the Company multiplied by a fraction,
the numerator of which shall be equal to (x) twelve (12) less (y) the number of
months that have elapsed from the Acquisition Date to the end of the Fiscal Year
immediately preceding the Exercise Date, or, with respect to Section 11, the
Adverse Act Exercise Date, and the denominator of which shall be twelve (12).
For example, if the EBITDA of the Acquired Business for the twelve (12) month
period prior to the Acquisition Date shall be US$1,000,000 and the Acquisition
Date shall be three (3) months prior to the end of the Fiscal Year immediately
preceding the Exercise Date, EBITDA shall increase by US$750,000, or
US$1,000,000 x 9/12.
(d) For purposes of the calculations of clauses
(a)(ii) and (iii) above, in the event that EBITDA of
the Company includes EBITDA of assets that have been divested by the Company at
any time prior to the Exercise Date, EBITDA of the Company shall be adjusted to
subtract the EBITDA attributable to the divested assets during the period of
time referred to in clauses (a)(ii) and (iii), respectively.
(e) If at any time following the exercise of the Put
Option a member (other than the Company) of
either Reynolds, River City or RCI Marine purchases the membership interest held
by the Company in any of such companies upon the exercise of the member's
respective right under Section 9.2 of each of the Reynolds Operating Agreement,
the River City Operating Agreement or the RCI Marine Operating Agreement,
respectively (such member, the "Purchasing Member"), the Purchase Price shall be
recalculated as if the membership interest held by the Company in any such
company was divested prior to the Exercise Date in accordance with clause (d)
above, and for purposes of Section 9.6.3(a)(i), the Adjusted Book Value shall be
reduced by the book value of the transferred membership interests in any such
company. Upon receipt of the proceeds from the Purchasing Member, Cemex shall
pay to RMUSA an amount equal to the product of (x) the amount of such proceeds
and (y) RMUSA's Percentage Interest as of the Exercise Date. Notwithstanding
anything herein to the contrary, RMUSA shall cause the Company to take any and
all actions in connection with a request by a Purchasing Member to purchase any
membership interest of the Company in Reynolds, River City or RCI Marine, as the
case may be, as directed by Cemex.
9.6.4 Payment Terms.
(a) Within sixty (60) days after the Exercise Date,
the Company shall distribute to the Members all cash, if any, in excess of the
sum of (i) the average current liabilities of the Company for the preceding
twelve (12) months and (ii) the aggregate amount of cash necessary to fund
budgeted capital expenditures. A percentage of the portion of such distribution
to which Cemex would otherwise be entitled equal to one minus the Applicable Tax
Rate shall be paid to RMUSA (the amount so paid to RMUSA is referred to herein
as the "Cemex Post-Exercise Special Cash Distribution") and credited against the
Initial Payment (as defined below).
(b) Cemex, Inc. shall pay the Purchase Price as
follows:
(i) at the Put Option Closing, Cemex, Inc.
shall pay by wire transfer of immediately available funds an amount
(the "Initial Payment") equal to the greater of $200,000,000 or forty
percent (40%) of the Purchase Price;
(ii) on the first (1st) anniversary of the
Put Option Closing, Cemex, Inc. shall pay by wire transfer of
immediately available funds an amount (the "Second Installment") equal
to thirty percent (30%) of the Purchase Price; and
(iii) on the second (2nd) anniversary of the
Put Option Closing, Cemex, Inc. shall pay by wire transfer of
immediately available funds an amount (the "Third Installment") equal
to the remainder of the Purchase Price.
provided, however, that notwithstanding the foregoing in no event shall the
aggregate amount paid (and deemed paid) by Cemex, Inc. pursuant to clauses (i),
(ii) and (iii) exceed the Purchase Price. For purposes of the foregoing, Cemex,
Inc. shall be deemed to have paid to RMUSA (and shall be credited against the
amounts payable pursuant to the immediately preceding sentence), the Cemex
Post-Exercise Special Cash Distribution (which shall be credited against the
Initial Payment) and any Cemex Post-Exercise Regular Cash Distributions (each of
which shall be credited against the immediately following installment).
Notwithstanding the foregoing, Cemex, Inc. shall have the right to prepay all or
any part of the remaining amount of the Purchase Price at any time. For example,
if the Purchase Price is $700,000,000 and the Cemex Post-Exercise Special Cash
Distribution is $5,001,000, and assuming no Cemex Post-Exercise Regular Cash
Distributions or prepayments are made, then $274,999,000 shall be paid by Cemex,
Inc. to RMUSA at the Put Option Closing, $210,000,000 shall be paid by Cemex,
Inc. to RMUSA on the first anniversary of the Put Option Closing and
$210,000,000 shall be paid by Cemex, Inc. to RMUSA on the second anniversary of
the Put Option Closing.
(c) Beginning on the Exercise Date and continuing
until the Purchase Price is paid in full to RMUSA, a percentage of the portion
of each cash distribution made by the Company to which Cemex would otherwise be
entitled (other than the distribution contemplated by Section 9.6.4(a)) equal to
one minus the Applicable Tax Rate shall be paid to RMUSA (the amount so paid to
RMUSA is referred to herein as the "Cemex Post-Exercise Regular Cash
Distributions") and credited against the next installment of the Purchase Price.
(d) In the event as of the Put Option Closing RMUSA
owes an outstanding indemnity obligation to Cemex or its Affiliates or to the
Company or Cemex Southeast LLC or any of their respective Subsidiaries pursuant
to Section 9.2 of the Contribution Agreement or Section 9.2 of the Cemex
Contribution Agreement, which indemnity obligation has been finally determined
and quantified (whether through agreement of the parties or final,
non-appealable judgment) pursuant to the terms and procedures set forth in
Article 9 of the Contribution Agreement or the Cemex Contribution Agreement, as
the case may be, the amount of such indemnity obligation shall be offset against
the Purchase Price, and the amount thereof shall be deemed paid at the Put
Option Closing.
9.6.5 Closing. (a) The closing of the transaction
contemplated by this Section 9.6 (the "Put Option Closing") shall occur on a
date chosen by Cemex, Inc., in no event later than twelve (12) months after the
Exercise Date, at a time and place mutually agreeable to RMUSA and Cemex, Inc.
At the Put Option Closing:
(i) Cemex, Inc. shall deliver to RMUSA:
(x) the balance of the Initial Payment in
immediately available funds; and
(y) any other documents or agreements
required by this LLC Agreement or necessary to
effectuate the intended transfer.
(ii) RMUSA shall deliver to Cemex, Inc., or at its
direction:
(x) duly executed assignment of that certain
portion of its Percentage Interest determined in
accordance with Section 9.6.5(b);
(y) a certificate, dated as of the closing
date, containing a representation and warranty that
on the closing date RMUSA has transferred, or caused
to be transferred, to Cemex, Inc. (or its Affiliate)
good and marketable title to the portion of its
Percentage Interest being transferred, free and clear
of all claims, equities, liens, charges and
encumbrances; and
(z) any other documents or agreements
required by this LLC Agreement or necessary to
effectuate the intended transfer.
(b) In connection with the sale of its Membership
Interest pursuant to the Put Option, RMUSA shall assign and transfer its
Membership Interest to Cemex, Inc. (or its designated Affiliate) as follows:
(i) At the Put Option Closing, and upon the
receipt by RMUSA of payment in full of the Initial Payment, RMUSA shall
assign and transfer to Cemex, Inc. (or its designated Affiliate) a
portion of the Percentage Interest owned by RMUSA immediately prior to
the Put Option Closing equal to the product of the total amount of the
Percentage Interest owned by RMUSA immediately prior to the Put Option
Closing multiplied by a fraction, the numerator of which is the amount
of the Purchase Price paid or deemed paid by Cemex, Inc. and received
by RMUSA at or prior to the Put Option Closing and the denominator of
which is the Purchase Price.
(ii) In the event that RMUSA still owns a
Percentage Interest in the Company as of the first (1st) anniversary of
the Put Option Closing, on such anniversary and upon the receipt by
RMUSA of payment in full of the Second Installment, RMUSA shall assign
and transfer to Cemex, Inc. (or its designated Affiliate) a portion of
the Percentage Interest owned by RMUSA immediately prior to the Put
Option Closing equal to the product of the total amount of Percentage
Interest owned by RMUSA immediately prior to the Put Option Closing
multiplied by a fraction, the numerator of which is the amount of the
Purchase Price paid or deemed paid by Cemex, Inc. and received by RMUSA
after the Put Option Closing and at or prior to the first Anniversary
of the Put Option Closing, other than any other Significant Prepayment
made during such period for which a Percentage Interest was delivered
under Section 9.6.5(c) and the denominator of which is the Purchase
Price. RMUSA shall also deliver to Cemex, Inc. (or its designated
Affiliate) a certificate as referenced in Section 9.6.5(a)(ii)(y)
related to the Percentage Interest being assigned and transferred
pursuant to this Section 9.6.5(b)(ii).
(iii) In the event that RMUSA still owns a
Percentage Interest in the Company immediately prior to the second
(2nd) anniversary of the Put Option Closing, on such anniversary and
upon the receipt by RMUSA of payment of the balance of the Purchase
Price, RMUSA shall assign and transfer to Cemex, Inc. (or its
designated Affiliate) the remainder of the Membership Interest owned by
RMUSA (which shall include the Voting Interest of RMUSA) immediately
prior to the Put Option Closing. RMUSA shall also deliver to Cemex,
Inc. (or its designated Affiliate) a certificate, dated as of such
date, containing a representation and warranty that on the date of such
assignment and transfer RMUSA has transferred, or caused to be
transferred, to Cemex, Inc. (or its designated Affiliate) good and
marketable title to such Membership Interest, free and clear of all
claims, equities, liens, charges and encumbrances as referenced in
Section 9.6.5(a)(ii)(y) and Cemex, Inc. shall deliver to RMUSA a
release(s) and indemnity(ies) of RMUSA from any and all guaranty(ies)
with respect to which RMUSA may have guaranteed debts, obligations or
liabilities of the Company.
In the event Cemex, Inc. prepays to RMUSA the outstanding amount of the Purchase
Price (or otherwise pays the outstanding amount of the Purchase Price prior to
the second anniversary), upon receipt of such payment in full of the Purchase
Price (i) Cemex, Inc. shall deliver to RMUSA a release(s) and indemnity(ies) of
RMUSA from any and all guaranty(ies) with respect to which RMUSA may have
guaranteed debts, obligations or liabilities of the Company, and (ii) RMUSA
shall assign and transfer to Cemex, Inc. (or its designated Affiliate) the
remainder of the Membership Interest then owned by RMUSA and shall deliver to
Cemex, Inc. (or its designated Affiliate) a certificate as contemplated in
paragraph (b)(iii) above. Notwithstanding any provision herein to the contrary,
RMUSA shall retain its full Voting Interest until the Purchase Price has been
paid in full.
(c) If at any time prior to any scheduled payment
date pursuant to Section 9.6.5(b), Cemex, Inc. pays
or is deemed to have paid an amount under the Put Option equal to or greater
than US$ 10 million (a "Significant Prepayment"), within three (3) Business Days
after receipt by RMUSA or any of its Affiliates of such Significant Prepayment,
RMUSA shall (or shall cause one or more of its Affiliates to) assign and
transfer to Cemex, Inc. (or its designated Affiliate) a portion of the
Percentage Interest owned by RMUSA and its Affiliates immediately prior to the
Put Option Closing multiplied by a fraction, the numerator of which is the
amount of the Significant Prepayment and the denominator of which is the
Purchase Price. RMUSA shall also deliver to Cemex, Inc. (or its designated
Affiliate) a certificate as referenced in Section 9.6.5(a)(ii)(y) related to the
Percentage Interest being assigned and transferred pursuant to this Section
9.6.5(c).
(d) At or prior to any installment payment date
pursuant to Section 9.6.5(b) or any Significant
Prepayment pursuant to Section 9.6.5(c), RMUSA or its Affiliate, as may be the
case, shall deliver to Cemex, Inc. a certificate, in the form described in
Treasury Regulation Section 1.1445-2(b)(2)(iv)(B), certifying its compliance
with Treasury Regulation Section 1.1445-2(b) that, as of the date of such
installment payment or Significant Prepayment, RMUSA or its Affiliate is not a
"foreign person" within the meaning of Section 1445 of the Code. If RMUSA does
not deliver such certificate to Cemex, Inc., Cemex, Inc. shall be permitted to
withhold from the payment amount, the amount required to be withheld pursuant to
Section 1445 of the Code, as calculated by Cemex, Inc. in good faith, and (i)
Cemex, Inc. shall not be deemed to be in default of any of its obligations under
this LLC Agreement (including this Section 9.6) by virtue of having withheld
such amount and (ii) the amount so withheld and remitted to Department of
Treasury shall be deemed to have been paid to RMUSA or its Affiliates on the
date that any amounts not so withheld were paid for all purposes under this LLC
Agreement. If RMUSA or its Affiliate does deliver such certificate to Cemex,
Inc., Cemex, Inc. shall not withhold under Section 1445 of the Code.
9.6.6 Regulatory and Other Authorizations;
Cooperation.
(a) Upon the exercise by RMUSA of the Put Option,
Cemex, Inc. shall use its best efforts to promptly obtain all authorizations,
consents, orders and approvals of all governmental authorities and officials and
third parties that may be or become necessary for its performance of its
obligations pursuant to the Put Option; provided, however, that notwithstanding
the foregoing, prior to the date which is twelve (12) months after the Exercise
Date, Cemex, Inc. shall not be required to accept, as a condition to obtaining
any required approval or resolving any objection of any governmental authority,
any requirement to divest or hold separate or in trust (or the imposition of any
other condition or restriction with respect to) any of the respective businesses
of Cemex, Inc., Cemex, the Company, Cemex Southeast LLC or any of their
respective subsidiaries or assets.
(b) Upon the exercise by RMUSA of the Put Option,
RMUSA shall use its best efforts to promptly obtain (and, in the event RMUSA is
or its Affiliates are the Manager or Majority Member of the Company, to cause
the Company to obtain) all authorizations, consents, orders and approvals of all
governmental authorities and officials and third parties that may be or become
necessary for its performance of its obligations pursuant to the Put Option.
(c) Each of RMUSA and Cemex, Inc. agrees to make, and
to cause its Affiliates, as necessary, to make its filing pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, or any successor law (the
"HSR Act"), with respect to the acquisition and sale pursuant to the exercise of
the Put Option within forty-five (45) days after the Exercise Date and to supply
as promptly as practicable to the appropriate governmental authorities any
information and documentary material that may be requested pursuant to the HSR
Act. Each of RMUSA and Cemex, Inc. further agrees to make, and to cause its
Affiliates, as necessary, to make responses (including providing required
information) to the Federal Trade Commission or the United States Department of
Justice, as the case may be, and state antitrust regulators as required of such
party by any such regulators with respect to the Put Option transaction.
(d) RMUSA agrees that, in its capacity as "Manager"
of the Company it will (or, if an Affiliate of RMUSA is then the "Manager" of
the Company it will cause such Affiliate, in such capacity, to) provide
reasonable access to the books, records and properties of the Company to Cemex's
potential financing sources, and shall cause the officers and employees of the
Company to provide reasonable cooperation to Cemex in obtaining financing in
order to consummate the transactions contemplated by this Section 9.6.
(e) From and after exercise of the Put Option, RMUSA
agrees that it shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind upon its Membership Interest.
9.7 Effect of Transfer. Any Member that Transfers its entire
Membership Interest in the Company to an un-Affiliated third party pursuant to
the terms of this LLC Agreement shall be deemed to have retired and shall cease
to be a Member as of the effective date of such Transfer, and shall cease to
have any rights or obligations under this LLC Agreement; provided, however, that
the foregoing shall not limit or modify: (i) any rights of such Member under
Sections 8.7, 8.8, 8.9 and 9.3(d) hereof with respect to matters occurring prior
to such transaction; (ii) the obligations of such Member under this LLC
Agreement arising prior to or in connection with such transaction or the
obligations of such Member under Sections 7.2 and 19(g) hereof; or (iii) the
rights of such Member under this LLC Agreement arising as a result of a breach
of the other Member's obligations under this LLC Agreement prior to such
transaction. The Transfer of any Membership Interest pursuant to Section 9.5
shall not relieve the transferring Member from any of its obligations under this
Agreement.
10. Substituted Members. Notwithstanding any other provision of this
LLC Agreement to the contrary, no permitted assignee or permitted transferee of
the whole or any portion of any Membership Interest in the Company shall have
the right to become a substituted Member in place of his assignor unless all of
the following conditions are satisfied:
10.1 Written Assignment. The assignor and assignee shall have
executed and acknowledged a written instrument of assignment, together with such
other instruments as the Manager may deem necessary or desirable to effect the
admission of the assignee as a Member.
10.2 Assignment Delivered. Such instrument of assignment
provided for herein shall have been delivered to and received by the Manager.
10.3 Approval by Members. The written consent or approval of a
Majority-In-Interest shall have been first obtained.
10.4 Transfer Fee Paid. A transfer fee (in an amount
determined by the Manager) has been paid to the Company which is sufficient to
cover all reasonable expenses connected with such assignment and admission.
11. Adverse Action.
11.1 Remedies. Upon receipt of written notice from a
non-Adverse Member, an Adverse Member shall have thirty (30) days to cure an
Adverse Act. Thereafter, provided that the non-Adverse Member giving notice (i)
is also a non-adverse Member under this Agreement and the Cemex Southeast LLC
Agreement and (ii) with respect to clause (iii) of the definition of Adverse
Act, the non-Adverse Member (RMUSA) has complied with its obligations under
Sections 9.6.6(b) and (c), the failure of which to be performed would have an
adverse effect on Cemex's ability to close the Put Option, the non-Adverse
Member may, in its sole discretion, elect one or more of the following remedies:
(a) during the continuance of the Adverse Act, the
Adverse Member shall cease to be represented on the Board and the size of the
Board shall be reduced to four (4) individuals, all of whom shall be appointed
by the non-Adverse Member;
(b) during the continuance of the Adverse Act, the
Adverse Member will have all of its voting rights under this LLC Agreement and
applicable Law, in its capacity as a Member, a Manager or otherwise, suspended,
and the non-Adverse Member will have the voting rights of the Majority Member;
(c) during the continuance of the Adverse Act, the
Adverse Member shall not be entitled to receive any distributions of cash or
property from the Company and the non-Adverse Member will be entitled to receive
and retain all distributions of cash or property that otherwise would have been
made to the Adverse Member, but the Adverse Member shall continue to be liable
for its obligations as a Member under this LLC Agreement; or
(d) the non-Adverse Member shall have the right,
exercisable in its sole and absolute discretion from the thirtieth (30th) day
following the expiration of the Adverse Member's right to cure and thereafter
for the period that the Adverse Act continues, to purchase all of the Adverse
Member's Membership Interest in the Company (a "Buyout Option") at a purchase
price (the "Buyout Purchase Price") equal to seventy-five percent (75%) of the
amount which is the highest of the following:
(i) an amount equal to the product of (x)
the Adverse Member's Percentage Interest as of the date the non-Adverse
Member gives written notice of its election to exercise its rights
under this paragraph (d) (the "Adverse Act Exercise Date") and (y) the
Adjusted Book Value as of the date of the Adverse Exercise Date;
(ii) an amount equal to (x) (A) eight (8)
times the average EBITDA of the Company over the three (3) Fiscal Years
immediately preceding the Adverse Act Exercise Date minus (B) the
Company's Debt as of the Adverse Act Exercise Date, multiplied by (y)
the Adverse Member's Percentage Interest as of the Adverse Act Exercise
Date [(A - B) * y]; or
(iii) an amount equal to (x) (A) eight (8)
times the EBITDA of the Company during the Fiscal Year immediately
preceding the Adverse Act Exercise Date minus (B) the Company's Debt as
of the Adverse Act Exercise Date, multiplied by (y) the Adverse
Member's Percentage Interest as of the Adverse Act Exercise Date [(A -
B) * y].
For the avoidance of doubt, the Buyout Purchase Price shall be determined as set
forth above and there shall be no adjustment to the amounts so determined for
Working Capital (although the parties acknowledge that the amount of Working
Capital will affect the calculation pursuant to clause (i) above). The parties
acknowledge that the non-Adverse Member shall be entitled to retain all Working
Capital in the Company as of the Adverse Member Buyout Closing.
The parties acknowledge and agree that, in the event the non-Adverse Member that
exercises its right to purchase the Membership Interest of the Adverse Member
pursuant to this Section 11.1(d) also exercises its similar right to purchase
the Membership Interest of the Adverse Member (or its Affiliate) pursuant to the
Cemex Southeast LLC Agreement, the pricing methodology which shall apply to the
sale of the Membership Interest of the Adverse Member in the Company shall be
the same methodology as applies to its sale of its Membership Interest in Cemex
Southeast LLC and shall be the methodology that yields the highest result for
the combined companies even if the methodology utilized results in a negative
number under this Section 11.1(d) or under Section 11.1(d) of the Cemex
Southeast LLC Agreement. In the event that the methodology utilized under this
Agreement pursuant to the immediately preceding sentence results in a negative
Purchase Price, then the non-Adverse Member shall be entitled to a credit in an
amount equal to the absolute value of the Buyout Purchase Price against any
amounts due from the non-Adverse Member to the Adverse Member pursuant to
Section 11.1(d) of the Cemex Southeast LLC Agreement. In the event that the
pricing methodology utilized under the Cemex Southeast LLC Agreement results in
a negative purchase price thereunder, then the non-Adverse Member shall be
entitled to a credit in an amount equal to the absolute value of such purchase
price against any amounts due from the non-Adverse Member to the Adverse Member
pursuant to this Section 11.1(d), such credit to be applied as of the Adverse
Member Buyout Closing.
In the event that the Buyout Option is exercised by RMUSA as a result of a
breach by Cemex of Section 9.6 hereof, at the Adverse Member Buyout Closing
RMUSA shall (i) repurchase the Percentage Interests purchased by Cemex prior to
its Adverse Act pursuant to RMUSA's exercise of the Put Option (the "Purchased
Interests") for the amount paid by Cemex to RMUSA for such Purchased Interests
and the purchase price paid by RMUSA for the remaining Percentage Interest of
Cemex shall be the Buyout Purchase Price as determined above and (ii) refund to
Cemex any amounts paid or deemed paid by Cemex in respect of the Put Option for
which no Percentage Interest has been transferred whether before or after the
Adverse Act.
For purposes of determining the Purchase Price under this Section 11.1, to the
extent the Company shall acquire any Acquired Business, which shall have been
owned by the Company for less than twelve (12) calendar months during the Fiscal
Year immediately preceding the Adverse Act Exercise Date, EBITDA of the Company
for the Fiscal Year immediately preceding the Adverse Act Exercise Date shall be
increased by an amount which shall consist of the Prorata EBITDA in connection
with such Acquired Business.
For purposes of the calculations of clauses (ii) and (iii) above, in the event
that Adverse Act EBITDA of the Company includes EBITDA of assets that have been
divested by the Company at any time prior to the Exercise Date, EBITDA of the
Company shall be adjusted to subtract the EBITDA attributable to the divested
assets during the period of time referred to in clauses (ii) and (iii),
respectively.
The closing of such transaction (the "Adverse Member Buyout Closing") shall
occur at a time and place mutually agreeable to the non-Adverse Member and the
Adverse Member, provided that the closing date shall be no later than six (6)
months after the date on which the Buyout Option is exercised. At the closing of
such transaction:
(i) the non-Adverse Member shall deliver to
the Adverse Member:
(A) the amount of the Buyout
Purchase Price in immediately available funds; and
(B) a release(s) and indemnity(ies)
of the Adverse Member from any and all guaranty(ies) with
respect to which the Adverse Member may have guaranteed debts,
obligations or liabilities of the Company.
(ii) the Adverse Member shall deliver to the
non-Adverse Party:
(A) a duly exercised assignment of
its Membership Interest in the Company;
(B) a certificate, dated as of the
closing date, containing a representation and warranty that on
the closing date the Adverse Member has transferred, or caused
to be transferred, to the non-Adverse Member good and
marketable title to its Membership Interest, free and clear of
all claims, equities, liens, charges and encumbrances; and
(C) any other documents or
agreements required by this LLC Agreement or necessary to
effectuate the intended transfer.
11.2 Notwithstanding the foregoing, the remedies provided in
this Section 11 are cumulative and are not exclusive, and the Company and the
non-Adverse Member shall be entitled to all other remedies available at law or
equity.
12. Dissolution of Company.
12.1 Events of Dissolution.
(a) The Company shall be dissolved and its affairs
shall be wound up upon the happening of the first to occur of the following (a
"Liquidating Event"):
(i) the unanimous written consent of all of
the Members of the Company; or
(ii) an entry of a final decree of
dissolution of the Company by a court of competent jurisdiction.
(b) In the event of dissolution of the Company, RMUSA
shall be entitled to elect to receive, to the extent of its interest, and
subject to the order of priority set forth in Section 12.4, the assets
contributed by RMUSA pursuant to the Contribution Agreement. In addition, in the
event of dissolution of the Company, notwithstanding anything in this LLC
Agreement to the contrary, RMUSA shall have the right to purchase all of the
remaining assets of the Company not distributed to RMUSA pursuant to the
immediately preceding sentence for a price equal the Purchase Price.
12.2 Special Meeting to Appoint Liquidating Member. In the
event that the Company is dissolved by reason of the occurrence of a Liquidating
Event and the Manager has been removed, disqualified, or resigned, then a
special meeting of all the Members shall be held at the office of the Company
for the purpose of appointing a liquidating Member (the "Liquidating Member") to
wind up the affairs of the Company, to liquidate its assets and distribute the
proceeds therefrom. Such special meeting shall be held, without notice, on the
fifteenth (15th) day after the happening of the Liquidating Event causing
dissolution of the Company, or if such day is a Sunday or a legal holiday, then
on the first day immediately following the fifteenth (15th) day which is not a
Sunday or a legal holiday. In the event the Manager has not been removed,
disqualified or resigned, the Manager shall wind up the affairs of the Company
and it shall not be necessary to call a special meeting to appoint a Liquidating
Member.
12.3 Statement of Assets and Liabilities. Upon the happening
of a Liquidating Event under Section 12.1 hereof, a statement shall be prepared
under the direction of the Manager or the Liquidating Member, as the case may
be, setting forth the assets and liabilities of the Company, and a copy of such
statement shall be furnished to all Members within thirty (30) days after such
Liquidating Event. The Manager or the Liquidating Member, as the case may be,
shall promptly take such action as is necessary so that the Company's business
shall be terminated, its liabilities discharged and its assets distributed as
hereinafter described. A reasonable period of time shall be allowed for the
orderly termination of the Company's business, the discharge of its liabilities
and the distribution of its remaining assets so as to enable the Company to
minimize the normal losses incurred in the liquidation process.
12.4 Sale of Assets and Distribution of Proceeds. Upon the
dissolution and winding up of the Company, either, as determined by a
Majority-in-Interest of the Members, (x) the Company's assets and properties
shall be distributed or (y) the assets and properties of the Company shall be
sold for cash or a cash equivalent and any gain or loss resulting therefrom
shall be allocated among the Members as provided in Section 5 hereof. Such
assets and property or cash proceeds, as applicable, shall be distributed in the
following order of priority:
(a) to creditors (other than Members who are
creditors) in satisfaction of the liabilities of the Company;
(b) to Members in satisfaction of liabilities owed to
them as creditors of the Company; and
(c) the balance, if any, to the Members in accordance
with their positive Capital Account balances, after giving effect to all
contributions, distributions and allocations for all periods.
12.5 Contributions Upon Liquidation. The provisions of this
Section 12 shall be applied only after giving full effect to all distributions
pursuant to Sections 5.2 and 12.4 hereof. Notwithstanding anything contained in
this LLC Agreement or in applicable state law to the contrary, no Member shall
have any liability to the Company or to any other Member or Person with respect
to any deficit balance in such Person's Capital Account and any such deficit
shall not be considered a debt owed to the Company or to any other Person for
any purpose whatsoever.
13. Notices. Any notices or document required or desired to be given to
the Manager or the Members, as the case may be, shall be in writing (which may
include facsimile) and will be deemed to have been given and received when (a)
delivered to the address specified by the party to receive the notice, if
delivered personally, (b) five (5) days after deposited with the U.S. postal
service for delivery by first class mail or, an internationally recognized
express courier, (c) immediately upon delivery by facsimile if a confirmation is
received and (d) one (1) day after deposit with a nationally recognized
overnight carrier for next-day delivery. Such notices shall be given to Members
at their respective addresses set forth on Exhibit A and to the Manager at its
address set forth on Exhibit C as may be updated from time to time. Any party
may, at any time by giving five (5) business days' prior written notice to the
other parties, designate any other address in substitution of the foregoing
address to which such notice will be given.
14. Certain Member Representations and Warranties. Each Member, and in
the case of an organization, the Person(s) executing this LLC Agreement on
behalf of the organization, hereby represents and warrants to the Company and
each other Member that: (a) that if such Member is an organization, it is duly
organized, validly existing, and in good standing under the law of its state of
organization and has full organizational power and authority to execute this LLC
Agreement and to perform its obligations hereunder; (b) that the Member is
acquiring its Membership Interest in the Company for such Member's own account
as an investment and without an intent to distribute the same; (c) the Member
acknowledges that the Membership Interests in the Company have not been
registered under the Securities Act of 1933, as amended, or any state securities
laws, and may not be resold or transferred by the Member without appropriate
registration or the availability of an exemption from such requirements.
15. Disclaimer. The Members agree that their Membership Interests in
the Company are not being sold by any one or more Members, but that the Company
is being formed, and the Membership Interests are being sold, as a private
offering under applicable federal and state securities laws, and that there is
no sponsor, promoter or seller of such securities. To induce the Manager to
serve as a Manager of the Company, and to induce the Manager to take an active
role in procuring properties and business opportunities for the Company, all
Members agree that neither the Manager nor any Member is a sponsor, promoter or
seller of any securities, and neither the Manager nor any Member shall be liable
for any disclosures or failures to disclose any matters pertaining to any new
properties purchased, or relating to the formation of the Company or issuance of
any Membership Interests. Each Member agrees that it is each Member's
responsibility to obtain full information concerning the Company, the Membership
Interests therein, and any acquisition, sale, or business transaction entered
into by the Company, and each Member acknowledges that decisions of the Company
are made by the Manager or the Members, as applicable. Accordingly, each Member
hereby disclaims any right to assert that any other Member violated any federal
or state securities laws in connection with the formation of this Company, the
acquisition of such Member's Membership Interest, or in connection with any
acquisition or sale by the Company in the conduct of its business.
16. No Right to Dissolve or Demand Partition. Except as otherwise
expressly permitted by the terms and conditions of this LLC Agreement, until
such time as the Company is dissolved pursuant to the provisions of this LLC
Agreement, no Member shall have, and each such Member hereby expressly waives,
any right or power to: (i) maintain an action for partition; or (ii) in any way
cause a dissolution of the Company.
17. No Partnership Intended for Nontax Purposes. The Members have
formed the Company under the LLC Act, and expressly do not intend hereby to form
a partnership under either the Delaware Revised Uniform Partnership Act or the
Delaware Uniform Limited Partnership Act. The Members do not intend to be
partners one to another, or partners as to any third party.
18. Rights of Creditors and Third Parties under this LLC Agreement.
This LLC Agreement is entered into among the Company and the Members for the
exclusive benefit of the Company, its Members, and their successors and
permitted assigns. This LLC Agreement is expressly not intended for the benefit
of any creditor of the Company or any other Person. Except and only to the
extent provided by applicable statute, no such creditor or third party shall
have any rights under this LLC Agreement or any agreement between the Company
and any Member with respect to any Capital Contribution or Required Additional
Capital Contribution, or otherwise.
19. Non-Competition Agreement. (a) Without the prior written consent of
the Board ("Competitive Business Approval"), neither Member shall, and each
Member shall cause each of its Affiliates not to, directly or indirectly, own or
operate a Competitive Business, unless the Competitive Business shall be an
External Competitive Business. In the event a Member or any of its Affiliates
acquires or otherwise operates an External Competitive Business, or in the event
a Member or any of its Affiliates acquires or otherwise operates a Competitive
Business that is not an External Competitive Business, but the required
Competitive Business Approval shall have been obtained, the operating and other
assets associated therewith that are located or operated within the Ready Mix
Boundaries ("Internal Boundaries Assets") shall, subject to receipt of any
required governmental consents or approvals, be contributed or sold by the
Member or its Affiliate, as the case may be (the "Contributing Member"), to the
Company as provided herein. Within thirty (30) days after the acquisition of
Internal Boundaries Assets by the Contributing Member, the value of the Internal
Boundaries Assets shall be determined by the Board based on the applicable
multiples of EBITDA of the predecessor business during the last Fiscal Year
immediately prior to the acquisition as set forth on Schedule 19 attached
hereto. In the event that the EBITDA of the Internal Boundaries Assets takes
into account acquisitions or divestitures of certain assets of the Internal
Boundaries Assets during the Fiscal Year immediately prior to such acquisition,
then such EBITDA shall be adjusted to reflect such acquisitions and
divestitures. Upon the determination by the Board of the value of the Internal
Boundaries Assets (the "Internal Boundaries Assets Value"), the Board shall
notify the Members in writing of the Board's determination of the Internal
Boundaries Assets Value and the Non-Contributing Member shall elect, within
thirty (30) days after its receipt of such notice, one of the following options
by giving written notice of such election to the Contributing Member:
(i) that the Contributing Member shall
contribute the Internal Boundaries Assets to the Company (whereupon the
Internal Boundaries Assets Value shall be credited to the contributing
Member's Capital Account) and the Non-Contributing Member shall
simultaneously make a Capital Contribution to the Company in cash in an
amount equal to the Internal Boundaries Assets Value (which shall be
credited to such Member's Capital Account);
(ii) subject to Section 8.2(b)(vi) and
paragraph (b) below, that the Company shall borrow from a third party
the funds necessary to purchase the Internal Boundaries Assets from the
Contributing Member for the Internal Boundaries Assets Value and shall
purchase the Internal Boundaries Assets from the Contributing Member;
(iii) that the Company shall borrow the
funds, as contemplated in (ii) above, from the Contributing Member and
purchase the Internal Boundaries Assets from the Contributing Member,
in which case, at the closing of the purchase of the Internal
Boundaries Assets, the Company shall execute a promissory note payable
to the Contributing Member which provides for the payment of interest
at an annual rate of ten percent (10%), and which is amortized and
payable (principal and interest) over five (5) years; or
(iv) that the Contributing Member shall
contribute the Internal Boundaries Assets to the Company and the
Non-Contributing Member shall make no Capital Contribution to the
Company, in which case the Percentage Interest of the Contributing
Member shall be increased to the amount determined by dividing (x) an
amount equal to the sum of (1) the product of the Percentage Interest
of the Contributing Member prior to such adjustment and the Adjusted
Book Value immediately prior to the contribution of such Internal
Boundaries Assets and (2) the Internal Boundaries Assets Value with
respect to such Internal Boundaries Assets, by (y) the Adjusted Book
Value immediately after contribution of such Internal Boundaries
Assets, and the Percentage Interest of the Non-Contributing Member
shall be reduced to the amount obtained by dividing (x) an amount equal
to the product of the Percentage Interest of the Non Contributing
Member prior to such adjustment and the Adjusted Book Value immediately
prior to the contribution of such Internal Boundaries Assets by (y) the
Adjusted Book Value immediately after contribution of such Internal
Boundaries Assets.
(b) Notwithstanding any provision in the foregoing
paragraph (a) to the contrary, in the event the Non-Contributing Member elects
the option set forth in paragraph (a)(ii) above and the incurring of the
indebtedness by the Company as contemplated in such paragraph (a)(ii) above,
after giving effect thereto, would cause the ratio of indebtedness for borrowed
money to EBITDA to be greater than 2.5:1, then upon the making of such election
by the Non-Contributing Member the Contributing Member shall have the option
(which must be exercised within thirty (30) days after the Non-Contributing
Member makes its election or shall be deemed to be waived) to loan to the
Company the funds necessary to purchase the Internal Boundaries Assets, which
loan shall bear interest at an annual rate equal to the lesser of (i) the best
rate available to the Company from its proposed third party lender, or (ii) ten
percent (10%), and be amortized and payable (principal and interest) over five
(5) years.
(c) In the event the Non-Contributing Member fails to
make its election within the thirty (30) day period, such Member shall be deemed
to have waived its right to make an election, and the Contributing Member shall
elect, within thirty (30) days thereafter, one of the following options by
giving written notice of such election to the Non-Contributing Member.
(i) that the Contributing Member shall
contribute the Internal Boundaries Assets to the Company in which case
the Percentage Interest of the Contributing Member shall be increased
to the amount obtained by dividing (x) an amount equal to the sum of
(1) the product of the Percentage Interest of the Contributing Member
prior to such adjustment and the Adjusted Book Value immediately prior
to the contribution of such Internal Boundaries Assets and (2) the
Internal Boundaries Assets Value with respect to such Internal
Boundaries Assets, by (y) the Adjusted Book Value immediately after
contribution of such Internal Boundaries Assets, and the Percentage
Interest of the Non-Contributing Member shall be reduced to the amount
obtained by dividing (x) an amount equal to the product of the
Percentage Interest of the Non-Contributing Member prior to such
adjustment and the Adjusted Book Value immediately prior to the
contribution of such Internal Boundaries Assets by (y) the Adjusted
Book Value immediately after contribution of such Internal Boundaries
Assets;
(ii) subject to Section 8.2(b)(vi), that the
Company shall borrow from a third party the funds necessary to purchase
the Internal Boundaries Assets from the Contributing Member for the
Internal Boundaries Assets Value and shall purchase the Internal
Boundaries Assets from the Contributing Member; or
(iii) that the Company shall borrow the
funds, as contemplated in (ii) above, from the Contributing Member and
purchase the Internal Boundaries Assets from the Contributing Member,
in which case, at the closing of the purchase of the Internal
Boundaries Assets, the Company shall execute a promissory note payable
to the Contributing Member which provides for the payment of interest
at an annual rate of ten percent (10%), and which is amortized and
payable (principal and interest) over five (5) years.
(d) After the election has been made by the
Non-Contributing Member or the Contributing Member, as the case may be, as
contemplated above, the Company, the Manager and Members shall use their good
faith efforts to consummate the contribution or sale by the Contributing Member
of the Internal Boundaries Assets to the Company, and, if applicable, the
financing of such transaction, as soon as is reasonably practicable, but in any
event within one hundred eighty (180) days after acquisition of the Internal
Boundaries Assets by the Contributing Member. Without limiting the generality of
the foregoing, each of the Members and their Affiliates shall use its best
efforts to promptly obtain (and to cause the Company to obtain) all
authorizations, consents, orders and approvals of all governmental authorities
and officials that may be or become necessary to permit the contribution or sale
to the Company of the Internal Boundaries Assets, and will cooperate fully with
the other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals, including making any required filing pursuant to the HSR
Act, with respect to the contribution or sale, and to supply as promptly as
practicable to the appropriate governmental authorities any information and
documentary material that may be requested pursuant to the HSR Act. In the event
that the Contributing Member or the Company shall not have consummated the
contribution or sale of the Internal Boundaries Assets to the Company in
accordance with this Section 19 prior to the end of such 180-day period for any
reason, including any failure to obtain any necessary authorization, consent,
order or approval, other than a breach by the Company, the Manager or any of the
Members of this Section 19, then the Non-Contributing Member shall have the
right, exercisable for a period of three hundred sixty-five (365) days
thereafter, to require the Contributing Member to sell or otherwise transfer the
Internal Boundaries Assets to an un-Affiliated third party. Upon the exercise by
the Non-Contributing Member of its right to require a sale of the Internal
Boundaries Assets, the Contributing Member shall use its best efforts to sell or
otherwise transfer such Internal Boundaries Assets to an un-Affiliated third
party as soon as reasonably practicable, and in no event more than one hundred
eighty (180) days after the Non-Contributing Member gives written notice to the
Contributing Member of its election. In the event the Non-Contributing Member
does not exercise its right to require the Contributing Member to sell the
Internal Boundaries Assets as contemplated in the foregoing sentence and the
Internal Boundaries Assets have not been purchased or otherwise contributed to
the Company as of the expiration of the 365-day period, then the Contributing
Member shall be entitled to own and operate or sell the said Assets without such
being a breach of this Section 19. In the event the Contributing Member does not
consummate a sale or transfer to an un-Affiliated third party within the time
allotted following the giving of written notice by the Non-Contributing Member,
in addition to other remedies available to the Company and the Non-Contributing
Member, the Contributing Member shall cease operation of the Internal Boundaries
Assets.
(e) Notwithstanding anything in this Agreement to the
contrary, pending consummation of the contribution or sale of the Internal
Boundaries Assets to the Company pursuant to this Section 19, or to an
un-Affiliated third party in accordance with the fourth sentence of Section
19(d), ownership and operation of the Internal Boundaries Assets by the
Contributing Member or its Affiliates shall not constitute a breach of this
Section 19.
(f) In the event either Member or any of its
Affiliates acquires assets or operations within the Ready Mix Boundaries used
primarily for the production of aggregates (the "Aggregates Assets"), at the
election of the non-acquiring Member, the Aggregate Assets shall be contributed
to the Company by the acquiring Member or its Affiliate, as the case may be. The
non-acquiring Member shall make such election within thirty (30) days following
notice to it of the acquisition of such Aggregates Assets. Following such
notice, the acquiring Member (or its Affiliate) shall provide the non-acquiring
Member with such information regarding such Aggregates Assets as the
non-acquiring Member shall reasonably request. In the event the non-Acquiring
Member so elects to cause the Aggregates Assets to be contributed to the
Company, the provisions contained in subsections (a) through (e) above shall
become applicable with respect to the contribution transaction. If the
non-acquiring Member elects that such Aggregates Assets shall not be contributed
to the Company, then the ownership and operation of such assets by the acquiring
Member (or its Affiliate) shall not be deemed a violation of this Section 19.
(g) Notwithstanding anything to the contrary in this
LLC Agreement, this Section 19 shall not apply to a passive minority investment
made by a Member or any of its Affiliates. Further, notwithstanding anything to
the contrary in this LLC Agreement, this Section 19 shall not apply to: (x) a
Person (and any of its Affiliates) that is not an Affiliate of the Member prior
to the transaction and that acquires (i) a majority of the equity interests in a
Member, or (ii) a majority of the equity interests in a controlling Person of a
Member; provided, that the provisions of this Section 19 shall continue to apply
to such Member and such Persons that were Affiliates of such Member prior to
such transaction; nor shall this Section 19 apply to (y) a Person (and any of
its Affiliates) purchasing any assets or business from a Member, which assets
include the Membership Interest held by such Member, where such Member's share
of the revenues of the Company during the Fiscal Year preceding such transaction
represent less than 20% of the consolidated total revenues during such Fiscal
Year of the assets or business being transferred; provided, that the
Transferring Member complied with its obligations under Sections 9.3 and 9.4
with respect to such transfer; nor shall this Section 19 apply to (z) the
ownership and operation of the Allied Assets by Cemex, Inc.
(h) In the event a Member acquires the Membership
Interest of the other Member pursuant to the exercise of such Member's right of
first refusal under Section 9.3(a) or pursuant to Section 11.1(d), the Member
whose Membership Interest is acquired shall at the closing of the acquisition
execute and deliver to the acquiring Member an agreement whereby such
Transferring Member covenants and agrees that it shall not, and shall cause its
Affiliates not to, directly or indirectly, own or operate a Competitive Business
for a period of five (5) years following the date of such closing. In the event
Cemex acquires the Membership Interest of RMUSA pursuant to the exercise by
RMUSA of its Put Option, at the Put Option Closing or upon the payment in full
of the Purchase Price, whichever is the later to occur, RMUSA shall execute and
deliver to Cemex an agreement whereby RMUSA covenants and agrees that it shall
not, and shall cause its Affiliates not to, directly or indirectly, own or
operate a Competitive Business for a period of five (5) years following the
delivery of such agreement.
(i) For purposes of this Section 19, none of Cemex,
RMUSA or any of their respective Affiliates shall be deemed to be Affiliates of
the Company or any of its Subsidiaries.
20. Continuing Contribution to the University of Alabama. The Members
acknowledge and agree that the Company will make an annual contribution in the
amount of $1,000,000 to the University of Alabama for a period of ten (10) years
from the date of this Agreement.
21. Contribution Agreement Indemnification Obligations.
21.1 Notwithstanding anything in this LLC Agreement to the
contrary, each of Cemex and RMUSA hereby agrees (and any Permitted Transferee of
either of the foregoing shall agree) that any Damages for which it or any of its
Affiliates (the "Indemnifying Party") owes the other party (or its Affiliates)
or the Company or Cemex Southeast LLC (the "Indemnified Party") an
indemnification obligation under the Contribution Agreement or the Cemex
Contribution Agreement shall be paid from any distributions that otherwise would
be paid by the Company to the Indemnifying Party pursuant to Section 6.1 or
otherwise, and each party hereby irrevocably waives all rights and title it
would otherwise have to, and irrevocably instructs the Manager to pay to the
Indemnified Party, all distributions that otherwise would be paid by the Company
to the Indemnifying Party under this LLC Agreement, until all such Damages have
been paid in full to the Indemnified Party. For purposes of this Section 21.1,
each party acknowledges that to the extent any distributions are paid to the
Indemnified Party under Section 21.1 of the Cemex Southeast LLC Agreement in
respect of a particular indemnification claim, such payments will also reduce
the amount of such Damages. In the event of multiple claims, the distributions
shall be applied against such claims in the order in which the amount of the
indemnification obligation in respect thereof is finally determined.
Notwithstanding anything in this LLC Agreement to the contrary, in no event
shall any amount of damages withheld by the Company under this Section 21.1 as a
payment of indemnified Damages incurred by the Company be treated as (i) EBITDA
for purposes of (x) calculating the amount of any required distribution
(including pursuant to Section 6.1) or (y) determining the Purchase Price or the
Buyout Purchase Price, or (ii) available cash for purposes of determining the
amount of any distribution under Section 9.6.4(a).
21.2 Notwithstanding anything in this LLC Agreement to the
contrary, prior to making any distribution to the Members, if there is any Net
Indemnity Obligation owed by any Member immediately prior to such distribution,
each of Cemex and RMUSA hereby agrees that the Percentage Interests of the Net
Indemnifying Party (and any Member that is an Affiliate of the Net Indemnifying
Party), on the one hand, and the Net Zero Indemnifying Party (and any Member
that is an Affiliate of the Net Zero Indemnifying Party), on the other hand,
shall be adjusted as follows:
(a) the aggregate Percentage Interest of the Net
Indemnifying Party and its Affiliates shall be adjusted to the amount obtained
by dividing (i) an amount equal to (1) the product of the aggregate Notional
Pre-Damage Percentage Interest of the Net Indemnifying Party and its Affiliates
as of the time of such adjustment and the Adjusted Book Value as of the time of
such adjustment (without regard to any adjustment for such Net Indemnity
Obligation or any component thereof), minus (2) the Net Indemnity Obligation
Amount as of such time, by (ii) the Adjusted Book Value as of the time of such
adjustment (without regard to any adjustment for such Net Indemnity Obligation
or any component thereof) minus the Net Indemnity Obligation as of such time;
(b) the aggregate Percentage Interest of the Net Zero
Indemnifying Party and its Affiliates shall be adjusted to the amount obtained
by dividing (i) an amount equal to the product of the aggregate Notional
Pre-Damage Percentage Interest of the Net Zero Indemnifying Party and its
Affiliates at the time of such adjustment and the Adjusted Book Value as of the
time of such adjustment (without regard to any adjustment for such Net Indemnity
Obligation or any component thereof), by (ii) the Adjusted Book Value as of the
time of such adjustment (without regard to any adjustment for such Net Indemnity
Obligation or any component thereof) minus the Net Indemnity Obligation as of
such time; and
(c) If immediately prior to making any distribution
to the Members, there is no Net Indemnity Obligation owed by any Member, then
immediately prior to such distribution, each of Cemex and RMUSA hereby agrees
that the Percentage Interests of each Member shall be adjusted, if necessary, to
equal such Member's Notional Pre-Damage Percentage Interest as of such time.
21.3 Notwithstanding anything in this LLC Agreement to the
contrary, in the event that the aggregate Cemex Southeast Percentage Interest of
Cemex and its Affiliates or RMUSA and its Affiliates, as the case may be, under
the Cemex Southeast LLC Agreement is zero, then the amount of any Damages under
the Cemex Contribution Agreement that otherwise would have resulted in an
adjustment to the Ready Mix Percentage Interest under Section 21.2 of the Cemex
Southeast LLC Agreement shall be deemed to be Damages arising under the
Contribution Agreement for purposes of Section 21.2 hereof.
21.4 For purposes of this Section 21, the following terms
shall have the meanings set forth below:
"Net Zero Indemnifying Party" means, as of a particular time,
a Member (and its Affiliates) with a Net Indemnity Obligation at such
time of zero.
"Net Indemnifying Party" means, as of a particular time, an
Indemnified Party with a positive Net Indemnity Obligation at such
time.
"Net Indemnity Obligation" means, with respect to a particular
Indemnifying Party as of a particular time, the amount, if any, by
which (i) the aggregate Damages for which it and its Affiliates owes
the Indemnified Party and any of its Affiliates an indemnification
obligation under the Contribution Agreement as of such time exceeds
(ii) the aggregate Damages for which the other Indemnifying Party (or
Member, as the case may be) and any of its Affiliates owes the
Indemnified Party and any of its Affiliates an indemnification
obligation under the Contribution Agreement as of such time. For
purposes of determining the Net Indemnity Obligation, only Damages
which have been finally determined (whether by agreement of the parties
or by any final, non-appealable determination of any tribunal with
jurisdiction) shall be taken into account.
"Notional Pre-Damage Percentage Interest" of a Member as of a
particular time means the Percentage Interest of such Member as set
forth on Exhibit A as of the date of this Agreement, as adjusted
through such time pursuant to Section 1.4, other than any adjustments
pursuant to Section 21.2, which shall be disregarded for purposes of
determining the Notional Pre-Damage Percentage Interest.
22. Miscellaneous.
22.1 Applicable Law. This LLC Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, without regard to conflicts of laws principles.
22.2 Consent to Jurisdiction. All disputes, litigation,
proceedings or other legal actions by any party to this Agreement in connection
with or relating to this LLC Agreement or any matters described or contemplated
in this LLC Agreement shall be instituted in the courts of the State of Georgia,
or of the United States in the State of Georgia, in either case, sitting in
Atlanta, Georgia. Each party to this LLC Agreement irrevocably submits to the
exclusive jurisdiction of the courts of the State of Georgia, and of the United
States sitting in the State of Georgia, in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this LLC
Agreement. Each party to this LLC Agreement may receive the service of any
process or summons in connection with any such dispute, litigation, action or
proceeding brought in any such court by a mailed copy of such process or summons
sent to it at its address set forth, and in the manner provided, in Section 13
hereof. Each party to this LLC Agreement irrevocably waives, to the fullest
extent permitted by applicable law, any defense or objection it may now or
hereafter have to the laying of venue of any proceeding under this LLC Agreement
brought in the courts of the State or of the United States in the State of
Georgia, in either case, sitting in Atlanta, Georgia, and any claim that any
proceeding under this LLC Agreement brought in any such court has been brought
in an inconvenient forum.
22.3 Entire Agreement. This LLC Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior understandings or agreements among the parties with
respect to that subject matter. There are no representations, arrangements,
understandings or agreements, oral or written, among the parties hereto relating
to the subject matter hereof, except those fully expressed herein.
22.4 Transaction Agreements. The Members hereby authorize the
Company to execute and deliver this LLC Agreement and the Contribution
Agreement, and to consummate the transactions contemplated hereby and thereby.
22.5 Specific Performance. The parties to this LLC Agreement
agree that irreparable damage would occur in the event that any provision of
this LLC Agreement was not performed in accordance with the terms of this LLC
Agreement and that the parties shall be entitled to specific performance of the
terms of this LLC Agreement in addition to any other remedy at law or equity.
22.6 Assignment; Successors in Interests; No Third Party
Rights. Except as otherwise provided herein, all provisions of this LLC
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against the respective successors and permitted assigns of any of the
parties to this LLC Agreement. Except as otherwise provided herein, no Member
may assign, by operation of law or otherwise, any of its rights or obligations
under this LLC Agreement without the prior written consent of all of the other
Members. Nothing expressed or referred to in this LLC Agreement will be
construed to give any Person other than the parties to this LLC Agreement any
legal or equitable right, remedy, or claim under or with respect to this LLC
Agreement or any provision of this LLC Agreement.
22.7 Counterparts. This LLC Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. Execution and delivery by facsimile
shall constitute good and valid execution and delivery unless and until replaced
or substituted by an original executed instrument.
22.8 Captions. The captions or headings in this LLC Agreement
are made for convenience and general reference only and shall not be construed
to describe, define or limit the scope or intent of the provisions of this LLC
Agreement.
22.9 Construction.
(a) Whenever the singular number is used in this LLC
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.
(b) In the event any claim is made by any Member
relating to any conflict, omission or ambiguity in this LLC Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this LLC Agreement was prepared by or at the request of a particular
Member or its counsel.
(c) Whenever the words "include," "includes" or
"including" are used in this LLC Agreement, they shall be deemed to be followed
by the words "without limitation." The phrases "the date of this LLC Agreement,"
"the date hereof" and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to July 1, 2005.
(d) If a payment hereunder is scheduled to be made on
a date that is not a Business Day, payment shall be made on the next succeeding
day that is a Business Day.
22.10 Severability. If any provision of this LLC Agreement or
the application thereof to any person or circumstance shall be invalid, illegal
or unenforceable to any extent, the remainder of this LLC Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
22.11 Additional Documents and Acts. Each Member agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions, and conditions of this LLC Agreement
and the transactions contemplated hereby.
[Signature Pages Follow]
MEMBER:
CEMEX SOUTHEAST HOLDINGS LLC
By /s/ Gilberto Perez
-------------------------------------
Name Gilberto Perez
-------------------------------------
Its President
-------------------------------------
MEMBER:
READY MIX USA, INC.
By /s/ Marc Bryant Tyson
-------------------------------------
Name Marc Bryant Tyson
-------------------------------------
Its President
-------------------------------------
THE COMPANY:
READY MIX USA, LLC
By /s/ Marc Bryant Tyson
-------------------------------------
Name Marc Bryant Tyson
-------------------------------------
Its Manager
-------------------------------------
SOLELY FOR PURPOSES OF SECTION 9.6:
CEMEX, INC.
By /s/ Gilberto Perez
-------------------------------------
Name Gilberto Perez
-------------------------------------
Its President
-------------------------------------
Schedule 3.2
------------
Permitted Affiliate Transactions
1. Supply Agreement, dated as of July 1, 2005, between Cemex Southeast LLC
and Company.
