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, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
Commission file number 1-14946 _____________________________________
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 five
Ordinary Participation Certificates (Certificados de
Participacion Ordinarios) ("CPOs"), each CPO representing
two Series A shares and one Series B share(1) New York Stock Exchange
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
Not applicable
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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.
- -------------------------------------------------------------------------------
(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.
- -------------------------------------------------------------------------------
(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.
1,789,730,511 CPOs (1)
3,703,634,244 Series A shares (including Series A shares
underlying CPOs) (1)
1,851,817,122 Series B shares (including Series B shares
underlying CPOs) (1)
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 which financial statement item the registrant
has elected to follow.
Item 17 Item 18 |X|
----- -----
(1) This information does not give effect to the stock split approved by
shareholders on April 28, 2005, which is expected to be effected in July 2005.
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......................................................................................8
Selected Consolidated Financial Information......................................................................9
Item 4 - Information on the Company..............................................................................13
Business Overview...............................................................................................13
RMC Business Overview...........................................................................................16
Our Production Processes........................................................................................18
User Base.......................................................................................................18
Our Business Strategy...........................................................................................19
Our Corporate Structure.........................................................................................21
North America...................................................................................................22
Europe, Asia and Africa.........................................................................................29
South America, Central America and the Caribbean................................................................34
Our Trading Operations..........................................................................................40
Description of RMC Operations...................................................................................41
Regulatory Matters and Legal Proceedings........................................................................45
Item 5 - Operating and Financial Review and Prospects............................................................52
Cautionary Statement Regarding Forward Looking Statements.......................................................52
Overview........................................................................................................52
Critical Accounting Policies....................................................................................53
Results of Operations...........................................................................................56
Liquidity and Capital Resources.................................................................................69
Research and Development, Patents and Licenses, etc.............................................................75
Trend Information...............................................................................................76
Summary of Material Contractual Obligations and Commercial Commitments..........................................77
Off-Balance Sheet Arrangements..................................................................................78
Qualitative and Quantitative Market Disclosure..................................................................78
Investments, Acquisitions and Divestitures......................................................................83
U.S. GAAP Reconciliation........................................................................................85
Newly Issued Accounting Pronouncements Under U.S. GAAP..........................................................85
Item 6 - Directors, Senior Management and Employees...............................................................87
Senior Management and Directors.................................................................................87
Board Practices.................................................................................................92
Compensation of Our Directors and Members of Our Senior Management..............................................92
Employees.......................................................................................................98
Share Ownership.................................................................................................98
Item 7 - Major Shareholders and Related Party Transactions.......................................................99
Major Shareholders..............................................................................................99
Related Party Transactions.....................................................................................100
i
Item 8 - Financial Information..................................................................................100
Consolidated Financial Statements and Other Financial Information..............................................100
Legal Proceedings..............................................................................................100
Dividends......................................................................................................100
Significant Changes............................................................................................101
Item 9 - Offer and Listing......................................................................................102
Market Price Information.......................................................................................102
Item 10 - Additional Information................................................................................103
Articles of Association and By-laws............................................................................103
Material Contracts.............................................................................................110
Exchange Controls..............................................................................................112
Taxation.......................................................................................................112
Documents on Display...........................................................................................115
Item 11 - Quantitative and Qualitative Disclosures About Market Risk............................................115
Item 12 - Description of Securities Other than Equity Securities................................................115
PART II.............................................................................................................116
Item 13 - Defaults, Dividend Arrearages and Delinquencies.......................................................116
Item 14 - Material Modifications to the Rights of Security Holders and Use of Proceeds..........................116
Item 15 - Controls and Procedures...............................................................................116
Item 16A - Audit Committee Financial Expert.....................................................................117
Item 16B - Code of Ethics.......................................................................................117
Item 16C - Principal Accountant Fees and Services...............................................................117
Item 16E - Purchases of Equity Securities by the Issuer and Affiliated Purchasers...............................118
PART III............................................................................................................119
Item 17 - Financial Statements..................................................................................119
Item 18 - Financial Statements..................................................................................119
Item 19 - Exhibits..............................................................................................119
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-11
ii
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. 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.
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, 2004. See note 24 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 28, 2005, our shareholders approved a new stock split, which
we expect to occur in July 2005. 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. The number of our existing ADSs will not change as a
result of the stock split; instead the ratio of CPOs to ADSs will be modified
so that each existing ADS will represent ten 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, 2004. 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 Ps11.14 to U.S.$1.00, the
CEMEX accounting rate as of December 31, 2004. 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 31, 2004 was Ps 11.15 to
U.S.$1.00 and on April 29, 2005 was Ps11.08 to U.S.$1.00.
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
1
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 24(x) to our
consolidated financial statements have been presented in this annual report.
2
PART I
Item 1 - Identity of Directors, Senior Management and Advisors
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Not applicable.
Item 2 - Offer Statistics and Expected Timetable
---------------------------------------
Not applicable.
Item 3 - Key Information
---------------
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 may not be able to realize the expected benefits from our acquisition of
RMC or the expected benefits from future acquisitions.
A key element of our growth strategy is to integrate our recently
acquired operations with 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 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 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.$5.8
billion, which included approximately U.S.$1.7 billion of assumed debt. RMC,
which is headquartered in the United Kingdom, has significant operations in
the United Kingdom, Germany, France and the United States, as well as
operations in other European countries and globally. At that time, we
estimated that we would achieve approximately U.S.$200 million of annual
savings by 2007 through cost-saving synergies. See Item 4 "Information on the
Company -- Description of RMC Operations." 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 realized our expected benefits from
acquisitions in the past, the acquired companies 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,
presents 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. 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 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.
3
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, 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, 2004, we had outstanding debt
equal to Ps66.1 billion (U.S.$5.9 billion), not including obligations under
equity derivative transactions in our own stock. The aggregate amount of debt
we incurred in connection with the RMC acquisition was approximately U.S.$5.8
billion, including our assumption of debt of approximately US$1.7 billion.
Approximately U.S.$819 million of the U.S.$5.8 billion of debt incurred in
connection with the RMC acquisition was included in our outstanding debt as of
December 31, 2004.
We have to service our Dollar and Yen denominated debt with revenues generated
in Pesos or other currencies, as we do not generate sufficient revenue in
Dollars and Yen from our operations to service all our Dollar and Yen
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 and Yen; as of March 31, 2005, the portions were 58% and