2. The transition services set forth on the attached summary of principal
terms.
3. Until the assignment date, necessary payments under the following
leases will be made by Cemex, Inc., and Company will reimburse Cemex,
Inc. for such payments:
a. Master Lease Agreement, dated as of March 9, 2000, between
Banc One Leasing Corporation, as Lessor, and Southdown, Inc.,
as Lessee, as it pertains to Schedule # 1000103366.
b. Master Lease Agreement 07709-00400, dated as of April 16,
2004, among Bank of America Leasing & Capital, LLC, as
Lessor, and Cemex, Inc., Cemex Cement, Inc., Cemex Cement
Texas, L.P., Cemex Construction Materials, L.P., Pacific
Coast Cement Corporation, Cemex California Cement LLP, Cemex
Central Plains Cement, LLC, and Kosmos Cement Company, as
Lessees, as it pertains to Schedules #011, #002, #059, and
#046.
c. Equipment Lease, dated as of May 17, 2002, between First
Union Commercial Corporation, as Lessor, and Cemex, Inc., as
Lessee, as it pertains to Schedules No. XI (2020016-015), No.
XX (20300199-008), No. XXVI (2030019-015), and XXI
(2030019-009).
d. Master Lease Agreement, dated as of August 1, 1997, between
General Electric Capital Corporation, as Lessor, and Sunbelt
Asphalt & Materials, Inc., as Lessee, as it pertains to
Schedule No. 42 (4045017-099).
e. Master Lease Agreement, dated as of July 25, 2003, between
Lasalle National Leasing Corporation, as Lessor, and Cemex,
Inc., as Lessee, as it pertains to Schedules No. 10376-3CCM
and No. 10375-10CCM.
f. Lease Agreement, dated as of June, 2004, among RBS Lombard,
Inc., as Lessor, and Cemex, Inc., Cemex Cement, Inc., Cemex
Cement of Texas, L.P., Cemex Construction Materials, L.P.,
Cemex Pacific Coast Cement Corporation, Cemex California
Cement LLC, Cemex Central Plains Cement LLC, and Kosmos
Cement Company, as Lessees, as it pertains to Schedule No.
001-000049-000 #04.
g. Master Lease Finance Agreement, dated as of April 19, 1999,
between STI Credit Corporation, as Lessor, and Southdown,
Inc., as Lessee, as it pertains to Schedule No.
139-9500364-031.
4. Lease Agreement, dated as of July 1, 2005 between Cemex Southeast LLC
and Company for Company's portion of the property located in Freeport,
Florida.
5. License Agreement between Cemex Trademarks Worldwide Ltd. and Company
dated as of the date hereof.
6. Allease, Inc. is a lessor of certain equipment to Company. See attached
schedule for equipment leased from Allease, Inc. to RMUSA as of July 1,
2005.
7. 22 employees of Alabama Catfish, Inc., the sole employee of AIM
Management, Inc., and 4 employees of Coeur d'Alene Racing Limited
Partnership are covered under the Company's self-insured health plan on
the same terms and conditions as employees of the Company. 21 employees
of Alabama Catfish, Inc. and 4 employees of Coeur d'Alene Racing
Limited Partnership are covered under the Company's self-insured dental
plan on the same terms and conditions as employees of the Company.
8. 8 non-highly compensated employees of Greene Group, Inc. participate in
the Company's 401(k) plan on the same terms and conditions as employees
of the Company.
9. The Company purchases catfish at market terms from Alabama Catfish,
Inc. for corporate purposes.
10. The Company uses a farm owned by Paul W. Bryant, Jr., for corporate
purposes and reimburses Mr. Bryant for expenses incurred as a result of
RMUSA's use. Any such transaction is entered into on terms no less
favorable to Paul W. Bryant, Jr. than those which he could obtain at
that time on an arm's length basis from an unaffiliated third party.
11. Intellectual Property License Agreement by and between Ready Mix USA,
Inc. and Ready Mix USA, LLC.
12. Ready Mix USA, LLC will maintain bank accounts with Bryant Bank on the
same terms and conditions as other customers of Bryant Bank.
13. Hunting and Fishing Leases by and between Thisldu and Ready Mix USA,
LLC. Any such transaction is entered into on terms no less favorable to
Thisldu than those which it could obtain at that time on an arm's
length basis from an unaffiliated third party.
14. Hunting Lease by and between Paul W. Bryant, Jr. and Ready Mix USA,
LLC. Any such transaction is entered into on terms no less favorable to
Paul W. Bryant, Jr. than those which he could obtain at that time on an
arm's length basis from an unaffiliated third party.
Administrative Services
-----------------------
A. Time Period: Fourty-five (45) days following the Closing Date. Following
expiration of the time period set forth in this Section (A), and any extension
granted by Cemex, Ready Mix USA LLC shall have no further right to receive any
services or use any property described herein.
B. Payment for Administrative Services. No payment for service is required for
the 45-day period. If an extension of the service period is requested, Ready Mix
USA LLC shall pay Cemex Fifteen Thousand Dollars ($15,000.00) for each 45-day
extension granted; however such extension is at the sole discretion of Cemex.
1. Order entry/ticketing services, including:
o Order entry
o Scheduling
o Ticketing
Cemex's granting Ready Mix USA LLC employees the continued use of the Cemex
proprietary GINCO and Lupex systems, at a portion of the facilities they are
currently located, will constitute such services. Cemex employees will have no
operational responsibilities for these systems other than as follows:
o Centrally controlled master data entry as reasonably requested by
Ready Mix USA LLC operational personnel for normal daily business.
Said master data will continue the coding methodology and numerical
sequences currently used by Cemex. Master data includes new
customers, projects, mix designs, and product and raw material
codes.
o Maintaining the Order entry/Dispatching/Ticketing applications in
working condition, as currently used.
2. Ready Mix USA LLC shall be responsible for providing the stationary needs
(tickets) at each facility prior to the Closing Date. The tickets will use the
same format as the current Cemex tickets but will replace the Cemex logo and
address information with that of Ready Mix USA LLC.
3. All control data changes required to transition from Cemex systems to Ready
Mix USA LLC systems will be the sole responsibility of Ready Mix USA LLC.
"Control data" includes, but is not limited to, customer masters, trucks,
drivers, mix designs, and product codes. Cemex will provide control data
transition assistance within accepted business practice, as allowed by time
constraints.
4. All communication circuits will be kept operational for the duration of the
services agreement, Cemex will be responsible for the support and
troubleshooting of the circuits, at the end of the services agreement all lines
will be cancelled. Ready Mix USA LLC will be responsible for providing its own
communication circuits to the locations included in the agreement
5. Only the Administrative Services as described above will be provided. Without
limiting the foregoing, Cemex will not provide any financial reporting and any
inadvertent errors such as incorrect shipments will result in no liability to
Cemex.
Schedule 9.6(a)
---------------
Member Ultimate Parent
Member
Name and
Mailing Address Ultimate Parent
- --------------------------------------- -----------------------------------
Cemex Southeast Holdings LLC Cemex, Inc.
840 Gessner, Suite 1400 840 Gressner, Suite 1400
Houston, TX 77024 Houston, TX 77024
READY MIX USA, INC. Paul W. Bryant, Jr.
P. O. Box 020152 Sam M. Phelps
Tuscaloosa, AL 35402
Schedule 19
-----------
EBITDA Multiples
8x EBITDA
Exhibit A
---------
Initial Members' Names, Mailing Addresses, Initial Capital Contributions
and Initial Percentage and Voting Interests
Member Initial Initial Initial
Name and Capital Percentage Voting
Mailing Address Contribution Interest Interest
- -------------------------- ----------------- ------------- --------------
READY MIX USA, INC. $433,401,939.05 50.01% 50.01%
P.O. Box 020152
Tuscaloosa, AL 35402
CEMEX SOUTHEAST $ 43,208,461.45 49.99% 49.99%
HOLDINGS LLC
840 Gessner, Suite 1400
Houston, TX 77024
------------- --------------
Total 100.00% 100.00%
Exhibit B-1
-----------
"Minor Acquisition Criteria"
----------------------------
1) 5x EBITDA multiple for the respective business type times the previous
year EBITDA of the operations to be acquired.
Or
2) 5x EBITDA multiple for the respective business type times the previous 3
year average EBITDA of the operations to be acquired.
Equity investments that do not represent 100% ownership shall be subject
to the Minor Acquisition criteria requirements of 1) or 2) above, on a
prorated basis, in accordance with the percent equity share of the
investment.
In the case of an aggregates acquisition, the existing permitted reserves
must be in excess of 20 years at current production rates for either
option 1) or 2) above.
Or
3) Assets to be valued in aggregate with the following maximum valuation
scale on a per item basis (applies to block and concrete acquisitions
only):
o Permitted and operating concrete plant ($750,000)
o Permitted and operating block plant in excess of 5 years old
($1,500,000)
o Permitted and operating block plant less than 5 years old
($3,000,000)
o Equipment (current replacement cost depreciated with a 10% declining
balance per year)
o Rolling stock (current replacement cost depreciated with a 10%
declining balance per year)
o Buildings ($25 per SQFT and $100 per SQFT of office space)
o Land (appraised value or under $25,000 per acre)
o Current Assets (book value)
Exhibit B-2
-----------
"Minor Investment Criteria"
---------------------------
1) Margin Improvement or Growth Investments - minimum of 20% IRR (on a free
cash flow basis) for minor strategic capital investments.
2) Mandatory Investments - letter, report or notice from the applicable
governmental or legal authority in regards to the required investment.
Exhibit B-3
-----------
"Adjusted Book Value Calculation"
---------------------------------
Attached.
Exhibit B-4
-----------
"Allied Assets"
---------------
Attached.
Exhibit C
---------
Name and Mailing Address of Manager
READY MIX USA, INC.
P.O. Box 020152
Tuscaloosa, AL 35402
Exhibit D
---------
Form of Adoption Agreement
This Adoption Agreement (this "Adoption Agreement") is executed by the
undersigned Person (the "New Member") pursuant to the terms of that Limited
Liability Company Agreement of READY MIX USA, LLC (the "Company") dated
[_______], 20[__] (as may be amended from time to time, the "LLC Agreement"). By
the execution of this Adoption Agreement, the New Member agrees as follows:
1. Adoption. On the date of this Adoption Agreement, the New Member is
[acquiring Membership Interests from the Company]\[acquiring Membership
Interests from [identify transferor]]. The New Member hereby agrees to be bound
by the terms and conditions of the LLC Agreement to the same extent as if the
New Member had executed the LLC Agreement as an original Member thereto.
2. Representations and Warranties. The representations and warranties set forth
in Section 14 of the LLC Agreement are incorporated herein mutatis mutandis, and
the New Member hereby makes such representations and warranties as of the date
of this Adoption Agreement.
3. Notice. Any notice required as permitted by the LLC Agreement shall be given
to the New Member at the address listed below the New Member's signature below.
4. Definitions. Capitalized terms used in this Adoption Agreement which are not
otherwise defined have the meaning set forth in the LLC Agreement.
5. Counterparts. This Adoption Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
6. Governing Law. This Adoption Agreement shall be governed by the laws of the
State of Delaware, without reference to the principles of conflicts of law
thereof.
EXECUTED AND DATED this _____ day of _____ _____
[NEW MEMBER]
By:
-------------------------------
Name:
Title:
Address:
Attention:
Telecopy:
Agreed to and accepted by the Company:
READY MIX USA, LLC
By:
-------------------------------
Name:
Title:
Exhibit 4.18.1
AMENDMENT NO. 1
TO LIMITED LIABILITY COMPANY AGREEMENT
AMENDMENT NO. 1 TO LIMITED LIABILITY COMPANY AGREEMENT OF READY MIX
USA, LLC, a Delaware limited liability company ("Company"), effective as of
September 1, 2005 (this "Amendment"), by and between Company, CEMEX SOUTHEAST
HOLDINGS, LLC, a Delaware limited liability company ("Cemex"), READY MIX USA,
INC., an Alabama corporation ("RMUSA"), and solely for the purposes set forth
in Section 9.6 thereof, CEMEX, INC., a Louisiana corporation. Capitalized terms
used herein but not otherwise defined shall have the meaning ascribed to such
terms in the LLC Agreement (as defined below).
WITNESSETH:
WHEREAS, the Company, Cemex and RMUSA desire to amend the Limited
Liability Company Agreement of the Company, effective as of July 1, 2005 (the
"LLC Agreement");
WHEREAS, Company and RMC Mid-Atlantic, LLC, a South Carolina limited
liability company and an Affiliate of Cemex ("RMC"), have entered into an Asset
Purchase Agreement, dated, September 1, 2005 (the "Asset Purchase Agreement"),
whereby (a) Company will purchase from RMC, and RMC will assign and delegate to
Company, certain assets and liabilities of RMC in accordance with the terms of
the Asset Purchase Agreement and (b) Company will be indemnified;
WHEREAS, Section 8.2(b)(x) of the LLC Agreement provides that the LLC
Agreement may be amended with prior Board approval, which approval has been
granted by the Board; and
WHEREAS, the Company, Cemex and RMUSA have agreed to amend certain
provisions of the LLC Agreement on the terms and conditions set forth in this
Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in the LLC Agreement and this Amendment, the
receipt, adequacy and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Company, Cemex and RMUSA hereby agree
as follows:
ARTICLE I
AMENDMENTS, ACKNOWLEDGEMENT AND COVENANTS
SECTION 1.1 Amendments to Section 3.2
(a) Section 3.2 of the LLC Agreement is amended to include a
definition of the "Asset Purchase Agreement" as follows:
"Asset Purchase Agreement" means that certain Asset
Purchase Agreement entered by and between the Company and RMC
Mid-Atlantic, LLC, a South Carolina limited liability company and an
Affiliate of Cemex, dated September 1, 2005.
SECTION 1.2 Amendments to Section 21
(a) Section 21.1 of the LLC Agreement is amended and restated in its
entirety to read as follows:
21.1 Notwithstanding anything in this LLC Agreement
to the contrary, each of Cemex and RMUSA hereby agrees (and any
Permitted Transferee of either of the foregoing shall agree) that any
Damages for which it or any of its Affiliates (the "Indemnifying
Party") owes the other party (or its Affiliates) or the Company or
Cemex Southeast LLC (the "Indemnified Party") an indemnification
obligation under the Contribution Agreement, the Cemex Contribution
Agreement or the Asset Purchase Agreement shall be paid from any
distributions that otherwise would be paid by the Company to the
Indemnifying Party and its Affiliates pursuant to Section 6.1 or
otherwise, and each party hereby irrevocably waives all rights and
title it would otherwise have to, and irrevocably instructs the
Manager to pay to the Indemnified Party, all distributions that
otherwise would be paid by the Company to the Indemnifying Party and
its Affiliates under this LLC Agreement, until all such Damages have
been paid in full to the Indemnified Party. For purposes of this
Section 21.1, each party acknowledges that to the extent any
distributions are paid to the Indemnified Party under Section 21.1 of
the Cemex Southeast LLC Agreement in respect of a particular
indemnification claim, such payments will also reduce the amount of
such Damages. In the event of multiple claims, the distributions shall
be applied against such claims in the order in which the amount of the
indemnification obligation in respect thereof is finally determined.
Notwithstanding anything in this LLC Agreement to the contrary, in no
event shall any amount of damages withheld by the Company under this
Section 21.1 as a payment of indemnified Damages incurred by the
Company be treated as (i) EBITDA for purposes of (x) calculating the
amount of any required distribution (including pursuant to Section
6.1) or (y) determining the Purchase Price or the Buyout Purchase
Price, or (ii) available cash for purposes of determining the amount
of any distribution under Section 9.6.4(a). The parties acknowledge
and agree that in the event RMC Mid-Atlantic, LLC is no longer an
Affiliate of Cemex such change in status shall not affect the
obligations under this Section 21.1 and any Damages for which RMC
Mid-Atlantic, LLC owes the Company (or its Affiliates) an
indemnification obligation under the Asset Purchase Agreement shall be
paid as provided in this Section 21.1 as if RMC Mid-Atlantic, LLC
remained an Affiliate of Cemex. For purposes of this Section 21, none
of Cemex, RMUSA or any of their respective Affiliates shall be deemed
to be Affiliates of the Company or any of its Subsidiaries or Cemex
Southeast LLC or any of its Subsidiaries.
(b) The definition of "Net Indemnity Obligation" in Section 21.4 of
the LLC Agreement is amended and restated in its entirety to read as follows:
"Net Indemnity Obligations" means, with respect to a
particular Indemnifying Party as of a particular time, the amount, if
any, by which (i) the aggregate Damages for which it and its
Affiliates owes the Indemnified Party and any of its Affiliates an
indemnification obligation under the Contribution Agreement and the
Asset Purchase Agreement as of such time exceeds (ii) the aggregate
Damages for which the other Indemnifying Party (or Member, as the case
may be) and any of its Affiliates owes the Indemnified Party and any
of its Affiliates an indemnification obligation under the Contribution
Agreement and the Asset Purchase Agreement as of such time. For
purposes of determining the Net Indemnity Obligation, only Damages
which have been finally determined (whether by agreement of the
parties or by any final, non-appealable determination of any tribunal
with jurisdiction) shall be taken into account.
SECTION 1.3 Amendments to Exhibit A
(a) The first column of Exhibit A of the LLC Agreement titled "Member
Name and Mailing Address" is amended and restated in its entirety to read as
follows:
READY MIX USA, INC.
1300 McFarland Blvd NE
Tuscaloosa, AL 35406
Attn: Scott Phelps
Fax: (205) 345-5772
CEMEX SOUTHEAST HOLDINGS, LLC
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
Fax: (713) 722-5110
SECTION 1.4 Amendments to Exhibit C
(a) Exhibit C of the LLC Agreement is amended and restated in its
entirety to read as follows:
READY MIX USA, INC.
1300 McFarland Blvd NE
Tuscaloosa, AL 35406
ARTICLE II
REPRESENTATIONS
Each of Company, Cemex and RMUSA hereby represents to the other that
(a) it has full organizational power and authority to execute and deliver this
Amendment and to consummate the transactions contemplated hereby, (b) the
execution and delivery of this Amendment by such party have been duly and
validly authorized by all necessary corporate action on the part of such party
and (c) this Amendment has been duly and validly executed and delivered by such
party and constitutes a valid and binding obligation of such party, enforceable
against such party in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of equity and the
discretion of the court before which any proceedings seeking injunctive relief
or specific performance may be brought.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 Headings. The headings contained in this Amendment are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Amendment.
SECTION 3.2 Counterparts. This Amendment may be executed in two or
more counterparts, each of which when executed shall be deemed to be an
original but all of which shall constitute one and the same agreement.
SECTION 3.3 Governing Law. This Amendment shall be governed, construed
and enforced in accordance with the Laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
SECTION 3.4 No Other Effect on the LLC Agreement. Except as modified
by this Amendment, all of the terms of the LLC Agreement are hereby ratified
and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, Company, Cemex and RMUSA have caused this
Amendment to be signed by their respective officers thereunto duly authorized
as of the date first written above.
READY MIX USA, LLC
By: Ready Mix USA, Inc.
Its Manager
By: /s/ Marc Bryant Tyson
-----------------------
Marc Bryant Tyson
Its Manager
READY MIX USA, INC.
By: /s/ Marc Bryant Tyson
-----------------------------
Marc Bryant Tyson
Its President
CEMEX SOUTHEAST HOLDINGS LLC
By: /s/ Gilberto Perez
---------------------------
Name: Gilberto Perez
Title: President
Exhibit 4.19
ASSET AND CAPITAL CONTRIBUTION AGREEMENT
THIS ASSET AND CAPITAL CONTRIBUTION AGREEMENT (this "Agreement") made
and entered into this 1st day of July, 2005, by and among READY MIX USA, INC.,
an Alabama corporation ("RMUSA"), CEMEX SOUTHEAST HOLDINGS LLC, a Delaware
limited liability company ("Cemex"), and CEMEX SOUTHEAST LLC, a Delaware
limited liability company ("Company").
W-I-T-N-E-S-S-E-T-H :
WHEREAS, RMUSA and Cemex are the sole members of Company; and
WHEREAS, RMUSA and Cemex have agreed to each make an asset and capital
contribution (the "Contribution") to Company pursuant to terms contained
herein; and
WHEREAS, subsequent to the Contribution, Company will own and operate
the RMUSA Assets and the Cemex Assets, both of which terms are defined below,
in connection with the cement production and terminal business at the RMUSA
Business Location and the Cemex Business Locations, both of which terms are
defined below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, the receipt, adequacy and sufficiency of which are
hereby acknowledged, RMUSA and Cemex agree as follows:
ARTICLE 1
TRANSFER OF ASSETS
1.1 Assets To Be Contributed By RMUSA. Subject to the terms
hereinafter set forth, RMUSA hereby transfers, conveys, assigns and delivers,
and agrees to cause each of its Affiliates (as defined herein) to transfer,
convey, assign and deliver, to Company those assets described on Schedule
1.1(a) which are currently owned by RMUSA or any of its Affiliates and used or
intended for use primarily in, or which are being utilized or operated by RMUSA
or any of its Affiliates primarily in its cement terminal location located in
Birmingham, Alabama (the "RMUSA Assets") and the business associated with said
assets (the "RMUSA Business"). The location listed on Schedule 1.1(a)-1 is
referred to sometimes herein as the "RMUSA Business Location." Notwithstanding
the foregoing, the assets, properties and rights described on Schedule 1.1(b)
shall not be transferred, conveyed, assigned or delivered to Company under this
Agreement (the "Retained RMUSA Assets").
1.2 Assets To Be Contributed By Cemex. Subject to the terms
hereinafter set forth, Cemex hereby transfers, conveys, assigns and delivers,
and agrees to cause each of its Affiliates to transfer, convey, assign and
deliver, to Company those assets described on Schedule 1.2(a) which are
currently owned by Cemex or any of its Affiliates and used or intended for use
primarily in, or which are being utilized or operated by Cemex or any of its
Affiliates primarily in its cement production and terminal business locations
in the Cemex Boundaries (the "Cemex Assets") and the business associated with
said assets (the "Cemex Business", and together with the RMUSA Business, the
"Business"). The locations listed on Schedule 1.2(a)-1 are referred to
sometimes herein as the "Cemex Business Locations". Notwithstanding the
foregoing, the assets, properties and rights described on Schedule 1.2(b) shall
not be transferred, conveyed, assigned or delivered to Company under this
Agreement (the "Retained Cemex Assets").
ARTICLE 2
ASSIGNED VALUES
2.1 Values Assigned to RMUSA Assets And Cemex Assets. RMUSA and Cemex
agree, for purposes of this Agreement, that:
(a) the value assigned to the RMUSA Assets is equal to the sum of
$1,000,000.00, plus the adjustments made pursuant to Section 2.2 and 2.3 below
(the "RMUSA Value"); and
(b) the value assigned to the Cemex Assets is equal to the sum of
$371,859.275.15 ($375,000,000.00 - $3,140,724.85), plus the adjustments made
pursuant to Section 2.2 and 2.3 below (the "Cemex Value").
2.2 Prorations. Except for any accounts payable of Cemex or its
Affiliates, arising out of the ordinary course of the Cemex Business, which
shall be valued at face value (net of discounts) at close of business on the
Contribution Date and subject to adjustment pursuant to Section 2.3 below
("Cemex Accounts Payable"), Cemex and RMUSA each acknowledge and agree that
RMUSA shall be responsible for the expenses relating to the RMUSA Assets, and
Cemex shall be responsible for the expenses relating to the Cemex Assets, up to
and through the Contribution Date (for example, ad valorem taxes and utilities)
and that such expenses shall be paid by them at or before the Contribution
Date. To the extent that a period of time for the assessment of any of the
expenses (for example, property taxes) shall be due both before and after the
Contribution Date, the same shall be prorated as of the Contribution Date.
RMUSA and Cemex acknowledge and agree that one or more of such prorations may
occur or be reconciled subsequent to the Contribution Date.
2.3 Estimated Values; Adjustments.
(a) The RMUSA Value shall be (i) increased by (w) any cash contributed
to the Company by RMUSA on the Contribution Date; (x) the value of the
inventory of sand, gravel, cement, admixtures, fuel, other raw material and
finished goods on hand constituting RMUSA Inventory, which shall all be valued
at book value at close of business on the Contribution Date; (y) the value of
the inventory of tools, parts and related items constituting RMUSA Inventory,
which shall all be valued at book value at close of business on the
Contribution Date; and (z) the value of all deposits and prepaid items at close
of business on the Contribution Date (the "RMUSA Prepaids").
(b) The Cemex Value shall be (i) increased by (v) any cash contributed
to the Company by Cemex on the Contribution Date; (w) the value of the
inventory of sand, gravel, cement, admixtures, fuel, other raw material and
finished goods on hand constituting Cemex Inventory, which shall all be valued
at book value at close of business on the Contribution Date; (x) the value of
the inventory of tools, parts and related items constituting Cemex Inventory,
which shall all be valued at book value at close of business on the
Contribution Date; (y) the value of all deposits and prepaid items at close of
business on the Contribution Date (the "Cemex Prepaids"); and (z) the amount,
if any, by which the Cemex Accounts Receivable, valued at face value at close
of business on the Contribution Date, exceed the Cemex Accounts Payable, and
(ii) decreased by the amount, if any, by which the Cemex Accounts Payable
exceed the Cemex Accounts Receivable. For the purpose of calculating the Cemex
Accounts Receivable: (i) accounts receivable that are less than sixty (60) days
past due will be valued at face value as of the close of business on the
Contribution Date; (ii) accounts receivable that are more than sixty (60) days
and less than ninety (90) days past due will be valued at 90% of face value as
of the close of business on the Contribution Date; and (iii) accounts
receivable that are more than ninety (90) days past due will be valued at 75%
of the face value as of the close of business on the Contribution Date.
(c) (i) Within thirty (30) days after the Contribution Date, (x) Cemex
shall deliver to the Company and RMUSA a working capital statement reflecting
the current assets, the Cemex Prepaids and the Cemex Accounts Payable assigned
by Cemex pursuant to this Agreement as of the close of business on the
Contribution Date, with each item valued as contemplated in Section 2.2 or
2.3(b), as the case may be (the "Cemex Working Capital Statement") and (y)
RMUSA shall deliver to the Company and Cemex a working capital statement
reflecting the current assets and the RMUSA Prepaids assigned by RMUSA pursuant
to this Agreement as of the close of business on the Contribution Date, with
each item valued as contemplated in Section 2.2 or 2.3(a), as the case may be
(the "RMUSA Working Capital Statement").
(ii) Upon receipt of the Cemex Working Capital Statement,
RMUSA and its independent certified public accountants shall have the
right during the succeeding 30-day period to review and audit the
accounts represented by the line items set forth on the Cemex Working
Capital Statement and to examine and review all records and work
papers and other supporting documents used to prepare such statement.
Cemex shall give RMUSA full access at all reasonable times to the
working papers relating to the Cemex Working Capital Statement,
including but not limited to any descriptions of the methodology,
procedures, internal audits and analysis undertaken in connection with
the preparation of the Cemex Working Capital Statement. RMUSA shall
notify Cemex in writing, on or before the last day of the 30-day
period, of any good faith objections to the Cemex Working Capital
Statement, setting forth a detailed explanation of the objections and
the dollar amount of each such objection. If RMUSA does not deliver
such notice within such 30-day period, the Cemex Working Capital
Statement shall be deemed to have been irrevocably accepted by RMUSA
and the Company.
(iii) Upon receipt of the RMUSA Working Capital Statement,
Cemex and its independent certified public accountants shall have the
right during the succeeding 30-day period to review and audit the
accounts represented by the line items set forth on the RMUSA Working
Capital Statement and to examine and review all records and work
papers and other supporting documents used to prepare such statement.
RMUSA shall give Cemex full access at all reasonable times to the
working papers relating to the RMUSA Working Capital Statement,
including but not limited to any descriptions of the methodology,
procedures, internal audits and analysis undertaken in connection with
the preparation of the RMUSA Working Capital Statement. Cemex shall
notify RMUSA in writing, on or before the last day of the 30-day
period, of any good faith objections to the RMUSA Working Capital
Statement, setting forth a detailed explanation of the objections and
the dollar amount of each such objection. If Cemex does not deliver
such notice within such 30-day period, the RMUSA Working Capital
Statement shall be deemed to have been irrevocably accepted by Cemex
and the Company.
(iv) If any party in good faith objects to line items set
forth on the Cemex Working Capital Statement, or the RMUSA Working
Capital Statement, as the case may be, the parties shall attempt to
resolve any such objections within 30 days of receipt by the
corresponding party of any such objections. If the parties are unable
to resolve the matter within such 30-day period, they shall jointly
appoint an impartial nationally recognized independent certified
public accounting firm (the "Impartial Accounting Firm") mutually
acceptable to the parties (or, if they cannot agree on a mutually
acceptable firm, they shall cause their respective accounting firms to
select such firm) within five (5) days after the end of such 30-day
period to resolve any such remaining matters. Any such resolution
shall be conclusive and binding on the parties and the fees of the
Impartial Accounting Firm shall be borne as the Impartial Accounting
Firm shall determine after considering the positions asserted by the
parties in light of its final decision. The parties shall fully
cooperate with the Impartial Accounting Firm. The Impartial Accounting
Firm shall be instructed to reach its conclusion regarding the dispute
within 30 days of its appointment to settle the dispute.
(v) Adjustments to the values contemplated in paragraphs (a)
and (b) of this Section 2.3 shall be made pursuant to the Cemex
Working Capital Statement and the RMUSA Working Capital Statement,
after their acceptance by the parties or the resolution of all
disputes in connection therewith, pursuant to the provisions of this
paragraph 2.3(c) Upon any adjustment to the RMUSA Value or the Cemex
Value, as contemplated above, in the event that the sum of RMUSA Value
under this Agreement and the RMUSA Value under the Ready Mix LLC
Contribution Agreement, as finally determined (the "Aggregate RMUSA
Contribution"), is less than the sum of the Cemex Value under this
Agreement and the Cemex Value under the Ready Mix LLC Contribution
Agreement, as finally determined (the "Aggregate Cemex Contribution"),
then within ten (10) days following such final determination RMUSA
shall make a cash contribution (as part of its Contribution) to Ready
Mix LLC in an amount equal to such shortfall. In the event the
Aggregate RMUSA Contribution is greater than the Aggregate Cemex
Contribution, then within ten (10) days following such final
determination Cemex shall make a cash contribution (as part of its
Contribution) to Company in an amount equal to such shortfall.
(d) In connection with the preparation of the Cemex Working Capital
Statement and the RMUSA Working Capital Statement, each of RMUSA and Cemex
shall be entitled, for a period of thirty (30) days following the Contribution
Date, to conduct a review of Company's physical inventory.
ARTICLE 3
CONTRIBUTION DATE
3.1 Contribution Date. The Contribution shall be made by RMUSA and
Cemex simultaneously with the entering into of this Agreement (the
"Contribution Date").
ARTICLE 4
DELIVERIES
4.1 Deliveries By RMUSA. Contemporaneously with the execution and
delivery of this Agreement, RMUSA shall deliver or cause to be delivered the
following:
(a) To Company:
(i) A bill of sale and assignment evidencing the contribution
to Company of those items described in paragraph 2 of Schedule 1.1(a),
duly executed by RMUSA;
(ii) A limited warranty deed for each parcel of RMUSA Land
duly executed by RMUSA, evidencing the contribution of the RMUSA Land
to Company (the "RMUSA Warranty Deed");
(iii) A Title Policy for each parcel of RMUSA Land;
(iv) Any sales tax and real estate transfer tax returns,
notice of sale of assets, inventory resale certificate or like
governmental report required or permitted by any Governmental
Authority having jurisdiction over the RMUSA Real Property;
(v) An affidavit pursuant to the Foreign Investment and Real
Property Transfer Act in respect of the transfer of RMUSA Land;
(vi) Duly executed and assigned certificates of title for all
vehicles/rolling stock being contributed to Company as part of the
RMUSA Assets;
(vii) Resolutions adopted by the directors of RMUSA
unanimously authorizing the execution and delivery of this Agreement
and the transactions contemplated hereunder and appointing the
person(s) authorized to consummate this transaction on behalf of RMUSA
(the "RMUSA Authorized Person(s)");
(viii) A current Certificate of Good Standing of RMUSA from
the state in which the RMUSA Business Location is located;
(ix) A certificate executed by an authorized officer of RMUSA
as to the incumbency of the RMUSA Authorized Person(s);
(x) Possession of the RMUSA Assets;
(xi) To the extent assignable, an assignment of the RMUSA
Permits;
(xii) An instrument of assignment and assumption with respect
to each RMUSA Assumed Contract (the "RMUSA Agreement Assignment and
Assumption"), duly executed by RMUSA;
(xiii) An Assignment and Assumption Agreement and Lessor and
Lessee Estoppel Agreement with respect to each RMUSA Lease
substantially in the form attached hereto as Exhibit A ("RMUSA Lease
Assignment");
(xiv) The Cement Supply Agreement duly executed by RMUSA, in
its capacity as manager of Ready Mix LLC; and
(xv) $7,000,000 by wire transfer in immediately available
funds to the account designated by the Company.
(b) To Company and Cemex:
(i) The Limited Liability Company Agreement of Cemex
Southeast LLC; dated July 1, 2005 (the "Cemex LLC Agreement"), duly
executed by RMUSA.
4.2 Deliveries By Cemex. Contemporaneously with the execution and
delivery of this Agreement, Cemex shall deliver or cause to be delivered the
following:
(a) To Company:
(i) A bill of sale and assignment evidencing the contribution
to Company of those items described in paragraph 2 of Schedule 1.2(a),
duly executed by Cemex;
(ii) A limited warranty deed for each parcel of Cemex Land
duly executed by Cemex, evidencing the contribution of the Cemex Land
to Company (the "Cemex Warranty Deed");
(iii) A Title Policy for each parcel of Cemex Land;
(iv) Any sales tax and real estate transfer tax returns,
notice of sale of assets, inventory resale certificate or like
governmental report required or permitted by any Governmental
Authority having jurisdiction over the Cemex Real Property;
(v) An affidavit pursuant to the Foreign Investment and Real
Property Transfer Act in respect of the transfer of Cemex Land;
(vi) Duly executed and assigned Certificates of Title for all
vehicles/rolling stock being contributed to Company as part of the
Cemex Assets;
(vii) Resolutions adopted by the directors of Cemex
unanimously authorizing the execution and delivery of this Agreement
and the transactions contemplated hereunder and appointing the
person(s) authorized to consummate this transaction on behalf of Cemex
(the "Cemex Authorized Person(s)");
(viii) A current Certificate of Good Standing of Cemex from
each state in which a Cemex Business Location is located;
(ix) A certificate executed by an authorized officer of Cemex
as to the incumbency of the Cemex Authorized Person(s);
(x) Possession of the Cemex Assets;
(xi) To the extent assignable, an assignment of the Cemex
Permits;
(xii) An instrument of assignment and assumption with respect
to each Cemex Assumed Contract (the "Cemex Agreement Assignment and
Assumption"), duly executed by Cemex; and
(xiii) An Assignment and Assumption Agreement and Lessor and
Lessee Estoppel Agreement with respect to each Cemex Lease
substantially in the form attached hereto as Exhibit B ("Cemex Lease
Assignment").
(b) To Company and RMUSA:
(i) The Cemex LLC Agreement, duly executed by Cemex.
4.3 Deliveries By Company. Contemporaneously with the execution and
delivery of this Agreement, Company shall deliver or cause to be delivered:
(a) To each of RMUSA and Cemex, the Cemex LLC Agreement, duly executed
by Company;
(b) To Ready Mix LLC, the Cement Supply Agreement, duly executed by
Company;
(c) To RMUSA, the RMUSA Agreement Assignment and Assumption, duly
executed by Company;
(d) To Cemex, the Cemex Agreement Assignment and Assumption, duly
executed by Company;
(e) To Cemex, a Cemex Lease Assignment with respect to each Cemex
Lease, duly executed by Company; and
(f) To RMUSA, a RMUSA Lease Assignment with respect to each RMUSA
Lease, duly executed by Company.
4.4 Consents. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement shall not constitute an agreement to transfer,
sell or otherwise assign any instrument, Contract, license or Permit of the
Cemex Business or the RMUSA Business which would otherwise be a Transferred
Asset but which is not permitted to be assigned in connection with a
transaction of the type contemplated by this Agreement (collectively, the
"Unassigned Contracts"). To the extent permitted under the terms of each
Unassigned Contract, the beneficial interest in and to each Unassigned Contract
shall in any event pass to Company at the Closing, and each of Cemex and RMUSA,
as the case may be, covenants and agrees to cooperate with Company in any
lawful and economically reasonable arrangement to provide Company with Cemex's
or RMUSA's, as the case may be, entire interest in the benefits under each of
the Unassigned Contracts. Cemex or RMUSA, as the case may be, shall exercise or
exploit its rights and options under all such Unassigned Contracts referred to
in this Section 4.4 only as reasonably directed by Company; provided, that
Company shall be responsible for any liability incurred by Cemex or RMUSA, as
the case may be, pursuant to such direction and, provided, further, that
Company shall not direct Cemex or RMUSA, as the case may be, not to attempt to
obtain a Required Contractual Consent for an Unassigned Contract. If Company
receives an economic benefit under an Unassigned Contract, Company shall accept
the burdens and perform the obligations under such Unassigned Contract as
subcontractor of Cemex or RMUSA, as the case may be, to the extent of the
benefit received, and to the extent such burdens and obligations would have
constituted an Assumed Liability if such Unassigned Contract had been
transferred to Company at the Contribution. Furthermore, if the other
party(ies) to an Unassigned Contract subsequently Consent to the assignment of
such Contract to Company, Company shall thereupon agree to assume and perform
all liabilities and the obligations arising thereunder after the date of such
Consent, at which time such Unassigned Contract shall be deemed a Transferred
Asset, without the payment of further consideration, and the obligations so
assumed thereunder shall be deemed Assumed Liabilities.
ARTICLE 5
LIABILITIES
5.1 Limitation on Liabilities of RMUSA to be Assumed by Company.
Notwithstanding any provision of this Agreement to the contrary, Company shall
not assume or become liable to RMUSA, or any other Person, for any liabilities
or obligations of RMUSA or any of its Affiliates whether accrued, absolute,
contingent or otherwise, except for those liabilities of RMUSA and its
Affiliates described on Schedule 5.1 (the "RMUSA Assumed Liabilities"), which
Company hereby assumes and agrees to perform, satisfy and discharge when due.
5.2 Limitation on Liabilities of Cemex to be Assumed by Company.
Notwithstanding any provision of this Agreement to the contrary, Company shall
not assume or become liable to Cemex, or any other Person, for any liabilities
or obligations of Cemex or any of its Affiliates whether accrued, absolute,
contingent or otherwise, except for those liabilities of Cemex and its
Affiliates described on Schedule 5.2 (the "Cemex Assumed Liabilities") which
the Company hereby assumes and agrees to perform, satisfy and discharge when
due.
ARTICLE 6
CERTAIN POST-CONTRIBUTION MATTERS
6.1 Further Acts.
(a) RMUSA and Cemex shall, respectively, assist Company in planning
for and accomplishing the orderly transfer of the RMUSA Assets and Cemex Assets
to Company as of the Contribution Date and shall take all steps reasonably
requested by Company in furtherance thereof. From time to time, at the request
of Company, whether at or after the Contribution Date and without further
consideration, RMUSA, Cemex and their respective officers and employees will
do, execute, acknowledge and deliver to Company all further acts, instruments,
and assurances, in recordable form, that are reasonably required by Company to
effectuate the terms and conditions of this Agreement and the Contribution
contemplated hereunder. In addition to the foregoing, on or before the day
which is sixty (60) days following the Contribution Date, Cemex shall cause (i)
all of the Cemex Required Contractual Consents to be obtained, (ii) the Cemex
Permits to be assigned to the Company, and (iii) all certificates of title for
all vehicles/rolling stock being contributed to the Company as part of the
Cemex Assets to be duly executed and assigned to the Company. In addition to
the foregoing, on or before the day which is sixty (60) days following the
Contribution Date, RMUSA shall cause (i) all of the RMUSA Required Contractual
Consents to be obtained, (ii) the RMUSA Permits to be assigned to the Company,
and (iii) all certificates of title for all vehicles/rolling stock being
contributed to the Company as part of the RMUSA Assets to be duly executed and
assigned to the Company. The parties covenant and agree that following the
Contribution Date they shall take all commercially reasonable actions necessary
at their own respective cost to clarify, correct, remove or satisfy any matters
of title or survey as to which either party may have an objection that affect
any parcel of real property that is contributed or conveyed by either party to
Company. From time to time, at the request of RMUSA or Cemex, whether at or
after the Contribution Date and without further consideration, Company and its
officers and employees will do, execute, acknowledge and deliver to RMUSA or
Cemex, as the case may be, all further acts, instruments, and assurances, in
recordable form, that are reasonably required by RMUSA or Cemex, as the case
may be, to effectuate the terms and conditions of this Agreement and the
assumption of the RMUSA Assumed Liabilities or the Cemex Assumed Liabilities,
as the case may be, contemplated hereunder.
(b) The agreements of RMUSA and Cemex in (a) above shall include,
without limitation, the execution and delivery of deeds, assignments, bills of
sale, affidavits, agreements, consents, certificates and other documents or
instruments which RMUSA or Cemex, as applicable, shall be unable to deliver as
of the Contribution Date and RMUSA and Cemex, as applicable, shall diligently
take whatever steps or actions subsequent to the Contribution Date as may be
necessary in order to effectuate delivery of each of the same.
6.2 Continued Access to Records. RMUSA and Cemex shall, respectively,
preserve for a period of five (5) years after the Contribution Date their
respective records and documents which, in Company's reasonable opinion, relate
to the RMUSA Assets and the Cemex Assets, respectively, any of the
representations or warranties of RMUSA and Cemex, as applicable, contained
herein, or the conduct or operation of the RMUSA Assets and Cemex Assets in the
Business by Company subsequent to Contribution and will grant Company such
reasonable access to and ability to copy all such records and documents as may
be needed by Company.
6.3 Accounts Receivable. In the event that Cemex receives any payments
subsequent to the Contribution Date relating to any Cemex Accounts Receivable
outstanding on or after such date, such payment shall be the property of, and
shall be forwarded and remitted to Company as hereinafter provided. After the
Contribution Date Cemex shall and shall cause its Affiliates to pay to Company
on a bi-monthly basis all amounts received after the Contribution Date by Cemex
with respect to Cemex Accounts Receivable.
6.4 Publicity. Unless and only to the extent required to be made
pursuant to any applicable Law, regulation or other requirement of any
Governmental Authority, or by any listing agreement with a national securities
exchange or trading market, none of RMUSA, Cemex or Company shall make any
public announcement or issue any press release regarding this Agreement or the
consummation of the transactions contemplated hereby without the prior written
consent of the other party hereto, which consent shall not be unreasonably
withheld.
6.5 Insurance. Each of Cemex and Company acknowledges that the RMUSA
Retained Policies will not continue to insure the RMUSA Assets or the RMUSA
Business after the Contribution Date and that it is incumbent upon Company to
obtain substitute policies of insurance that provide insurance coverage for the
RMUSA Assets and the RMUSA Business. Each of Cemex and Company hereby further
acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the RMUSA Assets or RMUSA
Business occurs prior to or on the Contribution Date, such loss shall be
payable solely from the RMUSA Retained Policies. Each of Cemex and Company
hereby further acknowledges that in the event any casualty or loss, including a
product liability or workers' compensation claim, relating to the RMUSA Assets
or RMUSA Business occurs after the Contribution Date, such loss shall be
payable solely from such substitute policies. Any such substitute policies
shall include a waiver of any rights of subrogation that the insurance carriers
underwriting such policies may have against RMUSA or RMUSA's Affiliates, or
under the RMUSA Retained Policies.
6.6 Employment Matters. Cemex shall cause the transfer to Company of
the employees of Cemex and its Affiliates associated with the Cemex Assets and
the Cemex Business ("Cemex Transferred Employees"). Cemex shall maintain, or
cause to be maintained, employee benefit and compensation plans, programs and
arrangements for the benefit of the Cemex Transferred Employees.
6.7 Cemex Environmental Indemnity. Cemex, in addition to its other
indemnity obligations otherwise provided in this Agreement, agrees to indemnify
and hold harmless Company and its officers, shareholders, members, managers,
directors, employees, agents, successors, and assigns (the "Cemex Environmental
Indemnitees"), against and in respect of, any and all damages, claims, losses,
liabilities, and expenses (including without limitation, reasonable legal,
accounting, consulting, engineering and other expenses) that may be incurred by
any of the Cemex Environmental Indemnitees, or assessed against any of the
Cemex Environmental Indemnitees by any other party or parties (including,
without limitation, a governmental entity) arising out of, in connection with,
or relating to the subject matter of: (1) the breach or inaccuracy of any of
the representations and warranties set forth in Section 7.7; (2) any Cemex
Environmental Condition which exists as of the Contribution Date, even if not
discovered until after the Contribution Date, including, without limitation,
remediation of such condition and loss of life, injury to persons or property,
or damage to natural resources arising from such condition; (3) any violation
of an Environmental Law prior to the Contribution Date which relates to the
Cemex Real Property or the Cemex Business; or (4) the off-site transportation,
storage, disposal, treatment or recycling of Hazardous Materials generated by
or on behalf of the Cemex Business on or prior to the Contribution Date,
including, without limitation, any claims related to remediation of such
Hazardous Materials and loss of life, injury to persons or property, or damage
to natural resources arising from such Hazardous Materials. Such damages,
claims, losses, liabilities, and expenses may sometimes be referred to herein
as "Cemex Environmental Liabilities." This indemnity shall survive the
Contribution Date only for a period of five (5) years after the Contribution
Date. Any testing or investigation which RMUSA or Company deems reasonably
necessary in order to determine whether any environmental indemnity obligations
of Cemex exist hereunder may be conducted at any time prior to the termination
of this indemnity obligation at the expense of RMUSA.
6.8 RMUSA Environmental Indemnity. RMUSA, in addition to its other
indemnity obligations otherwise provided in this Agreement, agrees to indemnify
and hold harmless Company and its officers, shareholders, members, managers,
directors, employees, agents, successors, and assigns (the "RMUSA Environmental
Indemnitees"), against and in respect of, any and all damages, claims, losses,
liabilities, and expenses (including without limitation, reasonable legal,
accounting, consulting, engineering and other expenses) that may be incurred by
any of the RMUSA Environmental Indemnitees, or assessed against any of the
RMUSA Environmental Indemnitees by any other party or parties (including,
without limitation, a governmental entity) arising out of, in connection with,
or relating to the subject matter of: (1) the breach or inaccuracy of any of
the representations and warranties set forth in Section 8.7; (2) any RMUSA
Environmental Condition which exists as of the Contribution Date, even if not
discovered until after the Contribution Date, including, without limitation,
remediation of such condition and loss of life, injury to persons or property,
or damage to natural resources arising from such condition; (3) any violation
of an Environmental Law prior to the Contribution Date which relates to the
RMUSA Real Property or the RMUSA Business; or (4) the off-site transportation,
storage, disposal, treatment or recycling of Hazardous Materials generated by
or on behalf of the RMUSA Business on or prior to the Contribution Date,
including, without limitation, any claims related to remediation of such
Hazardous Materials and loss of life, injury to persons or property, or damage
to natural resources arising from such Hazardous Materials. Such damages,
claims, losses, liabilities, and expenses may sometimes be referred to herein
as "RMUSA Environmental Liabilities." This indemnity shall survive the
Contribution Date only for a period of five (5) years after the Contribution
Date. Any testing or investigation which Cemex or Company deems reasonably
necessary in order to determine whether any environmental indemnity obligations
of RMUSA exist hereunder may be conducted at any time prior to the termination
of this indemnity obligation at the expense of Cemex.
6.9 Bulk Transfer Laws. Without admitting applicability of the bulk
transfer laws of any jurisdiction, RMUSA, Cemex and Company have agreed to
waive compliance by each of RMUSA and Cemex with the laws of any jurisdiction
relating to bulk transfers which may be applicable in connection with the
transfer of the RMUSA Assets or the Cemex Assets to Company. Each of RMUSA and
Cemex shall defend, indemnify and hold harmless Company from and against any
liabilities incurred as a result of its noncompliance with any applicable bulk
transfer laws.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES BY CEMEX
Cemex hereby represents and warrants to Company that, except as set
forth in the disclosure schedule being delivered by Cemex contemporaneously
herewith (the "Cemex Disclosure Schedule"):
7.1 Existence and Authorization for Agreement; Enforceability. Cemex
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the requisite power
and authority to own, lease, and operate its properties and carry on and
operate its business as and where such business is now being conducted. Each of
the Affiliates of Cemex which are contributing Cemex Assets or Cemex Business
at the direction of or for the benefit of Cemex is an entity duly organized,
validly existing and in good standing under the laws of the State of its
organization, and has the requisite power and authority to own, lease, and
operate the Cemex Assets and the Cemex Business that it is contributing to
Company. Each of the Affiliates of Cemex which are contributing Cemex Assets or
Cemex Business to Company has been duly authorized to do so, and has taken all
necessary actions to transfer such Cemex Assets or Cemex Business to Company.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, have been duly authorized by the Board of
Directors of Cemex. Cemex has taken all actions necessary to authorize it to
enter into and perform fully its obligations under this Agreement and all of
the documents or instruments otherwise contemplated herein and to consummate
the transactions contemplated herein and therein. Each of this Agreement and
the other closing documents delivered pursuant hereto has been duly executed
and delivered by Cemex and is the legal, valid and binding obligation of Cemex
enforceable in accordance with its respective terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to the general principles of equity.
7.2 Title to and Sufficiency of Cemex Assets.
(a) Cemex or the Cemex Affiliate that contributes the Cemex Assets, as
the case may be, has good and marketable title to the Cemex Assets. Except for
(i) the Cemex Assumed Liabilities, and (ii) Permitted Encumbrances, none of the
Cemex Assets shall, at the Contribution Date, be subject to any Lien.
(b) The Cemex Assets, in conjunction with the rights, goods and
services granted, transferred or to be performed by Cemex and its Affiliates
and subsidiaries pursuant to this Agreement, constitute all the property, real
and personal, tangible and intangible, necessary for the conduct of the Cemex
Business as it is presently being conducted by Cemex or its Affiliates in all
material respects.
7.3 Taxes. Cemex will pay and satisfy, or cause to be paid and
satisfied, all property and excise and other tax obligations, penalties and
interest, imposed by any governmental entity either (i) in connection with the
Cemex Business or the Cemex Assets arising prior to the Contribution Date, and
in connection with the transactions contemplated by this Agreement, including,
but not limited to, all United States, foreign, state, provincial, county and
local income, ad valorem, excise, sales, use, withholding, unemployment, social
security or other taxes and assessments of or payable by Cemex and arising
prior to the Contribution Date, or (ii) otherwise chargeable against the Cemex
Business or the Cemex Assets, and arising prior to Contribution Date. Anything
in this Agreement to the contrary notwithstanding, the Company shall pay all
recording and filing fees and taxes, sales taxes, gross receipt taxes, tag fees
and similar expenses applicable to the transfer of the Cemex Assets from Cemex
to the Company, including but not limited to any recording or filing fees or
taxes associated with the transfer of the Cemex Real Property and any sales,
gross receipt, and tag fees or taxes associated with transferring the titles to
any vehicles. All taxes attributable to the activities of the Cemex Business
and the ownership and operation of the Cemex Assets prior to the Contribution
Date shall be the responsibility of Cemex.
7.4 Litigation. There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or, to the
Knowledge of Cemex, threatened, against or relating to Cemex or any of its
Affiliates, or any of their respective directors, officers, shareholders,
employees, or properties, in each case, with respect to the Cemex Assets or the
Cemex Business, which would reasonably be expected to have a material adverse
effect on, the Cemex Assets, the Cemex Business or the transactions
contemplated by this Agreement.
7.5 Contracts; and Other Agreements.
(a) Section 7.5 of the Cemex Disclosure Schedule sets forth a list of
the Material Cemex Contracts primarily relating to the Cemex Business or the
Cemex Assets as of the date of this Agreement. Cemex has made available to each
of the Company and RMUSA a true and complete copy of each Material Cemex
Contract listed on Section 7.5 of the Cemex Disclosure Schedule. For purposes
hereof, "Material Cemex Contract" shall mean:
(i) agreements, contracts, licenses, leases of real or
personal property, indentures, mortgages, instruments, security
interests, purchase and sale orders and other similar arrangements,
commitments or understandings in each case, whether written or oral
("Contracts"), for the future acquisition or sale of any assets
involving $250,000 individually (or in the aggregate, in the case of
any related series of Contracts), other than the acquisition or sale
of inventory in the ordinary course of business;
(ii) Contracts calling for future payments to or from Cemex
or any of its Affiliates in any one year of more than $250,000 in any
one case (or in the aggregate, in the case of any related series of
Contracts), or involving the payment or receipt of $1,000,000 or more
over the lifetime of such agreements;
(iii) Contracts that contain covenants prohibiting or
limiting the right to compete of the Cemex Business or prohibiting or
restricting the ability of the owner of the Cemex Business (or any of
its Affiliates) to deal with any Person or in any geographical area;
(iv) Contracts that require the payment by or to Cemex or any
Affiliate of Cemex of a royalty, override or similar commission or fee
of more than $1,000,000 in the aggregate;
(v) Contracts that are collective bargaining agreements;
(vi) guaranties and any outstanding Contracts and instruments
relating to the borrowing of money, or any extension of credit, which
impose any Lien on any of the Cemex Assets;
(vii) Contracts involving sales agency, manufacturing,
consignment, sales representative, distributorship or marketing;
(viii) Contracts for the license to or from Cemex or any
Affiliate of Cemex to or from, as the case may be, any third party
(including to another Affiliate) of any (x) Cemex Intangible Property
or (y) intellectual property rights that are owned by any such third
party and, in each case that primarily relate to or are material to
the Cemex Business, except for contracts for the license of software
that is commercially available "off the shelf";
(ix) Contracts for the construction or acquisition of fixed
assets or other capital expenditures requiring the payment by Cemex of
more than $1,000,000 in the aggregate;
(x) Contracts that are broker's or finder's agreements;
(xi) Contracts relating to partnerships, joint ventures or
other arrangements involving a sharing of profits or expenses;
(xii) Contracts to sell, lease or otherwise dispose of any
Cemex Asset, in each case other than in the ordinary course of
business;
(xiii) except for collective bargaining agreements (which are
listed in subparagraph (v) above), Contracts relating to employment or
termination or severance benefits or arrangements;
(xiv) Contracts relating to the leasing of or other
arrangement for use of real property or material personal property;
(xv) Contracts that include any obligation to make payments,
contingent or otherwise, arising out of the prior acquisition or
disposition of a business;
(xvi) Contracts which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or
upon the occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise) becoming
due, or the acceleration or vesting of any rights to any payment or
benefits, from Company, Cemex or any of their respective Affiliates to
any officer, director, consultant or employee thereof; and
(xvii) Contracts entered into outside of the ordinary course
of business or which are material to the Cemex Business.
(b) With respect to each Material Cemex Contract, (i) each such
Contract is a valid and binding agreement of Cemex or its Affiliates and is in
full force and effect in all material respects, (ii) Cemex has no Knowledge of
any material default by any third party under any such Contract which default
has not been cured or waived and which default by any third party would
reasonably be expected to result in a material adverse effect on (i) the Cemex
Assets or the business, financial condition or results of operations of the
Cemex Business, taken as a whole, or (ii) on the ability of Cemex and its
Affiliates to consummate the transactions contemplated hereby or perform any of
their obligations hereunder (a "Cemex Material Adverse Effect") and (iii) there
is no material default by Cemex or its Affiliates under any such Contract which
default has not been cured or waived and which default would reasonably be
expected to result in a Cemex Material Adverse Effect.
7.6 Compliance with Laws. The Cemex Business is presently complying in
all material respects with all applicable Laws and Judgments, except for such
failures to comply which, individually or in the aggregate, would not
reasonably be expected to result in a Cemex Material Adverse Effect. The Cemex
Business and Cemex and its Affiliates have all Permits necessary for the
conduct of the Cemex Business as currently conducted, other than those the
absence of which, individually or in the aggregate, would not reasonably be
expected to result in a Cemex Material Adverse Effect, and there are no
Proceedings pending, or to the Knowledge of Cemex, threatened which may result
in the revocation, termination, cancellation or suspension of any such Permit
except those that, individually or in the aggregate, would not reasonably be
expected to result in a Cemex Material Adverse Effect; it being understood that
nothing in this Section 7.6 is intended to address any failure to comply with
any Law, Judgment or Permit (including Environmental Laws or
environmentally-related Judgments or Permits) that is the subject of any other
representation or warranty set forth herein. All of the Cemex Permits are
listed in Section 7.6 of the Cemex Disclosure Schedule, together with any
information relative to any requirements applicable to the assignability of the
same.
7.7 Environmental:
(a) Definitions. For the purpose of this Agreement, the following
words and phrases shall have the following meanings:
"Cemex Environmental Condition" shall mean any condition of the
Environment with respect to the Cemex Real Property or property located in the
vicinity of the Cemex Real Property that results from the ownership,
possession, use, occupation, construction and/or improvement to or operation of
the Cemex Business on the Cemex Real Property, that (i) exists as of the
Contribution Date, and (ii) is in violation of applicable Environmental Law as
of the Contribution Date or involves concentrations of Hazardous Materials in
soils, surface waters, groundwater, land, stream sediments, or surface or
subsurface strata that are in excess of applicable remediation standards or
guidelines, in effect as of the Contribution Date, that are applicable in the
jurisdiction in which the relevant real property is located.
For purposes of this Section 7.7 only, the term "Cemex Real Property"
shall mean the Cemex Real Property as referred to in Schedule 1.2(a)(i) and any
leased real property upon which a Cemex Business Location is operated.
(b) Environmental Representations, Warranties, and Obligations. With
reference to the Cemex Real Property and the Cemex Business, Cemex represents
and warrants that, to the Knowledge of Cemex, Cemex and its Affiliates are
presently in substantial compliance with all Environmental Laws applicable to
the Cemex Real Property and the Cemex Business, and no Cemex Environmental
Conditions exist that are material, whether individually or in the aggregate.
7.8 No Violations. The execution, delivery and performance by Cemex of
this Agreement and each of the other documents or agreements to which it is or
will be a party pursuant hereto, and the consummation by Cemex and its
Affiliates of the transactions contemplated by this Agreement and such other
documents and agreements, do not and will not (i) violate any provision of the
certificate of formation or limited liability company agreement of Cemex or the
articles of incorporation, by-laws or similar governing documents of any of its
Affiliates or subsidiaries, or (ii) (x) violate any Law, Permit or Judgment
applicable to Cemex or any of its Affiliates or subsidiaries, or any of their
respective properties or assets, or (y) subject to obtaining the Consents set
forth in Section 7.8 of the Cemex Disclosure Schedule (the "Cemex Required
Contractual Consents"), violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of Cemex or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Cemex or any of its Affiliates is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have and would not be reasonably likely to have a Cemex Material
Adverse Effect.
7.9 Consents. No consent is required to be obtained by Cemex (or by
any Affiliate) from, and no notice or filing is required to be given by Cemex
(or by any Affiliate) to or made by Cemex (or by any Affiliate) with, any
Governmental Authority in connection with the execution, delivery and
performance by Cemex of this Agreement, other than in all cases where the
failure to obtain such Consent or to give or make such notice or filing would
not, individually or in the aggregate, reasonably be expected to result in a
Cemex Material Adverse Effect.
7.10 Financial Information. True and complete copies of the Cemex
Financial Statements are included in the Cemex Disclosure Schedule. The Cemex
Financial Statements have been prepared from, are in accordance with and
accurately reflect the books and records of the Cemex Business, comply in all
material respects with applicable accounting requirements, fairly present, in
all material respects, the results of operations of the Cemex Business for the
respective periods indicated, and were prepared in accordance with GAAP applied
consistently during such periods, except as set forth in the footnotes thereto,
and except that the Interim Cemex Financial Statements are subject to normal
year-end adjustments and do not contain all of the footnote disclosure required
by GAAP.
7.11 Absence of Changes.
(a) Since August 31, 2004, (i) the Cemex Business has been operated in
the ordinary course in a manner consistent with past practice and (ii) there
has not been a change, event, development or circumstance that has had or would
reasonably be expected to have a Cemex Material Adverse Effect, but for
purposes of this Section 7.11(a), with respect to clause (i) of the definition
of Cemex Material Adverse Effect shall exclude any change or development
involving (w) a prospective change arising out of any proposed or adopted
legislation, or any other proposal or enactment by any governmental, regulatory
or administrative authority, (x) general conditions applicable to the economy
of the United States, including changes in interest rates, (y) conditions or
effects resulting from the announcement of the existence and terms of this
Agreement, or (z) conditions or factors affecting the industry in the United
States in which the Cemex Business operates, taken as a whole; provided, with
respect to clauses (w) or (x) above, that such change, event, development or
circumstance does not affect the Cemex Business to a materially greater extent
than other participants in the industry in the United States in which the Cemex
Business operates generally.
(b) Without limiting the foregoing, since August 31, 2004, neither
Cemex nor any of its Affiliates has with respect to the Cemex Business:
(i) granted or committed to grant any bonus, commission, or
other form of incentive compensation or increased or committed to
increase the compensation, fees or pension, welfare, fringe or other
benefits provided or payable to or in respect of any employees of the
Cemex Business, except for customary bonuses and regular salary
increases made in the ordinary course of business, consistent with
past practices, or granted any severance or termination pay;
(ii) except in the ordinary course, written off any accounts
receivable without adequate consideration;
(iii) made any material change in any method of accounting
(for book or Tax purposes) or accounting practice;
(iv) purchased or otherwise acquired, or sold, leased,
transferred or otherwise disposed of any material properties or
material assets of the Cemex Business, except in the ordinary course
of business, consistent with past practices;
(v) entered into any leases with respect to the Cemex Real
Property;
(vi) terminated or amended any Material Cemex Contract;
(vii) entered into, terminated or amended any Contracts or
other agreements with respect to intellectual property rights, except
in the ordinary course of business;
(viii) suffered any material damage or material loss to the
assets of the Cemex Business;
(ix) permitted or suffered any material Lien on any Cemex
Asset, other than Permitted Encumbrances;
(x) commenced or initiated any lawsuit, action or proceeding
with respect to the Cemex Business or Cemex Assets, except in the
ordinary course of business;
(xi) incurred any indebtedness, material liability or
obligation (whether absolute, accrued, contingent or otherwise) with
respect to the Cemex Business, except in the ordinary course of
business, consistent with past practices;
(xii) waived, abandoned or otherwise disposed of any material
rights in or to any intangible property related to the Cemex Business;
or
(xiii) agreed (whether or not in writing) to do any of the
foregoing.
7.12 Transactions with Affiliates. No Affiliate of Cemex is an
employee, consultant, competitor, customer, distributor, supplier or vendor of,
or is party to any contractual obligations with Cemex relating to the Cemex
Business and no officer or director of Cemex is an Affiliate of any competitor,
customer, distributor, supplier or vendor of the Cemex Business. None of the
Cemex Assets are owned by an Affiliate of Cemex or subject to any license or
similar arrangement allowing use thereof by an Affiliate.
7.13 Condition of Cemex Assets. To Cemex's Knowledge, there are no
defects in or concerning the buildings, equipment or the tangible personal
property occupied, operated or owned by Cemex or its Affiliates as a part of
the Cemex Business which, individually or in the aggregate, would reasonably be
expected to result in a Cemex Material Adverse Effect. All of the Cemex Assets
are in good operating condition and repair, ordinary wear and tear excepted,
and are suitable for the uses for which such Cemex Assets were intended. Except
as expressly set forth in this Agreement, (i) Cemex expressly disclaims any
other representation and warranty of any kind or nature, express or implied, as
to the condition, value or quality of the Cemex Assets and (ii) Cemex
specifically disclaims any representation or warranty of merchantability, usage
or fitness for any particular purpose with respect to any of the Cemex Assets.
7.14 Real Property Matters. (A) Cemex and its Affiliates are not
currently in default under any agreement, order, judgment or decree relating to
the Cemex Real Property, and no conditions or circumstances exist which, with
the giving of notice or passage of time or both, would constitute a default or
breach with respect to any such agreement, order, judgment or decree, (B) Cemex
and its Affiliates have paid all Taxes due and owing which if not paid could
result in a Lien on the Cemex Real Property or impose liability on Company, (C)
Neither Cemex nor its Affiliates have received any written notice of any
proposed special assessment which would affect the Cemex Real Property, (D)
Neither Cemex nor its Affiliates have received any written notice of any
claims, causes of action, lawsuits or legal proceedings pending or threatened
regarding the ownership, use or possession of the Cemex Real Property,
including condemnation or similar proceedings, (E) Neither Cemex nor its
Affiliates have received any written notice of any violation of any zoning,
subdivision, platting, building, fire or insurance laws, ordinances or
regulations (whether related to the Cemex Real Property or the occupancy
thereof) to the extent not previously cured, including the failure of Cemex to
comply with all covenants, easements and restrictions recorded against the
Cemex Real Property, (F) Cemex and its Affiliates have not received any written
notice of any intention on the part of the issuing authority to cancel, suspend
or modify any licenses or permits relating to the Cemex Real Property, (G)
Cemex and its Affiliates are in material compliance with all recorded
covenants, easements and restrictions affecting the Cemex Real Property, and
(H) each of the Cemex Leases is in full force and effect and has not been
modified, amended, added to, or changed in any manner whatsoever except for
those amendments attached to a Cemex Lease Assignment.
7.15 Brokers and Finders. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Cemex or any Affiliate of Cemex who might be entitled to any fee
or commission from Cemex or any Affiliate of Cemex in connection with the
transactions contemplated by this Agreement.
7.16 Labor Matters. With respect to the Cemex Business, since January
1, 2000, there has not occurred or been threatened any material employee
strike, work stoppage, slowdown, lockout, picketing or concerted refusal to
work overtime at Cemex Business Location and there are no labor disputes
currently subject to any arbitration or administrative proceeding involving
employees of Cemex or its Affiliates who are involved in the Cemex Business
(excluding routine workers' compensation claims).
7.17 Accounts Receivable. All Cemex Accounts Receivable represent bona
fide sales actually made in the ordinary course of business and the accounts
receivable reflected in the adjustments pursuant to Section 2.3 are owed to
Cemex or its Affiliates, are not more than 120 days past due and are not
subject to offset, counterclaim or other defense.
7.18 Inventory. The Cemex Inventory, whether finished goods, work in
process or raw materials, consist of a quality and quantity usable and saleable
in the ordinary and usual course of the Cemex Business consistent with past
practice.
7.19 Employee Benefit Plans; ERISA. None of Cemex or its ERISA
Affiliates has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than for payment of premiums to the Pension Benefit
Guaranty Corporation in the ordinary course of business), and no fact or event
exists which would reasonably be expected to give rise to any such liability
that would reasonably be expected to result in a Lien on the Cemex Assets or a
liability of the Company. The employee benefit plans, programs and arrangements
applicable to the Cemex Transferred Employees have been administered in
accordance with their terms and applicable law, including ERISA and the Code,
in all material respects.
7.20 Cement Reserves. The Cemex Assets include at least twenty (20)
years of permitted limestone reserves at current production rates.
7.21 No Liabilities. There are no liabilities or obligations, secured
or unsecured, known or unknown (whether accrued, absolute, contingent or
otherwise) of Cemex or its Affiliates which in any way relate to or encumber
the Cemex Assets or the Cemex Business, except for (a) those reflected or
reserved on the Cemex Financial Statements, (b) those trade payables and
contractual obligations incurred or accrued in the ordinary and normal course
of the Cemex Business and consistent with past practice since August 31, 2004,
none of which, individually or in the aggregate, is material, and none of which
is for breach of warranty or contract or for tort infringement, (c) those under
the Cemex Assumed Contracts, (d) those under the Cemex Permits, (e)
Environmental Liabilities, and (f) any taxes accruing in the ordinary course of
the Cemex Business, none of such taxes being the responsibility or obligation
of Company (other than those ad valorem taxes which will be prorated as of the
Contribution Date).
ARTICLE 8
REPRESENTATIONS AND WARRANTIES BY RMUSA
RMUSA hereby represents and warrants to Company that, except as set
forth in the disclosure schedule being delivered by RMUSA contemporaneously
herewith (the "RMUSA Disclosure Schedule"):
8.1 Existence and Authorization for Agreement; Enforceability. RMUSA
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Alabama, and has the requisite power and authority to
own, lease, and operate its properties and carry on and operate the RMUSA
Business as and where the RMUSA Business is now being conducted. The execution
and delivery of this Agreement, and the consummation of the transactions
contemplated herein, have been duly authorized by the Board of Directors of
RMUSA. RMUSA has taken all actions necessary to authorize it to enter into and
perform fully its obligations under this Agreement and all of the documents or
instruments otherwise contemplated herein and to consummate the transactions
contemplated herein and therein. Each of this Agreement and the other closing
documents delivered pursuant hereto has been duly executed and delivered by
RMUSA and is the legal, valid and binding obligation of RMUSA enforceable in
accordance with its respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to the
general principles of equity.
8.2 Title to and Sufficiency of RMUSA Assets.
(a) RMUSA has good and marketable title to the RMUSA Assets. Except
for (i) the RMUSA Assumed Liabilities, and (ii) Permitted Encumbrances, none of
the RMUSA Assets shall, at the Contribution Date, be subject to any Lien.
(b) The RMUSA Assets, in conjunction with the rights, goods and
services granted, transferred or to be performed by RMUSA and its subsidiaries
pursuant to this Agreement, constitute all the property, real and personal,
tangible and intangible, necessary for the conduct of the RMUSA Business as it
is presently being conducted by RMUSA in all material respects.
8.3 Taxes. RMUSA will pay and satisfy, or cause to be paid and
satisfied, all property and excise and other tax obligations, penalties and
interest, imposed by any governmental entity either (i) in connection with the
RMUSA Business or the RMUSA Assets arising prior to the Contribution Date, and
in connection with the transactions contemplated by this Agreement, including,
but not limited to, all United States, foreign, state, provincial, county and
local income, ad valorem, excise, sales, use, withholding, unemployment, social
security or other taxes and assessments of or payable by RMUSA and arising
prior to the Contribution Date, or (ii) otherwise chargeable against the RMUSA
Business or the RMUSA Assets, and arising prior to Contribution Date. Anything
in this Agreement to the contrary notwithstanding, the Company shall pay all
recording and filing fees and taxes, sales taxes, gross receipt taxes, tag fees
and similar expenses applicable to the transfer of the RMUSA Assets from RMUSA
to the Company, including but not limited to any recording or filing fees or
taxes associated with the transfer of the RMUSA Real Property and any sales,
gross receipt, and tag fees or taxes associated with transferring the titles to
any vehicles. All taxes attributable to the activities of the RMUSA Business
and the ownership and operation of the RMUSA Assets prior to the Contribution
Date shall be the responsibility of RMUSA.
8.4 Litigation. There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or, to the
Knowledge of RMUSA, threatened, against or relating to RMUSA or any of its
Affiliates, or any of their respective directors, officers, shareholders,
employees, or properties, in each case, with respect to the RMUSA Assets or the
RMUSA Business, which would reasonably be expected to have a material adverse
effect on, the RMUSA Assets, the RMUSA Business or the transactions
contemplated by this Agreement.
8.5 Contracts; and Other Agreements.
(a) Section 8.5 of the RMUSA Disclosure Schedule sets forth a list of
the Material RMUSA Contracts primarily relating to the RMUSA Business or the
RMUSA Assets as of the date of this Agreement. RMUSA has made available to each
of the Company and RMUSA a true and complete copy of each Material RMUSA
Contract listed on Section 8.5 of the RMUSA Disclosure Schedule. For purposes
hereof, "Material RMUSA Contract" shall mean:
(i) Contracts for the future acquisition or sale of any
assets involving $250,000 individually (or in the aggregate, in the
case of any related series of Contracts), other than the acquisition
or sale of inventory in the ordinary course of business;
(ii) Contracts calling for future payments to or from RMUSA
or any of its Affiliates in any one year of more than $250,000 in any
one case (or in the aggregate, in the case of any related series of
Contracts), or involving the payment or receipt of $1,000,000 or more
over the lifetime of such agreements;
(iii) Contracts that contain covenants prohibiting or
limiting the right to compete of the RMUSA Business or prohibiting or
restricting the ability of the owner of the RMUSA Business (or any of
its Affiliates) to deal with any Person or in any geographical area;
(iv) Contracts that require the payment by or to RMUSA or any
Affiliate of RMUSA of a royalty, override or similar commission or fee
of more than $1,000,000 in the aggregate;
(v) Contracts that are collective bargaining agreements;
(vi) guaranties and any outstanding Contracts and instruments
relating to the borrowing of money, or any extension of credit, which
impose any Lien on any of the RMUSA Assets;
(vii) Contracts involving sales agency, manufacturing,
consignment, sales representative, distributorship or marketing;
(viii) Contracts for the license to or from RMUSA or any
Affiliate of RMUSA to or from, as the case may be, any third party
(including to another Affiliate) of any (x) RMUSA Intangible Property
or (y) intellectual property rights that are owned by any such third
party and, in each case that primarily relate to or are material to
the RMUSA Business, except for contracts for the license of software
that is commercially available "off the shelf";
(ix) Contracts for the construction or acquisition of fixed
assets or other capital expenditures requiring the payment by RMUSA of
more than $1,000,000 in the aggregate;
(x) Contracts that are broker's or finder's agreements;
(xi) Contracts relating to partnerships, joint ventures or
other arrangements involving a sharing of profits or expenses;
(xii) Contracts to sell, lease or otherwise dispose of any
RMUSA Asset, in each case other than in the ordinary course of
business;
(xiii) except for collective bargaining agreements (which are
listed in subparagraph (v) above), Contracts relating to employment or
termination or severance benefits or arrangements;
(xiv) Contracts relating to the leasing of or other
arrangement for use of real property or material personal property;
(xv) Contracts that include any obligation to make payments,
contingent or otherwise, arising out of the prior acquisition or
disposition of a business;
(xvi) Contracts which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or
upon the occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise) becoming
due, or the acceleration or vesting of any rights to any payment or
benefits, from Company, RMUSA or any of their respective Affiliates to
any officer, director, consultant or employee thereof; and
(xvii) Contracts entered into outside of the ordinary course
of business or which are material to the RMUSA Business.
(b) With respect to each Material RMUSA Contract, (i) each such
Contract is a valid and binding agreement of RMUSA and is in full force and
effect in all material respects, (ii) RMUSA has no Knowledge of any material
default by any third party under any such Contract which default has not been
cured or waived and which default by any third party would reasonably be
expected to result in a material adverse effect on (i) the RMUSA Assets or the
business, financial condition or results of operations of the RMUSA Business,
taken as a whole, or (ii) on the ability of RMUSA and its Affiliates to
consummate the transactions contemplated hereby or perform any of their
obligations hereunder (a "RMUSA Material Adverse Effect") and (iii) there is no
material default by RMUSA under any such Contract which default has not been
cured or waived and which default would reasonably be expected to result in a
RMUSA Material Adverse Effect.
8.6 Compliance with Laws. The RMUSA Business is presently complying in
all material respects with all applicable Laws and Judgments, except for such
failures to comply which, individually or in the aggregate, would not
reasonably be expected to result in a RMUSA Material Adverse Effect. The RMUSA
Business or RMUSA has all Permits necessary for the conduct of the RMUSA
Business as currently conducted, other than those the absence of which,
individually or in the aggregate, would not reasonably be expected to result in
a RMUSA Material Adverse Effect, and there are no Proceedings pending, or to
the knowledge of RMUSA, threatened which may result in the revocation,
termination, cancellation or suspension of any such Permit except those that,
individually or in the aggregate, would not reasonably be expected to result in
a RMUSA Material Adverse Effect; it being understood that nothing in this
Section 8.6 is intended to address any failure to comply with any Law, Judgment
or Permit (including Environmental Laws or environmentally-related Judgments or
Permits) that is the subject of any other representation or warranty set forth
herein. All of the RMUSA Permits are listed in Section 8.6 of the RMUSA
Disclosure Schedule, together with any information relative to any requirements
applicable to the assignability of the same.
8.7 Environmental:
(a) Definitions. For the purpose of this Agreement, the following
words and phrases shall have the following meanings:
"RMUSA Environmental Condition" shall mean any condition of the
Environment with respect to the RMUSA Real Property or property located in the
vicinity of the RMUSA Real Property that results from the ownership,
possession, use, occupation, construction and/or improvement to or operation of
the RMUSA Business on the RMUSA Real Property, that (i) exists as of the
Contribution Date, and (ii) is in violation of applicable Environmental Law as
of the Contribution Date or involves concentrations of Hazardous Materials in
soils, surface waters, groundwater, land, stream sediments, or surface or
subsurface strata that are in excess of applicable remediation standards or
guidelines, in effect as of the Contribution Date, that are applicable in the
jurisdiction in which the relevant real property is located.
For purposes of this Section 8.7 only, the term "RMUSA Real Property"
shall mean the RMUSA Real Property as referred to in Schedule 1.1(a)-1 and any
leased real property upon which a RMUSA Business Location is operated.
(b) Environmental Representations, Warranties, and Obligations. With
reference to the RMUSA Real Property and the RMUSA Business, RMUSA represents
and warrants that, to the Knowledge of RMUSA, RMUSA is presently in substantial
compliance with all Environmental Laws applicable to the RMUSA Real Property
and the RMUSA Business, and no RMUSA Environmental Conditions exist that are
material, whether individually or in the aggregate.
8.8 No Violations. The execution, delivery and performance by RMUSA of
this Agreement and each of the other documents or agreements to which it is or
will be a party pursuant hereto, and the consummation by RMUSA of the
transactions contemplated by this Agreement and such other documents and
agreements, do not and will not (i) violate any provision of the articles of
incorporation or bylaws of RMUSA or the articles of incorporation, by-laws or
similar governing documents of any of its subsidiaries, or (ii) (x) violate any
Law, Permit or Judgment applicable to RMUSA or any of its subsidiaries, or any
of their respective properties or assets, or (y) subject to obtaining the
Consents set forth in Section 8.8 of the RMUSA Disclosure Schedule (the "RMUSA
Required Contractual Consents"), violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of RMUSA or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which RMUSA or any of its Affiliates is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have and would not be reasonably likely to have a RMUSA Material
Adverse Effect.
8.9 Consents. No consent is required to be obtained by RMUSA (or by
any Affiliate) from, and no notice or filing is required to be given by RMUSA
(or by any Affiliate) to or made by RMUSA (or by any Affiliate) with, any
Governmental Authority in connection with the execution, delivery and
performance by RMUSA of this Agreement, other than in all cases where the
failure to obtain such Consent or to give or make such notice or filing would
not, individually or in the aggregate, reasonably be expected to result in a
RMUSA Material Adverse Effect.
8.10 Financial Information. True and complete copies of the RMUSA
Financial Statements are included in the RMUSA Disclosure Schedule. The RMUSA
Financial Statements have been prepared from, are in accordance with and
accurately reflect the books and records of the RMUSA Business, comply in all
material respects with applicable accounting requirements, fairly present, in
all material respects, the results of operations of the RMUSA Business for the
respective periods indicated, and were prepared in accordance with GAAP applied
consistently during such periods, except as set forth in the footnotes thereto,
and except that the Interim RMUSA Financial Statements are subject to normal
year-end adjustments and do not contain all of the footnote disclosure required
by GAAP.
8.11 Absence of Changes.
(a) Since August 31, 2004, (i) the RMUSA Business has been operated in
the ordinary course in a manner consistent with past practice and (ii) there
has not been a change, event, development or circumstance that has had or would
reasonably be expected to have a RMUSA Material Adverse Effect, but for
purposes of this Section 8.11(a), with respect to clause (i) of the definition
of RMUSA Material Adverse Effect shall exclude any change or development
involving (w) a prospective change arising out of any proposed or adopted
legislation, or any other proposal or enactment by any governmental, regulatory
or administrative authority, (x) general conditions applicable to the economy
of the United States, including changes in interest rates, (y) conditions or
effects resulting from the announcement of the existence and terms of this
Agreement, or (z) conditions or factors affecting the industry in the United
States in which the RMUSA Business operates, taken as a whole; provided, with
respect to clauses (w) or (x) above, that such change, event, development or
circumstance does not affect the RMUSA Business to a materially greater extent
than other participants in the industry in the United States in which the RMUSA
Business operates generally.
(b) Without limiting the foregoing, since August 31, 2004, neither
RMUSA nor any of its Affiliates has with respect to the RMUSA Business:
(i) granted or committed to grant any bonus, commission, or
other form of incentive compensation or increased or committed to
increase the compensation, fees or pension, welfare, fringe or other
benefits provided or payable to or in respect of any employees of the
RMUSA Business, except for customary bonuses and regular salary
increases made in the ordinary course of business, consistent with
past practices, or granted any severance or termination pay;
(ii) except in the ordinary course, written off any accounts
receivable without adequate consideration;
(iii) made any material change in any method of accounting
(for book or Tax purposes) or accounting practice;
(iv) purchased or otherwise acquired, or sold, leased,
transferred or otherwise disposed of any material properties or
material assets of the RMUSA Business, except in the ordinary course
of business, consistent with past practices;
(v) entered into any leases with respect to the RMUSA Real
Property;
(vi) terminated or amended any Material RMUSA Contract;
(vii) entered into, terminated or amended any Contracts or
other agreements with respect to intellectual property rights, except
in the ordinary course of business;
(viii) suffered any material damage or material loss to the
assets of the RMUSA Business;
(ix) permitted or suffered any material Lien on any RMUSA
Asset, other than Permitted Encumbrances;
(x) commenced or initiated any lawsuit, action or proceeding
with respect to the RMUSA Business or RMUSA Assets, except in the
ordinary course of business;
(xi) incurred any indebtedness, material liability or
obligation (whether absolute, accrued, contingent or otherwise) with
respect to the RMUSA Business, except in the ordinary course of
business, consistent with past practices;
(xii) waived, abandoned or otherwise disposed of any material
rights in or to any intangible property related to the RMUSA Business;
or
(xiii) agreed (whether or not in writing) to do any of the
foregoing.
8.12 Transactions with Affiliates. No Affiliate of RMUSA is an
employee, consultant, competitor, customer, distributor, supplier or vendor of,
or is party to any contractual obligations with RMUSA relating to the RMUSA
Business and no officer or director of RMUSA is an Affiliate of any competitor,
customer, distributor, supplier or vendor of the RMUSA Business. None of the
RMUSA Assets are owned by an Affiliate of RMUSA or subject to any license or
similar arrangement allowing use thereof by an Affiliate.
8.13 Condition of RMUSA Assets. To RMUSA's Knowledge, there are no
defects in or concerning the buildings, equipment or the tangible personal
property occupied, operated or owned by RMUSA as a part of the RMUSA Business
which, individually or in the aggregate, would reasonably be expected to result
in a RMUSA Material Adverse Effect. All of the RMUSA Assets are in good
operating condition and repair, ordinary wear and tear excepted, and are
suitable for the uses for which such RMUSA Assets were intended. Except as
expressly set forth in this Agreement, (i) RMUSA expressly disclaims any other
representation and warranty of any kind or nature, express or implied, as to
the condition, value or quality of the RMUSA Assets and (ii) RMUSA specifically
disclaims any representation or warranty of merchantability, usage or fitness
for any particular purpose with respect to any of the RMUSA Assets.
8.14 Real Property Matters. (A) RMUSA is not currently in default
under any agreement, order, judgment or decree relating to the RMUSA Real
Property, and no conditions or circumstances exist which, with the giving of
notice or passage of time or both, would constitute a default or breach with
respect to any such agreement, order, judgment or decree, (B) RMUSA has paid
all Taxes due and owing which if not paid could result in a Lien on the RMUSA
Real Property or impose liability on Company, (C) RMUSA has not received any
written notice of any proposed special assessment which would affect the RMUSA
Real Property, (D) RMUSA has not received any written notice of any claims,
causes of action, lawsuits or legal proceedings pending or threatened regarding
the ownership, use or possession of the RMUSA Real Property, including
condemnation or similar proceedings, (E) RMUSA has not received any written
notice of any violation of any zoning, subdivision, platting, building, fire or
insurance laws, ordinances or regulations (whether related to the RMUSA Real
Property or the occupancy thereof) to the extent not previously cured,
including the failure of RMUSA to comply with all covenants, easements and
restrictions recorded against the RMUSA Real Property, (F) RMUSA has not
received any written notice of any intention on the part of the issuing
authority to cancel, suspend or modify any licenses or permits relating to the
RMUSA Real Property, (G) RMUSA is in material compliance with all recorded
covenants, easements and restrictions affecting the RMUSA Real Property, and
(H) each of the RMUSA Leases is in full force and effect and has not been
modified, amended, added to, or changed in any manner whatsoever except for
those amendments attached to a RMUSA Lease Assignment.
8.15 Brokers and Finders. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of RMUSA or any Affiliate of RMUSA who might be entitled to any fee
or commission from RMUSA or any Affiliate of RMUSA in connection with the
transactions contemplated by this Agreement.
8.16 Labor Matters. Except as set forth on Section 8.16 of the RMUSA
Disclosure Schedule, with respect to the RMUSA Business, since January 1, 2000,
there has not occurred or been threatened any material employee strike, work
stoppage, slowdown, lockout, picketing or concerted refusal to work overtime at
RMUSA Business Location and there are no labor disputes currently subject to
any arbitration or administrative proceeding involving employees of RMUSA who
are involved in the RMUSA Business (excluding routine workers' compensation
claims).
8.17 Accounts Receivable. Reserved.
8.18 Inventory. The RMUSA Inventory, whether finished goods, work in
process or raw materials, consist of a quality and quantity usable and saleable
in the ordinary and usual course of the RMUSA Business consistent with past
practice.
8.19 Employee Benefit Plans; ERISA. None of RMUSA or its ERISA
Affiliates has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than for payment of premiums to the Pension Benefit
Guaranty Corporation in the ordinary course of business), and no fact or event
exists which would reasonably be expected to give rise to any such liability
that would reasonably be expected to result in a Lien on the RMUSA Assets or a
liability of the Company.
8.20 No Liabilities. There are no liabilities or obligations, secured
or unsecured, known or unknown (whether accrued, absolute, contingent or
otherwise) of RMUSA which in any way relate to or encumber the RMUSA Assets or
the RMUSA Business, except for (a) those reflected or reserved on the RMUSA
Financial Statements, (b) those trade payables and contractual obligations
incurred or accrued in the ordinary and normal course of the RMUSA Business and
consistent with past practice since August 31, 2004, none of which,
individually or in the aggregate, is material, and none of which is for breach
of warranty or contract or for tort infringement, (c) those under the RMUSA
Assumed Contracts, (d) those under the RMUSA Permits, (e) Environmental
Liabilities, and (f) any taxes accruing in the ordinary course of the RMUSA
Business, none of such taxes being the responsibility or obligation of Company
(other than those ad valorem taxes which will be prorated as of the
Contribution Date).
ARTICLE 9
INDEMNIFICATION
9.1 Indemnity By Cemex. Subject to the provisions of this Article 9,
Cemex agrees to pay and to indemnify fully, hold harmless and defend each
Company Indemnified Party from and against any and all claims and/or Damages
arising out of or relating to:
(a) any inaccuracy or breach of any representation or warranty of
Cemex contained in this Agreement;
(b) any breach of any covenant or agreement of Cemex contained in this
Agreement;
(c) the liabilities and obligations of Cemex or any of its Affiliates
arising out of the operation or ownership of the Cemex Assets or the Cemex
Business on or prior to the Contribution Date, except obligations or
liabilities assumed by the Company pursuant to this Agreement; or
(d) all obligations or liabilities that arise, whether before, on or
after, the Contribution Date, out of, or in connection with, the Retained Cemex
Assets;
provided that Cemex shall have an obligation to indemnify any Company
Indemnified Party for Damages pursuant to this Section 9.1 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Company
Indemnified Party pursuant to any contract to which any Company Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Company
Indemnified Party, Cemex shall be subrogated to all rights of the Company
Indemnified Party against any third party in respect of the losses to which
such payment relates, and such Company Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 9.1 shall require a Company
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 9.
9.2 Indemnity By RMUSA. Subject to the provisions of this Article 9,
RMUSA agrees to pay and to indemnify fully, hold harmless and defend each
Company Indemnified Party from and against any and all claims and/or Damages
arising out of or relating to:
(a) any inaccuracy or breach of any representation or warranty of
RMUSA contained in this Agreement;
(b) any breach of any covenant or agreement of RMUSA contained in this
Agreement;
(c) the liabilities and obligations of RMUSA or any of its Affiliates
arising out of the operation or ownership of the RMUSA Assets or the RMUSA
Business on or prior to the Contribution Date, except obligations or
liabilities assumed by the Company pursuant to this Agreement; or
(d) all obligations or liabilities that arise, whether before, on or
after, the Contribution Date, out of, or in connection with, the Retained RMUSA
Assets;
provided that RMUSA shall have an obligation to indemnify any Company
Indemnified Party for Damages pursuant to this Section 9.2 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Company
Indemnified Party pursuant to any contract to which any Company Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Company
Indemnified Party, RMUSA shall be subrogated to all rights of the Company
Indemnified Party against any third party in respect of the losses to which
such payment relates, and such Company Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 9.2 shall require a Company
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 9.
9.3 Indemnity By Company. Subject to the provisions of this Article 9,
Company agrees to pay and to indemnify fully, hold harmless and defend
(a) each Cemex Indemnified Party from and against any and all claims
and/or Damages arising out of or relating to:
(i) any breach of any covenant or agreement of Company
contained in this Agreement; or
(ii) the Cemex Assumed Liabilities; and
(b) each RMUSA Indemnified Party from and against any and all claims
and/or Damages arising out of or relating to:
(i) any breach of any covenant or agreement of Company
contained in this Agreement; or
(ii) the RMUSA Assumed Liabilities;
provided that Company shall have an obligation to indemnify any Contributor
Indemnified Party for Damages pursuant to this Section 9.3 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Contributor
Indemnified Party pursuant to any contract to which any Contributor Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Contributor
Indemnified Party, Company shall be subrogated to all rights of the Contributor
Indemnified Party against any third party in respect of the losses to which
such payment relates, and such Contributor Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 9.3 shall require a Contributor
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 9.
9.4 Exclusive Remedy. Except as provided in Section 10.12, the right
to indemnification provided for in this Article 9 shall be the exclusive remedy
of all Company Indemnified Parties with respect to the transactions
contemplated under this Agreement.
9.5 Indemnification Procedures. The party or parties making a claim
for indemnification under Section 9.1, 9.2 or 9.3 shall be, for the purposes of
this Agreement, referred to as the "Indemnified Party" and the party or parties
against whom such claims are asserted under this Article 9 shall be, for the
purposes of this Agreement, referred to as the "Indemnifying Party." All claims
by any Indemnified Party under this Article 9 shall be asserted and resolved as
follows:
(a) In the event that (i) any claim, demand or Proceeding is asserted
or instituted by any Person other than the parties to this Agreement or their
Affiliates which could give rise to Damages for which an Indemnifying Party
could be liable to an Indemnified Party under this Agreement (such claim,
demand or Proceeding, a "Third Party Claim") or (ii) any Indemnified Party
under this Agreement shall have a claim to be indemnified by any Indemnifying
Party under this Agreement which does not involve a Third Party Claim (such
claim, a "Direct Claim"), the Indemnified Party shall with reasonable
promptness send to the Indemnifying Party a written notice specifying the
nature of such claim, demand or Proceeding and the amount or estimated amount
thereof if known (which amount or estimated amount shall not be conclusive of
the final amount, if any, of such claim, demand or Proceeding) (a "Claim
Notice").
(b) In the event of a Third Party Claim, the Indemnifying Party shall
be entitled to appoint counsel of the Indemnifying Party's choice at the
expense of the Indemnifying Party to represent the Indemnified Party and any
others the Indemnifying Party may reasonably designate in connection with such
claim, demand or Proceeding (in which case the Indemnifying Party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by any Indemnified Party except as set forth below); provided that
such counsel is reasonably acceptable to the Indemnified Party. Notwithstanding
an Indemnifying Party's election to appoint counsel to represent an Indemnified
Party in connection with a Third Party Claim, an Indemnified Party shall have
the right to employ separate counsel, and the Indemnifying Party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest or (ii) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party within
a reasonable time after notice of the institution of such Third Party Claim. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim, demand or
Proceeding which the Indemnifying Party defends, or, if appropriate and related
to the claim, demand or Proceeding in question, in making any counterclaim
against the person asserting the Third Party Claim, or any cross-complaint
against any person. No Third Party Claim may be settled or compromised (i) by
the Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed or (ii) by
the Indemnifying Party without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed. In the
event any Indemnified Party settles or compromises or consents to the entry of
any Judgment with respect to any Third Party Claim without the prior written
consent of the Indemnifying Party, each Indemnified Party shall be deemed to
have waived all rights against the Indemnifying Party for indemnification under
this Article 9 with respect to such Third Party Claim.
(c) In the event of a Direct Claim the Indemnifying Party shall notify
the Indemnified Party within 30 days Business Days of receipt of a Claim Notice
whether or not the Indemnifying Party disputes such claim.
(d) From and after the delivery of a Claim Notice under this
Agreement, at the reasonable request of the Indemnifying Party, each
Indemnified Party shall grant the Indemnifying Party and its representatives
all reasonable access to the books, records and properties of such Indemnified
Party to the extent reasonably related to the matters to which the Claim Notice
relates. All such access shall be granted during normal business hours and
shall be granted under conditions, which will not unreasonably interfere with
the business and operations of such Indemnified Party. The Indemnifying Party
will not, and shall require that its representatives do not, use (except in
connection with such Claim Notice) or disclose to any third person other than
the Indemnifying Party's representatives (except as may be required by
applicable Law) any information obtained pursuant to this Section 9.5(d).
9.6 Monetary and Payment Limitations.
(a) Neither Cemex nor RMUSA shall have any obligation to indemnify a
Company Indemnified Party pursuant to Sections 9.1(a) or 9.2(a), respectively,
unless the aggregate amount of Damages suffered by all Company Indemnified
Parties in respect of such claims exceeds $1,000,000, in which case the Company
Indemnified Parties shall be entitled to recover all Damages including the
$1,000,000.
(b) Notwithstanding any provision of this Agreement to the contrary,
the aggregate liability of Cemex or RMUSA for Damages in respect of all claims
for indemnification pursuant to Sections 9.1(a) or 9.2(a), respectively, shall
in no event exceed the Cemex Value or the RMUSA Value, respectively. NO PARTY
SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, OR SIMILAR
DAMAGES, EXCEPT TO THE EXTENT ASSERTED BY, AWARDED, PAID OR PAYABLE TO ANY
THIRD PARTY.
(c) The parties mutually agree that payment to an Indemnified Party by
an Indemnifying Party for Damages shall be paid solely from the required EBITDA
distributions to be paid to the Indemnifying Party pursuant to Section 6.1 of
the Cemex LLC Agreement and Section 6.1 of the Ready Mix LLC Agreement. In the
event of Damages, compensation for which is owed to the Indemnified Party by
the Indemnifying Party, the parties mutually agree that the Indemnifying Party
shall waive all rights and title it has to, and shall instruct the Manager of
the Company and the Manager of Ready Mix LLC to make to the Indemnified Party,
distributions due the Indemnifying Party from the Company under Section 6.1 of
the Cemex LLC Agreement or Ready Mix LLC under Section 6.1 of the Ready Mix LLC
Agreement until such time as the Indemnified Party has recouped the amount of
Damages incurred by the Indemnified Party. The provisions and limitations set
forth in this Section 9.6(c) will not apply to any indemnification liability of
the Company pursuant to Section 9.3.
(d) Notwithstanding the foregoing, the Indemnified Party shall not be
limited to recovery of Damages pursuant to clause (c) above with respect to
Damages arising out of or relating to any fraud by RMUSA or Cemex in connection
with this Agreement, the discussions and negotiations leading up to this
Agreement or the transaction contemplated herein, and each of RMUSA and Cemex
shall be and remain liable to the other for any Damages arising out of any such
claim or fraud.
9.7 Survival. Except for the representations and warranties in
Sections 7.2(a) and 8.2(a), which shall survive without limit, the
representations and warranties of Cemex and RMUSA contained in this Agreement
shall survive the Contribution for the applicable period set forth in this
Section 9.7, and any and all claims and causes of action for indemnification
under this Article 9 arising out of the inaccuracy or breach of any
representation or warranty of Cemex or RMUSA must be made prior to the
termination of the applicable survival period set forth in this Section 9.7.
All of the representations and warranties of Cemex and RMUSA contained in this
Agreement and any and all claims and causes of action for indemnification under
this Article 9 with respect thereto shall terminate on the second anniversary
of the date of this Agreement; provided that the representations and warranties
in Sections 7.3, 7.6, 7.19, 8.3, 8.6 and 8.19 shall survive until the
expiration of the applicable statute of limitations; provided further that the
representations and warranties in Sections 7.7 and 8.7 shall survive until the
fifth anniversary of the date of this Agreement and the representations and
warranties in Section 7.20 shall survive until the twentieth anniversary of the
date of this Agreement; it being understood that in the event notice of any
claim for indemnification under Section 9.1(a) or Section 9.2(a) shall have
been given within the applicable survival period, the representations and
warranties that are the subject of such indemnification claim shall survive
until such time as such claim is finally resolved.
9.8 Binding Nature. The indemnity obligations imposed under this
Article 9 shall be binding upon the parties hereto and their respective
successors and assigns. Wherever possible, such indemnity obligations shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of these indemnity obligations shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of the said
indemnity obligations.
ARTICLE 10
MISCELLANEOUS
10.1 Reliance Upon Representations and Warranties. The parties
mutually agree that notwithstanding any right of any party to investigate the
affairs of any other party and notwithstanding any Knowledge of any facts
determined or determinable by such party pursuant to such investigation or
right of investigation, each party has the right to fully rely upon the
respective representations and warranties of each other party contained in this
Agreement.
10.2 Amendments. No change, modification or amendment to this
Agreement shall be effective unless the same shall be in writing and signed by
the parties hereto.
10.3 Notices. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered
or mailed by first class registered mail, return receipt requested, addressed
to the parties at the addressees set forth below (or at such other address as
any party may specify by notice to all other parties given as aforesaid).
If to RMUSA:
Ready Mix USA, Inc.
P.O. Box 020152
Tuscaloosa, Alabama 35402
Attn: Scott M. Phelps
With a copy, which shall not constitute notice, to:
Phelps, Jenkins, Gibson & Fowler, L.L.P.
P.O. Box 020848
Tuscaloosa, Alabama 35402-0848
Attn: Sam M. Phelps
If to Cemex:
Cemex, Inc.
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Jesus Gonzalez
With copies, which shall not constitute notice, to:
Cemex, Inc.
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
Skadden, Arps, Slate, Meagher & Flom LLP
1600 Smith, Suite 4400
Houston, TX 77024
Attn: Frank Ed Bayouth II
If to Company:
Cemex Southeast LLC
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
10.4 Payment of Fees and Expenses. Except as otherwise provided in
this Agreement, Cemex and RMUSA shall pay all fees and expenses of such
respective party's respective counsel, accountants and all other expenses
incurred by such party incident to the negotiation, preparation and execution
of this Agreement and the consummation of the transactions contemplated hereby.
10.5 Binding Effect. This Agreement shall be binding and conclusive
upon and inure to the benefit of the respective parties hereto and their
successors and assigns.
10.6 Waiver. Failure of any party hereto to insist upon the strict
performance of any of the covenants or conditions of this Agreement or to
exercise any right or option conferred herein in one or more instances shall
not be construed as a waiver or relinquishment of any such covenant, or
condition, right or option, but the same shall remain in full force and effect.
The committing by either party of any act or thing which it is not obligated to
do hereunder shall not be deemed to impose an obligation upon it to do any such
act or thing in the future or in any way change or alter any provision of this
Agreement.
10.7 Counterparts. This Agreement may be executed by original or
facsimile signatures in several counterparts that together shall constitute but
one and the same agreement, binding on both the parties notwithstanding that
both parties have not signed the same counterpart.
10.8 Construction.
(a) This Agreement shall be construed in its entirety according to its
plain meaning and shall not be construed against the party who provided or
drafted it.
(b) Any reference to an Article, Section, Schedule or Annex is a
reference to an Article or Section of, or a Schedule or an Annex to, this
Agreement.
(c) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(d) The words "include", "includes" and "including" are not limiting,
and shall be deemed to be followed by the phrase "without limitation".
(e) The terms "dollars" and "$" mean United States dollars.
(f) The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to July 1, 2005.
(g) The conjunction "or" shall be understood in its inclusive sense
(and/or).
10.9 Captions. The titles of the Articles, Sections, Schedules and
Annexes of this Agreement have been assigned thereto for convenience only and
shall not be construed as limiting, defining or affecting the substantive terms
of this Agreement.
10.10 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Georgia, without giving effect to its principles
or rules of conflict of laws.
10.11 Consent to Jurisdiction. All disputes, litigation, proceedings
or other legal actions by any party to this Agreement in connection with or
relating to this Agreement or any matters described or contemplated in this
Agreement shall be instituted in the courts of the State of Georgia, or of the
United States in the State of Georgia, in either case, sitting in Atlanta,
Georgia. Each party to this Agreement irrevocably submits to the exclusive
jurisdiction of the courts of the State of Georgia, and of the United States
sitting in the State of Georgia, in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this Agreement.
Each party to this Agreement may receive the service of any process or summons
in connection with any such dispute, litigation, action or proceeding brought
in any such court by a mailed copy of such process or summons sent to it at its
address set forth, and in the manner provided, in Section 10.3 hereof. Each
party to this Agreement irrevocably waives, to the fullest extent permitted by
applicable law, any defense or objection it may now or hereafter have to the
laying of venue of any proceeding under this Agreement brought in the courts of
the State of Georgia, or of the United States in the State of Georgia, in
either case, sitting in Atlanta, Georgia, and any claim that any proceeding
under this Agreement brought in any such court has been brought in an
inconvenient forum.
10.12 Specific Performance. The parties to this Agreement agree that
irreparable damage would occur in the event that any provision of this
Agreement was not performed in accordance with the terms of this Agreement and
that the parties shall be entitled to specific performance of the terms of this
Agreement in addition to any other remedy at Law or equity.
10.13 Translation. Should this Agreement be translated into any
language other than English, the English version shall control and prevail on
any question of interpretation or otherwise.
10.14 Assignment. This Agreement shall be binding upon the respective
successors and permitted assigns of the parties hereto. This Agreement shall
not be assignable or otherwise transferable by any of Cemex, RMUSA or Company
without the prior written consent of the other parties and any attempt to so
assign or transfer this Agreement without such consent shall be void and of no
effect.
10.15 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement of the parties and supersedes
any and all prior agreements, arrangements and understandings relating to the
subject matters hereof and thereto.
10.16 Rights of Creditors and Third Parties under this Agreement. This
Agreement is entered into among the Company, RMUSA and Cemex for the exclusive
benefit of the Company, RMUSA and Cemex, and their successors and permitted
assigns. This Agreement is expressly not intended for the benefit of any
creditor of the Company or any other Person. Except and only to the extent
provided by applicable statute, no such creditor or third party shall have any
rights under this Agreement or any agreement between the Company and RMUSA or
Cemex with respect to any Contribution, or otherwise.
10.17 Certain Definitions. As used in this Agreement, the following
terms have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common
control with, such Person. For the purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled," "controlled by"
and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, for purposes of this
Agreement, Company shall not be deemed to be an Affiliate of Cemex or RMUSA or
any of their respective Affiliates.
"Aggregate Cemex Contribution" has the meaning set forth in
Section 2.3(c)(v).
"Aggregate RMUSA Contribution" has the meaning set forth in
Section 2.3(c)(v).
"Agreement" has the meaning set forth in the Introduction.
"Assumed Liability" means a Cemex Assumed Liability or an
RMUSA Assumed Liability, as the context requires.
"Business" has the meaning set forth in Section 1.2.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by law or
executive order to close.
"Cement Supply Agreement" means the cement supply agreement
to be entered into concurrently with the execution of this Agreement, by and
between the Company and Ready Mix LLC.
"Cemex" has the meaning set forth in the Introduction.
"Cemex Accounts Payable" has the meaning set forth in Section
2.2.
"Cemex Accounts Receivable" has the meaning set forth in
Schedule 1.2(a)5.
"Cemex Agreement Assignment and Assumption" has the meaning
set forth in Section 4.2(a)(xii).
"Cemex Assets" has the meaning set forth in Section 1.2.
"Cemex Assumed Contracts" has the meaning set forth in
Schedule 1.2(a)8.
"Cemex Assumed Liabilities" has the meaning set forth in
Section 5.2.
"Cemex Authorized Person(s)" has the meaning set forth in
Section 4.2(a)(vii).
"Cemex Boundaries" means the states of Alabama, Georgia and
Mississippi, the Cemex Florida Panhandle (as defined herein) and the Cemex
Limited Tennessee Area (as defined herein).
"Cemex Business" has the meaning set forth in Section 1.2.
"Cemex Business Locations" has the meaning set forth in
Section 1.2.
"Cemex Disclosure Schedule" has the meaning set forth in
Article 7.
"Cemex Environmental Condition" has the meaning set forth in
Section 7.7(a).
"Cemex Environmental Indemnitees" has the meaning set forth
in Section 6.7.
"Cemex Environmental Liabilities" has the meaning set forth
in Section 6.7.
"Cemex Financial Statements" means the statement of income
for the Cemex Assets for the twelve months ended December 31, 2004.
"Cemex Florida Panhandle" means the following counties in the
State of Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington,
Jackson, Bay, Calhoun, Gulf and Franklin. The Cemex Florida Panhandle shall
exclude the City of Tallahassee, Florida.
"Cemex Indemnified Party" means Cemex, Cemex's Affiliates,
directors, officers, shareholders, attorneys, accountants, agents and
employees, and their respective heirs, successors and assigns.
"Cemex Intangible Property" means intellectual property owned
by Cemex or any Affiliate of Cemex.
"Cemex Intracompany Receivables" has the meaning set forth in
Schedule 1.2(b)5.
"Cemex Inventory" has the meaning set forth in Schedule
1.2(a)3.
"Cemex Land" has the meaning set forth in Schedule 1.2(a)1.
"Cemex Leases" has the meaning set forth in Schedule 1.2(a)8.
"Cemex Lease Assignment" has the meaning set forth in Section
4.2(a)(xiii).
"Cemex LLC Agreement" has the meaning set forth in Section
4.1(b)(i).
"Cemex Limited Tennessee Area" means the Metropolitan
Statistical Areas of Chattanooga and Memphis, Tennessee.
"Cemex Material Adverse Effect" has the meaning set forth in
Section 7.5(b).
"Cemex Permits" has the meaning set forth in Schedule
1.2(a)9.
"Cemex Prepaids" has the meaning set forth in Section 2.3(b).
"Cemex Real Property" has the meaning set forth in Schedule
1.2(a)1.
"Cemex Required Contractual Consents" has the meaning set
forth in Section 7.8.
"Cemex Retained Names" has the meaning set forth in Schedule
1.2(b)(4).
"Cemex Retained Policies" has the meaning set forth in
Schedule 1.2(b)3.
"Cemex Transferred Employees" has the meaning set forth in
Section 6.6.
"Cemex Value" has the meaning set forth in Section 2.1(b).
"Cemex Warranty Deed" has the meaning set forth in Section
4.2(a)(ii).
"Cemex Working Capital Statement" has the meaning set forth
in Section 2.3(c)(i).
"Claim Notice" has the meaning set forth in Section 9.5(a).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company" has the meaning set forth in the Introduction.
"Company Indemnified Party" means Company, Company's
Affiliates, directors, managers, officers, members, shareholders, attorneys,
accountants, agents and employees, and their respective heirs, successors and
assigns.
"Consent" means any consent, waiver, approval, authorization,
exemption, registration or declaration.
"Contracts" has the meaning set forth in Section 7.5(a)(i).
"Contribution" has the meaning set forth in the Recitals.
"Contribution Date" has the meaning set forth in Section 3.1.
"Contributor Indemnified Party" means any Cemex Indemnified
Party or any RMUSA Indemnified Party.
"Damages" means liabilities, damages, penalties, Judgments,
assessments, losses, costs and expenses in any case, whether arising under
strict liability or otherwise (including reasonable attorneys' fees) including
lost profits, lost benefits, loss of or diminution in enterprise value and loss
of goodwill, but excluding consequential, incidental, special, punitive or
similar damages, except to the extent such consequential, incidental, special,
punitive or similar damages are asserted by, awarded, paid or payable to any
third party.
"Direct Claim" has the meaning set forth in Section 9.5(a).
"Environment" shall mean soil, surface waters, groundwater,
land, stream sediments, surface or subsurface strata, ambient air, indoor air
or indoor air quality, interior and/or exterior, including, without limitation,
any material or substance used in the physical structure, of any building or
improvement and any environmental medium.
"Environmental Law" shall mean the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901, et seq., as amended ("RCRA");
the Comprehensive Environmental Response Compensation and Liability Act of
1980, 42 U.S.C. Sections 9601, et seq. (original act know as "CERCLA" or
"Superfund," the Amendments are known as "SARA"); the HSWA amendments to RCRA
regulating Underground Storage Tanks ("USTS"), 42 U.S.C. " 6991-6991(i); the
Clean Air Act of 1963 as amended in 1970 and 1977, 42 U.S.C. ' 7401, et seq.
("Clean Air Act"); the Federal Water Pollution Control Act of 1976, as
subsequently amended by the Clean Water Act of 1977 and 1987, 33 U.S.C. " 1251,
et seq. ("Clean Water Act"), and the Toxic Substances Control Act of 1976, 15
U.S.C. " 2501 ("TSCA"), and all other federal, state and local laws,
regulations, rules or ordinances implementing or otherwise dealing with the
subject matter of the preceding federal statutes or otherwise relating to the
protection of human health or the Environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any entity that is a member of a
controlled group for purposes of Section 4001(a)(14) of ERISA.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Governmental Authority" means (i) any domestic or foreign
national, state or local government, any political subdivision thereof or any
other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, court, department, bureau or entity,
or (ii) any arbitrator with authority to legally bind a party or any of its
Affiliates.
"Hazardous Material" shall mean any pollutant, toxic
substance including asbestos and asbestos-containing materials, hazardous
waste, hazardous material or hazardous substance as defined in or controlled by
the Environmental Law.
"Impartial Accounting Firm" has the meaning set forth in
Section 2.3(c)(iv).
"Indemnified Party" has the meaning set forth in Section 9.5.
"Indemnifying Party" has the meaning set forth in Section
9.5.
"Injunction" means any order, statute, rule, regulation,
executive order, injunction, stay, decree or restraining order.
"Interim Cemex Financial Statements" means the statement of
income for the RMUSA Assets for the nine months ended September 30, 2004.
"Interim RMUSA Financial Statements" means the statement of
income for the RMUSA Assets for the eight months ended August 31, 2004.
"IP License Agreement" means the Intellectual Property
License Agreement dated as of the date hereof by and between Cemex Trademarks
Worldwide Ltd. and the Company.
"Judgments" means any judgments, injunctions, orders, writs,
rulings or awards of any court or other judicial authority or any governmental,
administrative or regulatory authority of competent jurisdiction.
"Knowledge" shall mean, with respect to the Cemex, the actual
knowledge of the Jesus Gonzalez Herrera, Leslie White, Andy Miller, Steve Wise,
Luis Oropeza, and Frank Craddock, and with respect to RMUSA, the actual
knowledge of Marc Bryant Tyson, Scott Phelps, Steve Shaw, Bill Roy, Bill
Holden, Bobby Lindsay and James Lewis.
"Laws" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order or decree.
"Liens" means all liens (statutory or otherwise), mortgages,
pledges, charges, security interests, sureties, options, easements, covenants,
restrictions or other encumbrances whatsoever.
"Material Cemex Contract" has the meaning set forth in
Section 7.5(a).
"Material RMUSA Contract" has the meaning set forth in
Section 8.5(a).
"Permits" means all permits, authorizations, approvals,
registrations, licenses, certificates, variances and similar rights granted by
or obtained from any federal, state, local or foreign governmental,
administrative or regulatory authority.
"Permitted Encumbrances" means (a) mechanics', carriers',
warehousemens' workmens' and other similar Liens arising (I) with respect to
the Cemex Assets, in the ordinary course of the Cemex Business and (II) with
respect to the RMUSA Assets, in the ordinary course of the RMUSA Business, and
which would not, individually or in the aggregate, reasonably be expected to
have a Cemex Material Adverse Effect or a RMUSA Material Adverse Effect,
respectively, (b) Liens for taxes, assessments and other governmental charges
not yet due and payable or that may subsequently be paid without penalty or
that are being contested in good faith by appropriate proceedings, and (c) with
respect to the Real Property, encumbrances to fee simple, leasehold or easement
title for: (I) Real Property taxes or other property taxes, assessments,
governmental charges or levies not yet due; (II) easements, rights-of-way,
licenses, restrictions, reservations of mineral rights (with surface rights
being waived) or similar encumbrances that do not materially impair the
marketability, use or operation of such Real Property by the Company; and (III)
rights of tenants in possession of any such Real Property pursuant to tenant
leases to be assigned to the Company.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or other entity or
organization.
"Proceeding" means any action, suit, demand, claim, legal or
administrative proceeding or any arbitration or other alternative dispute
resolution proceeding, hearing or investigation.
"Ready Mix LLC" means Ready Mix USA, LLC, a Delaware limited
liability company.
"Ready Mix LLC Agreement" means the Limited Liability Company
Agreement of Ready Mix USA, LLC, dated July 1, 2005.
"Ready Mix LLC Contribution Agreement" means the Asset and
Capital Contribution Agreement of Ready Mix USA, LLC dated July 1, 2005.
"Required Contractual Consent" means a Cemex Required
Contractual Consent or a RMUSA Required Contractual Consent.
"Retained Cemex Assets" has the meaning set forth in Section
1.2.
"Retained RMUSA Assets" has the meaning set forth in Section
1.1.
"RMUSA" has the meaning set forth in the Introduction.
"RMUSA Accounts Receivable" has the meaning set forth in
Schedule 1.1(b)2.
"RMUSA Agreement Assignment and Assumption" has the meaning
set forth in Section 4.1(a)(xii).
"RMUSA Assets" has the meaning set forth in Section 1.1.
"RMUSA Assumed Contracts" has the meaning set forth in
Schedule 1.1(a)8.
"RMUSA Assumed Liabilities" has the meaning set forth in
Section 5.1.
"RMUSA Authorized Person(s)" has the meaning set forth in
Section 4.1(a)(vii).
"RMUSA Boundaries" means the states of Alabama, Arkansas,
Georgia, excluding the Metropolitan Statistical Area of Brunswick, Georgia,
Mississippi and Tennessee and the RMUSA Florida Panhandle (as defined herein).
"RMUSA Business" has the meaning set forth in Section 1.1.
"RMUSA Business Location" has the meaning set forth in
Section 1.1.
"RMUSA Disclosure Schedule" has the meaning set forth in
Article 8.
"RMUSA Environmental Condition" has the meaning set forth in
Section 8.7(a).
"RMUSA Environmental Indemnitees" has the meaning set forth
in Section 6.8.
"RMUSA Environmental Liabilities" has the meaning set forth
in Section 6.8.
"RMUSA Financial Statements" means the statement of income
for the RMUSA Asset for the twelve months ended December 31, 2004.
"RMUSA Florida Panhandle" means the following counties in the
State of Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington,
Jackson, Bay, Calhoun, Gulf, Franklin, Liberty, Gadsden, Leon, Wakulla,
Jefferson, Madison and Taylor.
"RMUSA Indemnified Party" means RMUSA, RMUSA's Affiliates,
directors, officers, shareholders, attorneys, accountants, agents and
employees, and their respective heirs, successors and assigns.
"RMUSA Intangible Property" means intellectual property owned
by RMUSA or any Affiliate of RMUSA.
"RMUSA Intracompany Receivables" has the meaning set forth in
Schedule 1.1(b)6.
"RMUSA Inventory" has the meaning set forth in Schedule
1.1(a)3.
"RMUSA Land" has the meaning set forth in Schedule 1.1(a)1.
"RMUSA Leases" has the meaning set forth in Schedule 1.1(a)8.
"RMUSA Lease Assignment" has the meaning set forth in Section
4.1(a)(xiii).
"RMUSA Material Adverse Effect" has the meaning set forth in
Section 8.5(b).
"RMUSA Permits" has the meaning set forth in Schedule
1.1(a)9.
"RMUSA Prepaids" has the meaning set forth in Section 2.3(a).
"RMUSA Real Property" has the meaning set forth in Schedule
1.1(a)1.
"RMUSA Required Contractual Consents" has the meaning set
forth in Section 8.8.
"RMUSA Retained Names" has the meaning set forth in Schedule
1.1(b)5.
"RMUSA Retained Policies" has the meaning set forth in
Schedule 1.1(b)4.
"RMUSA Transferred Employees" has the meaning set forth in
Section 6.6.
"RMUSA Value" has the meaning set forth in Section 2.1(a).
"RMUSA Warranty Deed" has the meaning set forth in Section
4.1(a)(ii).
"RMUSA Working Capital Statement" has the meaning set forth
in Section 2.3(c)(i).
"Third Party Claim" has the meaning set forth in Section
9.5(a).
"Title Company" shall mean either of First American Title
Insurance Company or Fidelity National Title Insurance Company.
"Title Policy" shall mean an ALTA owner's policy of title
insurance in a form acceptable to (i) Cemex, with respect to any such policy
issued for RMUSA Real Property and (ii) RMUSA, with respect to a policy issued
for Cemex Real Property (or, with respect to any parcel of RMUSA Real Property
or Cemex Real Property that is in a State which does not permit the issuance of
such ALTA policy, such form as shall be permitted in such State and acceptable
to Cemex or RMUSA, respectively) issued by the Title Company with respect to
such Real Property and insuring the Company's indefeasible fee simple ownership
of such Real Property as of the date hereof, subject only to the standard
exceptions and exclusions from coverage and the (i) RMUSA's Permitted
Encumbrances, with respect to any such policy issued for RMUSA Real Property
and (ii) Cemex's Permitted Encumbrances, with respect to any policy issued for
Cemex Real Property.
"Trademark License Agreement" means the Trademark License
Agreement dated as of the date hereof by and between Cemex S.A. de C.V. and the
Company.
"Transferred Asset" means a Cemex Asset or an RMUSA Asset, as
the context requires.
"Unassigned Contracts" has the meaning set forth in Section
4.4.
"WARN" has the meaning set forth in paragraph 6 of Schedule
5.1.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement executed on the day and year first
above written.
READY MIX USA, INC.
/s/ Marc Bryant Tyson
-------------------------
Marc Bryant Tyson
President
CEMEX SOUTHEAST HOLDINGS LLC
/s/ Gilberto Perez
---------------------------
Gilberto Perez
President
CEMEX SOUTHEAST LLC
By: Cemex, Inc.
Its Manager
/s/ Gilberto Perez
---------------------------
Gilberto Perez
Its President
LIST OF SCHEDULES
-----------------
1.1(a) RMUSA Assets
1.1(a)-1 RMUSA Land
1.1(b) RMUSA Retained Assets
1.2(a) Cemex Assets
1.2(a)-1 Cemex Land
1.2(b) Cemex Retained Assets
1.2(b)-8 Cemex Retained Contracts
5.1 RMUSA Assumed Liabilities
5.2 Cemex Assumed Liabilities
LIST OF EXHIBITS
----------------
A Form of Cemex Lease Assignment
B Form of RMUSA Lease Assignment
Schedule 1.1(a)
RMUSA Assets
1. Real Property. Subject to the RMUSA Permitted Encumbrances, the real
property owned, or in the case of (vi) below, leased, by RMUSA or any of
its Affiliates and consisting of: (i) the real property described on
Schedule 1.1(a)-1 (the "RMUSA Land"), (ii) all buildings, structures and
improvements located on the RMUSA Land, to the extent owned by RMUSA or
any of its Affiliates, (iii) all fixtures, machinery, apparatus or
equipment affixed to the Cemex Land, including all of the electrical,
heating, plumbing, air conditioning, air compression and all other similar
systems located on the RMUSA Land, to the extent owned by RMUSA or any of
its Affiliates and to the extent that such items constitute fixtures, (iv)
all right, title and interest of RMUSA or any of its Affiliates,
reversionary or otherwise, in and to all easements, if any, in or upon the
RMUSA Land and all other rights and appurtenances belonging or in any way
pertaining to the RMUSA Land (including RMUSA's and its Affiliates' right,
title and interest in and to any mineral rights or water rights relating
to the RMUSA Land), (v) all right, title and interest of RMUSA or any of
its Affiliates in, to or under all strips and gores and any land lying in
the bed of any public road, highway or other access way, open or proposed,
adjoining the RMUSA Land and (vi) the RMUSA Leases (collectively, the
"RMUSA Real Property");
2. Personal Property. Except as described on Schedule 1.1(b), the tangible
personal property that is either located on the RMUSA Real Property or
used or intended for use primarily in, or which is being utilized or
operated by RMUSA primarily in the RMUSA Business as presently conducted,
including all off road, non-titled rolling stock, material handling
equipment, wheel loaders, track dozers, scrapers, water trucks, haul
trucks, conveyor system, aggregate processing equipment/crushers and
machinery, cement manufacturing equipment including rotary kilns, storage
silos, installed control systems, installed electric motors, conveyors,
rail engine, cement and raw material storage and handling equipment, weigh
scales, office furniture, business machines, cement/aggregate testing and
laboratory equipment, tools and fixtures;
3. Inventory. Except as described on Schedule 1.1(b), all inventory,
including all inventories of products, work in process, finished goods,
raw materials, supplies, parts, finished cement, clinker, construction
aggregate, coal and fuel, lubricants, machinery and equipment repair parts
and components, including those tools, fuel, repair parts, components and
other items, and including the supplies of coal, clay, construction
aggregate, fly and bottom ash and other raw materials and repair parts
(collectively, "RMUSA Inventory");
4. Prepaid Items. All of RMUSA's and its Affiliates' rights and interests
relating to prepaid expenses, advance payments, deposits and prepaid
items, including prepaid interest and deposits with lessors, suppliers or
utilities, which relate primarily to the RMUSA Business;
5. Reserved.
6. Books, Records and Written Materials. Except as described on Schedule
1.1(b), all of RMUSA's and its Affiliates' books and records, whether in
hard copy or in electronic format (e.g. computer files), including all
production data, equipment maintenance data, accounting records, (but
specifically excluding those files related to the Retained RMUSA
Litigation), and any inventory records, sales and sales promotional data
and materials, advertising materials, sales training materials,
educational support program materials, cost and pricing information,
business plans, quality control records and manuals, blueprints, research
and development files, records and laboratory books, patent disclosures,
correspondence, and any other records and data, in each case (i) used
primarily in or necessary for the conduct of the RMUSA Business or (ii)
that are located on the RMUSA Real Property or are within the possession
or control of those persons employed by RMUSA to work primarily for the
Business, and all books and records relating to Taxes (other than income
Taxes) with respect to the RMUSA Business; provided that nothing in this
paragraph 6 shall require RMUSA to deliver to Company or otherwise provide
Company access to any electronic records that cannot be separated from
information relating to the RMUSA Retained Assets or RMUSA's other
businesses;
7. Catalogs and Advertising Materials. RMUSA's and its Affiliates'
promotional and advertising materials relating primarily to or necessary
for the conduct of the RMUSA Business as presently conducted, including
all catalogs, brochures, plans, customer lists, supplier lists, manuals,
handbooks, equipment and parts lists, and dealer and distributor lists;
8. Assumed Contracts. Except as described on Schedule 1.1(b) and subject to
Section 4.4, all rights and benefits of RMUSA and its Affiliates in, to or
under all Contracts relating primarily to the RMUSA Business, to which
RMUSA or any of its Affiliates is a party or by which any of the RMUSA
Assets are bound, including (i) all rights of RMUSA and its Affiliates in
all purchase and sales orders relating principally to the Business, (ii)
all rights of RMUSA and its Affiliates as lessee under all leases of
personal property relating primarily to the RMUSA Business, (iii) all
Contracts with suppliers for any products, raw materials, supplies,
equipment or parts heretofore sold, or to be sold, by RMUSA and its
Affiliates used primarily in the RMUSA Business as presently conducted,
and (iv) all rights of RMUSA and its Affiliates either as lessee or lessor
under all leases affecting the RMUSA Real Property (the "RMUSA Leases"),
(all of the foregoing being collectively, the "RMUSA Assumed Contracts");
9. Permits and Approvals. All licenses, permits, approvals, variances,
emission allowances, authorizations, waivers or consents used primarily in
or necessary for the conduct of the RMUSA Business as presently conducted
or ownership or operation of the RMUSA Real Property as currently operated
and issued to RMUSA or any of its Affiliates by any Governmental
Authority, to the extent transferable (collectively, "RMUSA Permits");
10. Claims. Except as described on Schedule 1.1(b), all rights, privileges,
claims, demands, causes of action, claims in bankruptcy, indemnification
agreements with, and indemnification rights against, third parties,
warranty claims (to the extent transferable), offsets and other claims
relating to the RMUSA Assets or the RMUSA Business, but not to the extent
that they relate to the Retained RMUSA Assets or the Retained RMUSA
Liabilities; and
11. Goodwill. Any and all goodwill associated principally with the RMUSA
Business.
Schedule 1.1(a)-1
-----------------
RMUSA Land
1. 24th Street North, Finley Site (Birmingham Cement Terminal)
Schedule 1.1(b)
---------------
RMUSA Retained Assets
1. Cash. All cash, bank balances, money market accounts, moneys in possession
of banks and other depositories, term or term deposits and similar cash
equivalents and cash items of, owned or held by or for the account of
RMUSA;
2. Accounts Receivable. RMUSA's and its Affiliates' accounts receivable
arising out of the conduct of the RMUSA Business and outstanding as of the
Contribution Date, including any payments received by RMUSA or any of its
Affiliates with respect thereto on or after the Contribution Date, and
unpaid interest accrued on any accounts receivable and any security or
collateral relating thereto (collectively, "RMUSA Accounts Receivable");
3. Corporate and Other Records. The corporate books and records, including
stock certificates, treasury stock, stock transfer records, corporate
seals and minute books of RMUSA (i) which are not used in or necessary for
the conduct of the RMUSA Business and (ii) which are not located on the
RMUSA Real Property or are not within the possession or control of those
persons employed to work principally for the RMUSA Business, (iii)
employee files for employees other than the RMUSA Transferred Employees,
(iv) RMUSA's Tax Returns and any tax supporting information related
thereto, and (v) any and all records related to pending or completed
litigation and claims;
4. Insurance. Any and all policies of insurance, whether or not covering the
RMUSA Assets or the RMUSA Business, that are or have been maintained or
managed through RMUSA or any of its Affiliates, including general
liability, property, casualty, product liability and workers' compensation
insurance (the "RMUSA Retained Policies"), including any and all amounts
recovered by RMUSA under such RMUSA Retained Policies;
5. Intellectual Property. All intellectual property of RMUSA and its
Affiliates, whether or not used primarily in or necessary for the conduct
of the RMUSA Business, including RMUSA's and its Affiliates' patents,
trade secrets, copyrights, trademarks, trade names, logos, slogans,
internet domain names, licenses and software, including any and all rights
(including any common law trademark rights) to the names Ready Mix USA,
Inc. and Ready Mix USA (such names, collectively, the "RMUSA Retained
Names");
6. Intracompany Receivables. All outstanding amounts, including accounts
receivable, owing to the RMUSA Business from other businesses of RMUSA or
RMUSA 's Affiliates (the "RMUSA Intracompany Receivables").
Schedule 1.2(a)
---------------
Cemex Assets
1. Real Property. Subject to the Cemex's Permitted Encumbrances, the real
property owned, or in the case of (vi) below, leased, by Cemex, Inc. or
any of its Affiliates and consisting of: (i) the real property described
on Schedule 1.2(a)-1 (the "Cemex Land"), (ii) all buildings, structures
and improvements located on the Cemex Land, to the extent owned by Cemex,
Inc. or any of its Affiliates, (iii) all fixtures, machinery, apparatus or
equipment affixed to the Cemex Land, including all of the electrical,
heating, plumbing, air conditioning, air compression and all other similar
systems located on the Cemex Land, to the extent owned by Cemex, Inc. or
any of its Affiliates and to the extent that such items constitute
fixtures, (iv) all right, title and interest of Cemex, Inc. or any of its
Affiliates, reversionary or otherwise, in and to all easements, if any, in
or upon the Cemex Land and all other rights and appurtenances belonging or
in any way pertaining to the Cemex Land (including Cemex, Inc.'s and its
Affiliates' right, title and interest in and to any mineral rights or
water rights relating to the Cemex Land), (v) all right, title and
interest of Cemex, Inc. or any of its Affiliates in, to or under all
strips and gores and any land lying in the bed of any public road, highway
or other access way, open or proposed, adjoining the Cemex Land and (vi)
the Cemex Leases (collectively, the "Cemex Real Property");
2. Personal Property. Except as described on Schedule 1.2(b), the tangible
personal property that is either located on the Cemex Real Property or
used or intended for use primarily in, or which is being utilized or
operated by Cemex primarily in the Cemex Business as presently conducted,
including all off road, non-titled rolling stock, material handling
equipment, wheel loaders, track dozers, scrapers, water trucks, haul
trucks, conveyor system, aggregate processing equipment/crushers and
machinery, cement manufacturing equipment including rotary kilns, storage
silos, installed control systems, installed electric motors, conveyors,
rail engine, cement and raw material storage and handling equipment, weigh
scales, office furniture, business machines, cement/aggregate testing and
laboratory equipment, tools and fixtures;
3. Inventory. Except as described on Schedule 1.2(b), all inventory,
including all inventories of products, work in process, finished goods,
raw materials, supplies, parts, finished cement, clinker, construction
aggregate, coal and fuel, lubricants, machinery and equipment repair parts
and components, including those tools, fuel, repair parts, components and
other items, and including the supplies of coal, clay, construction
aggregate, fly and bottom ash and other raw materials and repair parts
(collectively, "Cemex Inventory");
4. Prepaid Items. All of Cemex Inc.'s and its Affiliates' rights and
interests relating to prepaid expenses, advance payments, deposits and
prepaid items, including prepaid interest and deposits with lessors,
suppliers or utilities, which relate primarily to the Cemex Business;
5. Accounts Receivable. Except as described on Schedule 1.2(b), Cemex, Inc.'s
and its Affiliates' accounts receivable arising out of the conduct of the
Cemex Business and outstanding as of the Contribution Date, including any
payments received by Cemex, Inc. or any of its Affiliates with respect
thereto on or after the Contribution Date, and unpaid interest accrued on
any accounts receivable and any security or collateral relating thereto
(collectively, "Cemex Accounts Receivable");
6. Books, Records and Written Materials. Except as described on Schedule
1.2(b), all of Cemex Inc.'s and its Affiliates' books and records, whether
in hard copy or in electronic format (e.g. computer files), including all
production data, equipment maintenance data, accounting records, (but
specifically excluding those files related to the Retained Cemex
Litigation), any inventory records, sales and sales promotional data and
materials, advertising materials, sales training materials, educational
support program materials, cost and pricing information, business plans,
quality control records and manuals, blueprints, research and development
files, records and laboratory books, patent disclosures, correspondence,
and any other records and data, in each case (i) used primarily in or
necessary for the conduct of the Cemex Business or (ii) that are located
on the Cemex Real Property or are within the possession or control of
those persons employed by Cemex, Inc. to work primarily for the Business,
and all books and records relating to Taxes (other than income Taxes) with
respect to the Cemex Business; provided that nothing in this paragraph 6
shall require Cemex, Inc. to deliver to Company or otherwise provide
Company access to any electronic records that cannot be separated from
information relating to the Cemex Retained Assets or Cemex's other
businesses;
7. Catalogs and Advertising Materials. Cemex, Inc.'s and its Affiliates'
promotional and advertising materials relating primarily to or necessary
for the conduct of the Cemex Business as presently conducted, including
all catalogs, brochures, plans, customer lists, supplier lists, manuals,
handbooks, equipment and parts lists, and dealer and distributor lists;
8. Assumed Contracts. Except as described on Schedule 1.2(b) and subject to
Section 4.4, all rights and benefits of Cemex, Inc. and its Affiliates in,
to or under all Contracts relating primarily to the Cemex Business, to
which Cemex, Inc. or any of its Affiliates is a party or by which any of
the Cemex Assets are bound, including (i) all rights of Cemex, Inc. and
its Affiliates in all purchase and sales orders relating principally to
the Business, (ii) all rights of Cemex, Inc. and its Affiliates as lessee
under all leases of personal property relating primarily to the Cemex
Business, (iii) all Contracts with suppliers for any products, raw
materials, supplies, equipment or parts heretofore sold, or to be sold, by
Cemex, Inc. and its Affiliates used primarily in the Cemex Business as
presently conducted, and (iv) all rights of Cemex, Inc. and its Affiliates
either as lessee or lessor under all leases affecting the Cemex Real
Property (the "Cemex Leases"), (all of the foregoing being collectively,
the "Cemex Assumed Contracts");
9. Permits and Approvals. All licenses, permits, approvals, variances,
emission allowances, authorizations, waivers or consents used primarily in
or necessary for the conduct of the Cemex Business as presently conducted
or ownership or operation of the Cemex Real Property as currently operated
and issued to Cemex, Inc. or any of its Affiliates by any Governmental
Authority, to the extent transferable (collectively, "Cemex Permits");
10. Claims. Except as described on Schedule 1.2(b), all rights, privileges,
claims, demands, causes of action, claims in bankruptcy, indemnification
agreements with, and indemnification rights against, third parties,
warranty claims (to the extent transferable), offsets and other claims
relating to the Cemex Assets or the Cemex Business, but not to the extent
that they relate to the Retained Cemex Assets or the Retained Cemex
Liabilities; and
11. Goodwill. Any and all goodwill associated principally with the Cemex
Business.
Schedule 1.2(a)-1
-----------------
Cemex Land
- -------------------------------------------------------------------------------
City State County Street Address
- -------------------------------------------------------------------------------
Rockmart GA Clayton 1801 Rome Hwy
- -------------------------------------------------------------------------------
Pensacola FL Escambia 110 E. Olive Road
- -------------------------------------------------------------------------------
Freeport FL Walton 647 E. Bay Loop
- -------------------------------------------------------------------------------
Clinchfield GA Houston 2620 Highway 341 South
- -------------------------------------------------------------------------------
Buford GA Hall 6891 McEvers Road
- -------------------------------------------------------------------------------
Forest Park GA Polk 5115 Old Dixie Road
- -------------------------------------------------------------------------------
Chattanooga TN Hamilton 611 Hudson Road
- -------------------------------------------------------------------------------
Memphis TN Shelby Intersection of Riverport Road and
Rivergate Road South
- -------------------------------------------------------------------------------
Montgomery AL Montgomery 55 Division Street
- -------------------------------------------------------------------------------
Decatur AL Morgan 1216 State Dock Road
- -------------------------------------------------------------------------------
Birmingham AL Jefferson 4700 Shuttlesworth Drive
- -------------------------------------------------------------------------------
Demopolis AL Marengo 1617 Arcola Rd.
- -------------------------------------------------------------------------------
Schedule 1.2(b)
---------------
Cemex Retained Assets
1. Cash. All cash, bank balances, money market accounts, moneys in possession
of banks and other depositories, term or term deposits and similar cash
equivalents and cash items of, owned or held by or for the account of
Cemex, Inc.;
2. Corporate and Other Records. The corporate books and records, including
stock certificates, treasury stock, stock transfer records, corporate
seals and minute books of Cemex, Inc. (i) which are not used in or
necessary for the conduct of the Cemex Business and (ii) which are not
located on the Cemex Real Property or are not within the possession or
control of those persons employed to work principally for the Cemex
Business, (iii) employee files for employees other than the Cemex
Transferred Employees, (iv) Cemex, Inc.'s Tax Returns and any tax
supporting information related thereto, and (v) any and all records
related to pending or completed litigation and claims;
3. Insurance. Any and all policies of insurance, whether or not covering the
Cemex Assets or the Cemex Business, that are or have been maintained or
managed through Cemex, Inc. or any of its Affiliates, including general
liability, property, casualty, product liability and workers' compensation
insurance (the "Cemex Retained Policies"), including any and all amounts
recovered by Cemex, Inc. under such Cemex Retained Policies;
4. Intellectual Property. All intellectual property of Cemex, Inc. and its
Affiliates, whether or not used primarily in or necessary for the conduct
of the Cemex Business, including Cemex Inc.'s and its Affiliates' patents,
trade secrets, copyrights, trademarks, trade names, logos, slogans,
internet domain names, licenses and software, and any goodwill related to
the foregoing including any and all rights (including any common law
trademark rights) to the names Cemex and Cemex, Inc. (such names,
collectively, the "Cemex Retained Names");
5. Intracompany Receivables. All outstanding amounts, including accounts
receivable, owing to the Cemex Business from other businesses of Cemex or
Cemex 's Affiliates (the "Cemex Intracompany Receivables");
6. Personal Property. The following cement tanker haul trucks and their
respective trailers: 2000 Mack Truck 3R0030, VIN# 1M1AA13Y5YW120782; 2000
Mack Truck 3R0031, VIN# 1M1AA13Y5YW120781; 2000 Mack Truck 3R0032, VIN#
1M1AA13Y5YW120575; 2006 Peterbilt Truck 3R0049, VIN# 1XPDG09816N899196.
7. Claims. All rights, privileges, claims, demands, causes of action, claims
in bankruptcy, indemnification agreements with, and indemnification rights
against, third parties, warranty claims, offsets and other claims relating
to the following:
a. A dispute with the welding contractor and Loeshce over poor
quality work done on the raw mill at the Clinchfield Cement plant during
the last outage.
b. A dispute with Airstream over an outage and damages caused by a
poor quality kiln ID fan that was installed and subsequently removed at
the Demopolis Cement plant.
8. Contracts. All rights and benefits of Cemex, Inc. and its Affiliates in,
to or under the contracts listed on Schedule 1.2(b)-8.
Schedule 1.2(b)-8
-----------------
Cemex Retained Contracts
1. MRO Procurement Agreement, dated as of September 27, 2004, between CEMEX,
Inc. and Applied Industrial Technologies.
2. Master Materials Agreement, dated as of June 1, 2003, between CEMEX, Inc.
and Quality Grinding Aids, Inc.
3. Global Sourcing Contract, undated, between CEMEX Inc. and Harbison-Walker
Refractories Company.
4. Global Sourcing Contract, undated, between CEMEX Inc. and Magotteaux, Inc.
5. Sales Purchase Agreement, dated July 29, 2004, between CEMEX, Inc. and
Petroleum Traders Corporation.
6. Service Agreement, dated as of July 21, 2004, between Manpower Inc. and
CEMEX Inc.
7. Coke Sales Agreement, undated, between Transenergy Grinding, Inc. and
ExxonMobil Corporation.
8. Master Lease Agreement 07709-00400, dated as of April 16, 2004, among Bank
of America Leasing & Capital, LLC, as Lessor, and Cemex, Inc., Cemex Cement,
Inc., Cemex Cement Texas, L.P., Cemex Construction Materials, L.P., Pacific
Coast Cement Corporation, Cemex California Cement LLP, Cemex Central Plains
Cement, LLC, and Kosmos Cement Company, as Lessees.
9. BTM Master Lease Agreement, dated as of August 7, 2000, between BTM Capital
Corporation (Bank of Tokyo-Mitsubishi), as Lessor, and Southdown, Inc., as
Lessee.
10. Master Lease Agreement 287309-000-001, dated as of January 28, 2004,
between Caterpillar Financial Services Corporation, as Lessor, and Cemex, Inc.
11. Equipment Lease, dated as of May 17, 2002, between First Union Commercial
Corporation, as Lessor, and Cemex, Inc., as Lessee.
12. Master Lease Finance Agreement, dated as of June 13, 1995, between
BancBoston Leasing Inc., as Lessor, and Southdown, Inc., as Lessee.
13. Master Equipment Lease Agreement No. 34574, dated as of March 26, 2001,
between Fleet Capital Corporation, as Lessor, and Cemex, Inc.
14. Master Lease Agreement, dated as of August 1, 1997, between General
Electric Capital Corporation, as Lessor, and Sunbelt Asphalt & Materials, Inc.,
as Lessee.
15. Master Lease Finance Agreement, dated as of April 19, 1999, between STI
Credit Corporation, as Lessor, and Southdown, Inc.
Schedule 5.1
------------
RMUSA Assumed Liabilities
1. Assumed Contracts. Subject to Section 4.4, all liabilities and obligations
of RMUSA arising after the Contribution under the RMUSA Assumed Contracts.
For the avoidance of doubt, Company shall not assume any liabilities or
obligations arising out of any breach of or default under such RMUSA
Assumed Contracts by RMUSA that occurred prior to the Contribution;
2. Real Property. Except as set forth in Section 2.2 and 6.8, all liabilities
and obligations relating to, or occurring or existing in connection with,
or arising out of, the ownership and use of the RMUSA Real Property,
arising after the Contribution;
3. Product Liability. Claims for product warranty, product liability,
refunds, returns, personal injury and property damage, and all other
liabilities and obligations, relating to products sold or services
provided by Company after the Contribution;
4. Post Closing Liabilities. Any liability, claim or obligation which is
based on events or conditions occurring or arising out of the RMUSA
Business as operated by Company after the Contribution or the ownership,
possession, use or sale of the RMUSA Assets by Company after the
Contribution (but, in each case, only to the extent such liability, claim
or obligation is based on events or conditions that occur or arise for the
first time after the Contribution);
5. Taxes (excluding transfer and income Taxes). All liabilities and
obligations related to Taxes (excluding transfer and income Taxes) to the
extent due and payable after the Contribution;
6. WARN. Any liabilities or obligations of RMUSA arising under the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. ss.ss. 2101 2109
("WARN") to the RMUSA Business Employees arising out of a "plant closing"
or "mass layoff" (as those terms are defined under WARN) occurring as of
or after the Contribution.
7. Environmental Liabilities. (a) The RMUSA Environmental Liabilities (except
to the extent that such liabilities are subject to indemnification
pursuant to Section 6.8); and (b) any damages, claims, losses, liabilities
and expenses that may be incurred as a result of the presence of Hazardous
Materials at the RMUSA Real Property or property located in the vicinity
of the RMUSA Real Property that results from the ownership, possession,
use, occupation, construction and/or improvement to or operation of the
RMUSA Business or RMUSA Real Property, that exists as of the Contribution
Date but is not otherwise a RMUSA Environmental Condition as defined in
Section 8.7(a).
Schedule 5.2
------------
Cemex Assumed Liabilities
1. Assumed Contracts. Subject to Section 4.4, all liabilities and obligations
of Cemex, Inc. arising after the Contribution under the Cemex Assumed
Contracts and any and all obligations by Cemex, Inc. or any of its
Affiliates to guarantee or support obligations of the Company or any of
its Subsidiaries under any of the Assumed Contracts. For the avoidance of
doubt, Company shall not assume any liabilities or obligations arising out
of any breach of or default under such Cemex Assumed Contracts by Cemex,
Inc. that occurred prior to the Contribution;
2. Real Property. Except as set forth in Section 2.2 and 6.7, all liabilities
and obligations relating to, or occurring or existing in connection with,
or arising out of, the ownership and use of the Cemex Real Property,
arising after the Contribution;
3. Product Liability. Claims for product warranty, product liability,
refunds, returns, personal injury and property damage, and all other
liabilities and obligations, relating to products sold or services
provided by Company after the Contribution;
4. Post Closing Liabilities. Any liability, claim or obligation which is
based on events or conditions occurring or arising out of the Cemex
Business as operated by Company after the Contribution or the ownership,
possession, use or sale of the Cemex Assets by Company after the
Contribution (but, in each case, only to the extent such liability, claim
or obligation is based on events or conditions that occur or arise for the
first time after the Contribution);
5. Taxes (excluding transfer and income Taxes). All liabilities and
obligations related to Taxes (excluding transfer and income Taxes) to the
extent due and payable after the Contribution;
6. Accounts Payable. The Cemex Accounts Payable.
7. WARN. Any liabilities or obligations of Cemex arising under the WARN to
the Cemex Business Employees arising out of a "plant closing" or "mass
layoff" (as those terms are defined under WARN) occurring as of or after
the Contribution.
8. Environmental Liabilities. (a) The Cemex Environmental Liabilities (except
to the extent that such liabilities are subject to indemnification
pursuant to Section 6.7); and (b) any damages, claims, losses, liabilities
and expenses that may be incurred as a result of the presence of Hazardous
Materials at the Cemex Real Property or property located in the vicinity
of the Cemex Real Property that results from the ownership, possession,
use, occupation, construction and/or improvement to or operation of the
Cemex Business or Cemex Real Property, that exists as of the Contribution
Date but is not otherwise a Cemex Environmental Condition as defined in
Section 7.7(a).
Exhibit A
---------
Form of Cemex Lease Assignment
See attached.
Exhibit B
---------
Form of RMUSA Lease Assignment
See attached.
Exhibit 4.20
ASSET AND CAPITAL CONTRIBUTION AGREEMENT
THIS ASSET AND CAPITAL CONTRIBUTION AGREEMENT (this "Agreement") is
made and entered into this 1st day of July, 2005, by and among READY MIX USA,
INC., an Alabama corporation ("RMUSA"), CEMEX SOUTHEAST HOLDINGS LLC, a Delaware
limited liability company ("Cemex"), and READY MIX USA, LLC, a Delaware limited
liability company ("Company").
W-I-T-N-E-S-S-E-T-H :
---------------------
WHEREAS, RMUSA and Cemex are the sole members of Company; and
WHEREAS, RMUSA and Cemex have agreed to each make an asset and capital
contribution (the "Contribution") to Company pursuant to terms contained herein;
and
WHEREAS, subsequent to the Contribution, Company will own and operate
the RMUSA Assets and the Cemex Assets, both of which terms are defined below, in
connection with the business of producing and selling ready-mix concrete and
concrete block, pavers and septic tanks, and materials to produce the same, such
as aggregates and sand, at the RMUSA Business Locations and the Cemex Business
Locations, both of which terms are defined below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, the receipt, adequacy and sufficiency of which are
hereby acknowledged, RMUSA and Cemex hereby agree as follows:
ARTICLE 1
TRANSFER OF ASSETS
------------------
1.1 Assets To Be Contributed By RMUSA. Subject to the terms hereinafter
set forth, RMUSA hereby transfers, conveys, assigns and delivers, and agrees to
cause each of its Affiliates (as defined herein) to transfer, convey, assign and
deliver, to Company those assets described on Schedule 1.1(a) which are
currently owned by RMUSA or any of its Affiliates and used or intended for use
primarily in, or which are being utilized or operated by RMUSA or any of its
Affiliates in its ready-mix concrete, concrete block and septic tank manufacture
facilities, paver manufacture facilities and aggregate and sand business (the
"RMUSA Assets") and the business associated with said assets, including the
business associated with the Partnerships (as defined below) (the "RMUSA
Business"). The locations listed on Schedule 1.1(a)-1 are referred to sometimes
herein as the "RMUSA Business Locations." Notwithstanding the foregoing, the
assets, properties and rights described on Schedule 1.1(b) shall not be
transferred, conveyed, assigned or delivered to Company under this Agreement
(the "Retained RMUSA Assets"). Notwithstanding the definition of RMUSA Assets
included above, the parties acknowledge that a portion of the RMUSA Value (as
defined below) includes, primarily for convenience and scheduling purposes,
those membership interests (the "Membership Interests") in each of the companies
to which each of the Membership Interests apply (the "Partnerships") as
disclosed on Schedule 1.1(a).
1.2 Assets To Be Contributed By Cemex. Subject to the terms hereinafter
set forth, Cemex hereby transfers, conveys, assigns and delivers, and agrees to
cause each of its Affiliates to transfer, convey, assign and deliver, to Company
those assets described on Schedule 1.2(a) which are currently owned by Cemex or
any of its Affiliates and used or intended for use primarily in, or which are
being utilized or operated by Cemex or any of its Affiliates primarily in its
ready-mix concrete, concrete block and aggregate business locations in the RMUSA
Boundaries (the "Cemex Assets") and the business associated with said assets
(the "Cemex Business", and together with the RMUSA Business, the "Business").
The locations listed on Schedule 1.2(a)-1 are referred to sometimes herein as
the "Cemex Business Locations." Notwithstanding the foregoing, the assets,
properties and rights described on Schedule 1.2(b) shall not be transferred,
conveyed, assigned or delivered to Company under this Agreement (the "Retained
Cemex Assets").
ARTICLE 2
ASSIGNED VALUES
---------------
2.1 Values Assigned to RMUSA Assets And Cemex Assets. RMUSA and Cemex
agree, for purposes of this Agreement, that:
(a) the value assigned to the RMUSA Assets is equal to the sum
of $357,318,591.59 ($344,000,000 and 13,318,591.59), plus the adjustments made
pursuant to Section 2.2 and 2.3 (the "RMUSA Value"); and
(b) the value assigned to the Cemex Assets is equal to the sum
of $41,061,758 ($16,061,758 and $25,000,000), plus the adjustments made pursuant
to Section 2.2 and 2.3 (the "Cemex Value").
2.2 Prorations. Except for any accounts payable of RMUSA, arising out
of the ordinary course of the RMUSA Business, which shall be valued at face
value (net of discounts) at close of business on the Contribution Date, and
subject to adjustment pursuant to Section 2.3 below (the "RMUSA Accounts
Payable"), Cemex and RMUSA each acknowledge and agree that RMUSA shall be
responsible for the expenses relating to the RMUSA Assets, and Cemex shall be
responsible for the expenses relating to the Cemex Assets, up to and through the
Contribution Date (for example, ad valorem taxes and utilities) and that such
expenses shall be paid by them at or before the Contribution Date. To the extent
that a period of time for the assessment of any of the expenses (for example,
property taxes) shall be due both before and after the Contribution Date, the
same shall be prorated as of the Contribution Date. RMUSA and Cemex acknowledge
and agree that one or more of such prorations may occur or be reconciled
subsequent to the Contribution Date.
2.3 Estimated Values; Adjustments.
(a) The RMUSA Value shall be (i) increased by (v) any cash
contributed to the Company by RMUSA on the Contribution Date; (w) the value of
the inventory of sand, gravel, cement, admixtures, fuel, other raw material and
finished goods on hand constituting RMUSA Inventory, which shall all be valued
at book value at close of business on the Contribution Date; (x) the value of
the inventory of tools, parts and related items constituting RMUSA Inventory,
which shall all be valued at book value at close of business on the Contribution
Date; (y) the value of all deposits and prepaid items at close of business on
the Contribution Date (the "RMUSA Prepaids"); and (z) the amount, if any, by
which the RMUSA Accounts Receivable, valued at face value at close of business
on the Contribution Date, exceed the RMUSA Accounts Payable, and (ii) decreased
by the amount, if any, by which the RMUSA Accounts Payable exceed the RMUSA
Accounts Receivable. For the purpose of calculating the RMUSA Accounts
Receivable: (i) accounts receivable that are less than sixty (60) days past due
will be valued at face value as of the close of business on the Contribution
Date; (ii) accounts receivable that are more than sixty (60) days and less than
ninety (90) days past due will be valued at 90% of face value as of the close of
business on the Contribution Date; and (iii) accounts receivable that are more
than ninety (90) days past due will be valued at 75% of the face value as of the
close of business on the Contribution Date.
(b) The Cemex Value shall be (i) increased by (w) any cash
contributed to the Company by Cemex on the Contribution Date; (x) the value of
the inventory of sand, gravel, cement, admixtures, fuel, other raw material and
finished goods on hand constituting Cemex Inventory, which shall all be valued
at book value at close of business on the Contribution Date; (y) the value of
the inventory of tools, parts and related items constituting Cemex Inventory,
which shall all be valued at book value at close of business on the Contribution
Date; and (z) the value of all deposits and prepaid items at close of business
on the Contribution Date (the "Cemex Prepaids").
(c) (i) Within thirty (30) days after the Contribution Date,
(x) Cemex shall deliver to the Company and RMUSA a working capital statement
reflecting the current assets and the Cemex Prepaids assigned by Cemex pursuant
to this Agreement as of the close of business on the Contribution Date, with
each item valued as contemplated in Section 2.2 or 2.3(b), as the case may be
(the "Cemex Working Capital Statement") and (y) RMUSA shall deliver to the
Company and Cemex a working capital statement reflecting the current assets, the
RMUSA Prepaids and the RMUSA Accounts Payable assigned by RMUSA pursuant to this
Agreement as of the close of business on the Contribution Date, with each item
valued as contemplated in Section 2.2 or 2.3(a), as the case may be (the "RMUSA
Working Capital Statement").
(ii) Upon receipt of the Cemex Working Capital
Statement, RMUSA and its independent certified public accountants shall
have the right during the succeeding 30-day period to review and audit
the accounts represented by the line items set forth on the Cemex
Working Capital Statement and to examine and review all records and
work papers and other supporting documents used to prepare such
statement. Cemex shall give RMUSA full access at all reasonable times
to the working papers relating to the Cemex Working Capital Statement,
including but not limited to any descriptions of the methodology,
procedures, internal audits and analysis undertaken in connection with
the preparation of the Cemex Working Capital Statement. RMUSA shall
notify Cemex in writing, on or before the last day of the 30-day
period, of any good faith objections to the Cemex Working Capital
Statement, setting forth a detailed explanation of the objections and
the dollar amount of each such objection. If RMUSA does not deliver
such notice within such 30-day period, the Cemex Working Capital
Statement shall be deemed to have been irrevocably accepted by RMUSA
and the Company.
(iii) Upon receipt of the RMUSA Working Capital
Statement, Cemex and its independent certified public accountants shall
have the right during the succeeding 30-day period to review and audit
the accounts represented by the line items set forth on the RMUSA
Working Capital Statement and to examine and review all records and
work papers and other supporting documents used to prepare such
statement. RMUSA shall give Cemex full access at all reasonable times
to the working papers relating to the RMUSA Working Capital Statement,
including but not limited to any descriptions of the methodology,
procedures, internal audits and analysis undertaken in connection with
the preparation of the RMUSA Working Capital Statement. Cemex shall
notify RMUSA in writing, on or before the last day of the 30-day
period, of any good faith objections to the RMUSA Working Capital
Statement, setting forth a detailed explanation of the objections and
the dollar amount of each such objection. If Cemex does not deliver
such notice within such 30-day period, the RMUSA Working Capital
Statement shall be deemed to have been irrevocably accepted by Cemex
and the Company.
(iv) If any party in good faith objects to line items
set forth on the Cemex Working Capital Statement, or the RMUSA Working
Capital Statement, as the case may be, the parties shall attempt to
resolve any such objections within 30 days of receipt by the
corresponding party of any such objections. If the parties are unable
to resolve the matter within such 30-day period, they shall jointly
appoint an impartial nationally recognized independent certified public
accounting firm (the "Impartial Accounting Firm") mutually acceptable
to the parties (or, if they cannot agree on a mutually acceptable firm,
they shall cause their respective accounting firms to select such firm)
within five (5) days after the end of such 30-day period to resolve any
such remaining matters. Any such resolution shall be conclusive and
binding on the parties and the fees of the Impartial Accounting Firm
shall be borne as the Impartial Accounting Firm shall determine after
considering the positions asserted by the parties in light of its final
decision. The parties shall fully cooperate with the Impartial
Accounting Firm. The Impartial Accounting Firm shall be instructed to
reach its conclusion regarding the dispute within thirty (30) days of
its appointment to settle the dispute.
(v) Adjustments to the values contemplated in
paragraphs (a) and (b) of this Section 2.3 shall be made pursuant to
the Cemex Working Capital Statement and the RMUSA Working Capital
Statement, after their acceptance by the parties or the resolution of
all disputes in connection therewith, pursuant to the provisions of
this paragraph 2.3(c). Upon any adjustment to the RMUSA Value or the
Cemex Value, as contemplated above, in the event that the sum of RMUSA
Value under this Agreement and the RMUSA Value under the Cemex
Contribution Agreement, as finally determined (the "Aggregate RMUSA
Contribution"), is less than the sum of the Cemex Value under this
Agreement and the Cemex Value under the Cemex Contribution Agreement,
as finally determined (the "Aggregate Cemex Contribution"), then within
ten (10) days following such final determination RMUSA shall make a
cash contribution (as part of its Contribution) to Company in an amount
equal to such shortfall. In the event the Aggregate RMUSA Contribution
is greater than the Aggregate Cemex Contribution, then within ten (10)
days following such final determination Cemex shall make a cash
contribution (as part of its Contribution) to Cemex LLC in an amount
equal to such shortfall.
(d) In connection with the preparation of the Cemex Working
Capital Statement and the RMUSA Working Capital Statement, each of RMUSA and
Cemex shall be entitled, for a period of thirty (30) days following the
Contribution Date, to conduct a review of Company's physical inventory.
ARTICLE 3
CONTRIBUTION DATE
-----------------
3.1 Contribution Date. The Contribution shall be made by RMUSA and
Cemex simultaneously with the entering into of this Agreement (the "Contribution
Date").
ARTICLE 4
DELIVERIES
----------
4.1 Deliveries By RMUSA. Contemporaneously with the execution and
delivery of this Agreement, RMUSA shall deliver or cause to be delivered the
following:
(a) To Company:
(i) A bill of sale and assignment evidencing the
contribution to Company of those items described in paragraph 2 of
Schedule 1.1(a), duly executed by RMUSA;
(ii) A limited warranty deed for each parcel of RMUSA
Land duly executed by RMUSA, evidencing the contribution of the RMUSA
Land to Company (the "RMUSA Warranty Deed");
(iii) A Title Policy for each parcel of RMUSA Land;
(iv) Any sales tax and real estate transfer tax
returns, notice of sale of assets, inventory resale certificate or like
governmental report required or permitted by any Governmental Authority
having jurisdiction over the RMUSA Real Property;
(v) An affidavit pursuant to the Foreign Investment
and Real Property Transfer Act in respect of the transfer of RMUSA
Land;
(vi) Duly executed and assigned certificates of title
for all vehicles/rolling stock being contributed to Company as part of
the RMUSA Assets;
(vii) Resolutions adopted by the directors of RMUSA
unanimously authorizing the execution and delivery of this Agreement
and the transactions contemplated hereunder and appointing the
person(s) authorized to consummate this transaction on behalf of RMUSA
(the "RMUSA Authorized Person(s)");
(viii) A current Certificate of Good Standing of
RMUSA from each of the states in which the RMUSA Business Locations are
located;
(ix) A certificate executed by an authorized officer
of RMUSA as to the incumbency of the RMUSA Authorized Person(s);
(x) Possession of the RMUSA Assets;
(xi) To the extent assignable, an assignment of the
RMUSA Permits;
(xii) An instrument of assignment and assumption with
respect to each RMUSA Assumed Contract (the "RMUSA Agreement Assignment
and Assumption"), duly executed by RMUSA;
(xiii) An Assignment and Assumption Agreement and
Lessor and Lessee Estoppel Agreement with respect to each RMUSA Lease
substantially in the form attached hereto as Exhibit A (the "RMUSA
Lease Assignment");
(xiv) A Trademark License Agreement (the "RMUSA
Trademark License Agreement"); and
(xv) $28,144,915.10, (x) by wire transfer of
$4,594,222.32 in immediately available funds to the account designated
by Company and (y) $23,550,692.78 by transfer of bank accounts to the
Company, as set forth in Schedule 4.1(a)(xv).
(b) To Company and Cemex:
(i) The Limited Liability Company Agreement of Ready
Mix USA, LLC, dated July 1, 2005 (the "Ready Mix LLC Agreement"), duly
executed by RMUSA.
4.2 Deliveries By Cemex. Contemporaneously with the execution and
delivery of this Agreement, Cemex shall deliver or cause to be delivered the
following:
(a) To Company:
(i) A bill of sale and assignment evidencing the
contribution to Company of those items described in paragraph 2 of
Schedule 1.2(a), duly executed by Cemex or its Affiliates;
(ii) A limited warranty deed for each parcel of Cemex
Land duly executed by Cemex or its Affiliates, evidencing the
contribution of the Cemex Land to Company (the "Cemex Warranty Deed");
(iii) A Title Policy for each parcel of Cemex Land;
(iv) Any sales tax and real estate transfer tax
returns, notice of sale of assets, inventory resale certificate or like
governmental report required or permitted by any Governmental Authority
having jurisdiction over the Cemex Real Property;
(v) An affidavit pursuant to the Foreign Investment
and Real Property Transfer Act in respect of the transfer of Cemex
Land;
(vi) Duly executed and assigned Certificates of Title
for all vehicles/rolling stock being contributed to Company as part of
the Cemex Assets;
(vii) Resolutions adopted by the directors of Cemex
or its Affiliates unanimously authorizing the execution and delivery of
this Agreement and the transactions contemplated hereunder and
appointing the person(s) authorized to consummate this transaction on
behalf of Cemex or its Affiliates (the "Cemex Authorized Person(s)");
(viii) A current Certificate of Good Standing of
Cemex or its Affiliates from each state in which a Cemex Business
Location is located;
(ix) A certificate executed by an authorized officer
of Cemex or its Affiliates as to the incumbency of the Cemex Authorized
Person(s);
(x) Possession of the Cemex Assets;
(xi) To the extent assignable, an assignment of the
Cemex Permits;
(xii) An instrument of assignment and assumption with
respect to each Cemex Assumed Contract (the "Cemex Agreement Assignment
and Assumption"), duly executed by Cemex or its Affiliates;
(xiii) An Assignment and Assumption Agreement and
Lessor and Lessee Estoppel Agreement with respect to each Cemex Lease
substantially in the form attached hereto as Exhibit B (the "Cemex
Lease Assignment"); and
(xiv) The Cement Supply Agreement duly executed by
Cemex, in its capacity as the Manager of Cemex LLC.
(b) To Company and RMUSA:
(i) The Ready Mix LLC Agreement, duly executed by
Cemex.
4.3 Deliveries By Company. Contemporaneously with the execution and
delivery of this Agreement, Company shall deliver or cause to be delivered:
(a) To each of RMUSA and Cemex, the Ready Mix LLC Agreement,
duly executed by Company;
(b) To Cemex LLC, the Cement Supply Agreement, duly executed
by Company;
(c) To RMUSA, the RMUSA Agreement Assignment and Assumption,
duly executed by Company;
(d) To Cemex, the Cemex Agreement Assignment and Assumption,
duly executed by Company;
(e) To Cemex, a Cemex Lease Assignment with respect to each
Cemex Lease, duly executed by Company;
(f) To RMUSA, a RMUSA Lease Assignment with respect to each
RMUSA Lease, duly executed by Company; and
(g) To RMUSA, the RMUSA Trademark License Agreement, duly
executed by the Company.
4.4 Consents. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement shall not constitute an agreement to transfer,
sell or otherwise assign any instrument, Contract, license or Permit of the
Cemex Business or the RMUSA Business which would otherwise be a Transferred
Asset but which is not permitted to be assigned in connection with a transaction
of the type contemplated by this Agreement (collectively, the "Unassigned
Contracts"). To the extent permitted under the terms of each Unassigned
Contract, the beneficial interest in and to each Unassigned Contract shall in
any event pass to Company at the Closing, and each of Cemex and RMUSA, as the
case may be, covenants and agrees to cooperate with Company in any lawful and
economically reasonable arrangement to provide Company with Cemex's or RMUSA's,
as the case may be, entire interest in the benefits under each of the Unassigned
Contracts. Cemex or RMUSA, as the case may be, shall exercise or exploit its
rights and options under all such Unassigned Contracts referred to in this
Section 4.4 only as reasonably directed by Company; provided, that Company shall
be responsible for any liability incurred by Cemex or RMUSA, as the case may be,
pursuant to such direction and, provided, further, that Company shall not direct
Cemex or RMUSA, as the case may be, not to attempt to obtain a Required
Contractual Consent for an Unassigned Contract. If Company receives an economic
benefit under an Unassigned Contract, Company shall accept the burdens and
perform the obligations under such Unassigned Contract as subcontractor of Cemex
or RMUSA, as the case may be, to the extent of the benefit received, and to the
extent such burdens and obligations would have constituted an Assumed Liability
if such Unassigned Contract had been transferred to Company at the Contribution.
Furthermore, if the other party(ies) to an Unassigned Contract subsequently
Consent to the assignment of such Contract to Company, Company shall thereupon
agree to assume and perform all liabilities and the obligations arising
thereunder after the date of such Consent, at which time such Unassigned
Contract shall be deemed a Transferred Asset, without the payment of further
consideration, and the obligations so assumed thereunder shall be deemed Assumed
Liabilities.
ARTICLE 5
LIABILITIES
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5.1 Limitation on Liabilities of RMUSA to be Assumed by Company.
Notwithstanding any provision of this Agreement to the contrary, Company shall
not assume or become liable to RMUSA, or any other Person, for any liabilities
or obligations of RMUSA or any of its Affiliates whether accrued, absolute,
contingent or otherwise, except for those liabilities of RMUSA and its
Affiliates described on Schedule 5.1 (the "RMUSA Assumed Liabilities"), which
Company hereby assumes and agrees to perform, satisfy and discharge when due.
5.2 Limitation on Liabilities of Cemex to be Assumed by Company.
Notwithstanding any provision of this Agreement to the contrary, Company shall
not assume or become liable to Cemex, or any other Person, for any liabilities
or obligations of Cemex or any of its Affiliates whether accrued, absolute,
contingent or otherwise, except for those liabilities of Cemex and its
Affiliates described on Schedule 5.2 (the "Cemex Assumed Liabilities") which
Company hereby assumes and agrees to perform, satisfy and discharge when due.
ARTICLE 6
CERTAIN POST-CONTRIBUTION MATTERS
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6.1 Further Acts.
(a) RMUSA and Cemex shall, respectively, assist Company, and
cause their Affiliates to assist, in planning for and accomplishing the orderly
transfer of the RMUSA Assets and Cemex Assets to Company as of the Contribution
Date and shall take all steps reasonably requested by Company in furtherance
thereof. From time to time, at the request of Company, whether at or after the
Contribution Date and without further consideration, RMUSA, Cemex and their
respective officers and employees will do, execute, acknowledge and deliver to
Company, or cause their Affiliates to do, execute, acknowledge and deliver to
Company, all further acts, instruments, and assurances, in recordable form, that
are reasonably required by Company to effectuate the terms and conditions of
this Agreement and the Contribution contemplated hereunder. In addition to the
foregoing, on or before the day which is sixty (60) days following the
Contribution Date, Cemex shall cause (i) all of the Cemex Required Contractual
Consents to be obtained, (ii) the Cemex Permits to be assigned to the Company,
and (iii) all certificates of title for all vehicles/rolling stock being
contributed to the Company as part of the Cemex Assets to be duly executed and
assigned to the Company. In addition to the foregoing, on or before the day
which is sixty (60) days following the Contribution Date, RMUSA shall cause (i)
all of the RMUSA Required Contractual Consents to be obtained, (ii) the RMUSA
Permits to be assigned to the Company, and (iii) all certificates of title for
all vehicles/rolling stock being contributed to the Company as part of the RMUSA
Assets to be duly executed and assigned to the Company. The parties covenant and
agree that following the Contribution Date they shall take all commercially
reasonable actions necessary at their own respective cost to clarify, correct,
remove or satisfy any matters of title or survey as to which either party may
have an objection that affect any parcel of real property that is contributed or
conveyed by either party to Company. From time to time, at the request of RMUSA
or Cemex, whether at or after the Contribution Date and without further
consideration, Company and its officers and employees will do, execute,
acknowledge and deliver to RMUSA or Cemex, as the case may be, all further acts,
instruments, and assurances, in recordable form, that are reasonably required by
RMUSA or Cemex, as the case may be, to effectuate the terms and conditions of
this Agreement and the assumption of the RMUSA Assumed Liabilities or the Cemex
Assumed Liabilities, as the case may be, contemplated hereunder.
(b) The agreements of RMUSA and Cemex in (a) above shall
include, without limitation, the execution and delivery of deeds, assignments,
bills of sale, affidavits, agreements, consents, certificates and other
documents or instruments which RMUSA or Cemex, or their Affiliates, as
applicable, shall be unable to deliver as of the Contribution Date and RMUSA and
Cemex, and their Affiliates, as applicable, shall diligently take whatever steps
or actions subsequent to the Contribution Date as may be necessary in order to
effectuate delivery of each of the same.
6.2 Continued Access to Records. RMUSA and Cemex shall, respectively,
preserve for a period of five (5) years after the Contribution Date their
respective records and documents which, in Company's reasonable opinion, relate
to the RMUSA Assets and the Cemex Assets, respectively, any of the
representations or warranties of RMUSA and Cemex, as applicable, contained
herein, or the conduct or operation of the RMUSA Assets and Cemex Assets in the
Business by Company subsequent to Contribution and will grant Company such
reasonable access to and ability to copy all such records and documents as may
be needed by Company.
6.3 Accounts Receivable. In the event that RMUSA receives any payments
subsequent to the Contribution Date relating to any RMUSA Accounts Receivable
outstanding on or after such date, such payment shall be the property of, and
shall be forwarded and remitted to Company as hereinafter provided. After the
Contribution Date RMUSA shall and shall cause its Affiliates to pay to Company
on a bi-monthly basis all amounts received after the Contribution Date by RMUSA
with respect to RMUSA Accounts Receivable.
6.4 Publicity. Unless and only to the extent required to be made
pursuant to any applicable Law, regulation or other requirement of any
Governmental Authority, or by any listing agreement with a national securities
exchange or trading market, none of RMUSA, Cemex or Company shall make any
public announcement or issue any press release regarding this Agreement or the
consummation of the transactions contemplated hereby without the prior written
consent of the other party hereto, which consent shall not be unreasonably
withheld.
6.5 Insurance.
(a) Each of Cemex and Company acknowledges that the RMUSA
Retained Policies will not continue to insure the RMUSA Assets or the RMUSA
Business after the Contribution Date and that it is incumbent upon Company to
obtain substitute policies of insurance that provide insurance coverage for the
RMUSA Assets and the RMUSA Business. Each of Cemex and Company hereby further
acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the RMUSA Assets or RMUSA
Business occurs prior to or on the Contribution Date, such loss shall be payable
solely from the RMUSA Retained Policies. Each of Cemex and Company hereby
further acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the RMUSA Assets or RMUSA
Business occurs after the Contribution Date, such loss shall be payable solely
from such substitute policies. Any such substitute policies shall include a
waiver of any rights of subrogation that the insurance carriers underwriting
such policies may have against RMUSA or RMUSA's Affiliates, or under the RMUSA
Retained Policies.
(b) Each of RMUSA and Company acknowledges that the Cemex
Retained Policies will not continue to insure the Cemex Assets or the Cemex
Business after the Contribution Date and that it is incumbent upon Company to
obtain substitute policies of insurance that provide insurance coverage for the
Cemex Assets and the Cemex Business. Each of RMUSA and Company hereby further
acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the Cemex Assets or Cemex
Business occurs prior to or on the Contribution Date, such loss shall be payable
solely from the Cemex Retained Policies. Each of RMUSA and Company hereby
further acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the Cemex Assets or Cemex
Business occurs after the Contribution Date, such loss shall be payable solely
from such substitute policies. Any such substitute policies shall include a
waiver of any rights of subrogation that the insurance carriers underwriting
such policies may have against Cemex or Cemex 's Affiliates, or under the Cemex
Retained Policies.
6.6 Employment Matters. RMUSA shall transfer to Company the RMUSA
employees associated with the RMUSA Assets ("RMUSA Transferred Employees").
Cemex shall transfer, or cause the transfer, to Company of the employees of
Cemex and its Affiliates associated with the Cemex Assets and the Cemex Business
("Cemex Transferred Employees"). RMUSA shall maintain, or cause to be
maintained, employee benefit and compensation plans, programs and arrangements
(the "Plans") for the benefit of the Cemex Transferred Employees and the RMUSA
Transferred Employees. With respect to each Plan in which a Cemex Transferred
Employee participates, for purposes of determining eligibility, vesting and
amount of benefits, including severance benefits and paid time off entitlement
(but not for pension benefit accrual purposes), RMUSA shall cause service with
Cemex and its Affiliates (or predecessor employers to the extent Cemex or its
Affiliates provided past service credit) to be treated as service with RMUSA and
its Affiliates; provided, that such service shall not be recognized to the
extent that such recognition would result in a duplication of benefits or to the
extent that such service was not recognized under an analogous plan of Cemex or
its Affiliates. With respect to any Plan maintained in which Cemex Transferred
Employees are eligible to participate, RMUSA shall, and shall cause its
Affiliates to, (i) waive all limitations as to preexisting conditions and
exclusions with respect to participation and coverage requirements applicable to
such employees to the extent such conditions and exclusions were satisfied or
did not apply to such employees under the analogous plan of Cemex or its
Affiliates and (ii) provide each Cemex Transferred Employee with credit for any
co-payments and deductibles paid prior to the Contribution Date in satisfying
any analogous deductible or out-of-pocket requirements to the extent applicable
under any such plan. Effective as of the Contribution Date, the Cemex
Transferred Employees shall cease to participate (and thus shall no longer be
eligible for vesting or benefit accrual under) any employee benefit or
compensation plans, programs or arrangements maintained by Cemex or its
Affiliates.
6.7 Cemex Environmental Indemnity. Cemex, in addition to its other
indemnity obligations otherwise provided in this Agreement, agrees to indemnify
and hold harmless Company and its officers, shareholders, members, managers,
directors, employees, agents, successors, and assigns (the "Cemex Environmental
Indemnitees"), against and in respect of, any and all damages, claims, losses,
liabilities, and expenses (including without limitation, reasonable legal,
accounting, consulting, engineering and other expenses) that may be incurred by
any of the Cemex Environmental Indemnitees, or assessed against any of the Cemex
Environmental Indemnitees by any other party or parties (including, without
limitation, a governmental entity) arising out of, in connection with, or
relating to the subject matter of: (1) the breach or inaccuracy of any of the
representations and warranties set forth in Section 7.7; (2) any Cemex
Environmental Condition which exists as of the Contribution Date, even if not
discovered until after the Contribution Date, including, without limitation,
remediation of such condition and loss of life, injury to persons or property,
or damage to natural resources arising from such condition; (3) any violation of
an Environmental Law prior to the Contribution Date which relates to the Cemex
Real Property or the Cemex Business; or (4) the off-site transportation,
storage, disposal, treatment or recycling of Hazardous Materials generated by or
on behalf of the Cemex Business on or prior to the Contribution Date, including,
without limitation, any claims related to remediation of such Hazardous
Materials and loss of life, injury to persons or property, or damage to natural
resources arising from such Hazardous Materials. Such damages, claims, losses,
liabilities, and expenses may sometimes be referred to herein as "Cemex
Environmental Liabilities." This indemnity shall survive the Contribution Date
only for a period of five (5) years after the Contribution Date. Any testing or
investigation which RMUSA or Company deems reasonably necessary in order to
determine whether any environmental indemnity obligations of Cemex exist
hereunder may be conducted at any time prior to the termination of this
indemnity obligation at the expense of RMUSA.
6.8 RMUSA Environmental Indemnity. RMUSA, in addition to its other
indemnity obligations otherwise provided in this Agreement, agrees to indemnify
and hold harmless Company and its officers, shareholders, members, managers,
directors, employees, agents, successors, and assigns (the "RMUSA Environmental
Indemnitees"), against and in respect of, any and all damages, claims, losses,
liabilities, and expenses (including without limitation, reasonable legal,
accounting, consulting, engineering and other expenses) that may be incurred by
any of the RMUSA Environmental Indemnitees, or assessed against any of the RMUSA
Environmental Indemnitees by any other party or parties (including, without
limitation, a governmental entity) arising out of, in connection with, or
relating to the subject matter of: (1) the breach or inaccuracy of any of the
representations and warranties set forth in Section 8.7; (2) any RMUSA
Environmental Condition which exists as of the Contribution Date, even if not
discovered until after the Contribution Date, including, without limitation,
remediation of such condition and loss of life, injury to persons or property,
or damage to natural resources arising from such condition; (3) any violation of
an Environmental Law prior to the Contribution Date which relates to the RMUSA
Real Property or the RMUSA Business; or (4) the off-site transportation,
storage, disposal, treatment or recycling of Hazardous Materials generated by or
on behalf of the RMUSA Business on or prior to the Contribution Date, including,
without limitation, any claims related to remediation of such Hazardous
Materials and loss of life, injury to persons or property, or damage to natural
resources arising from such Hazardous Materials. Such damages, claims, losses,
liabilities, and expenses may sometimes be referred to herein as "RMUSA
Environmental Liabilities." This indemnity shall survive the Contribution Date
only for a period of five (5) years after the Contribution Date. Any testing or
investigation which Cemex or Company deems reasonably necessary in order to
determine whether any environmental indemnity obligations of RMUSA exist
hereunder may be conducted at any time prior to the termination of this
indemnity obligation at the expense of Cemex.
6.9 Bulk Transfer Laws. Without admitting applicability of the bulk
transfer laws of any jurisdiction, RMUSA, Cemex and Company have agreed to waive
compliance by each of RMUSA and Cemex with the laws of any jurisdiction relating
to bulk transfers which may be applicable in connection with the transfer of the
RMUSA Assets or the Cemex Assets to Company. Each of RMUSA and Cemex shall
defend, indemnify and hold harmless Company from and against any liabilities
incurred as a result of its noncompliance with any applicable bulk transfer
laws.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES BY CEMEX
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Cemex hereby represents and warrants to Company that, except as set
forth in the disclosure schedule being delivered by Cemex contemporaneously
herewith (the "Cemex Disclosure Schedule"):
7.1 Existence and Authorization for Agreement; Enforceability. Cemex is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the requisite power
and authority to own, lease, and operate its properties and carry on and operate
its business as and where such business is now being conducted. Each of the
Affiliates of Cemex which are contributing Cemex Assets or Cemex Business at the
direction of or for the benefit of Cemex is an entity duly organized, validly
existing and in good standing under the laws of the State of its organization,
and has the requisite power and authority to own, lease, and operate the Cemex
Assets and the Cemex Business that it is contributing to Company. Each of the
Affiliates of Cemex which are contributing Cemex Assets or Cemex Business to
Company has been duly authorized to do so, and has taken all necessary actions
to transfer such Cemex Assets or Cemex Business to Company. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein, have been duly authorized by the Board of Directors of Cemex. Cemex has
taken all actions necessary to authorize it to enter into and perform fully its
obligations under this Agreement and all of the documents or instruments
otherwise contemplated herein and to consummate the transactions contemplated
herein and therein. Each of this Agreement and the other closing documents
delivered pursuant hereto has been duly executed and delivered by Cemex and is
the legal, valid and binding obligation of Cemex enforceable in accordance with
its respective terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to the general principles of
equity.
7.2 Title to and Sufficiency of Cemex Assets.
(a) Cemex or the Cemex Affiliate that contributes the Cemex
Assets, as the case may be, has good and marketable title to the Cemex Assets.
Except for (i) the Cemex Assumed Liabilities, and (ii) Permitted Encumbrances,
none of the Cemex Assets shall, at the Contribution Date, be subject to any
Lien.
(b) The Cemex Assets, in conjunction with the rights, goods
and services granted, transferred or to be performed by Cemex and its Affiliates
and subsidiaries pursuant to this Agreement, constitute all of the property,
real and personal, tangible and intangible, necessary for the conduct of the
Cemex Business as it is presently being conducted by Cemex or its Affiliates in
all material respects.
7.3 Taxes. Cemex will pay and satisfy, or cause to be paid and
satisfied, all property and excise and other tax obligations, penalties and
interest, imposed by any governmental entity either (i) in connection with the
Cemex Business or the Cemex Assets arising prior to the Contribution Date, and
in connection with the transactions contemplated by this Agreement, including,
but not limited to, all United States, foreign, state, provincial, county and
local income, ad valorem, excise, sales, use, withholding, unemployment, social
security or other taxes and assessments of or payable by Cemex and arising prior
to the Contribution Date, or (ii) otherwise chargeable against the Cemex
Business or the Cemex Assets, and arising prior to Contribution Date. Anything
in this Agreement to the contrary notwithstanding, the Company shall pay all
recording and filing fees and taxes, sales taxes, gross receipt taxes, tag fees
and similar expenses applicable to the transfer of the Cemex Assets from Cemex
to the Company, including but not limited to any recording or filing fees or
taxes associated with the transfer of the Cemex Real Property and any sales,
gross receipt, and tag fees or taxes associated with transferring the titles to
any vehicles. All taxes attributable to the activities of the Cemex Business and
the ownership and operation of the Cemex Assets prior to the Contribution Date
shall be the responsibility of Cemex.
7.4 Litigation. There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or, to the
Knowledge of Cemex, threatened, against or relating to Cemex or any of its
Affiliates, or any of their respective directors, officers, shareholders,
employees, or properties in each case, with respect to the Cemex Assets or the
Cemex Business which would reasonably be expected to have a material adverse
effect on, the Cemex Assets, the Cemex Business or the transactions contemplated
by this Agreement.
7.5 Contracts; and Other Agreements.
(a) Section 7.5 of the Cemex Disclosure Schedule sets forth a
list of the Material Cemex Contracts primarily relating to the Cemex Business or
the Cemex Assets as of the date of this Agreement. Cemex has made available to
each of the Company and RMUSA a true and complete copy of each Material Cemex
Contract listed on Section 7.5 of the Cemex Disclosure Schedule. For purposes
hereof, "Material Cemex Contract" shall mean:
(i) agreements, contracts, licenses, leases of real
or personal property, indentures, mortgages, instruments, security
interests, purchase and sale orders and other similar arrangements,
commitments or understandings in each case, whether written or oral
("Contracts"), for the future acquisition or sale of any assets
involving $250,000 individually (or in the aggregate, in the case of
any related series of Contracts), other than the acquisition or sale of
inventory in the ordinary course of business;
(ii) Contracts calling for future payments to or from
Cemex or any of its Affiliates in any one year of more than $250,000 in
any one case (or in the aggregate, in the case of any related series of
Contracts), or involving the payment or receipt of $1,000,000 or more
over the lifetime of such agreements;
(iii) Contracts that contain covenants prohibiting or
limiting the right to compete of the Cemex Business or prohibiting or
restricting the ability of the owner of the Cemex Business (or any of
its Affiliates) to deal with any Person or in any geographical area;
(iv) Contracts that require the payment by or to
Cemex or any Affiliate of Cemex of a royalty, override or similar
commission or fee of more than $1,000,000 in the aggregate;
(v) Contracts that are collective bargaining
agreements;
(vi) guaranties and any outstanding Contracts and
instruments relating to the borrowing of money, or any extension of
credit, which impose any Lien on any of the Cemex Assets;
(vii) Contracts involving sales agency,
manufacturing, consignment, sales representative, distributorship or
marketing;
(viii) Contracts for the license to or from Cemex or
any Affiliate of Cemex to or from, as the case may be, any third party
(including to another Affiliate) of any (x) Cemex Intangible Property
or (y) intellectual property rights that are owned by any such third
party and, in each case that primarily relate to or are material to the
Cemex Business, except for contracts for the license of software that
is commercially available "off the shelf";
(ix) Contracts for the construction or acquisition of
fixed assets or other capital expenditures requiring the payment by
Cemex of more than $1,000,000 in the aggregate;
(x) Contracts that are broker's or finder's
agreements;
(xi) Contracts relating to partnerships, joint
ventures or other arrangements involving a sharing of profits or
expenses;
(xii) Contracts to sell, lease or otherwise dispose
of any Cemex Asset, in each case other than in the ordinary course of
business;
(xiii) except for collective bargaining agreements
(which are listed in subparagraph (v) above), Contracts relating to
employment or termination or severance benefits or arrangements;
(xiv) Contracts relating to the leasing of or other
arrangement for use of real property or material personal property;
(xv) Contracts that include any obligation to make
payments, contingent or otherwise, arising out of the prior acquisition
or disposition of a business;
(xvi) Contracts which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or upon
the occurrence of any additional acts or events) result in any payment
or benefits (whether of severance pay or otherwise) becoming due, or
the acceleration or vesting of any rights to any payment or benefits,
from Company, Cemex or any of their respective Affiliates to any
officer, director, consultant or employee thereof; and
(xvii) Contracts entered into outside of the ordinary
course of business or which are material to the Cemex Business.
(b) With respect to each Material Cemex Contract, (i) each
such Contract is a valid and binding agreement of Cemex or its Affiliates and is
in full force and effect in all material respects, (ii) Cemex has no Knowledge
of any material default by any third party under any such Contract which default
has not been cured or waived and which default by any third party would
reasonably be expected to result in a material adverse effect on (i) the Cemex
Assets or the business, financial condition or results of operations of the
Cemex Business, taken as a whole, or (ii) on the ability of Cemex and its
Affiliates to consummate the transactions contemplated hereby or perform any of
their obligations hereunder (a "Cemex Material Adverse Effect") and (iii) there
is no material default by Cemex or its Affiliates under any such Contract which
default has not been cured or waived and which default would reasonably be
expected to result in a Cemex Material Adverse Effect.
7.6 Compliance with Laws. The Cemex Business is presently complying in
all material respects with all applicable Laws and Judgments, except for such
failures to comply which, individually or in the aggregate, would not reasonably
be expected to result in a Cemex Material Adverse Effect. The Cemex Business and
Cemex and its Affiliates have all Permits necessary for the conduct of the Cemex
Business as currently conducted, other than those the absence of which,
individually or in the aggregate, would not reasonably be expected to result in
a Cemex Material Adverse Effect, and there are no Proceedings pending, or to the
Knowledge of Cemex, threatened which may result in the revocation, termination,
cancellation or suspension of any such Permit except those that, individually or
in the aggregate, would not reasonably be expected to result in a Cemex Material
Adverse Effect; it being understood that nothing in this Section 7.6 is intended
to address any failure to comply with any Law, Judgment or Permit (including
Environmental Laws or environmentally-related Judgments or Permits) that is the
subject of any other representation or warranty set forth herein. All of the
Cemex Permits are listed in Section 7.6 of the Cemex Disclosure Schedule,
together with any information relative to any requirements applicable to the
assignability of the same.
7.7 Environmental:
(a) Definitions. For the purpose of this Agreement, the
following words and phrases shall have the following meanings:
"Cemex Environmental Condition" shall mean any condition of the
Environment with respect to the Cemex Real Property or property located in the
vicinity of the Cemex Real Property that results from the ownership, possession,
use, occupation, construction and/or improvement to or operation of the Cemex
Business on the Cemex Real Property, that (i) exists as of the Contribution
Date, and (ii) is in violation of applicable Environmental Law as of the
Contribution Date or involves concentrations of Hazardous Materials in soils,
surface waters, groundwater, land, stream sediments, or surface or subsurface
strata that are in excess of applicable remediation standards or guidelines, in
effect as of the Contribution Date, that are applicable in the jurisdiction in
which the relevant real property is located.
For purposes of this Section 7.7 only, the term "Cemex Real Property"
shall mean the Cemex Real Property as referred to in Schedule 1.2(a)-1 and any
leased real property upon which a Cemex Business Location is operated.
(b) Environmental Representations, Warranties, and
Obligations. With reference to the Cemex Real Property and the Cemex Business,
Cemex represents and warrants that, to the Knowledge of Cemex, Cemex and its
Affiliates are presently in substantial compliance with all Environmental Laws
applicable to the Cemex Real Property and the Cemex Business, and no Cemex
Environmental Conditions exist that are material, whether individually or in the
aggregate.
7.8 No Violations. The execution, delivery and performance by Cemex of
this Agreement and each of the other documents or agreements to which it is or
will be a party pursuant hereto, and the consummation by Cemex and its
Affiliates of the transactions contemplated by this Agreement and such other
documents and agreements, do not and will not (i) violate any provision of the
certificate of formation or limited liability company agreement of Cemex or the
articles of incorporation, by-laws or similar governing documents of any of its
Affiliates or subsidiaries, or (ii) (x) violate any Law, Permit or Judgment
applicable to Cemex or any of its Affiliates or subsidiaries, or any of their
respective properties or assets, or (y) subject to obtaining the Consents set
forth in Section 7.8 of the Cemex Disclosure Schedule (the "Cemex Required
Contractual Consents"), violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Cemex or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Cemex or any of its Affiliates is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have and would not be reasonably likely to have a Cemex Material
Adverse Effect.
7.9 Consents. No consent is required to be obtained by Cemex (or by any
Affiliate) from, and no notice or filing is required to be given by Cemex (or by
any Affiliate) to or made by Cemex (or by any Affiliate) with, any Governmental
Authority in connection with the execution, delivery and performance by Cemex of
this Agreement, other than in all cases where the failure to obtain such Consent
or to give or make such notice or filing would not, individually or in the
aggregate, reasonably be expected to result in a Cemex Material Adverse Effect.
7.10 Financial Information. True and complete copies of the Cemex
Financial Statements are included in the Cemex Disclosure Schedule. The Cemex
Financial Statements have been prepared from, are in accordance with and
accurately reflect the books and records of the Cemex Business, comply in all
material respects with applicable accounting requirements, fairly present, in
all material respects, the results of operations of the Cemex Business for the
respective periods indicated, and were prepared in accordance with GAAP applied
consistently during such periods, except as set forth in the footnotes thereto,
and except that the Interim Cemex Financial Statements are subject to normal
year-end adjustments and do not contain all of the footnote disclosure required
by GAAP.
7.11 Absence of Changes.
(a) Since August 31, 2004, (i) the Cemex Business has been
operated in the ordinary course in a manner consistent with past practice and
(ii) there has not been a change, event, development or circumstance that has
had or would reasonably be expected to have a Cemex Material Adverse Effect, but
for purposes of this Section 7.11(a), with respect to clause (i) of the
definition of Cemex Material Adverse Effect shall exclude any change or
development involving (w) a prospective change arising out of any proposed or
adopted legislation, or any other proposal or enactment by any governmental,
regulatory or administrative authority, (x) general conditions applicable to the
economy of the United States, including changes in interest rates, (y)
conditions or effects resulting from the announcement of the existence and terms
of this Agreement, or (z) conditions or factors affecting the industry in the
United States in which the Cemex Business operates, taken as a whole; provided,
with respect to clauses (w) or (x) above, that such change, event, development
or circumstance does not affect the Cemex Business to a materially greater
extent than other participants in the industry in the United States in which the
Cemex Business operates generally.
(b) Without limiting the foregoing, since August 31, 2004,
neither Cemex nor any of its Affiliates has with respect to the Cemex Business:
(i) granted or committed to grant any bonus,
commission, or other form of incentive compensation or increased or
committed to increase the compensation, fees or pension, welfare,
fringe or other benefits provided or payable to or in respect of any
employees of the Cemex Business, except for customary bonuses and
regular salary increases made in the ordinary course of business,
consistent with past practices, or granted any severance or termination
pay;
(ii) except in the ordinary course, written off any
accounts receivable without adequate consideration;
(iii) made any material change in any method of
accounting (for book or Tax purposes) or accounting practice;
(iv) purchased or otherwise acquired, or sold,
leased, transferred or otherwise disposed of any material properties or
material assets of the Cemex Business, except in the ordinary course of
business, consistent with past practices;
(v) entered into any leases with respect to the Cemex
Real Property;
(vi) terminated or amended any Material Cemex
Contract;
(vii) entered into, terminated or amended any
Contracts or other agreements with respect to intellectual property
rights, except in the ordinary course of business ;
(viii) suffered any material damage or material loss
to the assets of the Cemex Business;
(ix) permitted or suffered any material Lien on any
Cemex Asset, other than Permitted Encumbrances;
(x) commenced or initiated any lawsuit, action or
proceeding with respect to the Cemex Business or Cemex Assets, except
in the ordinary course of business;
(xi) incurred any indebtedness, material liability or
obligation (whether absolute, accrued, contingent or otherwise) with
respect to the Cemex Business, except in the ordinary course of
business, consistent with past practices;
(xii) waived, abandoned or otherwise disposed of any
material rights in or to any intangible property related to the Cemex
Business; or
(xiii) agreed (whether or not in writing) to do any
of the foregoing.
7.12 Transactions with Affiliates. No Affiliate of Cemex is an
employee, consultant, competitor, customer, distributor, supplier or vendor of,
or is party to any contractual obligations with Cemex relating to the Cemex
Business and no officer or director of Cemex is an Affiliate of any competitor,
customer, distributor, supplier or vendor of the Cemex Business. None of the
Cemex Assets are owned by an Affiliate of Cemex or subject to any license or
similar arrangement allowing use thereof by an Affiliate.
7.13 Condition of Cemex Assets. To Cemex's Knowledge, there are no
defects in or concerning the buildings, equipment or the tangible personal
property occupied, operated or owned by Cemex or its Affiliates as a part of the
Cemex Business which, individually or in the aggregate, would reasonably be
expected to result in a Cemex Material Adverse Effect. All of the Cemex Assets
are in good operating condition and repair, ordinary wear and tear excepted, and
are suitable for the uses for which such Cemex Assets were intended. Except as
expressly set forth in this Agreement, (i) Cemex expressly disclaims any other
representation and warranty of any kind or nature, express or implied, as to the
condition, value or quality of the Cemex Assets and (ii) Cemex specifically
disclaims any representation or warranty of merchantability, usage or fitness
for any particular purpose with respect to any of the Cemex Assets.
7.14 Real Property Matters. (A) Cemex and its Affiliates are not
currently in default under any agreement, order, judgment or decree relating to
the Cemex Real Property, and no conditions or circumstances exist which, with
the giving of notice or passage of time or both, would constitute a default or
breach with respect to any such agreement, order, judgment or decree, (B) Cemex
and its Affiliates have paid all Taxes due and owing which if not paid could
result in a Lien on the Cemex Real Property or impose liability on Company, (C)
Neither Cemex nor its Affiliates have received any written notice of any
proposed special assessment which would affect the Cemex Real Property, (D)
Neither Cemex nor its Affiliates have received any written notice of any claims,
causes of action, lawsuits or legal proceedings pending or threatened regarding
the ownership, use or possession of the Cemex Real Property, including
condemnation or similar proceedings, (E) Neither Cemex nor its Affiliates have
received any written notice of any violation of any zoning, subdivision,
platting, building, fire or insurance laws, ordinances or regulations (whether
related to the Cemex Real Property or the occupancy thereof) to the extent not
previously cured, including the failure of Cemex to comply with all covenants,
easements and restrictions recorded against the Cemex Real Property, (F) Cemex
and its Affiliates have not received any written notice of any intention on the
part of the issuing authority to cancel, suspend or modify any licenses or
permits relating to the Cemex Real Property, (G) Cemex and its Affiliates are in
material compliance with all recorded covenants, easements and restrictions
affecting the Cemex Real Property, and (H) each of the Cemex Leases is in full
force and effect and has not been modified, amended, added to, or changed in any
manner whatsoever except for those amendments attached to a Cemex Lease
Assignment.
7.15 Brokers and Finders. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Cemex or any Affiliate of Cemex who might be entitled to any fee or
commission from Cemex or any Affiliate of Cemex in connection with the
transactions contemplated by this Agreement.
7.16 Labor Matters. With respect to the Cemex Business, since January
1, 2000, there has not occurred or been threatened any material employee strike,
work stoppage, slowdown, lockout, picketing or concerted refusal to work
overtime at a Cemex Business Location and there are no labor disputes currently
subject to any arbitration or administrative proceeding involving employees of
Cemex or its Affiliates who are involved in the Cemex Business (excluding
routine workers' compensation claims).
7.17 Inventory. The Cemex Inventory, whether finished goods, work in
process or raw materials, consist of a quality and quantity usable and saleable
in the ordinary and usual course of the Cemex Business consistent with past
practice.
7.18 Employee Benefit Plans; ERISA. None of Cemex or its ERISA
Affiliates has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than for payment of premiums to the Pension Benefit
Guaranty Corporation in the ordinary course of business), and no fact or event
exists which would reasonably be expected to give rise to any such liability
that would reasonably be expected to result in a Lien on the Cemex Assets or a
liability of the Company. The employee benefit plans, programs and arrangements
applicable to the Cemex Transferred Employees have been administered in
accordance with their terms and applicable law, including ERISA and the Code, in
all material respects.
7.19 No Liabilities. There are no liabilities or obligations, secured
or unsecured, known or unknown (whether accrued, absolute, contingent or
otherwise) of Cemex or its Affiliates which in any way relate to or encumber the
Cemex Assets or the Cemex Business, except for (a) those reflected or reserved
on the Cemex Financial Statements, (b) those trade payables and contractual
obligations incurred or accrued in the ordinary and normal course of the Cemex
Business and consistent with past practice since August 31, 2004, none of which,
individually or in the aggregate, is material, and none of which is for breach
of warranty or contract or for tort infringement, (c) those under the Cemex
Assumed Contracts, (d) those under the Cemex Permits, (e) Environmental
Liabilities, and (f) any taxes accruing in the ordinary course of the Cemex
Business, none of such taxes being the responsibility or obligation of Company
(other than those ad valorem taxes which will be prorated as of the Contribution
Date).
ARTICLE 8
REPRESENTATIONS AND WARRANTIES BY RMUSA
---------------------------------------
RMUSA hereby represents and warrants to Company that, except as set
forth in the disclosure schedule being delivered by RMUSA contemporaneously
herewith (the "RMUSA Disclosure Schedule"):
8.1 Existence and Authorization for Agreement; Enforceability. RMUSA is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Alabama, and has the requisite power and authority to own,
lease, and operate its properties and carry on and operate the RMUSA Business as
and where the RMUSA Business is now being conducted. The execution and delivery
of this Agreement, and the consummation of the transactions contemplated herein,
have been duly authorized by the Board of Directors of RMUSA. RMUSA has taken
all actions necessary to authorize it to enter into and perform fully its
obligations under this Agreement and all of the documents or instruments
otherwise contemplated herein and to consummate the transactions contemplated
herein and therein. Each of this Agreement and the other closing documents
delivered pursuant hereto has been duly executed and delivered by RMUSA and is
the legal, valid and binding obligation of RMUSA enforceable in accordance with
its respective terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to the general principles of
equity.
8.2 Title to and Sufficiency of RMUSA Assets.
(a) RMUSA has good and marketable title to the RMUSA Assets.
Except for (i) the RMUSA Assumed Liabilities, and (ii) Permitted Encumbrances,
none of the RMUSA Assets shall, at the Contribution Date, be subject to any
Lien.
(b) The RMUSA Assets, in conjunction with the rights, goods
and services granted, transferred or to be performed by RMUSA and its
subsidiaries pursuant to this Agreement and the RMUSA Ancillary Agreements,
constitute all the property, real and personal, tangible and intangible,
necessary for the conduct of the RMUSA Business as it is presently being
conducted by RMUSA in all material respects.
8.3 Taxes. RMUSA will pay and satisfy, or cause to be paid and
satisfied, all property and excise and other tax obligations, penalties and
interest, imposed by any governmental entity either (i) in connection with the
RMUSA Business or the RMUSA Assets arising prior to the Contribution Date, and
in connection with the transactions contemplated by this Agreement, including,
but not limited to, all United States, foreign, state, provincial, county and
local income, ad valorem, excise, sales, use, withholding, unemployment, social
security or other taxes and assessments of or payable by RMUSA and arising prior
to the Contribution Date, or (ii) otherwise chargeable against the RMUSA
Business or the RMUSA Assets, and arising prior to Contribution Date. Anything
in this Agreement to the contrary notwithstanding, the Company shall pay all
recording and filing fees and taxes, sales taxes, gross receipt taxes, tag fees
and similar expenses applicable to the transfer of the RMUSA Assets from RMUSA
to the Company, including but not limited to any recording or filing fees or
taxes associated with the transfer of the RMUSA Real Property and any sales,
gross receipt, and tag fees or taxes associated with transferring the titles to
any vehicles. All taxes attributable to the activities of the RMUSA Business and
the ownership and operation of the RMUSA Assets prior to the Contribution Date
shall be the responsibility of RMUSA.
8.4 Litigation. There is no claim, legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or, to the
Knowledge of RMUSA, threatened, against or relating to RMUSA or any of its
Affiliates, or any of their respective directors, officers, shareholders,
employees, or properties in each case, with respect to the RMUSA Assets or the
RMUSA Business, which would reasonably be expected to have a material adverse
effect on, the RMUSA Assets, the RMUSA Business or the transactions contemplated
by this Agreement.
8.5 Contracts; and Other Agreements.
(a) Section 8.5 of the RMUSA Disclosure Schedule sets forth a
list of the Material RMUSA Contracts primarily relating to the RMUSA Business or
the RMUSA Assets as of the date of this Agreement. RMUSA has made available to
each of the Company and Cemex a true and complete copy of each Material RMUSA
Contract listed on Section 8.5 of the RMUSA Disclosure Schedule. For purposes
hereof, "Material RMUSA Contract" shall mean:
(i) Contracts for the future acquisition or sale of
any assets involving $250,000 individually (or in the aggregate, in the
case of any related series of Contracts), other than the acquisition or
sale of inventory in the ordinary course of business;
(ii) Contracts calling for future payments to or from
RMUSA or any of its Affiliates in any one year of more than $250,000 in
any one case (or in the aggregate, in the case of any related series of
Contracts), or involving the payment or receipt of $1,000,000 or more
over the lifetime of such agreements;
(iii) Contracts that contain covenants prohibiting or
limiting the right to compete of the RMUSA Business or prohibiting or
restricting the ability of the owner of the RMUSA Business (or any of
its Affiliates) to deal with any Person or in any geographical area;
(iv) Contracts that require the payment by or to
RMUSA or any Affiliate of RMUSA of a royalty, override or similar
commission or fee of more than $1,000,000 in the aggregate;
(v) Contracts that are collective bargaining
agreements;
(vi) guaranties and any outstanding Contracts and
instruments relating to the borrowing of money, or any extension of
credit, which impose any Lien on any of the RMUSA Assets;
(vii) Contracts involving sales agency,
manufacturing, consignment, sales representative, distributorship or
marketing;
(viii) Contracts for the license to or from RMUSA or
any Affiliate of RMUSA to or from, as the case may be, any third party
(including to another Affiliate) of any (x) RMUSA Intangible Property
or (y) intellectual property rights that are owned by any such third
party and, in each case that primarily relate to or are material to the
RMUSA Business, except for contracts for the license of software that
is commercially available "off the shelf";
(ix) Contracts for the construction or acquisition of
fixed assets or other capital expenditures requiring the payment by
RMUSA of more than $1,000,000 in the aggregate;
(x) Contracts that are broker's or finder's
agreements;
(xi) Contracts relating to partnerships, joint
ventures or other arrangements involving a sharing of profits or
expenses;
(xii) Contracts to sell, lease or otherwise dispose
of any RMUSA Asset, in each case other than in the ordinary course of
business;
(xiii) except for collective bargaining agreements
(which are listed in subparagraph (v) above), Contracts relating to
employment or termination or severance benefits or arrangements;
(xiv) Contracts relating to the leasing of or other
arrangement for use of real property or material personal property;
(xv) Contracts that include any obligation to make
payments, contingent or otherwise, arising out of the prior acquisition
or disposition of a business;
(xvi) Contracts which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or upon
the occurrence of any additional acts or events) result in any payment
or benefits (whether of severance pay or otherwise) becoming due, or
the acceleration or vesting of any rights to any payment or benefits,
from Company, RMUSA or any of their respective Affiliates to any
officer, director, consultant or employee thereof; and
(xvii) Contracts entered into outside of the ordinary
course of business or which are material to the RMUSA Business.
(b) With respect to each Material RMUSA Contract, (i) each
such Contract is a valid and binding agreement of RMUSA and is in full force and
effect in all material respects, (ii) RMUSA has no Knowledge of any material
default by any third party under any such Contract which default has not been
cured or waived and which default by any third party would reasonably be
expected to result in a material adverse effect on (i) the RMUSA Assets or the
business, financial condition or results of operations of the RMUSA Business,
taken as a whole, or (ii) on the ability of RMUSA and its Affiliates to
consummate the transactions contemplated hereby or perform any of their
obligations hereunder (a "RMUSA Material Adverse Effect") and (iii) there is no
material default by RMUSA under any such Contract which default has not been
cured or waived and which default would reasonably be expected to result in a
RMUSA Material Adverse Effect.
8.6 Compliance with Laws. The RMUSA Business is presently complying in
all material respects with all applicable Laws and Judgments, except for such
failures to comply which, individually or in the aggregate, would not reasonably
be expected to result in a RMUSA Material Adverse Effect. The RMUSA Business or
RMUSA has all Permits necessary for the conduct of the RMUSA Business as
currently conducted, other than those the absence of which, individually or in
the aggregate, would not reasonably be expected to result in a RMUSA Material
Adverse Effect, and there are no Proceedings pending, or to the knowledge of
RMUSA, threatened which may result in the revocation, termination, cancellation
or suspension of any such Permit except those that, individually or in the
aggregate, would not reasonably be expected to result in a RMUSA Material
Adverse Effect; it being understood that nothing in this Section 8.6 is intended
to address any failure to comply with any Law, Judgment or Permit (including
Environmental Laws or environmentally-related Judgments or Permits) that is the
subject of any other representation or warranty set forth herein. All of the
RMUSA Permits are listed in Section 8.6 of the RMUSA Disclosure Schedule,
together with any information relative to any requirements applicable to the
assignability of the same.
8.7 Environmental:
(a) Definitions. For the purpose of this Agreement, the
following words and phrases shall have the following meanings:
"RMUSA Environmental Condition" shall mean any condition of the
Environment with respect to the RMUSA Real Property or property located in the
vicinity of the RMUSA Real Property that results from the ownership, possession,
use, occupation, construction and/or improvement to or operation of the RMUSA
Business on the RMUSA Real Property, that (i) exists as of the Contribution
Date, and (ii) is in violation of applicable Environmental Law as of the
Contribution Date or involves concentrations of Hazardous Materials in soils,
surface waters, groundwater, land, stream sediments, or surface or subsurface
strata that are in excess of applicable remediation standards or guidelines, in
effect as of the Contribution Date, that are applicable in the jurisdiction in
which the relevant real property is located.
For purposes of this Section 8.7 only, the term "RMUSA Real Property"
shall mean the RMUSA Real Property as referred to in Schedule 1.1(a)-1 and any
leased real property upon which the RMUSA Business Locations are operated.
(b) Environmental Representations, Warranties, and
Obligations. With reference to the RMUSA Real Property and the RMUSA Business,
RMUSA represents and warrants that, to the Knowledge of RMUSA, RMUSA is
presently in substantial compliance with all Environmental Laws applicable to
the RMUSA Real Property and the RMUSA Business, and no RMUSA Environmental
Conditions exist that are material, whether individually or in the aggregate.
8.8 No Violations. The execution, delivery and performance by RMUSA of
this Agreement and each of the other documents or agreements to which it is or
will be a party pursuant hereto, and the consummation by RMUSA of the
transactions contemplated by this Agreement and such other documents and
agreements, do not and will not (i) violate any provision of the articles of
incorporation or bylaws of RMUSA or the articles of incorporation, by-laws or
similar governing documents of any of its subsidiaries, or (ii) (x) violate any
Law, Permit or Judgment applicable to RMUSA or any of its subsidiaries, or any
of their respective properties or assets, or (y) subject to obtaining the
Consents set forth in Section 8.8 of the RMUSA Disclosure Schedule (the "RMUSA
Required Contractual Consents"), violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of RMUSA or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which RMUSA or any of its Affiliates is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have and would not be reasonably likely to have a RMUSA Material
Adverse Effect.
8.9 Consents. No consent is required to be obtained by RMUSA (or by any
Affiliate) from, and no notice or filing is required to be given by RMUSA (or by
any Affiliate) to or made by RMUSA (or by any Affiliate) with, any Governmental
Authority in connection with the execution, delivery and performance by RMUSA of
this Agreement and each of the RMUSA Ancillary Agreements to which it is a
party, other than in all cases where the failure to obtain such Consent or to
give or make such notice or filing would not, individually or in the aggregate,
reasonably be expected to result in a RMUSA Material Adverse Effect.
8.10 Financial Information. True and complete copies of the RMUSA
Financial Statements are included in the RMUSA Disclosure Schedule. The RMUSA
Financial Statements have been prepared from, are in accordance with and
accurately reflect the books and records of the RMUSA Business, comply in all
material respects with applicable accounting requirements, fairly present, in
all material respects, the results of operations of the RMUSA Business for the
respective periods indicated, and were prepared in accordance with GAAP applied
consistently during such periods, except as set forth in the footnotes thereto,
and except that the Interim RMUSA Financial Statements are subject to normal
year-end adjustments and do not contain all of the footnote disclosure required
by GAAP.
8.11 Absence of Changes.
(a) Since August 31, 2004, (i) the RMUSA Business has been
operated in the ordinary course in a manner consistent with past practice and
(ii) there has not been a change, event, development or circumstance that has
had or would reasonably be expected to have a RMUSA Material Adverse Effect, but
for purposes of this Section 8.11(a), with respect to clause (i) of the
definition of RMUSA Material Adverse Effect shall exclude any change or
development involving (w) a prospective change arising out of any proposed or
adopted legislation, or any other proposal or enactment by any governmental,
regulatory or administrative authority, (x) general conditions applicable to the
economy of the United States, including changes in interest rates, (y)
conditions or effects resulting from the announcement of the existence and terms
of this Agreement, or (z) conditions or factors affecting the industry in the
United States in which the RMUSA Business operates, taken as a whole; provided,
with respect to clauses (w) or (x) above, that such change, event, development
or circumstance does not affect the RMUSA Business to a materially greater
extent than other participants in the industry in the United States in which the
RMUSA Business operates generally.
(b) Without limiting the foregoing, since August 31, 2004,
neither RMUSA nor any of its Affiliates has with respect to the RMUSA Business:
(i) granted or committed to grant any bonus,
commission, or other form of incentive compensation or increased or
committed to increase the compensation, fees or pension, welfare,
fringe or other benefits provided or payable to or in respect of any
employees of the RMUSA Business, except for customary bonuses and
regular salary increases made in the ordinary course of business,
consistent with past practices, or granted any severance or termination
pay;
(ii) except in the ordinary course, written off any
accounts receivable without adequate consideration;
(iii) made any material change in any method of
accounting (for book or Tax purposes) or accounting practice;
(iv) purchased or otherwise acquired, or sold,
leased, transferred or otherwise disposed of any material properties or
material assets of the RMUSA Business, except in the ordinary course of
business, consistent with past practices;
(v) entered into any leases with respect to the RMUSA
Real Property;
(vi) terminated or amended any Material RMUSA
Contract;
(vii) entered into, terminated or amended any
Contracts or other agreements with respect to intellectual property
rights, except in the ordinary course of business;
(viii) suffered any material damage or material loss
to the assets of the RMUSA Business;
(ix) permitted or suffered any material Lien on any
RMUSA Asset, other than Permitted Encumbrances;
(x) commenced or initiated any lawsuit, action or
proceeding with respect to the RMUSA Business or RMUSA Assets, except
in the ordinary course of business;
(xi) incurred any indebtedness, material liability or
obligation (whether absolute, accrued, contingent or otherwise) with
respect to the RMUSA Business, except in the ordinary course of
business, consistent with past practices;
(xii) waived, abandoned or otherwise disposed of any
material rights in or to any intangible property related to the RMUSA
Business; or
(xiii) agreed (whether or not in writing) to do any
of the foregoing.
8.12 Transactions with Affiliates. No Affiliate of RMUSA is an
employee, consultant, competitor, customer, distributor, supplier or vendor of,
or is party to any contractual obligations with RMUSA relating to the RMUSA
Business and no officer or director of RMUSA is an Affiliate of any competitor,
customer, distributor, supplier or vendor of the RMUSA Business. None of the
RMUSA Assets are owned by an Affiliate of RMUSA or subject to any license or
similar arrangement allowing use thereof by an Affiliate.
8.13 Condition of RMUSA Assets. To RMUSA's Knowledge, there are no
defects in or concerning the buildings, equipment or the tangible personal
property occupied, operated or owned by RMUSA as a part of the RMUSA Business
which, individually or in the aggregate, would reasonably be expected to result
in a RMUSA Material Adverse Effect. All of the RMUSA Assets are in good
operating condition and repair, ordinary wear and tear excepted, and are
suitable for the uses for which such RMUSA Assets were intended. Except as
expressly set forth in this Agreement, (i) RMUSA expressly disclaims any other
representation and warranty of any kind or nature, express or implied, as to the
condition, value or quality of the RMUSA Assets and (ii) RMUSA specifically
disclaims any representation or warranty of merchantability, usage or fitness
for any particular purpose with respect to any of the RMUSA Assets.
8.14 Real Property Matters. (A) RMUSA is not currently in default under
any agreement, order, judgment or decree relating to the RMUSA Real Property,
and no conditions or circumstances exist which, with the giving of notice or
passage of time or both, would constitute a default or breach with respect to
any such agreement, order, judgment or decree, (B) RMUSA has paid all Taxes due
and owing which if not paid could result in a Lien on the RMUSA Real Property or
impose liability on Company, (C) RMUSA has not received any written notice of
any proposed special assessment which would affect the RMUSA Real Property, (D)
RMUSA has not received any written notice of any claims, causes of action,
lawsuits or legal proceedings pending or threatened regarding the ownership, use
or possession of the RMUSA Real Property, including condemnation or similar
proceedings, (E) RMUSA has not received any written notice of any violation of
any zoning, subdivision, platting, building, fire or insurance laws, ordinances
or regulations (whether related to the RMUSA Real Property or the occupancy
thereof) to the extent not previously cured, including the failure of RMUSA to
comply with all covenants, easements and restrictions recorded against the RMUSA
Real Property, (F) RMUSA has not received any written notice of any intention on
the part of the issuing authority to cancel, suspend or modify any licenses or
permits relating to the RMUSA Real Property, (G) RMUSA is in material compliance
with all recorded covenants, easements and restrictions affecting the RMUSA Real
Property, and (H) each of the RMUSA Leases is in full force and effect and has
not been modified, amended, added to, or changed in any manner whatsoever except
for those amendments attached to a RMUSA Lease Assignment.
8.15 Brokers and Finders. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of RMUSA or any Affiliate of RMUSA who might be entitled to any fee or
commission from RMUSA or any Affiliate of RMUSA in connection with the
transactions contemplated by this Agreement.
8.16 Labor Matters. Except as set forth on Section 8.16 of the RMUSA
Disclosure Schedule, with respect to the RMUSA Business, since January 1, 2000,
there has not occurred or been threatened any material employee strike, work
stoppage, slowdown, lockout, picketing or concerted refusal to work overtime at
RMUSA Business Locations and there are no labor disputes currently subject to
any arbitration or administrative proceeding involving employees of RMUSA who
are involved in the RMUSA Business (excluding routine workers' compensation
claims).
8.17 Accounts Receivable. All RMUSA Accounts Receivable represent bona
fide sales actually made in the ordinary course of business and the accounts
receivable reflected in the adjustments pursuant to Section 2.3 are owed to
RMUSA, are not more than one hundred twenty (120) days past due and are not
subject to offset, counterclaim or other defense.
8.18 Inventory. The RMUSA Inventory, whether finished goods, work in
process or raw materials, consist of a quality and quantity usable and saleable
in the ordinary and usual course of the RMUSA Business consistent with past
practice.
8.19 Employee Benefit Plans; ERISA. None of RMUSA or its ERISA
Affiliates has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than for payment of premiums to the Pension Benefit
Guaranty Corporation in the ordinary course of business), and no fact or event
exists which would reasonably be expected to give rise to any such liability
that would reasonably be expected to result in a Lien on the RMUSA Assets or a
liability of the Company. The employee benefit plans, programs and arrangements
applicable to the RMUSA Transferred Employees have been administered in
accordance with their terms and applicable law, including ERISA and the Code, in
all material respects.
8.20 Aggregates Reserves. The RMUSA Assets include contractual rights
and commitments to at least 40,000,000 tons of permitted aggregates reserves.
8.21 No Liabilities. There are no liabilities or obligations, secured
or unsecured, known or unknown (whether accrued, absolute, contingent or
otherwise) of RMUSA which in any way relate to or encumber the RMUSA Assets or
the RMUSA Business, except for (a) those reflected or reserved on the RMUSA
Financial Statements, (b) those trade payables and contractual obligations
incurred or accrued in the ordinary and normal course of the RMUSA Business and
consistent with past practice since August 31, 2004, none of which, individually
or in the aggregate, is material, and none of which is for breach of warranty or
contract or for tort infringement, (c) those under the RMUSA Assumed Contracts,
(d) those under the RMUSA Permits, (e) Environmental Liabilities, and (f) any
taxes accruing in the ordinary course of the RMUSA Business, none of such taxes
being the responsibility or obligation of Company (other than those ad valorem
taxes which will be prorated as of the Contribution Date).
8.22 Representations and Warranties with Respect to the Membership
Interests and the Partnerships.
(a) RMUSA is the lawful owner of the Membership Interests.
RMUSA has the full legal right, power and authority to sell, transfer, convey
and assign the Membership Interests to the Company pursuant to this Agreement.
There are no outstanding options, warrants, rights (preemptive or otherwise),
calls, convertible instruments, agreements, arrangements or commitments
requiring restrictions or otherwise providing for the issuance, sale, transfer,
disposition or acquisition of the Membership Interests, subject to the terms and
conditions of each of the Operating Agreements of the respective Partnerships.
As of the date of this Agreement, the capitalization of each of the Partnerships
is, and the membership interests in each Partnership are owned, as set forth on
Section 8.21(a) of the RMUSA Disclosure Schedule. All the outstanding membership
interests of each of the Partnerships are duly authorized and validly issued
and, to the knowledge of RMUSA, all such membership interests in the
Partnerships are free and clear of all Liens.
(b) RMUSA has, and by execution and delivery of this
Agreement, shall transfer to the Company, good, absolute and marketable title
to, and unrestricted possession of, the Membership Interest, free and clear of
any Liens and any accrued, absolute, contingent or other liabilities of any
nature, including, without limitation, liabilities for any taxes, subject to the
terms and conditions of each of the Operating Agreements of the respective
Partnerships.
(c) Except for leases set forth on Section 8.22(c) of the
RMUSA Disclosure Schedule, each of the Partnerships hold free and clear title to
their respective assets.
(d) There is no action, litigation, suit, claim, proceeding or
governmental inquiry or investigation pending, or to RMUSA's Knowledge,
threatened against RMUSA that relates to the Membership Interests, and to
RMUSA's Knowledge, there are no circumstances that could reasonably be expected
to result in such an action, litigation, suit, claim, proceeding, inquiry or
investigation
(e) The transfer of the Membership Interests will not require
any consent or approval, or any filing with, any governmental entity, landlord,
owner or other person, other than those consents, approvals and filings which
have been or will be obtained or made prior to the Contribution Date.
ARTICLE 9
INDEMNIFICATION
---------------
9.1 Indemnity By Cemex. Subject to the provisions of this Article 9,
Cemex agrees to pay and to indemnify fully, hold harmless and defend each
Company Indemnified Party from and against any and all claims or Damages arising
out of or relating to:
(a) any inaccuracy or breach of any representation or warranty
of Cemex contained in this Agreement;
(b) any breach of any covenant or agreement of Cemex contained
in this Agreement;
(c) the liabilities and obligations of Cemex or any of its
Affiliates arising out of the operation or ownership of the Cemex Assets or the
Cemex Business on or prior to the Contribution Date, except obligations or
liabilities assumed by the Company pursuant to this Agreement; or
(d) all obligations or liabilities that arise, whether before,
on or after, the Contribution Date, out of, or in connection with, the Retained
Cemex Assets;
provided that Cemex shall have an obligation to indemnify any Company
Indemnified Party for Damages pursuant to this Section 9.1 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Company
Indemnified Party pursuant to any contract to which any Company Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Company
Indemnified Party, Cemex shall be subrogated to all rights of the Company
Indemnified Party against any third party in respect of the losses to which such
payment relates, and such Company Indemnified Party will execute upon request
all instruments reasonably necessary to evidence and perfect such subrogation
rights. Nothing in this Section 9.1 shall require a Company Indemnified Party to
seek to recover Damages from any third party before making a claim for
indemnification pursuant to Article 9.
9.2 Indemnity By RMUSA. Subject to the provisions of this Article 9,
RMUSA agrees to pay and to indemnify fully, hold harmless and defend each
Company Indemnified Party from and against any and all claims or Damages arising
out of or relating to:
(a) any inaccuracy or breach of any representation or warranty
of RMUSA contained in this Agreement;
(b) any breach of any covenant or agreement of RMUSA contained
in this Agreement;
(c) the liabilities and obligations of RMUSA or any of its
Affiliates arising out of the operation or ownership of the RMUSA Assets or the
RMUSA Business on or prior to the Contribution Date, except obligations or
liabilities assumed by the Company pursuant to this Agreement; or
(d) all obligations or liabilities that arise, whether before,
on or after, the Contribution Date, out of, or in connection with, the Retained
RMUSA Assets;
provided that RMUSA shall have an obligation to indemnify any Company
Indemnified Party for Damages pursuant to this Section 9.2 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Company
Indemnified Party pursuant to any contract to which any Company Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Company
Indemnified Party, RMUSA shall be subrogated to all rights of the Company
Indemnified Party against any third party in respect of the losses to which such
payment relates, and such Company Indemnified Party will execute upon request
all instruments reasonably necessary to evidence and perfect such subrogation
rights. Nothing in this Section 9.2 shall require a Company Indemnified Party to
seek to recover Damages from any third party before making a claim for
indemnification pursuant to Article 9.
9.3 Indemnity By Company. Subject to the provisions of this Article 9,
Company agrees to pay and to indemnify fully, hold harmless and defend
(a) each Cemex Indemnified Party from and against any and all
claims or Damages arising out of or relating to:
(i) any breach of any covenant or agreement of
Company contained in this Agreement; or
(ii) the Cemex Assumed Liabilities; and
(b) each RMUSA Indemnified Party from and against any and all
claims or Damages arising out of or relating to:
(i) any breach of any covenant or agreement of
Company contained in this Agreement; or
(ii) the RMUSA Assumed Liabilities;
provided that Company shall have an obligation to indemnify any Contributor
Indemnified Party for Damages pursuant to this Section 9.3 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Contributor
Indemnified Party pursuant to any contract to which any Contributor Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Contributor
Indemnified Party, Company shall be subrogated to all rights of the Contributor
Indemnified Party against any third party in respect of the losses to which such
payment relates, and such Contributor Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 9.3 shall require a Contributor
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 9.
9.4 Exclusive Remedy. Except as provided in Section 10.12, the right to
indemnification provided for in this Article 9 shall be the exclusive remedy of
all Company Indemnified Parties with respect to the transactions contemplated
under this Agreement.
9.5 Indemnification Procedures. The party or parties making a claim for
indemnification under Section 9.1, 9.2 or 9.3 shall be, for the purposes of this
Agreement, referred to as the "Indemnified Party" and the party or parties
against whom such claims are asserted under this Article 9 shall be, for the
purposes of this Agreement, referred to as the "Indemnifying Party." All claims
by any Indemnified Party under this Article 9 shall be asserted and resolved as
follows:
(a) In the event that (i) any claim, demand or Proceeding is
asserted or instituted by any Person other than the parties to this Agreement or
their Affiliates which could give rise to Damages for which an Indemnifying
Party could be liable to an Indemnified Party under this Agreement (such claim,
demand or Proceeding, a "Third Party Claim") or (ii) any Indemnified Party under
this Agreement shall have a claim to be indemnified by any Indemnifying Party
under this Agreement which does not involve a Third Party Claim (such claim, a
"Direct Claim"), the Indemnified Party shall with reasonable promptness send to
the Indemnifying Party a written notice specifying the nature of such claim,
demand or Proceeding and the amount or estimated amount thereof if known (which
amount or estimated amount shall not be conclusive of the final amount, if any,
of such claim, demand or Proceeding) (a "Claim Notice").
(b) In the event of a Third Party Claim, the Indemnifying
Party shall be entitled to appoint counsel of the Indemnifying Party's choice at
the expense of the Indemnifying Party to represent the Indemnified Party and any
others the Indemnifying Party may reasonably designate in connection with such
claim, demand or Proceeding (in which case the Indemnifying Party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by any Indemnified Party except as set forth below); provided that such
counsel is reasonably acceptable to the Indemnified Party. Notwithstanding an
Indemnifying Party's election to appoint counsel to represent an Indemnified
Party in connection with a Third Party Claim, an Indemnified Party shall have
the right to employ separate counsel, and the Indemnifying Party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest or (ii) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party within
a reasonable time after notice of the institution of such Third Party Claim. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim, demand or
Proceeding which the Indemnifying Party defends, or, if appropriate and related
to the claim, demand or Proceeding in question, in making any counterclaim
against the person asserting the Third Party Claim, or any cross-complaint
against any person. No Third Party Claim may be settled or compromised (i) by
the Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed or (ii) by
the Indemnifying Party without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed. In the event
any Indemnified Party settles or compromises or consents to the entry of any
Judgment with respect to any Third Party Claim without the prior written consent
of the Indemnifying Party, each Indemnified Party shall be deemed to have waived
all rights against the Indemnifying Party for indemnification under this Article
9 with respect to such Third Party Claim.
(c) In the event of a Direct Claim the Indemnifying Party
shall notify the Indemnified Party within thirty (30) days Business Days of
receipt of a Claim Notice whether or not the Indemnifying Party disputes such
claim.
(d) From and after the delivery of a Claim Notice under this
Agreement, at the reasonable request of the Indemnifying Party, each Indemnified
Party shall grant the Indemnifying Party and its representatives all reasonable
access to the books, records and properties of such Indemnified Party to the
extent reasonably related to the matters to which the Claim Notice relates. All
such access shall be granted during normal business hours and shall be granted
under conditions, which will not unreasonably interfere with the business and
operations of such Indemnified Party. The Indemnifying Party will not, and shall
require that its representatives do not, use (except in connection with such
Claim Notice) or disclose to any third person other than the Indemnifying
Party's representatives (except as may be required by applicable Law) any
information obtained pursuant to this Section 9.5(d).
9.6 Monetary and Payment Limitations.
(a) Neither Cemex nor RMUSA shall have any obligation to
indemnify a Company Indemnified Party pursuant to Sections 9.1(a) or 9.2(a),
respectively, unless the aggregate amount of Damages suffered by all Company
Indemnified Parties in respect of such claims exceeds $1,000,000, in which case
the Company Indemnified Parties shall be entitled to recover all Damages
including the $1,000,000.
(b) Notwithstanding any provision of this Agreement to the
contrary, the aggregate liability of Cemex or RMUSA for Damages in respect of
all claims for indemnification pursuant to Sections 9.1(a) or 9.2(a),
respectively, shall in no event exceed the Cemex Value or RMUSA Value,
respectively. NO PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL,
PUNITIVE, OR SIMILAR DAMAGES, EXCEPT TO THE EXTENT ASSERTED BY, AWARDED, PAID OR
PAYABLE TO ANY THIRD PARTY.
(c) The parties mutually agree that payment to an Indemnified
Party by an Indemnifying Party for Damages shall be paid solely from the
required EBITDA distributions to be paid to the Indemnifying Party pursuant to
Section 6.1 of the Cemex LLC Agreement and Section 6.1 of the Ready Mix LLC
Agreement. In the event of Damages, compensation for which is owed to the
Indemnified Party by the Indemnifying Party, the parties mutually agree that the
Indemnifying Party shall waive all rights and title it has to, and shall
instruct the Manager of Company and the Manager of Cemex LLC to make to the
Indemnified Party, distributions due the Indemnifying Party from Cemex LLC under
Section 6.1 of the Cemex LLC Agreement or Company under Section 6.1 of the Ready
Mix LLC Agreement until such time as the Indemnified Party has recouped the
amount of Damages incurred by the Indemnified Party. The provisions and
limitations set forth in this Section 9.6(c) will not apply to any
indemnification liability of the Company pursuant to Section 9.3.
(d) Notwithstanding the foregoing, the Indemnified Party shall
not be limited to recovery of Damages pursuant to clause (c) above with respect
to Damages arising out of or relating to any fraud by RMUSA or Cemex in
connection with this Agreement, the discussions and negotiations leading up to
this Agreement or the transaction contemplated herein, and each of RMUSA and
Cemex shall be and remain liable to the other for any Damages arising out of any
such claim or fraud.
9.7 Survival. Except for the representations and warranties in Sections
7.2(a) and 8.2(a), which shall survive without limit, the representations and
warranties of Cemex and RMUSA contained in this Agreement shall survive the
Contribution for the applicable period set forth in this Section 9.7, and any
and all claims and causes of action for indemnification under this Article 9
arising out of the inaccuracy or breach of any representation or warranty of
Cemex or RMUSA must be made prior to the termination of the applicable survival
period set forth in this Section 9.7. All of the representations and warranties
of Cemex and RMUSA contained in this Agreement and any and all claims and causes
of action for indemnification under this Article 9 with respect thereto shall
terminate on the second anniversary of the date of this Agreement; provided that
the representations and warranties in Sections 7.3, 7.6, 7.19, 8.3, 8.6 and 8.19
shall survive until the expiration of the applicable statute of limitations;
provided further that the representations and warranties in Sections 7.7 and 8.7
shall survive until the fifth anniversary of the date of this Agreement and the
representations and warranties in Section 8.20 shall survive until the twentieth
anniversary of the date of this Agreement; it being understood that in the event
notice of any claim for indemnification under Section 9.1(a) or Section 9.2(a)
shall have been given within the applicable survival period, the representations
and warranties that are the subject of such indemnification claim shall survive
until such time as such claim is finally resolved.
9.8 Binding Nature. The indemnity obligations imposed under this
Article 9 shall be binding upon the parties hereto and their respective
successors and assigns. Wherever possible, such indemnity obligations shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of these indemnity obligations shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of the said
indemnity obligations.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Reliance Upon Representations and Warranties. The parties mutually
agree that notwithstanding any right of any party to investigate the affairs of
any other party and notwithstanding any Knowledge of any facts determined or
determinable by such party pursuant to such investigation or right of
investigation, each party has the right to fully rely upon the respective
representations and warranties of each other party contained in this Agreement.
10.2 Amendments. No change, modification or amendment to this Agreement
shall be effective unless the same shall be in writing and signed by the parties
hereto.
10.3 Notices. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered or
mailed by first class registered mail, return receipt requested, addressed to
the parties at the addressees set forth below (or at such other address as any
party may specify by notice to all other parties given as aforesaid).
If to RMUSA:
Ready Mix USA, Inc.
P.O. Box 020152
Tuscaloosa, Alabama 35402
Attn: Scott M. Phelps
With a copy, which shall not constitute notice, to:
Phelps, Jenkins, Gibson & Fowler, L.L.P.
P.O. Box 020848
Tuscaloosa, Alabama 35402-0848
Attn: Sam M. Phelps
If to Cemex:
CEMEX Southeast Holdings LLC
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Jesus Gonzalez Herrera
With copies, which shall not constitute notice, to:
Cemex, Inc.
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
Skadden, Arps, Slate, Meagher & Flom LLP
1600 Smith, Suite 4400
Houston, TX 77024
Attn: Frank Ed Bayouth II
If to Company:
Ready Mix USA, LLC
2570 Ruffner Road
Birmingham, Alabama 35210
Attn: Marc Bryant Tyson
10.4 Payment of Fees and Expenses. Except as otherwise provided in this
Agreement, Cemex and RMUSA shall pay all fees and expenses of such respective
party's respective counsel, accountants and all other expenses incurred by such
party incident to the negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated hereby.
10.5 Binding Effect. This Agreement shall be binding and conclusive
upon and inure to the benefit of the respective parties hereto and their
successors and assigns.
10.6 Waiver. Failure of any party hereto to insist upon the strict
performance of any of the covenants or conditions of this Agreement or to
exercise any right or option conferred herein in one or more instances shall not
be construed as a waiver or relinquishment of any such covenant, or condition,
right or option, but the same shall remain in full force and effect. The
committing by either party of any act or thing which it is not obligated to do
hereunder shall not be deemed to impose an obligation upon it to do any such act
or thing in the future or in any way change or alter any provision of this
Agreement.
10.7 Counterparts. This Agreement may be executed by original or
facsimile signatures in several counterparts that together shall constitute but
one and the same agreement, binding on both the parties notwithstanding that
both parties have not signed the same counterpart.
10.8 Construction.
(a) This Agreement shall be construed in its entirety
according to its plain meaning and shall not be construed against the party who
provided or drafted it.
(b) Any reference to an Article, Section, Schedule or Annex is
a reference to an Article or Section of, or a Schedule or an Annex to, this
Agreement.
(c) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(d) The words "include", "includes" and "including" are not
limiting, and shall be deemed to be followed by the phrase "without limitation".
(e) The terms "dollars" and "$" mean United States dollars.
(f) The phrases "the date of this Agreement", "the date
hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to July 1, 2005.
(g) The conjunction "or" shall be understood in its inclusive
sense (and/or).
10.9 Captions. The titles of the Articles, Sections, Schedules and
Annexes of this Agreement have been assigned thereto for convenience only and
shall not be construed as limiting, defining or affecting the substantive terms
of this Agreement.
10.10 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Georgia, without giving effect to its principles
or rules of conflict of laws.
10.11 Consent to Jurisdiction. All disputes, litigation, proceedings or
other legal actions by any party to this Agreement in connection with or
relating to this Agreement or any matters described or contemplated in this
Agreement shall be instituted in the courts of the State of Georgia, or of the
United States in the State of Georgia, in either case, sitting in Atlanta,
Georgia. Each party to this Agreement irrevocably submits to the exclusive
jurisdiction of the courts of the State of Georgia, and of the United States
sitting in the State of Georgia, in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this Agreement.
Each party to this Agreement may receive the service of any process or summons
in connection with any such dispute, litigation, action or proceeding brought in
any such court by a mailed copy of such process or summons sent to it at its
address set forth, and in the manner provided, in Section 10.3. Each party to
this Agreement irrevocably waives, to the fullest extent permitted by applicable
law, any defense or objection it may now or hereafter have to the laying of
venue of any proceeding under this Agreement brought in the courts of the State
of Georgia, or of the United States in the State of Georgia, in either case,
sitting in Atlanta, Georgia, and any claim that any proceeding under this
Agreement brought in any such court has been brought in an inconvenient forum.
10.12 Specific Performance. The parties to this Agreement agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with the terms of this Agreement and that the
parties shall be entitled to specific performance of the terms of this Agreement
in addition to any other remedy at Law or equity.
10.13 Translation. Should this Agreement be translated into any
language other than English, the English version shall control and prevail on
any question of interpretation or otherwise.
10.14 Assignment. This Agreement shall be binding upon the respective
successors and permitted assigns of the parties hereto. This Agreement shall not
be assignable or otherwise transferable by any of Cemex, RMUSA or Company
without the prior written consent of the other parties and any attempt to so
assign or transfer this Agreement without such consent shall be void and of no
effect.
10.15 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement of the parties and supersedes
any and all prior agreements, arrangements and understandings relating to the
subject matters hereof and thereto.
10.16 Rights of Creditors and Third Parties under this Agreement. This
Agreement is entered into among the Company, RMUSA and Cemex for the exclusive
benefit of the Company, RMUSA and Cemex, and their successors and permitted
assigns. This Agreement is expressly not intended for the benefit of any
creditor of the Company or any other Person. Except and only to the extent
provided by applicable statute, no such creditor or third party shall have any
rights under this Agreement or any agreement between the Company and RMUSA or
Cemex with respect to any Contribution, or otherwise.
10.17 Certain Definitions. As used in this Agreement, the following
terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person. For the purposes of this definition, "control" (including, with
correlative meaning, the terms "controlled," "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement, Company shall not
be deemed to be an Affiliate of Cemex or RMUSA or any of their respective
Affiliates.
"Aggregate Cemex Contribution" has the meaning set forth in Section
2.3(c)(v).
"Aggregate RMUSA Contribution" has the meaning set forth in Section
2.3(c)(v).
"Agreement" has the meaning set forth in the Introduction.
"Assumed Liability" means a Cemex Assumed Liability or an RMUSA Assumed
Liability, as the context requires.
"Business" has the meaning set forth in Section 1.2.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banks in New York City are authorized or obligated by law or executive
order to close.
"Cement Supply Agreement" means the cement supply agreement to be
entered into concurrently with the execution of this Agreement, by and between
the Company and Cemex LLC.
"Cemex" has the meaning set forth in the Introduction.
"Cemex Accounts Receivable" has the meaning set forth in Schedule
1.2(b)7.
"Cemex Agreement Assignment and Assumption" has the meaning set forth
in Section 4.2(a)(xii).
"Cemex Assets" has the meaning set forth in Section 1.2.
"Cemex Assumed Contracts" has the meaning set forth in Schedule
1.2(a)8.
"Cemex Assumed Liabilities" has the meaning set forth in Section 5.2.
"Cemex Authorized Person(s)" has the meaning set forth in Section
4.2(a)(vii).
"Cemex Boundaries" means the states of Alabama, Georgia and
Mississippi, the Cemex Florida Panhandle (as defined herein) and the Cemex
Limited Tennessee Area (as defined herein).
"Cemex Business" has the meaning set forth in Section 1.2.
"Cemex Business Locations" has the meaning set forth in Section 1.2.
"Cemex Contribution Agreement" means the Asset and Capital Contribution
Agreement of Cemex Southeast LLC, dated July 1, 2005.
"Cemex Disclosure Schedule" has the meaning set forth in Article 7.
"Cemex Environmental Condition" has the meaning set forth in Section
7.7(a).
"Cemex Environmental Indemnitees" has the meaning set forth in Section
6.7.
"Cemex Environmental Liabilities" has the meaning set forth in Section
6.7.
"Cemex Financial Statements" means the statement of income for the
Cemex Assets for the twelve months ended December 31, 2004.
"Cemex Florida Panhandle" means the following counties in the State of
Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington, Jackson,
Bay, Calhoun, Gulf and Franklin. The Cemex Florida Panhandle shall exclude the
City of Tallahassee, Florida.
"Cemex Indemnified Party" means Cemex, Cemex's Affiliates, directors,
officers, shareholders, attorneys, accountants, agents and employees, and their
respective heirs, successors and assigns.
"Cemex Intangible Property" means intellectual property owned by Cemex
or an Affiliate of Cemex.
"Cemex Intellectual Property License Agreement" means the Intellectual
Property License Agreement dated as of the date hereof by and between Cemex
Trademarks Worldwide Ltd. and the Company.
"Cemex Intracompany Receivables" has the meaning set forth in Schedule
1.2(b)5.
"Cemex Inventory" has the meaning set forth in Schedule 1.2(a)3.
"Cemex Land" has the meaning set forth in Schedule 1.2(a)1.
"Cemex Leases" has the meaning set forth in Schedule 1.2(a)8.
"Cemex Lease Assignment" has the meaning set forth in Section
4.2(a)(xiii).
"Cemex Limited Tennessee Area" means the Metropolitan Statistical Areas
of Chattanooga and Memphis, Tennessee.
"Cemex LLC" means Cemex Southeast LLC, a Delaware limited liability
company.
"Cemex LLC Agreement" means the Limited Liability Company Agreement of
Cemex Southeast LLC, dated July 1, 2005.
"Cemex Material Adverse Effect" has the meaning set forth in Section
7.5(b).
"Cemex Permits" has the meaning set forth in Schedule 1.2(a)9.
"Cemex Prepaids" has the meaning set forth in Section 2.3(b).
"Cemex Real Property" has the meaning set forth in Schedule 1.2(a)1.
"Cemex Required Contractual Consents" has the meaning set forth in
Section 7.8.
"Cemex Retained Names" has the meaning set forth in Schedule 1.2(b)4.
"Cemex Retained Policies" has the meaning set forth in Schedule
1.2(b)3.
"Cemex Transferred Employees" has the meaning set forth in Section 6.6.
"Cemex Value" has the meaning set forth in Section 2.1(b).
"Cemex Warranty Deed" has the meaning set forth in Section 4.2(a)(ii).
"Cemex Working Capital Statement" has the meaning set forth in Section
2.3(c)(i).
"Claim Notice" has the meaning set forth in Section 9.5(a).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" has the meaning set forth in the Introduction.
"Company Indemnified Party" means Company, Company's Affiliates,
directors, managers, officers, members, shareholders, attorneys, accountants,
agents and employees, and their respective heirs, successors and assigns.
"Consent" means any consent, waiver, approval, authorization,
exemption, registration or declaration.
"Contracts" has the meaning set forth in Section 7.5(a)(i).
"Contribution" has the meaning set forth in the Recitals.
"Contribution Date" has the meaning set forth in Section 3.1.
"Contributor Indemnified Party" means any Cemex Indemnified Party or
any RMUSA Indemnified Party.
"Damages" means liabilities, damages, penalties, Judgments,
assessments, losses, costs and expenses in any case, whether arising under
strict liability or otherwise (including reasonable attorneys' fees) including
lost profits, lost benefits, loss of or diminution in enterprise value and loss
of goodwill, but excluding consequential, incidental, special, punitive or
similar damages, except to the extent such consequential, incidental, special,
punitive or similar damages are asserted by, awarded, paid or payable to any
third party.
"Direct Claim" has the meaning set forth in Section 9.5(a).
"Environment" shall mean soil, surface waters, groundwater, land,
stream sediments, surface or subsurface strata, ambient air, indoor air or
indoor air quality, interior and/or exterior, including, without limitation, any
material or substance used in the physical structure, of any building or
improvement and any environmental medium.
"Environmental Law" shall mean the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Sections 6901, et seq., as amended ("RCRA"); the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
U.S.C. Sections 9601, et seq. (original act know as "CERCLA" or "Superfund," the
Amendments are known as "SARA"); the HSWA amendments to RCRA regulating
Underground Storage Tanks ("USTS"), 42 U.S.C. " 6991-6991(i); the Clean Air Act
of 1963 as amended in 1970 and 1977, 42 U.S.C. ' 7401, et seq. ("Clean Air
Act"); the Federal Water Pollution Control Act of 1976, as subsequently amended
by the Clean Water Act of 1977 and 1987, 33 U.S.C. " 1251, et seq. ("Clean Water
Act"), and the Toxic Substances Control Act of 1976, 15 U.S.C. " 2501 ("TSCA"),
and all other federal, state and local laws, regulations, rules or ordinances
implementing or otherwise dealing with the subject matter of the preceding
federal statutes or otherwise relating to the protection of human health or the
Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any entity that is a member of a controlled
group for purposes of Section 4001(a)(14) of ERISA.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means (i) any domestic or foreign national,
state or local government, any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, court, department, bureau or entity, or (ii) any
arbitrator with authority to legally bind a party or any of its Affiliates.
"Hazardous Material" shall mean any pollutant, toxic substance
including asbestos and asbestos-containing materials, hazardous waste, hazardous
material or hazardous substance as defined in or controlled by the Environmental
Law.
"Impartial Accounting Firm" has the meaning set forth in Section
2.3(c)(iv).
"Indemnified Party" has the meaning set forth in Section 9.5.
"Indemnifying Party" has the meaning set forth in Section 9.5.
"Injunction" means any order, statute, rule, regulation, executive
order, injunction, stay, decree or restraining order.
"Interim Cemex Financial Statements" means the statement of income for
the RMUSA Assets for the nine months ended September 30, 2004.
"Interim RMUSA Financial Statements" means the statement of income for
the RMUSA Assets for the eight months ended August 31, 2004.
"Judgments" means any judgments, injunctions, orders, writs, rulings or
awards of any court or other judicial authority or any governmental,
administrative or regulatory authority of competent jurisdiction.
"Knowledge" shall mean, with respect to the Cemex, the actual knowledge
of the Jesus Gonzalez Herrera, Leslie White, Andy Miller, Steve Wise, Luis
Oropeza, and Frank Craddock, and with respect to RMUSA, the actual knowledge of
Marc Bryant Tyson, Scott Phelps, Steve Shaw, Bill Roy, Bill Holden, Bobby
Lindsay and James Lewis.
"Laws" means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order or decree.
"Liens" means all liens (statutory or otherwise), mortgages, pledges,
charges, security interests, sureties, options, easements, covenants,
restrictions or other encumbrances whatsoever.
"Material Cemex Contract" has the meaning set forth in Section 7.5(a).
"Material RMUSA Contract" has the meaning set forth in Section 8.5(a).
"Membership Interests" has the meaning set forth in Section 1.1.
"Partnerships" has the meaning set forth in Section 1.1.
"Permits" means all permits, authorizations, approvals, registrations,
licenses, certificates, variances and similar rights granted by or obtained from
any federal, state, local or foreign governmental, administrative or regulatory
authority.
"Permitted Encumbrances" means (a) mechanics', carriers',
warehousemens' workmens' and other similar Liens arising (I) with respect to the
Cemex Assets, in the ordinary course of the Cemex Business and (II) with respect
to the RMUSA Assets, in the ordinary course of the RMUSA Business, and which
would not, individually or in the aggregate, reasonably be expected to have a
Cemex Material Adverse Effect or a RMUSA Material Adverse Effect, respectively,
(b) Liens for taxes, assessments and other governmental charges not yet due and
payable or that may subsequently be paid without penalty or that are being
contested in good faith by appropriate proceedings, and (c) with respect to the
Real Property, encumbrances to fee simple, leasehold or easement title for: (I)
Real Property taxes or other property taxes, assessments, governmental charges
or levies not yet due; (II) easements, rights-of-way, licenses, restrictions,
reservations of mineral rights (with surface rights being waived) or similar
encumbrances that do not materially impair the marketability, use or operation
of such Real Property by the Company; and (III) rights of tenants in possession
of any such Real Property pursuant to tenant leases to be assigned to the
Company.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or other entity or organization.
"Proceeding" means any action, suit, demand, claim, legal or
administrative proceeding or any arbitration or other alternative dispute
resolution proceeding, hearing or investigation.
"Ready Mix LLC Agreement" has the meaning set forth in Section
4.1(b)(i).
"Required Contractual Consent" means a Cemex Required Contractual
Consent or a RMUSA Required Contractual Consent.
"Retained Cemex Assets" has the meaning set forth in Section 1.2.
"Retained RMUSA Assets" has the meaning set forth in Section 1.1.
"RMUSA" has the meaning set forth in the Introduction.
"RMUSA Accounts Payable" has the meaning set forth in Section 2.2.
"RMUSA Accounts Receivable" has the meaning set forth in Schedule
1.1(a)5.
"RMUSA Agreement Assignment and Assumption" has the meaning set forth
in Section 4.1(a)(xii).
"RMUSA Ancillary Agreements" means the RMUSA Trademark License
Agreement.
"RMUSA Assets" has the meaning set forth in Section 1.1.
"RMUSA Assumed Contracts" has the meaning set forth in Schedule
1.1(a)8.
"RMUSA Assumed Liabilities" has the meaning set forth in Section 5.1.
"RMUSA Authorized Person(s)" has the meaning set forth in Section
4.1(a)(vii).
"RMUSA Boundaries" means the states of Alabama, Arkansas, Georgia,
excluding the Metropolitan Statistical Area of Brunswick, Georgia, Mississippi
and Tennessee and the RMUSA Florida Panhandle (as defined herein).
"RMUSA Business" has the meaning set forth in Section 1.1.
"RMUSA Business Locations" has the meaning set forth in Section 1.1.
"RMUSA Disclosure Schedule" has the meaning set forth in Article 8.
"RMUSA Environmental Condition" has the meaning set forth in Section
8.7(a).
"RMUSA Environmental Indemnitees" has the meaning set forth in Section
6.8.
"RMUSA Environmental Liabilities" has the meaning set forth in Section
6.8.
"RMUSA Financial Statements" means the statement of income for the
RMUSA Asset for the twelve months ended December 31, 2004.
"RMUSA Florida Panhandle" means the following counties in the State of
Florida: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington, Jackson,
Bay, Calhoun, Gulf, Franklin, Liberty, Gadsden, Leon, Wakulla, Jefferson,
Madison and Taylor.
"RMUSA Indemnified Party" means RMUSA, RMUSA's Affiliates, directors,
officers, shareholders, attorneys, accountants, agents and employees, and their
respective heirs, successors and assigns.
"RMUSA Intangible Property" means intellectual property owned by RMUSA
or any Affiliate of RMUSA.
"RMUSA Intracompany Receivables" has the meaning set forth in Schedule
1.1(b)5.
"RMUSA Inventory" has the meaning set forth in Schedule 1.1(a)3.
"RMUSA Land" has the meaning set forth in Schedule 1.1(a)1.
"RMUSA Leases" has the meaning set forth in Schedule 1.1(a)8.
"RMUSA Lease Assignment" has the meaning set forth in Section
4.1(a)(xiii).
"RMUSA Material Adverse Effect" has the meaning set forth in Section
8.5(b).
"RMUSA Permits" has the meaning set forth in Schedule 1.1(a)9.
"RMUSA Prepaids" has the meaning set forth in Section 2.3(a).
"RMUSA Real Property" has the meaning set forth in Schedule 1.1(a)1.
"RMUSA Required Contractual Consents" has the meaning set forth in
Section 8.8.
"RMUSA Retained Names" has the meaning set forth in Schedule 1.1(b)4.
"RMUSA Retained Policies" has the meaning set forth in Schedule
1.1(b)3.
"RMUSA Trademark License Agreement" has the meaning set forth in
Section 4.1(a)(xiv).
"RMUSA Transferred Employees" has the meaning set forth in Section 6.6.
"RMUSA Value" has the meaning set forth in Section 2.1(a).
"RMUSA Warranty Deed" has the meaning set forth in Section 4.1(a)(ii).
"RMUSA Working Capital Statement" has the meaning set forth in Section
2.3(c)(i).
"Third Party Claim" has the meaning set forth in Section 9.5(a).
"Title Company" shall mean either of First American Title Insurance
Company or Fidelity National Title Insurance Company.
"Title Policy" shall mean an ALTA owner's policy of title insurance in
a form acceptable to (i) Cemex, with respect to any such policy issued for RMUSA
Real Property and (ii) RMUSA, with respect to a policy issued for Cemex Real
Property (or, with respect to any parcel of RMUSA Real Property or Cemex Real
Property that is in a State which does not permit the issuance of such ALTA
policy, such form as shall be permitted in such State and acceptable to Cemex or
RMUSA, respectively) issued by the Title Company with respect to such Real
Property and insuring the Company's indefeasible fee simple ownership of such
Real Property as of the date hereof, subject only to the standard exceptions and
exclusions from coverage and the (i) RMUSA's Permitted Encumbrances, with
respect to any such policy issued for RMUSA Real Property and (ii) Cemex's
Permitted Encumbrances, with respect to any policy issued for Cemex Real
Property.
"Transferred Asset" means a Cemex Asset or an RMUSA Asset, as the
context requires.
"Unassigned Contracts" has the meaning set forth in Section 4.4.
"WARN" has the meaning set forth in paragraph 6 of Schedule 5.1.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement executed on the day and year first
above written.
READY MIX USA, INC.
/s/ Marc Bryant Tyson
----------------------------------
Marc Bryant Tyson
President
CEMEX SOUTHEAST HOLDINGS LLC
/s/ Gilberto Perez
----------------------------------
Gilberto Perez
President
READY MIX USA, LLC
By: Ready Mix USA, Inc.
Its Manager
/s/ Marc Bryant Tyson
----------------------------------
Marc Bryant Tyson
Its President
LIST OF SCHEDULES
-----------------
1.1(a) RMUSA Assets
1.1(a)-1 RMUSA Land
1.1(b) RMUSA Retained Assets
1.1(b)-4 RMUSA Retained Names
1.2(a) Cemex Assets
1.2(a)-1 Cemex Land
1.2(b) Cemex Retained Assets
1.2(b)-6 Cemex Retained Contracts
1.2(b)-8 Cemex Other Retained Assets
5.1 RMUSA Assumed Liabilitie
5.2 Cemex Assumed Liabilities
LIST OF EXHIBITS
----------------
A Form of Cemex Lease Assignment
B Form of RMUSA Lease Assignment
Schedule 1.1(a)
---------------
RMUSA Assets
1. Real Property. Subject to the RMUSA Permitted Encumbrances, the real
property owned, or in the case of (vi) below, leased, by RMUSA or any
of its Affiliates and consisting of: (i) the real property described on
Schedule 1.1(a)-1 (the "RMUSA Land"), (ii) all buildings, structures
and improvements located on the RMUSA Land, to the extent owned by
RMUSA or any of its Affiliates, (iii) all fixtures, machinery,
apparatus or equipment affixed to the Cemex Land, including all of the
electrical, heating, plumbing, air conditioning, air compression and
all other similar systems located on the RMUSA Land, to the extent
owned by RMUSA or any of its Affiliates and to the extent that such
items constitute fixtures, (iv) all right, title and interest of RMUSA
or any of its Affiliates, reversionary or otherwise, in and to all
easements, if any, in or upon the RMUSA Land and all other rights and
appurtenances belonging or in any way pertaining to the RMUSA Land
(including RMUSA's and its Affiliates' right, title and interest in and
to any mineral rights or water rights relating to the RMUSA Land), (v)
all right, title and interest of RMUSA or any of its Affiliates in, to
or under all strips and gores and any land lying in the bed of any
public road, highway or other access way, open or proposed, adjoining
the RMUSA Land and (vi) the RMUSA Leases (collectively, the "RMUSA Real
Property");
2. Personal Property. Except as described on Schedule 1.1(b), the tangible
personal property that is either located on the RMUSA Real Property or
used or intended for use primarily in, or which is being utilized or
operated by RMUSA primarily in the RMUSA Business as presently
conducted, including all off road, non-titled rolling stock, material
handling equipment, wheel loaders, track dozers, scrapers, water
trucks, haul trucks, conveyor system, aggregate processing
equipment/crushers and machinery, cement manufacturing equipment
including rotary kilns, storage silos, installed control systems,
installed electric motors, conveyors, rail engine, cement and raw
material storage and handling equipment, weigh scales, office
furniture, business machines, cement/aggregate testing and laboratory
equipment, tools and fixtures;
3. Inventory. Except as described on Schedule 1.1(b), all inventory,
including all inventories of products, work in process, finished goods,
raw materials, supplies, parts, finished cement, clinker, construction
aggregate, coal and fuel, lubricants, machinery and equipment repair
parts and components, including those tools, fuel, repair parts,
components and other items, and including the supplies of coal, clay,
construction aggregate, fly and bottom ash and other raw materials and
repair parts (collectively, "RMUSA Inventory");
4. Prepaid Items. All of RMUSA's and its Affiliates' rights and interests
relating to prepaid expenses, advance payments, deposits and prepaid
items, including prepaid interest and deposits with lessors, suppliers
or utilities, which relate primarily to the RMUSA Business;
5. Accounts Receivable. Except as described on Schedule 1.1(b), RMUSA's
and its Affiliates' accounts receivable arising out of the conduct of
the RMUSA Business and outstanding as of the Contribution Date,
including any payments received by RMUSA or any of its Affiliates with
respect thereto on or after the Contribution Date, and unpaid interest
accrued on any accounts receivable and any security or collateral
relating thereto (collectively, "RMUSA Accounts Receivable");
6. Books, Records and Written Materials. Except as described on Schedule
1.1(b), all of RMUSA's and its Affiliates' books and records, whether
in hard copy or in electronic format (e.g. computer files), including
all production data, equipment maintenance data, accounting records,
(but specifically excluding those files related to the Retained RMUSA
Litigation), and any inventory records, sales and sales promotional
data and materials, advertising materials, sales training materials,
educational support program materials, cost and pricing information,
business plans, quality control records and manuals, blueprints,
research and development files, records and laboratory books, patent
disclosures, correspondence, and any other records and data, in each
case (i) used primarily in or necessary for the conduct of the RMUSA
Business or (ii) that are located on the RMUSA Real Property or are
within the possession or control of those persons employed by RMUSA to
work primarily for the Business, and all books and records relating to
Taxes (other than income Taxes) with respect to the RMUSA Business;
provided that nothing in this paragraph 6 shall require RMUSA to
deliver to Company or otherwise provide Company access to any
electronic records that cannot be separated from information relating
to the RMUSA Retained Assets or RMUSA's other businesses;
7. Catalogs and Advertising Materials. RMUSA's and its Affiliates'
promotional and advertising materials relating primarily to or
necessary for the conduct of the RMUSA Business as presently conducted,
including all catalogs, brochures, plans, customer lists, supplier
lists, manuals, handbooks, equipment and parts lists, and dealer and
distributor lists;
8. Assumed Contracts. Except as described on Schedule 1.1(b) and subject
to Section 4.4, all rights and benefits of RMUSA and its Affiliates in,
to or under all Contracts relating primarily to the RMUSA Business, to
which RMUSA or any of its Affiliates is a party or by which any of the
RMUSA Assets are bound, including (i) all rights of RMUSA and its
Affiliates in all purchase and sales orders relating principally to the
Business, (ii) all rights of RMUSA and its Affiliates as lessee under
all leases of personal property relating primarily to the RMUSA
Business, (iii) all Contracts with suppliers for any products, raw
materials, supplies, equipment or parts heretofore sold, or to be sold,
by RMUSA and its Affiliates used primarily in the RMUSA Business as
presently conducted, and (iv) all rights of RMUSA and its Affiliates
either as lessee or lessor under all leases affecting the RMUSA Real
Property (the "RMUSA Leases"), (all of the foregoing being
collectively, the "RMUSA Assumed Contracts");
9. Permits and Approvals. All licenses, permits, approvals, variances,
emission allowances, authorizations, waivers or consents used primarily
in or necessary for the conduct of the RMUSA Business as presently
conducted or ownership or operation of the RMUSA Real Property as
currently operated and issued to RMUSA or any of its Affiliates by any
Governmental Authority, to the extent transferable (collectively,
"RMUSA Permits");
10. Claims. Except as described on Schedule 1.1(b), all rights, privileges,
claims, demands, causes of action, claims in bankruptcy,
indemnification agreements with, and indemnification rights against,
third parties, warranty claims (to the extent transferable), offsets
and other claims relating to the RMUSA Assets or the RMUSA Business,
but not to the extent that they relate to the Retained RMUSA Assets or
the Retained RMUSA Liabilities; and
11. Goodwill. Any and all goodwill associated principally with the RMUSA
Business.
12. Membership Interests. The Membership Interests owned by RMUSA in each
of Reynolds Ready Mix, L.L.C., River City Industries, L.L.C., and RCI
Marine, L.L.C.
Schedule 1.1(a)-1
-----------------
RMUSA Land
See attached schedule.
Schedule 1.1(b)
---------------
RMUSA Retained Assets
1. Cash. All cash, bank balances, money market accounts, moneys in
possession of banks and other depositories, term or term deposits and
similar cash equivalents and cash items of, owned or held by or for the
account of RMUSA;
2. Corporate and Other Records. The corporate books and records, including
stock certificates, treasury stock, stock transfer records, corporate
seals and minute books of RMUSA (i) which are not used in or necessary
for the conduct of the RMUSA Business and (ii) which are not located on
the RMUSA Real Property or are not within the possession or control of
those persons employed to work principally for the RMUSA Business,
(iii) employee files for employees other than the RMUSA Transferred
Employees, (iv) RMUSA's Tax Returns and any tax supporting information
related thereto, and (v) any and all records related to pending or
completed litigation and claims;
3. Insurance. Any and all policies of insurance, whether or not covering
the RMUSA Assets or the RMUSA Business, that are or have been
maintained or managed through RMUSA or any of its Affiliates, including
general liability, property, casualty, product liability and workers'
compensation insurance (the "RMUSA Retained Policies"), including any
and all amounts recovered by RMUSA under such RMUSA Retained Policies;
4. Intellectual Property. All intellectual property of RMUSA and its
Affiliates, whether or not used primarily in or necessary for the
conduct of the RMUSA Business, including RMUSA's and its Affiliates'
patents, trade secrets, copyrights, trademarks, trade names, logos,
slogans, internet domain names, licenses and software, including any
and all rights (including any common law trademark rights) to the names
Ready Mix USA, Inc. and Ready Mix USA (such names, collectively, the
"RMUSA Retained Names") and including those items listed on Schedule
1.1(b)-4; and
5. Intracompany Receivables. All outstanding amounts, including accounts
receivable, owing to the RMUSA Business from other businesses of RMUSA
or RMUSA 's Affiliates (the "RMUSA Intracompany Receivables").
Schedule 1.1(b)-4
-----------------
RMUSA Retained Names
1. Ready Mix USA, Inc.
2. Ready Mix USA
3. Those names and marks registered on:
a. Certificate of Trademark Registration No. 2,694,510;
b. Certificate of Trademark Registration No. 2,616,672; and
c. Certificate of Trademark Registration No. 2,634,087.
Schedule 1.2(a)
---------------
Cemex Assets
1. Real Property. Subject to the Cemex's Permitted Encumbrances, the real
property owned, or in the case of (vi) below, leased, by Cemex, Inc. or
any of its Affiliates and consisting of: (i) the real property
described on Schedule 1.2(a)-1 (the "Cemex Land"), (ii) all buildings,
structures and improvements located on the Cemex Land, to the extent
owned by Cemex, Inc. or any of its Affiliates, (iii) all fixtures,
machinery, apparatus or equipment affixed to the Cemex Land, including
all of the electrical, heating, plumbing, air conditioning, air
compression and all other similar systems located on the Cemex Land, to
the extent owned by Cemex, Inc. or any of its Affiliates and to the
extent that such items constitute fixtures, (iv) all right, title and
interest of Cemex, Inc. or any of its Affiliates, reversionary or
otherwise, in and to all easements, if any, in or upon the Cemex Land
and all other rights and appurtenances belonging or in any way
pertaining to the Cemex Land (including Cemex, Inc.'s and its
Affiliates' right, title and interest in and to any mineral rights or
water rights relating to the Cemex Land), (v) all right, title and
interest of Cemex, Inc. or any of its Affiliates in, to or under all
strips and gores and any land lying in the bed of any public road,
highway or other access way, open or proposed, adjoining the Cemex Land
and (vi) the Cemex Leases (collectively, the "Cemex Real Property");
2. Personal Property. Except as described on Schedule 1.2(b), the tangible
personal property that is either located on the Cemex Real Property or
used or intended for use primarily in, or which is being utilized or
operated by Cemex, Inc. primarily in the Cemex Business as presently
conducted, including all off road, non-titled rolling stock, material
handling equipment, wheel loaders, track dozers, scrapers, water
trucks, haul trucks, conveyor system, aggregate processing
equipment/crushers and machinery, cement manufacturing equipment
including rotary kilns, storage silos, installed control systems,
installed electric motors, conveyors, rail engine, cement and raw
material storage and handling equipment, weigh scales, office
furniture, business machines, cement/aggregate testing and laboratory
equipment, tools and fixtures;
3. Inventory. Except as described on Schedule 1.2(b), all inventory,
including all inventories of products, work in process, finished goods,
raw materials, supplies, parts, finished cement, clinker, construction
aggregate, coal and fuel, lubricants, machinery and equipment repair
parts and components, including those tools, fuel, repair parts,
components and other items, and including the supplies of coal, clay,
construction aggregate, fly and bottom ash and other raw materials and
repair parts (collectively, "Cemex Inventory");
4. Prepaid Items. All of Cemex, Inc.'s and its Affiliates' rights and
interests relating to prepaid expenses, advance payments, deposits and
prepaid items, including prepaid interest and deposits with lessors,
suppliers or utilities, which relate primarily to the Cemex Business;
5. Reserved.
6. Books, Records and Written Materials. Except as described on Schedule
1.2(b), all of Cemex, Inc.'s and its Affiliates' books and records,
whether in hard copy or in electronic format (e.g. computer files),
including all production data, equipment maintenance data, accounting
records, (but specifically excluding those files related to the
Retained Cemex Litigation) any inventory records, sales and sales
promotional data and materials, advertising materials, sales training
materials, educational support program materials, cost and pricing
information, business plans, quality control records and manuals,
blueprints, research and development files, records and laboratory
books, patent disclosures, correspondence, and any other records and
data, in each case (i) used primarily in or necessary for the conduct
of the Cemex Business or (ii) that are located on the Cemex Real
Property or are within the possession or control of those persons
employed by Cemex, Inc. to work primarily for the Business, and all
books and records relating to Taxes (other than income Taxes) with
respect to the Cemex Business; provided that nothing in this paragraph
6 shall require Cemex, Inc. to deliver to Company or otherwise provide
Company access to any electronic records that cannot be separated from
information relating to the Cemex Retained Assets or Cemex, Inc.'s
other businesses;
7. Catalogs and Advertising Materials. Cemex, Inc.'s and its Affiliates'
promotional and advertising materials relating primarily to or
necessary for the conduct of the Cemex Business as presently conducted,
including all catalogs, brochures, plans, customer lists, supplier
lists, manuals, handbooks, equipment and parts lists, and dealer and
distributor lists;
8. Assumed Contracts. Except as described on Schedule 1.2(b), and subject
to Section 4.4, all rights and benefits of Cemex, Inc. and its
Affiliates in, to or under all Contracts relating primarily to the
Cemex Business, to which Cemex, Inc. or any of its Affiliates is a
party or by which any of the Cemex Assets are bound, including (i) all
rights of Cemex, Inc. and its Affiliates in all purchase and sales
orders relating principally to the Business, (ii) all rights of Cemex,
Inc. and its Affiliates as lessee under all leases of personal property
relating primarily to the Cemex Business, (iii) all Contracts with
suppliers for any products, raw materials, supplies, equipment or parts
heretofore sold, or to be sold, by Cemex, Inc. and its Affiliates used
primarily in the Cemex Business as presently conducted, and (iv) all
rights of Cemex, Inc. and its Affiliates either as lessee or lessor
under all leases affecting the Cemex Real Property (the "Cemex
Leases"), (all of the foregoing being collectively, the "Cemex Assumed
Contracts");
9. Permits and Approvals. All licenses, permits, approvals, variances,
emission allowances, authorizations, waivers or consents used primarily
in or necessary for the conduct of the Cemex Business as presently
conducted or ownership or operation of the Cemex Real Property as
currently operated and issued to Cemex, Inc. or any of its Affiliates
by any Governmental Authority, to the extent transferable
(collectively, "Cemex Permits");
10. Claims. All rights, privileges, claims, demands, causes of action,
claims in bankruptcy, indemnification agreements with, and
indemnification rights against, third parties, warranty claims (to the
extent transferable), offsets and other claims relating to the Cemex
Assets or the Cemex Business, but not to the extent that they relate to
the Retained Cemex Assets or the Retained Cemex Liabilities; and
11. Goodwill. Any and all goodwill associated principally with the Cemex
Business.
Schedule 1.2(a)-1
-----------------
Cemex Land
- --------------------------------------------------------------------------------
City State County Street Address
- --------------------------------------------------------------------------------
Port St. Joe Fl Gulf Hwy 71 South
- --------------------------------------------------------------------------------
Mossey Head Fl Walton 647 East Bay Loop
- --------------------------------------------------------------------------------
Panama City FL Bay 1810 MLK
- --------------------------------------------------------------------------------
Panama City FL Bay 12324 Panama City Beach
- --------------------------------------------------------------------------------
Tallahassee FL Leon 901 Mosley Street
- --------------------------------------------------------------------------------
Navarre FL Santa Rosa 279 Ola Broxson Road
- --------------------------------------------------------------------------------
Pensacola FL Escambia 100 E. Olive Road
- --------------------------------------------------------------------------------
Destin FL Okaloosa 820 Beach Drive
- --------------------------------------------------------------------------------
Crestview FL Okaloosa 4566 Old Antioch Road
- --------------------------------------------------------------------------------
Ft. Walton Beach FL Okaloosa 216 Race Track Road
- --------------------------------------------------------------------------------
Tifton GA Tift 130 East 9th Street
- --------------------------------------------------------------------------------
Americus GA Sumter 881 Spring Street
- --------------------------------------------------------------------------------
LaGrange GA Troup Cemex to provide
- --------------------------------------------------------------------------------
Fort Valley GA Peach 5102 Anthoine Street
- --------------------------------------------------------------------------------
Warner Robbins GA Houston 105 Plantation Road
- --------------------------------------------------------------------------------
Montezuma GA Macon 161 Airport Road
- --------------------------------------------------------------------------------
Fitzgerald GA Ben Hill 131 Appomattox Road
- --------------------------------------------------------------------------------
Perry GA Houston 106 Industrial Drive
- --------------------------------------------------------------------------------
Cordele GA Crisp 155 Market Avenue
- --------------------------------------------------------------------------------
Waycross GA Pierce 6219 Bowen Road
- --------------------------------------------------------------------------------
Ashburn GA Turner Highway 159
- --------------------------------------------------------------------------------
Schedule 1.2(b)
---------------
Cemex Retained Assets
1. Cash. All cash, bank balances, money market accounts, moneys in
possession of banks and other depositories, term or term deposits and
similar cash equivalents and cash items of, owned or held by or for the
account of Cemex, Inc.;
2. Corporate and Other Records. The corporate books and records, including
stock certificates, treasury stock, stock transfer records, corporate
seals and minute books of Cemex, Inc. (i) which are not used in or
necessary for the conduct of the Cemex Business and (ii) which are not
located on the Cemex Real Property or are not within the possession or
control of those persons employed to work principally for the Cemex
Business, (iii) employee files for employees other than the Cemex
Transferred Employees, (iv) Cemex, Inc.'s Tax Returns and any tax
supporting information related thereto, and (v) any and all records
related to pending or completed litigation and claims;
3. Insurance. Any and all policies of insurance, whether or not covering
the Cemex Assets or the Cemex Business, that are or have been
maintained or managed through Cemex, Inc. or any of its Affiliates,
including general liability, property, casualty, product liability and
workers' compensation insurance (the "Cemex Retained Policies"),
including any and all amounts recovered by Cemex, Inc. under such Cemex
Retained Policies;
4. Intellectual Property. All intellectual property of Cemex, Inc. and its
Affiliates, whether or not used primarily in or necessary for the
conduct of the Cemex Business, including Cemex, Inc.'s and its
Affiliates' patents, trade secrets, copyrights, trademarks, trade
names, logos, slogans, internet domain names, licenses and software,
and any goodwill related to the foregoing including any and all rights
(including any common law trademark rights) to the names Cemex and
Cemex, Inc. (such names, collectively, the "Cemex Retained Names");
5. Intracompany Receivables. All outstanding amounts, including accounts
receivable, owing to the Cemex Business from other businesses of Cemex,
Inc. or Cemex, Inc. 's Affiliates (the "Cemex Intracompany
Receivables");
6. Contracts. All rights and benefits of Cemex, Inc. and its Affiliates
in, to or under the contracts listed on Schedule 1.2(b)-6;
7. Accounts Receivable. Cemex, Inc.'s and its Affiliates' accounts
receivable arising out of the conduct of the Cemex Business and
outstanding as of the Contribution Date, including any payments
received by Cemex, Inc. or any of its Affiliates with respect thereto
on or after the Contribution Date, and unpaid interest accrued on any
accounts receivable and any security or collateral relating thereto
(collectively, "Cemex Accounts Receivable");
8. Others. Items set forth on Schedule 1.2(b)-8.
Schedule 1.2(b)-6
-----------------
Retained Contracts
1. Master Lease Agreement, dated as of March 9, 2000, between Banc One
Leasing Corporation, as Lessor, and Southdown, Inc., as Lessee.
2. Master Lease Agreement 07709-00400, dated as of April 16, 2004, among
Bank of America Leasing & Capital, LLC, as Lessor, and Cemex, Inc.,
Cemex Cement, Inc., Cemex Cement Texas, L.P., Cemex Construction
Materials, L.P., Pacific Coast Cement Corporation, Cemex California
Cement LLP, Cemex Central Plains Cement, LLC, and Kosmos Cement
Company, as Lessees.
3. Equipment Lease, dated as of May 17, 2002, between First Union
Commercial Corporation, as Lessor, and Cemex, Inc., as Lessee.
4. Master Lease Agreement, dated as of August 1, 1997, between General
Electric Capital Corporation, as Lessor, and Sunbelt Asphalt &
Materials, Inc., as Lessee.
5. Master Lease Agreement, dated as of July 25, 2003, between Lasalle
National Leasing Corporation, as Lessor, and Cemex, Inc., as Lessee.
6. Lease Agreement, dated as of June, 2004, among RBS Lombard, Inc., as
Lessor, and Cemex, Inc., Cemex Cement, Inc., Cemex Cement of Texas,
L.P., Cemex Construction Materials, L.P., Cemex Pacific Coast Cement
Corporation, Cemex California Cement LLC, Cemex Central Plains Cement
LLC, and Kosmos Cement Company, as Lessees.
Schedule 1.2(b)-8
-----------------
Other Retained Assets
1. All Allied Assets as defined in the Ready Mix LLC Agreement.
Schedule 4.1(a)(xv)
-------------------
CASH CONTRIBUTED TO READY MIX LLC
BANK ACCOUNTS BEING CONTRIBUTED
REGIONS BANK $ 18,077,515.80
UNION PLANTERS BANK $ 104,743.53
SECURITY BANK $ 676,869.73
GULF STATE CUMMUNITY BANK $ 79,263.22
PEOPLES BANK & TRUST $ 11,581.30
CHARTER BANK $ 2,393.12
THE CITIZENS BANK $ 6,199.72
TROY BANK & TRUST $ 54,067.91
FIRST PEOPLES BANK $ 12,824.77
REGIONS BANK (REYNOLDS READY MIX, L.L.C. 50.1%) (1) $ 4,170,706.26
REGIONS BANK (RIVER CITY INDUSTRIES 50%) (2) $ 354,527.42
--------------------------
TOTAL ACCOUNTS BEING CONTRIBUTED $ 23,550,692.78
CASH CONTRIBUTION (BY WIRE TRANSFER)
READY MIX USA, LLC $ 4,594,222.32
ACCOUNT#: 0509060999, REGIONS BANK, ROUTING #: 062005690
--------------------------
TOTAL CASH CONTRIBUTION BY RMUSA TO READY MIX LLC $ 28,144,915.10
(1) REYNOLDS READY MIX, L.L.C. TOTAL CASH BALANCE IS $8,324,763.00.
ACCOUNT NUMBERS: 2501028471, 2501028701, 0603039634, 0603039645,
0603039568, 0603039557 & (2904378741)
(2) RIVER CITY INDUSTRIES TOTAL CASH BALANCE IS $709,054.84
ACCOUNT NUMBERS: 1906500581 & (1906500383)
Schedule 5.1
------------
RMUSA Assumed Liabilities
1. Assumed Contracts. Subject to Section 4.4, all liabilities and
obligations of RMUSA arising after the Contribution under the RMUSA
Assumed Contracts. RMUSA and Cemex hereby agree that RMUSA shall assign
to Company, and Company shall assume from RMUSA, all of RMUSA's rights
and obligations under that certain Memorandum of Agreement with Greene
Group, Inc. for a Gift to Crimson Tide Foundation, whereby RMUSA has
pledged to make an annual gift of $1,000,000 to the University of
Alabama beginning in 2005 and ending in 2015. For the avoidance of
doubt, Company shall not assume any liabilities or obligations arising
out of any breach of or default under such RMUSA Assumed Contracts by
RMUSA that occurred prior to the Contribution;
2. Real Property. Except as set forth in Section 2.2 and 6.8, all
liabilities and obligations relating to, or occurring or existing in
connection with, or arising out of, the ownership and use of the RMUSA
Real Property, arising after the Contribution;
3. Product Liability. Claims for product warranty, product liability,
refunds, returns, personal injury and property damage, and all other
liabilities and obligations, relating to products sold or services
provided by Company after the Contribution;
4. Post Closing Liabilities. Any liability, claim or obligation which is
based on events or conditions occurring or arising out of the RMUSA
Business as operated by Company after the Contribution or the
ownership, possession, use or sale of the RMUSA Assets by Company after
the Contribution (but, in each case, only to the extent such liability,
claim or obligation is based on events or conditions that occur or
arise for the first time after the Contribution);
5. Taxes (excluding transfer and income Taxes). All liabilities and
obligations related to Taxes (excluding transfer and income Taxes) to
the extent due and payable after the Contribution;
6. Accounts Payable. The RMUSA Accounts Payable;
7. WARN. Any liabilities or obligations of RMUSA arising under the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. ss.ss. 2101 2109
("WARN") to the RMUSA Business Employees arising out of a "plant
closing" or "mass layoff" (as those terms are defined under WARN)
occurring as of or after the Contribution; and
8. Environmental Liabilities. (a) The RMUSA Environmental Liabilities
(except to the extent that such liabilities are subject to
indemnification pursuant to Section 6.8); and (b) any damages, claims,
losses, liabilities and expenses that may be incurred as a result of
the presence of Hazardous Materials at the RMUSA Real Property or
property located in the vicinity of the RMUSA Real Property that
results from the ownership, possession, use, occupation, construction
and/or improvement to or operation of the RMUSA Business or RMUSA Real
Property, that exists as of the Contribution Date but is not otherwise
a RMUSA Environmental Condition as defined in Section 8.7(a).
Schedule 5.2
------------
Cemex Assumed Liabilities
1. Assumed Contracts. Subject to Section 4.4, all liabilities and
obligations of Cemex, Inc. arising after the Contribution under the
Cemex Assumed Contracts and any and all obligations by Cemex, Inc. or
any of its Affiliates to guarantee or support obligations of the
Company or any of its Subsidiaries under any of the Assumed Contracts.
For the avoidance of doubt, Company shall not assume any liabilities or
obligations arising out of any breach of or default under such Cemex
Assumed Contracts by Cemex, Inc. that occurred prior to the
Contribution;
2. Real Property. Except as set forth in Section 2.2 and 6.7, all
liabilities and obligations relating to, or occurring or existing in
connection with, or arising out of, the ownership and use of the Cemex
Real Property, arising after the Contribution;
3. Product Liability. Claims for product warranty, product liability,
refunds, returns, personal injury and property damage, and all other
liabilities and obligations, relating to products sold or services
provided by Company after the Contribution;
4. Post Closing Liabilities. Any liability, claim or obligation which is
based on events or conditions occurring or arising out of the Cemex
Business as operated by Company after the Contribution or the
ownership, possession, use or sale of the Cemex Assets by Company after
the Contribution (but, in each case, only to the extent such liability,
claim or obligation is based on events or conditions that occur or
arise for the first time after the Contribution);
5. Taxes (excluding transfer and income Taxes). All liabilities and
obligations related to Taxes (excluding transfer and income Taxes) to
the extent due and payable after the Contribution;
6. WARN. Any liabilities or obligations of Cemex arising under WARN to the
Cemex Business Employees arising out of a "plant closing" or "mass
layoff" (as those terms are defined under WARN) occurring as of or
after the Contribution.
7. Environmental Liabilities. (a) The Cemex Environmental Liabilities
(except to the extent that such liabilities are subject to
indemnification pursuant to Section 6.7); and (b) any damages, claims,
losses, liabilities and expenses that may be incurred as a result of
the presence of Hazardous Materials at the Cemex Real Property or
property located in the vicinity of the Cemex Real Property that
results from the ownership, possession, use, occupation, construction
and/or improvement to or operation of the Cemex Business or Cemex Real
Property, that exists as of the Contribution Date but is not otherwise
a Cemex Environmental Condition as defined in Section 7.7(a).
Exhibit A
---------
Form of Cemex Lease Assignment
See attached.
Exhibit B
---------
Form of RMUSA Lease Assignment
See attached.
Exhibit 4.21
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
READY MIX USA, LLC
AND
RMC MID-ATLANTIC, LLC,
Dated: September 1, 2005
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 1st day of September, 2005, by and between READY MIX USA, LLC, a
Delaware limited liability company ("Buyer") and RMC MID-ATLANTIC, LLC, a South
Carolina limited liability company ("Seller").
R E C I T A L S:
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
certain of the assets of Seller, for the consideration and on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller, intending to be legally bound, hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 General Definitions. For purposes of this Agreement, the words and
phrases defined in Section 10.18 shall have the meanings specified therein.
ARTICLE 2.
PURCHASE OF ASSETS
2.1 Sale and Purchase of Assets. At the Closing, Seller shall sell,
transfer, convey, assign and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, those assets described on Schedule 2.1(a) which are
currently owned by Seller and used or intended for use primarily in, or which
are being utilized or operated by Seller or any of its Affiliates primarily in
its ready mix concrete, concrete block, and building materials business
locations located in the State of Georgia (the "Seller Assets") and the
business associated with the Seller Assets (the "Seller Business"). The
locations listed on Schedule 2.1(a)-1 are referred to sometimes herein as the
"Seller Business Locations." Notwithstanding the foregoing, the assets,
properties and rights described on Schedule 2.1(b) shall not be transferred,
conveyed, assigned or delivered to Buyer under this Agreement (the "Retained
Seller Assets"). For the avoidance of doubt, Buyer hereby acknowledges that (a)
CEMEX, Inc., a Louisiana corporation and Affiliate of Seller, owns and operates
businesses in Brunswick, Georgia and (b) such businesses and the associated
assets are Retained Seller Assets.
2.2 Prorations.
Seller and Buyer each acknowledge and agree that Seller shall be
responsible for the expenses relating to the Seller Assets (except to the
extent such amount is reflected in the Seller Working Capital Statement) up to
and through the Closing Date, and Buyer shall be responsible for the expenses
relating to the Seller Assets after the Closing Date (for example, ad valorem
taxes and utilities) and that such expenses relating to the Seller Assets up to
and through the Closing Date shall be paid by Seller at or before the Closing
Date. To the extent that a period of time for the assessment of any of the
expenses (for example, property taxes) shall be due both before and after the
Closing Date, the same shall be prorated as of the Closing Date. Seller and
Buyer acknowledge and agree that one or more of such prorations may occur or be
reconciled subsequent to the Closing Date.
2.3 Payment of Purchase Price; Allocation; Adjustments.
(a) The purchase price for the Seller Assets to be paid by wire
transfer of immediately available funds at the Closing shall be One Hundred
Twenty-Four Million Five Hundred Sixty Thousand Dollars ($124,560,000) (the
"Closing Purchase Price"), plus the assumption of the Assumed Liabilities in
accordance with Section 2.4. The Closing Purchase Price includes an estimated
purchase price for the Closing Working Capital in the amount of Thirty-Three
Million Dollars ($33,000,000), which amount is subject to adjustment to be made
following the Closing Date pursuant to Section 2.3(b) and Section 2.3(c) below.
(b) Following the Closing, in accordance with Section 2.3(c) below,
the Closing Purchase Price shall be (i) increased by the amount by which (A)
the value of the inventory of sand, gravel, cement, admixtures, fuel, other raw
material and finished goods on hand constituting Seller Inventory, which shall
all be valued at book value as of the Effective Time (the "Materials Inventory
Value"); plus (B) the value of the inventory of tools, parts and related items
constituting Seller Inventory, which shall all be valued at book value as of
the Effective Time (the "Parts Inventory Value"); plus (C) the aggregate amount
of the Seller Accounts Receivable, valued at face value as of the Effective
Time (the sum of Clauses (A), (B) and (C) is hereafter referred to as the
"Closing Working Capital"), exceeds Thirty-Three Million Dollars ($33,000,000)
or (ii) decreased by the amount by which the Closing Working Capital is less
than Thirty-Three Million Dollars ($33,000,000). For the purpose of calculating
the Seller Accounts Receivable: (i) accounts receivable that are less than
sixty (60) days past due will be valued at face value as of the Effective Time;
(ii) accounts receivable that are more than sixty (60) days and less than
ninety (90) days past due will be valued at ninety percent (90%) of face value
as of the Effective Time; and (iii) accounts receivable that are more than
ninety (90) days past due will be valued at seventy-five percent (75%) of face
value as of the Effective Time.
(c) (i) Within thirty (30) days after the Closing Date,
Seller shall deliver to the Buyer a working capital statement
reflecting the current assets assigned by Seller pursuant to this
Agreement as of the Effective Time, with each item valued as
contemplated in Section 2.2 and 2.3(b) as the case may be (the "Seller
Working Capital Statement") along with a statement of the amount by
which the Closing Working Capital exceeds or is less than Thirty-Three
Million Dollars ($33,000,000) (the "Working Capital Adjustment
Amount") and the amount of the final purchase price (the "Purchase
Price").
(ii) Upon receipt of the Seller Working Capital Statement,
Buyer and its independent certified public accountants shall have the
right during the succeeding 30-day period to review and audit the
accounts represented by the line items set forth on the Seller Working
Capital Statement and to examine and review all records and work
papers and other supporting documents used to prepare such statement.
Seller shall give Buyer full access at all reasonable times to the
working papers relating to the Seller Working Capital Statement,
including any descriptions of the methodology, procedures, internal
audits and analysis undertaken in connection with the preparation of
the Seller Working Capital Statement. Buyer shall notify Seller in
writing, on or before the last day of the 30-day period, of any good
faith objections to the Seller Working Capital Statement or the
Working Capital Adjustment Amount, setting forth a detailed
explanation of the objections and the dollar amount of each such
objection. If Buyer does not deliver such notice within such 30-day
period, the Seller Working Capital Statement, the Working Capital
Adjustment Amount and the Purchase Price shall be deemed to have been
irrevocably accepted by Buyer.
(iii) If Buyer in good faith objects to line items set forth
on the Seller Working Capital Statement or the Working Capital
Adjustment Amount, the parties shall attempt to resolve any such
objections within thirty (30) days of receipt by the corresponding
party of any such objections. If the parties are unable to resolve the
matter within such 30-day period, they shall jointly appoint an
impartial nationally recognized independent certified public
accounting firm (the "Impartial Accounting Firm") mutually acceptable
to the parties (or, if they cannot agree on a mutually acceptable
firm, they shall cause their respective accounting firms to select
such firm) within five (5) days after the end of such 30-day period to
resolve any such remaining matters. Any such resolution shall be
conclusive and binding on the parties and the fees of the Impartial
Accounting Firm shall be borne as the Impartial Accounting Firm shall
determine after considering the positions asserted by the parties in
light of its final decision. The parties shall fully cooperate with
the Impartial Accounting Firm. The Impartial Accounting Firm shall be
instructed to reach its conclusion regarding the dispute within thirty
(30) days of its appointment to settle the dispute.
(iv) Adjustments to the values contemplated in paragraph (b)
of this Section 2.3 shall be made pursuant to the Seller Working
Capital Statement, within thirty (30) days after their acceptance by
the parties or the resolution of all disputes in connection therewith,
pursuant to the provisions of this Section 2.3(c). In the event the
Closing Working Capital exceeds Thirty-Three Million Dollars
($33,000,000), Buyer shall pay to Seller the amount of such excess by
wire transfer of immediately available funds. In the event the Closing
Working Capital is less than Thirty-Three Million Dollars
($33,000,000), Seller shall pay to Buyer the amount of such shortfall
by wire transfer of immediately available funds.
(d) Payments to Seller or Buyer pursuant to this Section 2.3 shall be
made to the respective accounts set forth on Schedule 2.3(d) not later than ten
(10) days following the date the Seller Working Capital Statement becomes
final.
(e)(i) Within sixty (60) days after the Closing Date, the
Buyer shall deliver to the Seller a draft of schedule (the "Allocation
Schedule") allocating the Purchase Price and the amount of Assumed
Liabilities (including, for purposes of this section, any other
consideration paid by Buyer), among the Seller Assets.
(ii) Upon receipt of the Allocation Schedule, Seller and its
independent certified public accountants shall have the right during
the succeeding thirty (30) day period to review the Allocation
Schedule and to examine and review all records and work papers and
other supporting documents used to prepare such schedule. Buyer shall
give Seller full access at all reasonable times to the working papers
relating to the Allocation Schedule, including any descriptions of the
methodology, procedures, internal audits and analysis undertaken in
connection with the preparation of the Allocation Schedule. Seller
shall notify Buyer in writing, on or before the last day of the thirty
(30) day period, of any good faith objections to the Allocation
Schedule, setting forth a detailed explanation of the objections and
the dollar amount of each such objection. If Seller does not deliver
such notice within such thirty (30) day period, the Allocation
Schedule shall be deemed to have been irrevocably accepted by Seller.
(iii) If Seller in good faith objects to line items set forth
on the Allocation Schedule, the parties shall attempt to resolve any
such objections within thirty (30) days of receipt by the
corresponding party of any such objections. If the parties are unable
to resolve the matter within such thirty (30) day period, they shall
jointly appoint an Impartial Accounting Firm mutually acceptable to
the parties (or, if they cannot agree on a mutually acceptable firm,
they shall cause their respective accounting firms to select such
firm) within five (5) days after the end of such thirty (30) day
period to resolve any such remaining matters. Any such resolution
shall be conclusive and binding on the parties and the fees of the
Impartial Accounting Firm shall be borne as the Impartial Accounting
Firm shall determine after considering the positions asserted by the
parties in light of its final decision. The parties shall fully
cooperate with the Impartial Accounting Firm. The Impartial Accounting
Firm shall be instructed to reach its conclusion regarding the dispute
within thirty (30) days of its appointment to settle the dispute.
(iv) Seller and Buyer each agrees to file IRS Form 8594, and
all federal, state, local and foreign tax returns, in a manner
consistent with the Allocation Schedule.
2.4 Limitation on Liabilities of Seller to be Assumed by Buyer.
Notwithstanding any provision of this Agreement to the contrary, Buyer
shall not assume or become liable to Seller, or any other Person, for any
liabilities or obligations of Seller or any of its Affiliates whether accrued,
absolute, contingent or otherwise, except for those liabilities of Seller and
its Affiliates described on Schedule 2.4 (the "Assumed Liabilities"), which
Buyer hereby assumes and agrees to perform, satisfy and discharge when due.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to Buyer that, except as set
forth in the disclosure schedule being delivered by Seller contemporaneously
herewith (the "Seller Disclosure Schedule"):
3.1 Existence and Authorization for Agreement; Enforceability.
Seller is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of South Carolina, and has the
requisite power and authority to own, lease, and operate its properties and
carry on and operate its business as and where such business is now being
conducted. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by the managers
of Seller. Seller has taken all actions necessary to authorize it to enter into
and perform fully its obligations under this Agreement and all of the documents
or instruments otherwise contemplated herein and to consummate the transactions
contemplated herein and therein. Each of this Agreement and the other closing
documents delivered pursuant hereto has been or at the Closing will be duly
executed and delivered by Seller and is or at the Closing will be the legal,
valid and binding obligation of Seller enforceable in accordance with its
respective terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to the general principles of equity.
3.2 Title to and Sufficiency of Seller Assets.
(a) Seller has good and marketable title to the Seller Assets. Except
for (i) the Assumed Liabilities and (ii) Permitted Encumbrances, none of the
Seller Assets shall, at the Closing Date, be subject to any Lien.
(b) The Seller Assets, in conjunction with the rights, goods and
services granted, transferred or to be performed by Seller pursuant to this
Agreement, constitute all the property, real and personal, tangible and
intangible, necessary for the conduct of the Seller Business as it is presently
being conducted by Seller in all material respects.
3.3 Taxes.
Seller will pay and satisfy, or cause to be paid and satisfied, all
property and excise and other tax obligations, penalties and interest, imposed
by any governmental entity either (i) in connection with the Seller Business or
the Seller Assets arising prior to and through the Closing Date, and in
connection with the transactions contemplated by this Agreement, including all
United States, foreign, state, provincial, county and local income, ad valorem,
excise, sales, use, withholding, unemployment, social security or other taxes
and assessments of or payable by Seller and arising prior to and through the
Closing Date, or (ii) otherwise chargeable against the Seller Business or the
Seller Assets, and arising prior to and through the Closing Date. Anything in
this Agreement to the contrary notwithstanding, Buyer shall pay all recording
and filing fees and taxes, sales taxes, gross receipt taxes, tag fees and
similar expenses applicable to the transfer of the Seller Assets from Seller to
Buyer, including any recording or filing fees or taxes associated with the
transfer of the Seller Real Property and any sales, gross receipt, and tag fees
or taxes associated with transferring the titles to any vehicles. All taxes
attributable to the activities of the Seller Business and the ownership and
operation of the Seller Assets prior to and through the Closing Date shall be
the responsibility of Seller.
3.4 Litigation.
There is no claim, legal action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, nor any order,
decree or judgment in progress, pending or in effect, or, to the Knowledge of
Seller, threatened, against or relating to Seller or any of its Affiliates, or
any of their respective members, managers, directors, officers, shareholders,
employees, or properties, in each case, with respect to the Seller Assets or
the Seller Business, which would reasonably be expected to have a material
adverse effect on (a) the Seller Assets or the business, financial condition or
results of operations of the Seller Business, taken as a whole, or (b) the
ability of Seller to consummate the transactions contemplated hereby or perform
any of its obligations hereunder (a "Seller Material Adverse Effect").
3.5 Contracts; and Other Agreements.
(a) Section 3.5 of the Seller Disclosure Schedule sets forth a list of
the Material Seller Contracts primarily relating to the Seller Business or the
Seller Assets as of the date of this Agreement. Seller has made available to
Buyer a true and complete copy of each Material Seller Contract listed on
Schedule 3.5 of the Seller Disclosure Schedule. For purposes hereof, "Material
Seller Contract" shall mean:
(i) agreements, contracts, licenses, leases of real or
personal property, indentures, mortgages, instruments, security
interests, purchase and sale orders and other similar arrangements,
commitments or understandings in each case, whether written or oral
("Contracts"), for the future acquisition or sale of any assets
involving $250,000 individually (or in the aggregate, in the case of
any related series of Contracts), other than the acquisition or sale
of inventory in the ordinary course of business;
(ii) Contracts calling for future payments to or from Seller
or any of its Affiliates in any one year of more than $250,000 in any
one case (or in the aggregate, in the case of any related series of
Contracts), or involving the payment or receipt of $1,000,000 or more
over the lifetime of such agreements;
(iii) Contracts that contain covenants prohibiting or
limiting the right to compete of Seller or any Affiliate or
prohibiting or restricting the ability of the owner of the Seller
Business (or any of its Affiliates) to deal with any Person or in any
geographical area;
(iv) Contracts that require the payment by or to Seller or
any Affiliate of a royalty, override or similar commission or fee of
more than $1,000,000 in the aggregate;
(v) Contracts that are collective bargaining agreements;
(vi) guaranties and any outstanding Contracts and instruments
relating to the borrowing of money, or any extension of credit, which
impose any Lien on any of the Seller Assets;
(vii) Contracts involving sales agency, manufacturing,
consignment, sales representative, distributorship or marketing;
(viii) Contracts for the license to or from Seller or any
Affiliate of Seller to or from, as the case may be, any third party
(including to another Affiliate) of any (x) Seller Intangible Property
or (y) intellectual property rights that are owned by any such third
party and, in each case that primarily relate to or are material to
the Seller Business, except for contracts for the license of software
that is commercially available "off the shelf";
(ix) Contracts for the construction or acquisition of fixed
assets or other capital expenditures requiring the payment by Seller
of more than $1,000,000 in the aggregate;
(x) Contracts that are broker's or finder's agreements;
(xi) Contracts relating to partnerships, joint ventures or
other arrangements involving a sharing of profits or expenses;
(xii) Contracts to sell, lease or otherwise dispose of any
Seller Asset, in each case other than in the ordinary course of
business;
(xiii) except for collective bargaining agreements (which are
listed in subparagraph (v) above), Contracts relating to employment or
termination or severance benefits or arrangements;
(xiv) Contracts relating to the leasing of or other
arrangement for use of real property or material personal property;
(xv) Contracts that include any obligation to make payments,
contingent or otherwise, arising out of the prior acquisition or
disposition of a business;
(xvi) Contracts which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or
upon the occurrence of any additional acts or events) result in any
payment or benefits (whether of severance pay or otherwise) becoming
due, or the acceleration or vesting of any rights to any payment or
benefits, from Buyer, Seller or any of their respective Affiliates to
any officer, director, consultant or employee thereof; and
(xvii) Contracts entered into outside of the ordinary course
of business or which are material to the Seller Business.
(b) With respect to each Material Seller Contract, (i) each such
Contract is a valid and binding agreement of Seller or its Affiliates and is in
full force and effect in all material respects, (ii) Seller has no Knowledge of
any material default by any third party under any such Contract which default
has not been cured or waived and which default by any third party would
reasonably be expected to result in a Seller Material Adverse Effect and (iii)
there is no material default by Seller or its Affiliates under any such
Contract which default has not been cured or waived and which default would
reasonably be expected to result in a Seller Material Adverse Effect.
3.6 Compliance with Laws.
The Seller Business is presently complying in all material respects
with all applicable Laws and Judgments, except for such failures to comply
which, individually or in the aggregate, would not reasonably be expected to
result in a Seller Material Adverse Effect. Seller and its Affiliates have all
Permits necessary for the conduct of the Seller Business as currently
conducted, other than those the absence of which, individually or in the
aggregate, would not reasonably be expected to result in a Seller Material
Adverse Effect, and there are no Proceedings pending, or to the Knowledge of
Seller, threatened which may result in the revocation, termination,
cancellation or suspension of any such Permit except those that, individually
or in the aggregate, would not reasonably be expected to result in a Seller
Material Adverse Effect; it being understood that nothing in this Section 3.6
is intended to address any failure to comply with any Law, Judgment or Permit
(including Environmental Laws or environmentally-related Judgments or Permits)
that is the subject of any other representation or warranty set forth herein.
All of the Seller Permits are listed in Schedule 3.6 of the Seller Disclosure
Schedule, together with any information relative to any requirements applicable
to the assignability of the same.
3.7 Environmental.
(a) Definitions. For the purpose of this Agreement, the following
words and phrases shall have the following meanings:
"Seller Environmental Condition" shall mean any condition of the
Environment with respect to the Seller Real Property or property located in the
vicinity of the Seller Real Property that results from the ownership,
possession, use, occupation, construction and/or improvement to or operation of
the Seller Business on the Seller Real Property, that (i) exists as of the
Closing Date, and (ii) is in violation of applicable Environmental Law as of
the Closing Date or involves concentrations of Hazardous Materials in soils,
surface waters, groundwater, land, stream sediments, or surface or subsurface
strata that are in excess of applicable remediation standards or guidelines, in
effect as of the Closing Date, that are applicable in the jurisdiction in which
the relevant real property is located.
For purposes of this Section 3.7 only, the term "Seller Real Property"
shall mean the Seller Real Property as referred to in paragraph 1 of Schedule
2.1(a) and the leased real property upon which a Seller Business Location is
operated.
(b) Environmental Representations, Warranties, and Obligations. With
reference to the Seller Real Property and the Seller Business, Seller
represents and warrants that, to the Knowledge of Seller, Seller and its
Affiliates are presently in substantial compliance with all Environmental Laws
applicable to the Seller Real Property and the Seller Business, and no Seller
Environmental Conditions exist that are material, whether individually or in
the aggregate.
3.8 No Violations.
The execution, delivery and performance by Seller of this Agreement
and each of the other documents or agreements to which it is or will be a party
pursuant hereto, and the consummation by Seller and its Affiliates of the
transactions contemplated by this Agreement and such other documents and
agreements, do not and will not (i) violate any provision of the certificate of
formation or limited liability company agreement of Seller or the articles of
incorporation, by-laws or similar governing documents of any of its Affiliates
or subsidiaries, or (ii) (x) violate any Law, Permit or Judgment applicable to
Seller or any of its Affiliates or subsidiaries, or any of their respective
properties or assets, or (y) subject to obtaining the Consents set forth in
Schedule 3.8 of the Seller Disclosure Schedule (the "Seller Required
Contractual Consents"), violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of Seller or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller or any of its Affiliates is a party,
or by which they or any of their respective properties or assets may be bound
or affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have and would not be reasonably likely to have a Seller Material
Adverse Effect.
3.9 Consents.
No consent is required to be obtained by Seller (or by any Affiliate)
from, and no notice or filing is required to be given by Seller (or by any
Affiliate) to or made by Seller (or by any Affiliate) with, any Governmental
Authority in connection with the execution, delivery and performance by Seller
of this Agreement, other than in all cases where the failure to obtain such
Consent or to give or make such notice or filing would not, individually or in
the aggregate, reasonably be expected to result in a Seller Material Adverse
Effect.
3.10 Financial Information.
True and complete copies of the Seller Financial Statements are
included in the Seller Disclosure Schedule. The Seller Financial Statements
have been prepared from, are in accordance with and accurately reflect the
books and records of the Seller Business, comply in all material respects with
applicable accounting requirements, fairly present, in all material respects,
the results of operations of the Seller Business for the respective periods
indicated, and were prepared in accordance with GAAP applied consistently
during such periods, except as set forth in the footnotes thereto.
3.11 Absence of Changes.
(a) Since December 31, 2004, (i) the Seller Business has been operated
in the ordinary course in a manner consistent with past practice and (ii) there
has not been a change, event, development or circumstance that has had or would
reasonably be expected to have a Seller Material Adverse Effect, but for
purposes of this Section 3.11(a), with respect to clause (a) of the definition
of Seller Material Adverse Effect shall exclude any change or development
involving (w) a prospective change arising out of any proposed or adopted
legislation, or any other proposal or enactment by any governmental, regulatory
or administrative authority, (x) general conditions applicable to the economy
of the United States, including changes in interest rates, (y) conditions or
effects resulting from the announcement of the existence and terms of this
Agreement, or (z) conditions or factors affecting the industry in the United
States in which the Seller Business operates, taken as a whole; provided, with
respect to clauses (w) or (x) above, that such change, event, development or
circumstance does not affect the Seller Business to a materially greater extent
than other participants in the industry in the United States in which the
Seller Business operates generally.
(b) Without limiting the foregoing, since December 31, 2004, neither
Seller nor any of its Affiliates has with respect to the Seller Business:
(i) granted or committed to grant any bonus, commission, or
other form of incentive compensation or increased or committed to
increase the compensation, fees or pension, welfare, fringe or other
benefits provided or payable to or in respect of any employees of the
Seller Business, except for customary bonuses and regular salary
increases made in the ordinary course of business, consistent with
past practices, or granted any severance or termination pay;
(ii) except in the ordinary course, written off any accounts
receivable without adequate consideration;
(iii) made any material change in any method of accounting
(for book or Tax purposes) or accounting practice;
(iv) purchased or otherwise acquired, or sold, leased,
transferred or otherwise disposed of any material properties or
material assets of the Seller Business, except in the ordinary course
of business, consistent with past practices;
(v) entered into any leases with respect to the Seller Real
Property;
(vi) terminated or amended any Material Seller Contract;
(vii) entered into, terminated or amended any Contracts or
other agreements with respect to intellectual property rights, except
in the ordinary course of business;
(viii) suffered any material Damage to the assets of the
Seller Business;
(ix) permitted or suffered any material Lien on any of the
Seller Assets, other than Permitted Encumbrances;
(x) commenced or initiated any lawsuit, action or proceeding
with respect to the Seller Business or Seller Assets, except in the
ordinary course of business;
(xi) incurred any indebtedness, material liability or
obligation (whether absolute, accrued, contingent or otherwise) with
respect to the Seller Business, except in the ordinary course of
business, consistent with past practices;
(xii) waived, abandoned or otherwise disposed of any material
rights in or to any intangible property related to the Seller
Business; or
(xiii) agreed (whether or not in writing) to do any of the
foregoing.
3.12 Transactions with Affiliates.
No Affiliate of Seller is an employee, consultant, competitor,
customer, distributor, supplier or vendor of, or is party to any contractual
obligations with Seller relating to the Seller Business and no officer or
director of Seller is an Affiliate of any competitor, customer, distributor,
supplier or vendor of the Seller Business. None of the Seller Assets are owned
by an Affiliate of Seller or subject to any license or similar arrangement
allowing use thereof by an Affiliate.
3.13 Condition of Seller Assets.
To Seller's Knowledge, there are no defects in or concerning the
buildings, equipment or the tangible personal property occupied, operated or
owned by Seller or its Affiliates as a part of the Seller Business which,
individually or in the aggregate, would reasonably be expected to result in a
Seller Material Adverse Effect. All of the Seller Assets are in good operating
condition and repair, ordinary wear and tear excepted, and are suitable for the
uses for which such Seller Assets were intended. Except as expressly set forth
in this Agreement, (i) Seller expressly disclaims any other representation and
warrant of any kind or nature, express or implied, as to the condition, value
or quality of the Seller Assets and (ii) Seller specifically disclaims any
representation or warranty of merchantability, usage or fitness for any
particular purpose with respect to any of the Seller Assets.
3.14 Real Property Matters.
(a) Seller and its Affiliates are not currently in default under any
agreement, order, judgment or decree relating to the Seller Real Property, and
no conditions or circumstances exist which, with the giving of notice or
passage of time or both, would constitute a default or breach with respect to
any such agreement, order, judgment or decree, (b) Seller and its Affiliates
have paid all Taxes due and owing which if not paid could result in a Lien on
the Seller Real Property or impose liability on Buyer, (c) to Seller's
Knowledge, there is no proposed special assessment which would affect the
Seller Real Property, (d) to Seller's Knowledge, there are no claims, causes of
action, lawsuits or legal proceedings pending or threatened regarding the
ownership, use or possession of the Seller Real Property, including
condemnation or similar proceedings, (e) to Seller's Knowledge, there is no
violation of any zoning, subdivision, platting, building, fire or insurance
laws, ordinances or regulations (whether related to the Seller Real Property or
the occupancy thereof) to the extent not previously cured, including the
failure of Seller to comply with all covenants, easements and restrictions
recorded against the Seller Real Property, (f) Seller has no Knowledge of any
intention on the part of the issuing authority to cancel, suspend or modify any
licenses or permits relating to the Seller Real Property, (g) Seller and its
Affiliates are in material compliance with all recorded covenants, easements
and restrictions affecting the Seller Real Property, and (h) each of the Seller
Leases is in full force and effect and has not been modified, amended, added
to, or changed in any manner whatsoever except for those amendments attached to
a Seller Lease Assignment.
3.15 Brokers and Finders.
There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Seller or any
Affiliate of Seller who might be entitled to any fee or commission from Seller
or any Affiliate of Seller in connection with the transactions contemplated by
this Agreement.
3.16 Labor Matters.
With respect to the Seller Business, since January 1, 2000, there has
not occurred or been threatened, and Seller does not have Knowledge of, any
material employee strike, work stoppage, slowdown, lockout, picketing or
concerted refusal to work overtime at a Seller Business Location and there are
no, and Seller does not have Knowledge of, labor disputes currently subject to
any arbitration or administrative proceeding involving employees of Seller or
its Affiliates who are involved in the Seller Business (excluding routine
workers' compensation claims).
3.17 Accounts Receivable.
All Seller Accounts Receivable represent bona fide sales actually made
in the ordinary course of business and the accounts receivable reflected in the
adjustments pursuant to Section 2.3 are owed to Seller or its Affiliates and
are not subject to offset, counterclaim or other defense.
3.18 Inventory.
The Seller Inventory, whether finished goods, work in process or raw
materials, consist of a quality and quantity usable and saleable in the
ordinary and usual course of the Seller Business consistent with past practice.
3.19 Employee Benefit Plans; ERISA.
None of Seller or its ERISA Affiliates has incurred any liability
under, arising out of or by operation of Title IV of ERISA (other than for
payment of premiums to the Pension Benefit Guaranty Corporation in the ordinary
course of business), and no fact or event exists which would reasonably be
expected to give rise to any such liability that would reasonably be expected
to result in a Lien on the Seller Assets or a liability of the Buyer.
3.20 No Liabilities.
There are no liabilities or obligations, secured or unsecured, known
or unknown (whether accrued, absolute, contingent or otherwise) of Seller or
its Affiliates which in any way relate to or encumber the Seller Assets or the
Seller Business, except for (a) those reflected or reserved on the Seller
Financial Statements, (b) those trade payables and contractual obligations
incurred or accrued in the ordinary and normal course of the Seller Business
since December 31, 2004 and consistent with past practice, none of which,
individually or in the aggregate, is material, and none of which is for breach
of warranty or contract or for tort infringement, (c) those under the Seller
Assumed Contracts, (d) those under the Seller Permits, (e) Liabilities relating
to Environmental Laws, and (f) any taxes accruing in the ordinary course of the
Seller Business, none of such taxes being the responsibility or obligation of
Buyer (other than those ad valorem taxes which will be prorated as of the
Closing Date).
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that, except as set
forth in the disclosure schedule being delivered by Buyer contemporaneously
herewith (the "Buyer Disclosure Schedule"):
4.1 Existence of Authorization for Agreement; Enforceability.
Buyer is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite power and authority to own, lease, and operate its properties and
carry on and operate its business as and where such business is now being
conducted. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by the Board.
Buyer has taken all actions necessary to authorize it to enter into and perform
fully its obligations under this Agreement and all of the documents or
instruments otherwise contemplated herein and to consummate the transactions
contemplated herein and therein. Each of this Agreement and the other closing
documents delivered pursuant hereto has been or at the Closing will be duly
executed and delivered by Buyer and is or at the Closing will be the legal,
valid and binding obligation of Buyer enforceable in accordance with its
respective terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to the general principles of equity.
4.2 No Violations.
The execution, delivery and performance by Buyer of this Agreement and
each of the other documents or agreements to which it is or will be a party
pursuant hereto, and the consummation by Buyer and its Affiliates of the
transactions contemplated by this Agreement and such other documents and
agreements, do not and will not (i) violate any provision of the certificate of
formation or limited liability company agreement of Buyer or the articles of
incorporation, by-laws or similar governing documents of any of its Affiliates
or subsidiaries, or (ii) (x) violate any Law, Permit or Judgment applicable to
Buyer or any of its Affiliates or subsidiaries, or any of their respective
properties or assets, or (y) subject to obtaining the Consents set forth in
Schedule 4.2 of the Buyer Disclosure Schedule (the "Buyer Required Contractual
Consents"), violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of Buyer or any of its Affiliates under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer or any of its Affiliates is a party, or by which they
or any of their respective properties or assets may be bound or affected,
except (in the case of clause (y) above) for such violations, conflicts,
breaches or defaults which, either individually or in the aggregate, will not
have and would not be reasonably likely to have a material adverse effect on
(a) Buyer or the business, financial condition or results of operations of the
Buyer's business, taken as a whole, or (b) the ability of Buyer to consummate
the transactions contemplated hereby or perform any of its obligations
hereunder (a "Buyer Material Adverse Effect").
4.3 Consents.
No consent is required to be obtained by Buyer (or by any Affiliate)
from, and no notice or filing is required to be given by Buyer (or by any
Affiliate) to or made by Buyer (or by any Affiliate) with, any Governmental
Authority in connection with the execution, delivery and performance by Buyer
of this Agreement, other than in all cases where the failure to obtain such
Consent or to give or make such notice or filing would not, individually or in
the aggregate, reasonably be expected to result in a Buyer Material Adverse
Effect.
4.4 Brokers and Finders.
There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Buyer who might
be entitled to any fee or commission from Buyer in connection with the
transactions contemplated by this Agreement.
ARTICLE 5.
THE CLOSING
5.1 Generally.
(a) The Closing. The deliveries and payments contemplated by this
Agreement (the "Closing") shall be made at the offices of Bradley Arant Rose &
White LLP, One Federal Place, 1819 5th Avenue North, Birmingham, Alabama 35203.
(b) Closing Date; Effective Time. For purposes of this Agreement, the
term "Closing Date" shall mean the date on which the Closing shall occur. The
Closing shall occur simultaneously with the execution and delivery of this
Agreement. The parties to this Agreement hereby agree that the Closing shall be
effective at 12:01 a.m. (Central Time) on the date hereof (the "Effective
Time").
5.2 [Omitted.]
5.3 [Omitted.]
5.4 [Omitted.]
5.5 Deliveries by Seller.
Seller shall deliver or cause to be delivered to Buyer at the Closing
the following:
(a) A bill of sale and assignment evidencing the sale, transfer,
conveyance, assignment and delivery to Buyer of those items described in
paragraph 2 of Schedule 2.1(a), free and clear of all Liens (other than
Permitted Encumbrances), duly executed by Seller (the "Seller Bill of Sale");
(b) A limited warranty deed for each parcel of Seller Land duly
executed by Seller, evidencing the sale, transfer, conveyance, assignment and
delivery of the Seller Land to Buyer (the "Seller Warranty Deed");
(c) A Title Policy for each parcel of Seller Land;
(d) Any sales tax and real estate transfer tax returns, notice of sale
of assets, inventory resale certificate or like governmental report required or
permitted by any Governmental Authority having jurisdiction over the Seller
Real Property;
(e) An affidavit pursuant to the Foreign Investment and Real Property
Transfer Act in respect of the transfer of Seller Land;
(f) [Omitted;]
(g) Resolutions adopted by the managers of Seller unanimously
authorizing the execution and delivery of this Agreement and the transactions
contemplated hereunder and appointing the person(s) authorized to consummate
this transaction on behalf of Seller (the "Seller Authorized Person(s)");
(h) A current Certificate of Good Standing of Seller from the state of
its formation and each state in which a Seller Business Location is located;
(i) A certificate executed by an authorized officer of Seller as to
the incumbency of the Seller Authorized Person(s);
(j) [Omitted;]
(k) Possession of the Seller Assets;
(l) An instrument of assignment and assumption with respect to each
Seller Assumed Contract, substantially in the form attached hereto as Exhibit
5.5(l) (the "Seller Assignment and Assumption Agreement"), duly executed by
Seller;
(m) An Amendment No. 1 to that certain Limited Liability Company
Agreement of Buyer, dated July 1, 2005 (the "Ready Mix LLC Agreement"),
substantially in the form attached hereto as Exhibit 5.5(m) (the "Ready Mix LLC
Amendment"), duly executed by CEMEX Southeast Holdings LLC, a Delaware limited
liability company and an Affiliate of Seller ("CEMEX Holdings LLC"); and
(n) An Amendment No. 1 to that certain Limited Liability Company
Agreement of CEMEX LLC, dated July 1, 2005 (the "CEMEX LLC Agreement"),
substantially in the form attached hereto as Exhibit 5.5(n) (the "CEMEX LLC
Amendment"), duly executed by CEMEX Holdings LLC.
5.6 Deliveries by Buyer.
Buyer shall pay and deliver or cause to be paid and delivered to
Seller at the Closing the following:
(a) One Hundred Twenty-Four Million Five Hundred Sixty Thousand
Dollars ($124,560,000), by wire transfer in immediately available funds to
Seller's account designated in Schedule 2.3(d);
(b) The Seller Assignment and Assumption Agreement with respect to
each Seller Assumed Contract, duly executed by Buyer;
(c) A certificate executed by the Manager of Buyer, dated the Closing
Date, certifying as to the resolutions adopted by its Board with respect to the
transactions contemplated by this Agreement;
(d) [Omitted;]
(e) The Ready Mix LLC Amendment, duly executed by Buyer and Ready Mix
USA, Inc., an Alabama corporation and an Affiliate of Buyer ("RMUSA");
(f) The CEMEX LLC Amendment, duly executed by RMUSA; and
(g) The Seller Bill of Sale, duly executed by RMUSA.
ARTICLE 6.
AGREEMENTS
6.1 [Omitted]
6.2 [Omitted]
6.3 Further Acts.
(a) Seller shall assist Buyer in planning and accomplishing the
orderly transfer of the Seller Assets to Buyer as of the Closing Date and shall
take all steps reasonably requested by Buyer in furtherance thereof. From time
to time, at the request of Buyer, whether at or after the Closing Date and
without further consideration, Seller and its officers and employees will do,
execute, acknowledge and deliver to Buyer all further acts, instruments, and
assurances, in recordable form, that are reasonably required by Buyer to
effectuate the terms and conditions of this Agreement and the transactions
contemplated under this Agreement. In addition to the foregoing, on or before
the day which is sixty (60) days following the Closing, Seller shall cause (i)
all of the Seller Required Contractual Consents to be obtained, (ii) the Seller
Permits to be assigned to Buyer, (iii) all certificates of title for all
vehicles/rolling stock being transferred to Buyer as part of the Seller Assets
to be duly executed and assigned to Buyer, and (iv) an Assignment and
Assumption Agreement and Lessor and Lessee Estoppel Agreement with respect to
each Seller Lease, substantially in the form attached hereto as Exhibit 6.3(a)
("Seller Lease Assignment"), to be duly executed and delivered to Buyer. Seller
covenants and agrees that following the Closing Seller shall take all
commercially reasonable actions necessary at its own cost to clarify, correct,
remove or satisfy any matters of title or survey which exist as of the Closing
as to which Buyer may have an objection that affect any parcel of real property
that is conveyed by Seller to Buyer. From time to time, at the request of
Seller, whether at or after the Closing and without further consideration,
Buyer and its officers and employees will do, execute, acknowledge and deliver
to Seller all further acts, instruments, and assurances, in recordable form,
that are reasonably required by Seller to effectuate the terms and conditions
of this Agreement and the assumption of the Assumed Liabilities contemplated
hereunder.
(b) The agreements of Seller in (a) above shall include, without
limitation, the execution and delivery of deeds, assignments, bills of sale,
affidavits, agreements, consents, certificates and other documents or
instruments which Seller shall be unable to deliver as of the Closing and
Seller shall diligently take whatever steps or actions subsequent to the
Closing as may be necessary in order to effectuate delivery of each of the
same.
(c) Immediately after the Closing, Seller shall take all actions
reasonably necessary or appropriate to remove all Retained Seller Assets from
the Seller Business Locations and retain Seller's possession and title to all
Retained Seller Assets. Buyer hereby grants to Seller reasonable access to the
Seller Business Locations to take such actions.
6.4 Consents.
Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall not constitute an agreement to transfer, sell or otherwise
assign any instrument, Contract, license or Permit of the Seller Business which
would otherwise be a Seller Asset but which is not permitted to be assigned in
connection with a transaction of the type contemplated by this Agreement
(collectively, the "Unassigned Contracts"). To the extent permitted under the
terms of each Unassigned Contract, the beneficial interest in and to each
Unassigned Contract shall in any event pass to Buyer at the Closing, and Seller
covenants and agrees to cooperate with Buyer in any lawful and economically
reasonable arrangement to provide Buyer with Seller's entire interest in the
benefits under each of the Unassigned Contracts. Seller shall exercise or
exploit its rights and options under all such Unassigned Contracts referred to
in this Section 6.4 only as reasonably directed by Buyer; provided, that Buyer
shall be responsible for any liability incurred by Seller pursuant to such
direction and, provided, further, that Buyer shall not direct Seller not to
attempt to obtain a Seller Required Contractual Consent for an Unassigned
Contract. If Buyer receives an economic benefit under an Unassigned Contract,
Buyer shall accept the burdens and perform the obligations under such
Unassigned Contract as subcontractor of Seller to the extent of the benefit
received, and to the extent such burdens and obligations would have constituted
an Assumed Liability if such Unassigned Contract had been transferred to Buyer
at the Closing. Furthermore, if the other party(ies) to an Unassigned Contract
subsequently consent to the assignment of such Contract to Buyer, Buyer shall
thereupon agree to assume and perform all liabilities and obligations arising
thereunder after the date of such consent, at which time such Unassigned
Contract shall be deemed a Seller Asset, without the payment of further
consideration, and the obligations so assumed thereunder shall be deemed
Assumed Liabilities.
6.5 Mail.
From and after the Closing Date, (i) Buyer may open all mail and other
communications received by Buyer at the Seller Business Locations addressed to
Seller or any of its Affiliates, and may act with respect to such
communications in such manner as Buyer may elect if such communications relate
to the Seller Assets, the Assumed Liabilities or the Seller Business Locations
and the Seller Business (other than payments to which Seller is entitled) or if
such communications do not so relate, Buyer will forward the same promptly to
Seller, and (ii) Seller may open all mail and other communications received by
it with respect to the Seller Business Locations and the Seller Business, and
if such communications relate to the Seller Assets, the Assumed Liabilities or
the Seller Business Locations and the Seller Business (including payments to
which Buyer is entitled), Seller will promptly forward the same to Buyer. Buyer
shall hold, and shall cause its Affiliates, and its and their respective
agents, employees or representatives to hold in strict confidence all documents
and information that are not related to the Seller Assets or the Seller
Business.
6.6 Post-Closing Assistance.
From time to time after the Closing and until the fifth (5th)
anniversary of the Closing Date, to the extent permitted by Applicable Law,
Seller shall cause its appropriate employees and representatives (i) to provide
Buyer with information and data (including work papers) reasonably requested by
Buyer which is necessary or useful to Buyer in connection with its current or
former operation of the Seller Business, including personnel and employee
benefit records, or to prepare all accounting and related reports and all tax
returns with respect to the Seller Business, and (ii) to provide Buyer with
assistance as may be reasonably requested by Buyer in connection with its
current or former operation of the Seller Business or any third party claims or
litigation (including any audit or other examination by any taxing authority or
any judicial or administrative proceedings relating to any party's liability
for taxes) with respect to the Seller Business.
6.7 Confidentiality; Public Announcements.
Seller and Buyer agree that the terms and conditions of the
transactions contemplated in this Agreement are to remain confidential, except
that a party and its affiliates may disclose the terms and provisions of this
Agreement (i) to the extent that such party or any of its Affiliates is
required by Applicable Law or by the rules of any securities exchange or
trading market to make public disclosure or (ii) in any legal proceeding,
including any audit, to the extent necessary to enforce any rights under this
Agreement, in either case, the disclosing party shall provide the other parties
with prior notice of such disclosure and the content thereof. Any other public
announcement concerning the transactions contemplated by this Agreement,
excepting disclosure in accordance with the provisions of the preceding
sentence, shall be jointly planned and coordinated between Seller and Buyer.
Each party shall provide the other parties with the reasonable opportunity to
review any press release concerning the transactions contemplated by this
Agreement prior to dissemination of such press release.
6.8 Certain Tax Matters.
Seller shall prepare and file all returns and reports for its federal,
state and local taxes that are due on or after the Closing Date for the
Business through the Effective Time, including all final employment, security
and sales tax returns. Each of Seller and Buyer shall promptly forward to the
other parties all written notifications and other written communications from
any Governmental Authority received by Seller or Buyer, as the case may be,
relating to any liability for taxes for any taxable period for which the other
parties are obligated under this Agreement.
6.9 Accounts Receivable.
In the event that Seller receives any payments subsequent to the
Closing Date relating to any Seller Accounts Receivable outstanding on or after
such date, such payment shall be the property of, and shall be forwarded and
remitted to Buyer as hereinafter provided. After the Closing Date, Seller shall
and shall cause its Affiliates to pay to Buyer on a bi-monthly basis all
amounts received after the Closing Date by Seller with respect to Seller
Accounts Receivable.
6.10 Discontinuance of Use of Seller Retained Names.
To the extent any of the Seller Retained Names appear on any plants,
buildings, signs, equipment or other structures that constitute Seller Assets,
Buyer shall, by January 1, 2006, remove or obliterate, or cause to be removed
or obliterated, the Seller Retained Names from such plants, buildings, signs,
equipment or other structures. Seller shall use its commercially reasonable
efforts to remove, or cause to be removed, from the Seller Real Property on or
prior to Closing all stationery, business forms, packaging, containers and
other similar personal property on which any of the Seller Retained Names
appear; provided, however, to the extent any such items are inadvertently left
on the Seller Real Property, Buyer shall not use any such items without first
removing or obliterating, or causing to be removed or obliterated, the Seller
Retained Names from such items. For the avoidance of doubt, except as set forth
in the first sentence of this Section 6.10, Buyer shall have no rights to, and
shall not use in any manner, the Seller Retained Names on or after the Closing.
6.11 Transition Services.
Seller shall provide to Buyer the transition services set forth on
Schedule 6.11, pursuant to the terms and subject to the limitations set forth
therein.
6.12 Like-Kind Exchange.
(a) Seller may, with respect to some or all of the Seller Assets,
elect to effect a simultaneous or non-simultaneous tax-deferred exchange
pursuant to Section 1031 of the Code and the regulations thereunder. Buyer
expressly agrees to use reasonable efforts to cooperate with Seller, upon
Seller's reasonable request and at Seller's expense, in connection with any
such exchange, including by executing any and all documents, including escrow
instructions or agreements and consenting to Seller's assignment of its rights
hereunder to an exchange entity, which are reasonably necessary to carry out
such an exchange. Any and all representations, obligations, agreements,
warranties and covenants made by Seller to Buyer in connection with this
Agreement shall remain in full force and effect and continue to inure to the
benefit of Buyer, notwithstanding any assignment of this Agreement to a third
party in connection with such Section 1031 exchange. Nothing in this Section
6.12 shall in any manner relieve Seller from any of its obligations under this
Agreement, and Seller shall remain primarily liable to Buyer pursuant to the
terms of this Agreement.
(b) Buyer's obligation to cooperate in a Section 1031 exchange is
conditioned upon each of the following: (i) Buyer shall not be required to
incur any additional costs, expenses or liabilities (including professional
fees and transfer taxes) as a result of, or in connection with, any action
taken by Buyer under Section 6.12(a) or such Section 1031 exchange, and Seller
shall indemnify and hold Buyer harmless from any cost, expense or liability
incurred by Buyer in connection with any action taken by Buyer under Section
6.12(a) or such Section 1031 exchange, (ii) the Closing shall not be delayed as
a result of such Section 1031 exchange and (iii) all acknowledgments, releases,
representations, warranties, covenants and agreements made by Seller (as set
forth in this Agreement) shall remain in full force and effect in favor of
Buyer as if such Section 1031 exchange had not been made.
(c) Buyer shall not be in default under this Agreement and shall not
be liable for any damages, losses, costs or expenses incurred by Seller if (i)
any intermediary or exchange entity fails to take any steps to (A) locate,
identify, or negotiate for the acquisition of property, (B) prepare and execute
documents, or (C) arrange for financing necessary to effect the transactions
contemplated by this Section 6.12, (ii) any property designated as such by
Seller fails to qualify as "like-kind" property for purposes of Code Section
1031, or (iii) the transactions described herein otherwise fail, for any
reason, to afford Seller the benefits of Section 1031 of the Code.
(d) Seller shall be solely responsible for all of the tax incidences
of the transactions contemplated by this Section 6.12, including compliance
with any temporal requirements hereunder or under Code Section 1031 or the
Regulations thereunder.
6.13 Insurance
Buyer acknowledges that the Seller Retained Policies will not continue
to insure the Seller Assets or the Seller Business after the Closing Date and
that it is incumbent upon Buyer to obtain substitute policies of insurance that
provide insurance coverage for the Seller Assets and the Seller Business. Buyer
hereby further acknowledges that in the event any casualty or loss, including a
product liability or workers' compensation claim, relating to the Seller Assets
or Seller Business occurs prior to or on the Closing Date, such loss shall be
payable solely from the Seller Retained Policies. Buyer hereby further
acknowledges that in the event any casualty or loss, including a product
liability or workers' compensation claim, relating to the Seller Assets or
Seller Business occurs after the Closing Date, such loss shall be payable
solely from such substitute policies. Any such substitute policies shall
include a waiver of any rights of subrogation that the insurance carriers
underwriting such policies may have against Seller or Seller's Affiliates, or
under the Seller Retained Policies.
6.14 Office Space
The parties hereby agree and acknowledge that certain employees of
Seller will remain in the premises located at 1979 Lakeside Parkway Suite 800,
Tucker, Georgia for a period not to exceed 60 days following the Closing Date
and that Seller shall have no obligation to make any payment to Buyer in
respect of rent, utilities, office services or otherwise related to the office
space used by such employees during such 60-day period.
ARTICLE 7.
EMPLOYEE MATTERS
Seller shall transfer, or cause the transfer, to Buyer of the
employees of Seller associated with the Seller Assets and the Seller Business
("Seller Transferred Employees"). Buyer shall maintain, or cause to be
maintained, employee benefit and compensation plans, programs and arrangements
(the "Plans") for the benefit of the Seller Transferred Employees. With respect
to each Plan in which a Seller Transferred Employee participates, for purposes
of determining eligibility, vesting and amount of benefits, including severance
benefits and paid time off entitlement (but not for pension benefit accrual
purposes), Buyer shall cause service with Seller (or predecessor employers to
the extent Seller provided past service credit) to be treated as service with
Buyer and its Affiliates; provided, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits
or to the extent that such service was not recognized under an analogous plan
of Seller. With respect to any Plan maintained in which Seller Transferred
Employees are eligible to participate, Buyer shall, and shall cause its
Affiliates to, (i) waive all limitations as to preexisting conditions and
exclusions with respect to participation and coverage requirements applicable
to such employees to the extent such conditions and exclusions were satisfied
or did not apply to such employees under the analogous plan of Seller and (ii)
provide each Seller Transferred Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any analogous
deductible or out-of-pocket requirements to the extent applicable under any
such plan. Effective as of the Closing Date, the Seller Transferred Employees
shall cease to participate (and thus shall no longer be eligible for vesting or
benefit accrual under) any employee benefit or compensation plans, programs or
arrangements maintained by Seller.
ARTICLE 8.
INDEMNIFICATION
8.1 Environmental Indemnity.
Seller, in addition to its other indemnity obligations otherwise
provided in this Article 8, agrees to indemnify and hold harmless Buyer and its
officers, shareholders, members, managers, directors, employees, agents,
successors, and assigns (the "Seller Environmental Indemnitees"), against and
in respect of, any and all Damages and/or claims that may be incurred by any of
the Seller Environmental Indemnitees, or assessed against any of the Seller
Environmental Indemnitees by any other party or parties (including a
governmental entity) arising out of, in connection with, or relating to the
subject matter of: (a) the breach or inaccuracy of any of the representations
and warranties set forth in Section 3.7; (b) any Seller Environmental Condition
which exists as of the Closing Date, even if not discovered until after the
Closing Date, including remediation of such condition and loss of life, injury
to Persons or property, or Damage to natural resources arising from such
condition; (c) any violation of an Environmental Law prior to the Closing Date
that relates to the Seller Real Property or the Seller Business; or (d) the
off-site transportation, storage, disposal, treatment or recycling of Hazardous
Materials generated by or on behalf of the Seller Business on or prior to the
Closing Date, including any claims related to remediation of such Hazardous
Materials and loss of life, injury to Persons or property, or Damage to natural
resources arising from such Hazardous Materials. Such Damages or claims may
sometimes be referred to herein as "Seller Environmental Liabilities." This
indemnity shall survive the Closing Date only for a period of five (5) years
after the Closing Date. Any testing or investigation that Buyer deems
reasonably necessary in order to determine whether any environmental indemnity
obligations of Seller exist hereunder may be conducted at any time prior to the
termination of this indemnity obligation at the expense of Buyer.
8.2 Indemnity By Seller.
Subject to the provisions of this Article 8, Seller agrees to pay and
to indemnify fully, hold harmless and defend each Buyer Indemnified Party from
and against any and all claims or Damages arising out of or relating to:
(a) any inaccuracy or breach of any representation or warranty of
Seller contained in this Agreement;
(b) any breach of any covenant or agreement of Seller contained in
this Agreement;
(c) the liabilities and obligations of Seller or any of its Affiliates
arising out of the operation or ownership of the Seller Assets or the Seller
Business on or prior to the Closing Date, except Assumed Liabilities; and
(d) all obligations or liabilities that arise, whether before, on or
after, the Closing Date, out of, or in connection with, the Retained Seller
Assets;
provided that Seller shall have an obligation to indemnify any Buyer
Indemnified Party for Damages pursuant to this Section 8.2 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Buyer
Indemnified Party pursuant to any contract to which any Buyer Indemnified Party
is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Buyer
Indemnified Party, Seller shall be subrogated to all rights of the Buyer
Indemnified Party against any third party in respect of the losses to which
such payment relates, and such Buyer Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 8.2 shall require a Buyer
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 8.
8.3 Indemnity by Buyer.
Subject to the provisions of this Article 8, Buyer agrees to pay and
to indemnify fully, hold harmless and defend each Seller Indemnified Party from
and against any and all claims or Damages arising out of or relating to:
(a) any inaccuracy or breach of any representation or warranty of
Buyer contained in this Agreement;
(b) any breach of any covenant or agreement of Buyer contained in this
Agreement; and
(c) any and all Assumed Liability;
provided that Buyer shall have an obligation to indemnify any Seller
Indemnified Party for Damages pursuant to this Section 8.3 only to the extent
that such Damages are in excess of (i) any amounts recovered by any Seller
Indemnified Party pursuant to any contract to which any Seller Indemnified
Party is a party and (ii) any insurance proceeds received with respect thereto
(exclusive of amounts recovered which are subject to retrospective payments or
premiums); provided, further, that upon making any payment to any Seller
Indemnified Party, Buyer shall be subrogated to all rights of the Seller
Indemnified Party against any third party in respect of the losses to which
such payment relates, and such Seller Indemnified Party will execute upon
request all instruments reasonably necessary to evidence and perfect such
subrogation rights. Nothing in this Section 8.3 shall require a Seller
Indemnified Party to seek to recover Damages from any third party before making
a claim for indemnification pursuant to Article 8.
8.4 Exclusive Remedy.
Except as provided in Section 10.12, the right to indemnification
provided for in Sections 8.2 and 8.3 shall be the exclusive remedy of all
Indemnified Parties with respect to the transactions contemplated under this
Agreement.
8.5 Indemnification Procedures.
The party or parties making a claim for indemnification under Section
8.1, 8.2 or 8.3 shall be, for the purposes of this Agreement, referred to as
the "Indemnified Party" and the party or parties against whom such claims are
asserted under this Article 8 shall be, for the purposes of this Agreement,
referred to as the "Indemnifying Party." All claims by any Indemnified Party
under this Article 8 shall be asserted and resolved as follows:
(a) In the event that (i) any claim, demand or Proceeding is asserted
or instituted by any Person other than the parties to this Agreement or their
Affiliates which could give rise to Damages for which an Indemnifying Party
could be liable to an Indemnified Party under this Agreement (such claim,
demand or Proceeding, a "Third Party Claim") or (ii) any Indemnified Party
under this Agreement shall have a claim to be indemnified by any Indemnifying
Party under this Agreement which does not involve a Third Party Claim (such
claim, a "Direct Claim"), the Indemnified Party shall with reasonable
promptness send to the Indemnifying Party a written notice specifying the
nature of such claim, demand or Proceeding and the amount or estimated amount
thereof if known (which amount or estimated amount shall not be conclusive of
the final amount, if any, of such claim, demand or Proceeding) (a "Claim
Notice").
(b) In the event of a Third Party Claim, the Indemnifying Party shall
be entitled to appoint counsel of the Indemnifying Party's choice at the
expense of the Indemnifying Party to represent the Indemnified Party and any
others the Indemnifying Party may reasonably designate in connection with such
claim, demand or Proceeding (in which case the Indemnifying Party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by any Indemnified Party except as set forth below); provided that
such counsel is reasonably acceptable to the Indemnified Party. Notwithstanding
an Indemnifying Party's election to appoint counsel to represent an Indemnified
Party in connection with a Third Party Claim, an Indemnified Party shall have
the right to employ separate counsel, and the Indemnifying Party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest or (ii) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party within
a reasonable time after notice of the institution of such Third Party Claim. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim, demand or
Proceeding which the Indemnifying Party defends, or, if appropriate and related
to the claim, demand or Proceeding in question, in making any counterclaim
against the Person asserting the Third Party Claim, or any cross-complaint
against any Person. No Third Party Claim may be settled or compromised (i) by
the Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed or (ii) by
the Indemnifying Party without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed. In the
event any Indemnified Party settles or compromises or consents to the entry of
any Judgment with respect to any Third Party Claim without the prior written
consent of the Indemnifying Party, each Indemnified Party shall be deemed to
have waived all rights against the Indemnifying Party for indemnification under
this Article 8 with respect to such Third Party Claim.
(c) In the event of a Direct Claim the Indemnifying Party shall notify
the Indemnified Party within thirty (30) days of receipt of a Claim Notice
whether or not the Indemnifying Party disputes such claim.
(d) From and after the delivery of a Claim Notice under this
Agreement, at the reasonable request of the Indemnifying Party, each
Indemnified Party shall grant the Indemnifying Party and its representatives
all reasonable access to the books, records and properties of such Indemnified
Party to the extent reasonably related to the matters to which the Claim Notice
relates. All such access shall be granted during normal business hours and
shall be granted under conditions, which will not unreasonably interfere with
the business and operations of such Indemnified Party. The Indemnifying Party
will not, and shall require that its representatives do not, use (except in
connection with such Claim Notice) or disclose to any third person other than
the Indemnifying Party's representatives (except as may be required by
applicable Law) any information obtained pursuant to this Section 8.5(d).
8.6 Monetary and Payment Limitations.
(a) Neither Seller nor Buyer shall have any obligation to indemnify a
Buyer Indemnified Party or Seller Indemnified Party pursuant to Sections 8.2(a)
or 8.3(a), respectively, unless the aggregate amount of Damages suffered by all
Buyer Indemnified Parties or Seller Indemnified Parties, as the case may be, in
respect of such claims exceeds $1,000,000, in which case the Buyer Indemnified
Parties or Seller Indemnified Parties, as the case may be, shall be entitled to
recover all Damages including the $1,000,000. For purposes of determining when
and whether the $1,000,000 threshold for indemnification set forth in this
paragraph (a) has been met, the calculation of Damages suffered by an
Indemnified Party in respect of claims pursuant to Sections 8.2(a) or 8.3(a),
as the case may be, shall be deemed to include the aggregate amount of Damages
suffered by all Buyer Indemnified Parties or Seller Indemnified Parties, as the
case may be, and for which claims for indemnification have been made by such
Indemnified Parties pursuant to Section 9.1(a) or Section 9.2(a), as the case
may be, of the Asset and Capital Contribution Agreement dated July 1, 2005, by
and among Ready Mix USA, Inc., CEMEX Holdings LLC and Ready Mix USA, LLC (the
"Ready Mix LLC Contribution Agreement"). For the avoidance of doubt, and by way
of example, in the event that an Indemnified Party suffers Damages (i) in the
amount of $500,000 for which such Indemnified Party would be indemnified under
Section 9.1(a) or Section 9.2(a) of the Ready Mix LLC Contribution Agreement,
as the case may be, but for the limitation provided in Section 9.6(a) of the
Ready Mix LLC Contribution Agreement, and (ii) in the amount of $500,000 for
which such Indemnified Party would be indemnified under Section 8.2(a) or
Section 8.3(a) of this Agreement, as the case may be, but for the limitation
provided in this paragraph (a), then the Indemnified Party shall be entitled to
recover the full $1,000,000 in Damages from the Indemnifying Party.
(b) Notwithstanding any provision of this Agreement to the contrary,
the aggregate liability of Seller or Buyer for Damages in respect of all claims
for indemnification pursuant to Section 8.2(a) or 8.3(a), respectively, shall
in no event exceed the Purchase Price. NO PARTY SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, OR SIMILAR DAMAGES, EXCEPT TO THE
EXTENT ASSERTED BY, AWARDED, PAID OR PAYABLE TO ANY THIRD PARTY.
(c) The parties mutually agree that payment to a Buyer Indemnified
Party by Seller for Damages shall be paid solely from the required EBITDA
distributions to be paid to Cemex Holdings LLC or any of its Affiliates
pursuant to Section 6.1 of the Ready Mix LLC Agreement and Section 6.1 of the
Cemex LLC Agreement, as the case may be, and subject to the terms of Section 21
of the Ready Mix LLC Agreement, as amended by the Ready Mix Amendment, and
Section 21 of the Cemex LLC Agreement, as amended by the Cemex LLC Amendment.
(d) Notwithstanding the foregoing, the Indemnified Party shall not be
limited to recovery of Damages pursuant to clause (c) above with respect to
Damages arising out of or relating to any fraud by Seller or Buyer in
connection with this Agreement, the discussions and negotiations leading up to
this Agreement or the transaction contemplated herein, and each of Seller and
Buyer shall be and remain liable to the other for any Damages arising out of
any such claim or fraud.
8.7 Survival.
Except for the representations and warranties in Section 3.2(a), which
shall survive without limit, the representations and warranties of Seller
contained in this Agreement shall survive the Closing Date for the applicable
period set forth in this Section 8.7, and any and all claims and causes of
action for indemnification under this Article 8 arising out of the inaccuracy
or breach of any representation or warranty of Seller must be made prior to the
termination of the applicable survival period set forth in this Section 8.7.
All of the representations and warranties of Seller contained in this Agreement
and any and all claims and causes of action for indemnification under this
Article 8 with respect thereto shall terminate on the second anniversary of the
date of this Agreement; provided that the representations and warranties in
Sections 3.3, 3.6, and 3.19 shall survive until the expiration of the
applicable statute of limitations; provided further that the representations
and warranties in Sections 3.7 shall survive until the fifth anniversary of the
date of this Agreement; it being understood that in the event notice of any
claim for indemnification under Section 8.2(a) shall have been given within the
applicable survival period, the representations and warranties that are the
subject of such indemnification claim shall survive until such time as such
claim is finally resolved.
8.8 Binding Nature.
The indemnity obligations imposed under this Article 8 shall be
binding upon the parties hereto and their respective successors and assigns.
Wherever possible, such indemnity obligations shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of these indemnity obligations shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of the said indemnity
obligations.
ARTICLE 9.
[Omitted]
ARTICLE 10.
GENERAL PROVISIONS
10.1 Reliance on Representations and Warranties.
The parties mutually agree that notwithstanding any right of any party
to investigate the affairs of any other party and notwithstanding any Knowledge
of any facts determined or determinable by such party pursuant to such
investigation or right of investigation, each party has the right to fully rely
upon the respective representations and warranties of each other party
contained in this Agreement.
10.2 Amendments.
No change, modification or amendment to this Agreement shall be
effective unless the same shall be in writing and signed by the parties hereto.
10.3 Notices.
Any and all notices or other communications required or permitted to
be given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or mailed by
first class registered mail, return receipt requested, addressed to the parties
at the addressees set forth below (or at such other address as any party may
specify by notice to all other parties given as aforesaid).
If to Buyer:
Ready Mix USA, LLC
2570 Ruffner Road
Birmingham, Alabama 35210
Attn: Marc Bryant Tyson
With a copy, which shall not constitute notice, to:
Ready Mix USA, Inc.
1300 McFarland Boulevard N.E.
Tuscaloosa, Alabama 35406
Attn: Scott M. Phelps
If to Seller:
RMC Mid-Atlantic, LLC
c/o CEMEX, Inc.
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Jesus Gonzalez Herrera
With copies, which shall not constitute notice, to:
CEMEX, Inc.
840 Gessner, Suite 1400
Houston, TX 77024
Attn: Leslie White
Skadden, Arps, Slate, Meagher & Flom LLP
1600 Smith, Suite 4400
Houston, TX 77002
Attn: Frank Ed Bayouth II
10.4 Expenses.
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel, and accountants.
10.5 Binding Effect.
This Agreement shall be binding and conclusive upon and inure to the
benefit of the respective parties hereto and their successors and assigns.
10.6 Waiver.
Failure of any party hereto to insist upon the strict performance of
any of the covenants or conditions of this Agreement or to exercise any right
or option conferred herein in one or more instances shall not be construed as a
waiver or relinquishment of any such covenant, or condition, right or option,
but the same shall remain in full force and effect. The committing by either
party of any act or thing which it is not obligated to do hereunder shall not
be deemed to impose an obligation upon it to do any such act or thing in the
future or in any way change or alter any provision of this Agreement.
10.7 Counterparts.
This Agreement may be executed by original or facsimile signatures in
several counterparts that together shall constitute but one and the same
agreement, binding on both the parties notwithstanding that both parties have
not signed the same counterpart.
10.8 Construction.
(a) This Agreement shall be construed in its entirety according to its
plain meaning and shall not be construed against the party who provided or
drafted it. Any reference to an Article, Section, Schedule or Annex is a
reference to an Article or Section of, or a Schedule or an Annex to, this
Agreement.
(b) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(c) The words "include", "includes" and "including" are not limiting,
and shall be deemed to be followed by the phrase "without limitation".
(d) The terms "dollars" and "$" mean United States dollars.
(e) The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 1, 2005.
(f) The conjunction "or" shall be understood in its inclusive sense
(and/or).
(g) The word "day" shall be understood to be equal to a calendar day
unless otherwise specified.
10.9 Captions.
The titles of the Articles, Sections, Schedules and Annexes of this
Agreement have been assigned thereto for convenience only and shall not be
construed as limiting, defining or affecting the substantive terms of this
Agreement.
10.10 Applicable Law.
This Agreement shall be construed in accordance with the laws of the
State of Georgia, without giving effect to its principles or rules of conflict
of laws.
10.11 Consent to Jurisdiction.
All disputes, litigation, proceedings or other legal actions by any
party to this Agreement in connection with or relating to this Agreement or any
matters described or contemplated in this Agreement shall be instituted in the
courts of the State of Georgia, or of the United States in the State of
Georgia, in either case, sitting in Atlanta, Georgia. Each party to this
Agreement irrevocably submits to the exclusive jurisdiction of the courts of
the State of Georgia, and of the United States, in either case, sitting in
Atlanta, Georgia, in connection with any such dispute, litigation, action or
proceeding arising out of or relating to this Agreement. Each party to this
Agreement may receive the service of any process or summons in connection with
any such dispute, litigation, action or proceeding brought in any such court by
a mailed copy of such process or summons sent to it at its address set forth,
and in the manner provided, in Section 10.3. Each party to this Agreement
irrevocably waives, to the fullest extent permitted by applicable law, any
defense or objection it may now or hereafter have to the laying of venue of any
proceeding under this Agreement brought in the courts of the State of Georgia,
or of the United States in the State of Georgia, in either case, sitting in
Atlanta, Georgia, and any claim that any proceeding under this Agreement
brought in any such court has been brought in an inconvenient forum.
10.12 Specific Performance.
The parties to this Agreement agree that irreparable Damage would
occur in the event that any provision of this Agreement was not performed in
accordance with the terms of this Agreement and that the parties shall be
entitled to specific performance of the terms of this Agreement in addition to
any other remedy at Law or equity.
10.13 Translation.
Should this Agreement be translated into any language other than
English, the English version shall control and prevail on any question of
interpretation or otherwise.
10.14 Assignment.
This Agreement shall be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement shall not be assignable
or otherwise transferable by any of Seller or Buyer without the prior written
consent of the other parties and any attempt to so assign or transfer this
Agreement without such consent shall be void and of no effect.
10.15 Entire Agreement.
This Agreement (including the Schedules and Exhibits hereto) and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement of the parties and supersedes any and all prior
agreements, arrangements and understandings relating to the subject matters
hereof and thereto.
10.16 Rights of Creditors and Third Parties under this Agreement.
This Agreement is entered into between Seller and Buyer for the
exclusive benefit of Seller and Buyer, and their successors and permitted
assigns. This Agreement is expressly not intended for the benefit of any
creditor of Seller or Buyer or any other Person. Except and only to the extent
provided by applicable statute, no such creditor or third party shall have any
rights under this Agreement.
10.17 Severability.
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
10.18 Definitions.
"Allocation Schedule" has the meaning set forth in Section 2.3(e).
"Affiliate" of, or Person "affiliated" with a specified Person, means,
with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with, such Person. For the
purposes of this definition, "control" (including, with correlative meaning,
the terms "controlled," "controlled by" and "under common control with") shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the Preamble and includes any
amendments or other modifications and supplements to this Agreement, and all
exhibits, schedules and other attachments to it, as executed and delivered by
the parties thereto.
"Applicable Law" means all applicable provisions of any constitution,
statute, law, ordinance, code, rule, regulation, decision, order, decree,
judgment, release, license, permit, stipulation or other official pronouncement
enacted or issued by any Governmental Authority or arbitrator or arbitration
panel.
"Assumed Liabilities" has the meaning set forth in Section 2.4.
"Board" means the Board of Managers of Ready Mix USA, LLC, a Delaware
limited liability company.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banks in New York City are authorized or obligated by law or executive
order to close.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Disclosure Schedule" has the meaning set forth in Article 4.
"Buyer Indemnified Party" means Buyer, Buyer's Affiliates, managers,
directors, officers, members, shareholders, attorneys, accountants, agents and
employees, and their respective heirs, successors and assigns.
"Buyer Material Adverse Effect" has the meaning set forth in Section
4.2.
"Buyer Required Contractual Consents" has the meaning set forth in
Section 4.2.
"Consent" means any consent, waiver, approval, authorization,
exemption, registration or declaration.
"CEMEX Holdings LLC" has the meaning set forth in Section 5.5(m).
"CEMEX LLC" means CEMEX Southeast LLC, a Delaware limited liability
company.
"CEMEX LLC Agreement" has the meaning set forth in Section 5.5(n).
"CEMEX LLC Amendment" has the meaning set forth in Section 5.5(n).
"Claim Notice" has the meaning set forth in Section 8.5(a).
"Closing" has the meaning set forth in Section 5.1(a).
"Closing Date" has the meaning set forth in Section 5.1(b).
"Closing Working Capital" has the meaning set forth in Section 2.3(b).
"Closing Purchase Price" has the meaning set forth in Section 2.3(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Contracts" has the meaning set forth in Section 3.5(a)(i).
"Damages" means liabilities, damages, penalties, Judgments,
assessments, losses, costs and expenses in any case, whether arising under
strict liability or otherwise (including reasonable attorneys' fees) including
lost profits, lost benefits, loss of or diminution in enterprise value and loss
of goodwill, but excluding consequential, incidental, special, punitive or
similar damages, except to the extent such consequential, incidental, special,
punitive or similar damages are asserted by, awarded, paid or payable to any
third party.
"Direct Claim" has the meaning set forth in Section 8.5(a).
"Effective Time" has the meaning set forth in Section 5.1(b).
"Environmental Law" means the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Sections 6901, et seq., as amended ("RCRA"); the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
U.S.C. Sections 9601, et seq. (original act know as "CERCLA" or "Superfund,"
the Amendments are known as "SARA"); the HSWA amendments to RCRA regulating
Underground Storage Tanks ("USTS"), 42 U.S.C. " 6991-6991(i); the Clean Air Act
of 1963 as amended in 1970 and 1977, 42 U.S.C. ' 7401, et seq. ("Clean Air
Act"); the Federal Water Pollution Control Act of 1976, as subsequently amended
by the Clean Water Act of 1977 and 1987, 33 U.S.C. " 1251, et seq. ("Clean
Water Act"), and the Toxic Substances Control Act of 1976, 15 U.S.C. " 2501
("TSCA"), and all other federal, state and local laws, regulations, rules or
ordinances implementing or otherwise dealing with the subject matter of the
preceding federal statutes or otherwise relating to the protection of human
health or the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any entity that is a member of a controlled
group for purposes of Section 4001(a)(14) of ERISA.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means (i) any domestic or foreign national,
state or local government, any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, court, department, bureau or entity,
or (ii) any arbitrator with authority to legally bind a party or any of its
Affiliates.
"Hazardous Material" shall mean any pollutant, toxic substance
including asbestos and asbestos-containing materials, hazardous waste,
hazardous material or hazardous substance as defined in or controlled by the
Environmental Law.
"Impartial Accounting Firm" has the meaning set forth in Section
2.3(c)(iii).
"Indemnified Party" has the meaning set forth in Section 8.5.
"Indemnifying Party" has the meaning set forth in Section 8.5.
"Judgments" means any judgments, injunctions, orders, writs, rulings
or awards of any court or other judicial authority or any governmental,
administrative or regulatory authority of competent jurisdiction.
"Knowledge" shall mean, with respect to the Buyer, the actual
knowledge of Jesus Gonzalez Herrera, Leslie White, Andy Miller, Steve Wise,
Luis Oropeza, Chris Crouch, and Frank Craddock, and with respect to the Seller,
the actual knowledge of Marc Bryant Tyson, Scott M. Phelps, Bill Roy and Bill
Holden.
"Laws" means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order or decree.
"Lien" means all liens (statutory or otherwise), mortgages, pledges,
charges, security interests, sureties, options, easements, covenants,
restrictions or other encumbrances whatsoever.
"Material Seller Contract" has the meaning set forth in Section
3.5(a).
"Materials Inventory Value" has the meaning set forth in Section
2.3(b).
"Parts Inventory Value" has the meaning set forth in Section 2.3(b).
"Permits" means all permits, authorizations, approvals, registrations,
licenses, certificates, variances and similar rights granted by or obtained
from any federal, state, local or foreign governmental, administrative or
regulatory authority.
"Permitted Encumbrances" means (a) mechanics', carriers',
warehousemens', workmens' and other similar Liens arising with respect to the
Seller Assets, in the ordinary course of the Seller Business which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (b) Liens for taxes, assessments and other governmental charges
not yet due and payable or that may subsequently be paid without penalty or
that are being contested in good faith by appropriate proceedings, and (c) with
respect to the Seller Real Property, encumbrances to fee simple, leasehold or
easement title for: (i) Seller Real Property taxes or other property taxes,
assessments, governmental charges or levies not yet due; (ii) easements,
rights-of-way, licenses, restrictions, reservations of mineral rights (with
surface rights being waived) or similar encumbrances that do not materially
impair the marketability, use or operation of such Seller Real Property by
Buyer; and (iii) rights of tenants in possession of any such Seller Real
Property pursuant to tenant leases to be assigned to the Buyer.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or other entity or
organization.
"Plans" has the meaning set forth in Article 7.
"Proceeding" means any action, suit, demand, claim, legal or
administrative proceeding or any arbitration or other alternative dispute
resolution proceeding, hearing or investigation.
"Purchase Price" has the meaning set forth in Section 2.3(c)(i).
"Ready Mix LLC Agreement" has the meaning set forth in Section 5.5(m).
"Ready Mix LLC Amendment" has the meaning set forth in Section 5.5(m).
"Ready Mix LLC Contribution Agreement" has the meaning set forth in
Section 8.6(a).
"Retained Seller Assets" has the meaning set forth in Section 2.1.
"RMUSA" has the meaning set forth in Section 5.6(e).
"Seller" has the meaning set forth in the Preamble.
"Seller Accounts Receivable" has the meaning set forth in Schedule
2.1(a)(5).
"Seller Assignment and Assumption Agreement" has the meaning set forth
in Section 5.5(l).
"Seller Assets" has the meaning set forth in Section 2.1.
"Seller Assumed Contracts" has the meaning set forth in Schedule
2.1(a)(8).
"Seller Authorized Person" has the meaning set forth in Section
5.5(g).
"Seller Bill of Sale" has the meaning set forth in Section 5.5(a).
"Seller Business" has the meaning set forth in Section 2.1.
"Seller Business Locations" has the meaning set forth in Section 2.1.
"Seller Disclosure Schedule" has the meaning set forth in Article 3.
"Seller Environmental Condition" has the meaning set forth in Section
3.7(a).
"Seller Environmental Indemnitees" has the meaning set forth in
Section 8.1.
"Seller Environmental Liabilities" has the meaning set forth in
Section 8.1.
"Seller Financial Statements" means the statement of income for the
Seller Assets for the twelve months ended December 31, 2004.
"Seller Indemnified Party" means Seller, Seller's Affiliates,
directors, managers, officers, members, shareholders, attorneys, accountants,
agents and employees, and their respective heirs, successors and assigns.
"Seller Intangible Property" means intellectual property owned by
Seller or any Affiliate of Seller.
"Seller Inventory" has the meaning set forth in Schedule 2.1(a)(3).
"Seller Land" has the meaning set forth in Schedule 2.1(a)(1).
"Seller Leases" has the meaning set forth in Schedule 2.1(a)(8).
"Seller Lease Assignment" has the meaning set forth in Section 6.3(a).
"Seller Material Adverse Effect" has the meaning set forth in Section
3.4.
"Seller Permits" has the meaning set forth in Schedule 2.1(a)(9).
"Seller Real Property" has the meaning set forth in Schedule
2.1(a)(1).
"Seller Required Contractual Consents" has the meaning set forth in
Section 3.8.
"Seller Retained Names" has the meaning set forth in Schedule
2.1(b)(5).
"Seller Retained Policies" has the meaning set forth in Schedule
2.1(b)(4).
"Seller Transferred Employees" has the meaning set forth in Article 7.
"Seller Warranty Deed" has the meaning set forth in Section 5.5(b).
"Seller Working Capital Statement" has the meaning set forth in
Section 2.3(c)(i).
"Taxes" has the meaning set forth in Schedule 2.4(5).
"Third Party Claim" has the meaning set forth in Section 8.5(a).
"Time Period" has the meaning set forth in Schedule 6.11(A).
"Title Company" shall mean either of First American Title Insurance
Company or Fidelity National Title Insurance Company.
"Title Policy" means an ALTA owner's policy of title insurance in a
form acceptable to Buyer, with respect to any such policy issued for Seller
Real Property (or, with respect to any parcel of Seller Real Property that is
in a State which does not permit the issuance of such ALTA policy, such form as
shall be permitted in such State and acceptable to Buyer) issued by the Title
Company with respect to such Seller Real Property and insuring Buyer's
indefeasible fee simple ownership of such Seller Real Property as of the date
hereof, subject only to the standard exceptions and exclusions from coverage
and the Permitted Encumbrances, with respect to any such policy issued for
Seller Real Property.
"Unassigned Contract" has the meaning set forth in Section 6.4.
"WARN Act" means the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. ss. ss. 2101-2109.
"Working Capital Adjustment Amount" has the meaning set forth in
Section 2.3(c)(i).
IN WITNESS WHEREOF the parties have duly executed this Agreement as of
the day and year first above written.
BUYER:
READY MIX USA, LLC
By: Ready Mix USA, Inc.
Its Manager
By: /s/ Marc Bryant Tyson
------------------------------
Marc Bryant Tyson
Its President
SELLER:
RMC MID-ATLANTIC, LLC
By: /s/ Gilberto Perez
----------------------------------
Gilberto Perez
Its: Manager
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedule 2.1(a) Seller Assets
Schedule 2.1(a)-1 Seller Business Locations
Schedule 2.1(b) Retained Seller Assets
Schedule 2.3(d) Accounts
Schedule 2.4 Assumed Liabilities
Schedule 6.11 Transition Services and Terms
Exhibit 5.5(l) Seller Assignment and Assumption Agreement
Exhibit 5.5(m) Ready Mix LLC Amendment
Exhibit 5.5(n) CEMEX LLC Amendment
Exhibit 6.3(a) Seller Lease Agreement
Schedule 2.1(a)
---------------
Seller Assets
1. Real Property. Subject to the Permitted Encumbrances, the real property
owned, or in the case of (vi) below, leased, by Seller and consisting of:
(i) the real property described on Schedule 2.1(a)-1 (the "Seller Land"),
(ii) all buildings, structures and improvements located on the Seller
Land, to the extent owned by Seller, (iii) all fixtures, machinery,
apparatus or equipment affixed to the Seller Land, including all of the
electrical, heating, plumbing, air conditioning, air compression and all
other similar systems located on the Seller Land, to the extent owned by
Seller and to the extent that such items constitute fixtures, (iv) all
right, title and interest of Seller, reversionary or otherwise, in and to
all easements, if any, in or upon the Seller Land and all other rights and
appurtenances belonging or in any way pertaining to the Seller Land
(including Seller's right, title and interest in and to any mineral rights
or water rights relating to the Seller Land), (v) all right, title and
interest of Seller in, to or under all strips and gores and any land lying
in the bed of any public road, highway or other access way, open or
proposed, adjoining the Seller Land and (vi) the Seller Leases
(collectively, the "Seller Real Property");
2. Personal Property. Except as described on Schedule 2.1(b), the tangible
personal property that is either located on the Seller Real Property or
used or intended for use primarily in, or which is being utilized or
operated by Seller primarily in the Seller Business as presently
conducted, including all off road, non-titled rolling stock, material
handling equipment, wheel loaders, track dozers, scrapers, water trucks,
haul trucks, conveyor system, aggregate processing equipment/crushers and
machinery, storage silos, installed control systems, installed electric
motors, conveyors, cement and raw material storage and handling equipment,
weigh scales, office furniture, business machines, cement/aggregate
testing and laboratory equipment, tools and fixtures;
3. Inventory. Except as described on Schedule 2.1(b), all inventory,
including all inventories of products, work in process, finished goods,
raw materials, supplies, parts, cement, construction aggregate, coal and
fuel, lubricants, machinery and equipment repair parts and components,
including those tools, fuel, repair parts, components and other items, and
including the supplies of coal, clay, construction aggregate, fly and
bottom ash and other raw materials and repair parts (collectively, "Seller
Inventory");
4. Prepaid Items. All of Seller's rights and interests relating to prepaid
expenses, advance payments, deposits and prepaid items, including prepaid
interest and deposits with lessors, suppliers or utilities, which relate
primarily to the Seller Business;
5. Accounts Receivable. Except as described on Schedule 2.1(b), Seller's
accounts receivable primarily arising out of the conduct of the Seller
Business and outstanding as of the Closing Date, including any payments
received by Seller or any of its Affiliates with respect thereto on or
after the Closing Date, and unpaid interest accrued on any accounts
receivable and any security or collateral relating thereto (collectively,
"Seller Accounts Receivable");
6. Books, Records and Written Materials. Except as described on Schedule
2.1(b), all of Seller's and its Affiliates' books and records, whether in
hard copy or in electronic format (e.g. computer files), including all
production data, equipment maintenance data, accounting records, (but
specifically excluding those files related to the Retained Seller
Litigation), and any inventory records, sales and sales promotional data
and materials, advertising materials, sales training materials,
educational support program materials, cost and pricing information,
business plans, quality control records and manuals, blueprints, research
and development files, records and laboratory books, patent disclosures,
correspondence, and any other records and data, in each case (i) used
primarily in or necessary for the conduct of the Seller Business or (ii)
that are located on the Seller Real Property or are within the possession
or control of those Persons employed by Seller to work primarily for the
Business, and all books and records relating to Taxes (other than income
Taxes) with respect to the Seller Business; provided that nothing in this
paragraph 6 shall require Seller to deliver to Buyer or otherwise provide
Buyer access to any electronic records that cannot be separated from
information relating to the Seller Retained Assets or Seller's other
businesses;
7. Catalogs and Advertising Materials. Seller's promotional and advertising
materials relating primarily to or necessary for the conduct of the Seller
Business as presently conducted, including all catalogs, brochures, plans,
customer lists, supplier lists, manuals, handbooks, equipment and parts
lists, and dealer and distributor lists;
8. Assumed Contracts. Except as described on Schedule 2.1(b) and subject to
Section 6.3(b), all rights and benefits of Seller and its Affiliates in,
to or under all Contracts relating primarily to the Seller Business, to
which Seller or any of its Affiliates is a party or by which any of the
Seller Assets are bound, including (i) all rights of Seller in all
purchase and sales orders relating principally to the Business, (ii) all
rights of Seller as lessee under all leases of personal property relating
primarily to the Seller Business, (iii) all Contracts with suppliers for
any products, raw materials, supplies, equipment or parts heretofore sold,
or to be sold, by Seller used primarily in the Seller Business as
presently conducted, (iv) all rights of Seller either as lessee or lessor
under all leases affecting the Seller Real Property (the "Seller Leases"),
and (v) all other Contracts entered into between the date of this
Agreement and the Closing in accordance with Section 6.1 (all of the
foregoing being collectively, the "Seller Assumed Contracts");
9. Permits and Approvals. All licenses, permits, approvals, variances,
emission allowances, authorizations, waivers or consents used primarily in
or necessary for the conduct of the Seller Business as presently conducted
or ownership or operation of the Seller Real Property as currently
operated and issued to Seller by any Governmental Authority, to the extent
transferable (collectively, "Seller Permits");
10. Claims. Except as described on Schedule 2.1(b), all rights, privileges,
claims, demands, causes of action, claims in bankruptcy, indemnification
agreements with, and indemnification rights against, third parties,
warranty claims (to the extent transferable), offsets and other claims
relating to the Seller Assets or the Seller Business, but not to the
extent that they relate to the Retained Seller Assets or the Retained
Seller Liabilities; and
11. Goodwill. Any and all goodwill associated principally with the Seller
Business.
Schedule 2.1(a)-1
-----------------
Seller Business Locations
- --------------------------------------------------------------------------------------------------------------------------------
Owned/
Location Street Address City ST County Leased
- --------------------------------------------------------------------------------------------------------------------------------
Cartersville 144 Cassville Road Cartersville GA Bartow Owned
- --------------------------------------------------------------------------------------------------------------------------------
College Park 2194 West Point Avenue College Park GA Fulton Owned
- --------------------------------------------------------------------------------------------------------------------------------
Covington 160 Cook Road Covington GA Newton Owned and
Leased
- --------------------------------------------------------------------------------------------------------------------------------
Decatur 134 Maple Street Decatur GA DeKalb Owned
- --------------------------------------------------------------------------------------------------------------------------------
Downtown 1360 Marietta Boulevard Atlanta GA Fulton Owned
- --------------------------------------------------------------------------------------------------------------------------------
Lawrenceville 383 Maltbie Street (aggregates) Lawrenceville GA Gwinnett Owned
- --------------------------------------------------------------------------------------------------------------------------------
Lawrenceville 383 Maltbie Street (ready-mix) Lawrenceville GA Gwinnett Owned
- --------------------------------------------------------------------------------------------------------------------------------
Marietta 1398 Owenby Drive Marietta GA Cobb Owned
- --------------------------------------------------------------------------------------------------------------------------------
Rome 935 North Second Avenue Rome GA Floyd Owned
- --------------------------------------------------------------------------------------------------------------------------------
Stockbridge 500 South Lee Street Stockbridge GA Henry Owned
- --------------------------------------------------------------------------------------------------------------------------------
Douglasville 6611 West Bankhead Highway Douglasville GA Douglas Owned and
Leased
- --------------------------------------------------------------------------------------------------------------------------------
Buford 6711 McEvers Road Buford GA Hall Owned
- --------------------------------------------------------------------------------------------------------------------------------
Alpharetta 1320 Morrison Pkwy a/k/a Hembree Alpharetta GA Fulton Owned
Road
- --------------------------------------------------------------------------------------------------------------------------------
Armour Drive 340 Armour Drive Atlanta GA Fulton Leased
- --------------------------------------------------------------------------------------------------------------------------------
Auburn 269 Parks Mill Road Auburn GA Barrow Leased
- --------------------------------------------------------------------------------------------------------------------------------
Canton 715 Univeter Road Canton GA Cherokee Leased
- --------------------------------------------------------------------------------------------------------------------------------
Carrollton 369 Central Road Carrollton GA Carroll Leased
- --------------------------------------------------------------------------------------------------------------------------------
Dawsonville 171 Easy Street Dawsonville GA Dawson Leased
- --------------------------------------------------------------------------------------------------------------------------------
Fulco 4368 Martin Luther King Drive Atlanta GA Fulton Leased
- --------------------------------------------------------------------------------------------------------------------------------
Grayson 1125 Ozora Road Grayson GA Gwinnett Leased
- --------------------------------------------------------------------------------------------------------------------------------
Lilburn 125 Killian Hill Road Lilburn GA Gwinnett Leased
- --------------------------------------------------------------------------------------------------------------------------------
Madras 252 Elzie Johnson Road Madras GA Coweta Leased
- --------------------------------------------------------------------------------------------------------------------------------
North Fulton 3561 Peachtree Parkway Suwanee GA Forsyth Leased
- --------------------------------------------------------------------------------------------------------------------------------
RMC Mid-Atlantic Concrete Products 1979 Lakeside Parkway Ste. 800 Tucker GA DeKalb Leased
- --------------------------------------------------------------------------------------------------------------------------------
Scottdale 3305 E. Ponce de Leon Avenue Scottdale GA DeKalb Leased
- --------------------------------------------------------------------------------------------------------------------------------
Tyrone 115 Mallory Court Tyrone GA Fayette Leased
- --------------------------------------------------------------------------------------------------------------------------------
Doraville 6350 New Peachtree Road Doraville GA DeKalb Leased
- --------------------------------------------------------------------------------------------------------------------------------
Fayetteville 574 Highway 314 Fayetteville GA Fayette Leased
- --------------------------------------------------------------------------------------------------------------------------------
Schedule 2.1(b)
---------------
Retained Seller Assets
1. Cash. All cash, bank balances, money market accounts, moneys in possession
of banks and other depositories, term or term deposits and similar cash
equivalents and cash items of, owned or held by or for the account of
Seller;
3. Corporate and Other Records. The corporate books and records, including
stock certificates, treasury stock, stock transfer records, corporate
seals and minute books of Seller (i) which are not used in or necessary
for the conduct of the Seller Business and (ii) which are not located on
the Seller Real Property or are not within the possession or control of
those Persons employed to work principally for the Seller Business, (iii)
employee files for employees other than the Seller Transferred Employees,
(iv) Seller's Tax Returns and any tax supporting information related
thereto, and (v) any and all records related to pending or completed
litigation and claims;
4. Insurance. Any and all policies of insurance, whether or not covering the
Seller Assets or the Seller Business, that are or have been maintained or
managed through Seller or any of its Affiliates, including general
liability, property, casualty, product liability and workers' compensation
insurance (the "Seller Retained Policies"), including any and all amounts
recovered by Seller under such Seller Retained Policies;
5. Intellectual Property. All intellectual property of Seller and its
Affiliates, whether or not used primarily in or necessary for the conduct
of the Seller Business, including Seller's and its Affiliates' patents,
trade secrets, copyrights, trademarks, trade names, logos, slogans,
internet domain names, licenses and software, including any and all rights
(including any common law trademark rights) to the names CEMEX, CEMEX,
Inc., RMC, RMC Mid-Atlantic, RMC Mid-Atlantic LLC, RMC USA, RMC Allied
Materials, RMC Metromont Materials, RMC Allied Readymix, Inc., Metromont
Materials, Inc., RMC-CEMEX, RMC Metromont, RMC Allied Readymix, and
Metromont Materials LLC (such names, collectively, the "Seller Retained
Names"); and
6. Others. Reimbursement for expenses under the Georgia Underground Storage
Tank Trust Fund program.
Schedule 2.3(d)
---------------
Accounts
Seller's Account:
- -----------------
Bank Name: Bank of America
Account Name: RMC Industries
Account Number: 3750214635
Bank ABA Number: 111000012
Reference: Sale of Assets to Concrete Joint Venture
Buyer's Account:
- ----------------
Bank Name: Regions Bank
Pelham, Alabama
Account Name: Ready Mix USA, LLC
Account Number: 0509060999
Bank ABA Number: 062005690
Contact Person: John Mark Bentley
(205) 663-0723, Extension 244
Schedule 2.4
------------
Assumed Liabilities
1. Assumed Contracts. Subject to Section 6.4, all liabilities and obligations
of Seller arising after the Closing under the Assumed Contracts and any
and all obligations by Seller or any of its Affiliates to guarantee or
support obligations of the Buyer or any of its Subsidiaries under any of
the Assumed Contracts. For the avoidance of doubt, Buyer shall not assume
any liabilities or obligations arising out of any breach of or default
under such Assumed Contracts by Seller that occurred prior to the Closing;
2. Real Property. Except as set forth in Section 2.2 and Section 8.1, all
liabilities and obligations relating to, or occurring or existing in
connection with, or arising out of, the ownership and use of the Seller
Real Property, arising after the Closing;
3. Product Liability. Claims for product warranty, product liability,
refunds, returns, personal injury and property Damage, and all other
liabilities and obligations, relating to products sold or services
provided by Buyer after the Closing;
4. Post Closing Liabilities. Any liability, claim or obligation which is
based on events or conditions occurring or arising out of the Seller
Business as operated by Buyer after the Closing or the ownership,
possession, use or sale of the Seller Assets by Buyer after the Closing
(but, in each case, only to the extent such liability, claim or obligation
is based on events or conditions that occur or arise for the first time
after the Closing);
5. Taxes (excluding transfer and income Taxes). All liabilities and
obligations related to Taxes (excluding transfer and income Taxes) to the
extent due and payable after the Closing;
6. WARN. Any liabilities or obligations of Seller arising under the WARN Act
to the Seller employees arising out of a "plant closing" or "mass layoff"
(as those terms are defined under the WARN Act) occurring as of or after
the Closing.
7. Environmental Liabilities. (a) The Seller Environmental Liabilities
(except to the extent that such liabilities are subject to indemnification
pursuant to Section 8.1); and (b) any Damages that may be incurred as a
result of the presence of Hazardous Materials at the Seller Real Property
or property located in the vicinity of the Seller Real Property that
results from the ownership, possession, use, occupation, construction
and/or improvement to or operation of the Seller Business or Seller Real
Property, that exists as of the Closing Date but is not otherwise a Seller
Environmental Condition as defined in Section 3.7(a).
Schedule 6.11
-------------
Transition Services and Terms
A. Time Period: The transition services shall be provided for One Hundred and
Twenty (120) days following the Closing Date (the "Time Period").
Thereafter, Buyer shall have the right, in its sole discretion, to extend
the Time Period for up to four (4) additional sixty (60) day periods.
Following the expiration of the Time Period set forth in this Section A,
and any extension, Buyer shall have no further right to receive any
services or use any property described in this Schedule 6.11.
B. Payment for Transition Services. No payment for the transition services is
required for the initial Time Period. For any extension of the Time Period
required by Buyer, Buyer shall pay Seller Twenty Thousand Dollars
($20,000.00) for each 60-day extension Time Period.
C. Services Schedule:
a. Seller shall use reasonable efforts, within 30 days of the Closing
Date; to identify all software licenses that are part of or support
the Seller Assets, and Seller shall use reasonable efforts to
determine whether, under the applicable license agreement, the
software vendor will consent to the transfer of such software
licenses to Buyer. The prior sentence shall not apply to any software
license that also are utilized in any manner by other Seller
operations and cannot be bifurcated between the Seller Assets and
Seller. Provided that Seller uses reasonable efforts under this
Section C(a), Seller shall not be liable for any failure to identify
and make determination with regard to the software licenses described
in this Section C(a).
b. Seller will provide services and allow Buyer employees the continued
use of the Seller's phone systems, WAN data circuits, Command Series,
TracerNet, Baan, Customer Tracking System, Quadrel, TMT-Transman,
MyRMC, DriverTime, On-Base, Cognos, Oracle, invoice print
method/program, and applications and the related ancillary systems.
Seller shall provide to Buyer reasonable access to the
above-referenced systems and operations. The access to these systems
shall be subject to and limited by preexisting contractual agreements
that the seller has with the 3rd party vendors of the above-mentioned
systems, provided that in the event Buyer is not allowed access to
these systems, and to the extent permissible under such preexisting
contractual agreements, Seller shall provide the benefits of these
systems during the Time Period.
c. All control data changes required to transition from Seller systems
to Buyer systems will be the sole responsibility of Buyer. "Control
data" includes, but is not limited to, customer masters, trucks,
drivers, mix designs, and product codes. Seller will provide control
data transition assistance within accepted business practice, as
allowed by time constraints.
d. All communication circuits to the Seller Business Locations will be
kept operational for the duration of the Time Period, Seller will be
responsible for the support and troubleshooting of the circuits, at
the end of the final Time Period all lines will be cancelled. Buyer
will be responsible for providing its own communication circuits to
the Seller Business Locations.
e. Only the transition services as described above in this Schedule 6.11
will be provided. Without limiting the foregoing, Seller will not
provide any financial reporting and any inadvertent errors such as
incorrect shipments will result in no liability to Seller.
Exhibit 5.5(l)
--------------
Seller Assignment and Assumption Agreement
Exhibit 5.5(m)
--------------
Ready Mix LLC Amendment
Exhibit 5.5(n)
--------------
Cemex LLC Amendment
Exhibit 6.3(a)
--------------
Seller Lease Agreement
Exhibit 8.1
List of Subsidiaries
The following is a list of the significant subsidiaries of CEMEX, S.A.
de C.V. as of December 31, 2005, including the name of each subsidiary and its
country of incorporation:
CEMEX Mexico, S.A. De C.V......................... Mexico
CEMEX Concretos, S.A. De C.V...................... Mexico
CEMEX Espana, S.A................................. Spain
CEMEX Corp........................................ United States (DE)
CEMEX, Inc........................................ United States (LA)
Exhibit 12.1
Certification of the Principal Executive Officer of
CEMEX, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Lorenzo H. Zambrano, certify that:
1. I have reviewed this annual report on Form 20-F of CEMEX, S.A. de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Lorenzo H. Zambrano
-------------------------------
Lorenzo H. Zambrano
Chief Executive Officer
CEMEX, S.A. de C.V.
Exhibit 12.2
Certification of the Principal Financial Officer of
CEMEX, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Hector Medina, certify that:
1. I have reviewed this annual report on Form 20-F of CEMEX, S.A. de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Hector Medina
--------------------------------
Hector Medina
Executive Vice President of
Planning and Finance
CEMEX, S.A. de C.V.
Exhibit 12.3
Certification of the Principal Executive Officer of
CEMEX Mexico, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Lorenzo H. Zambrano, certify that:
1. I have reviewed this annual report on Form 20-F of CEMEX Mexico, S.A.
de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Lorenzo H. Zambrano
-------------------------------
Lorenzo H. Zambrano
Chief Executive Officer
CEMEX Mexico, S.A. de C.V.
Exhibit 12.4
Certification of the Principal Financial Officer of
CEMEX Mexico, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Hector Medina, certify that:
1. I have reviewed this annual report on Form 20-F of CEMEX Mexico, S.A.
de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Hector Medina
-------------------------------
Hector Medina
Executive Vice President of
Planning and Finance
CEMEX Mexico, S.A. de C.V.
Exhibit 12.5
Certification of the Principal Executive Officer of
Empresas Tolteca de Mexico, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Lorenzo H. Zambrano, certify that:
1. I have reviewed this annual report on Form 20-F of Empresas Tolteca de
Mexico, S.A. de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Lorenzo H. Zambrano
-------------------------------
Lorenzo H. Zambrano
Chief Executive Officer
Empresas Tolteca de Mexico, S.A.
de C.V.
Exhibit 12.6
Certification of the Principal Financial Officer of
Empresas Tolteca de Mexico, S.A. de C.V.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATIONS
I, Hector Medina, certify that:
1. I have reviewed this annual report on Form 20-F of Empresas Tolteca de
Mexico, S.A. de C.V.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the company as of, and for, the periods presented in this report;
4. The company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company
and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) Disclosed in this report any change in the company's internal
control over financial reporting that occurred during the
period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
5. The company's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial
reporting, to the company's auditors and the audit committee of the
company's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
company's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
company's internal control over financial reporting.
Date: June 7, 2006
/s/ Hector Medina
-------------------------------
Hector Medina
Executive Vice President of
Planning and Finance
Empresas Tolteca de Mexico, S.A.
de C.V.
Exhibit 13.1
Certification of the Principal Executive and Financial Officers of
CEMEX, S.A. de C.V.
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 20-F of CEMEX, S.A. de C.V. (the
"Company") for the year ended December 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Lorenzo H. Zambrano, as
Chief Executive Officer of the Company, and Hector Medina, as Executive Vice
President of Planning and Finance of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.
/s/ Lorenzo H. Zambrano
- -------------------------------------
Name: Lorenzo H. Zambrano
Title: Chief Executive Officer
Date: June 7, 2006
/s/ Hector Medina
- -------------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: June 7, 2006
This certification is furnished as an exhibit to the Report and accompanies the
Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be deemed filed by the Company for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
Exhibit 13.2
Certification of the Principal Executive and Financial Officers of
CEMEX Mexico, S.A. de C.V.
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 20-F of CEMEX Mexico, S.A. de C.V.
(the "Company") for the year ended December 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Lorenzo H.
Zambrano, as Chief Executive Officer of the Company, and Hector Medina, as
Executive Vice President of Planning and Finance of the Company, each hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.
/s/ Lorenzo H. Zambrano
- -------------------------------------
Name: Lorenzo H. Zambrano
Title: Chief Executive Officer
Date: June 7, 2006
/s/ Hector Medina
- -------------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: June 7, 2006
This certification is furnished as an exhibit to the Report and accompanies the
Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be deemed filed by the Company for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
Exhibit 13.3
Certification of the Principal Executive and Financial Officers of
Empresas Tolteca de Mexico, S.A. de C.V.
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 20-F of Empresas Tolteca de Mexico,
S.A. de C.V. (the "Company") for the year ended December 31, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
Lorenzo H. Zambrano, as Chief Executive Officer of the Company, and Hector
Medina, as Executive Vice President of Planning and Finance of the Company, each
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.
/s/ Lorenzo H. Zambrano
- -------------------------------------
Name: Lorenzo H. Zambrano
Title: Chief Executive Officer
Date: June 7, 2006
/s/ Hector Medina
- -------------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: June 7, 2006
This certification is furnished as an exhibit to the Report and accompanies the
Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be deemed filed by the Company for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
Exhibit 14.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
We hereby consent to the incorporation by reference into (i) the Registration
Statement on Form S-8 (File No. 333-13970) of CEMEX, S.A. de C.V., (ii) the
Registration Statement on Form S-8 (File No. 333-83962) of CEMEX, S.A. de C.V.,
(iii) the Registration Statement on Form S-8 (File No. 333-86060) of CEMEX,
S.A. de C.V. and (iv) the Registration Statement on Form S-8 (File No.
333-128657) of CEMEX, S.A. de C.V., of our reports dated January 27, 2006
(except for note 25, which is as of May 25, 2006), with respect to the
consolidated balance sheets of CEMEX, S.A. de C.V. and subsidiaries as of
December 31, 2004 and 2005, and the related consolidated statements of income,
changes in stockholders' equity and changes in financial position for each of
the years in the three year period ended December 31, 2005, and the related
financial statements schedules, which reports appear in this Annual Report on
Form 20-F of CEMEX, S.A. de C.V.
KPMG Cardena Dosal, S.C.
/s/ Leandro Castillo Parada
Leandro Castillo Parada
Monterrey, N.L., Mexico
June 6, 2006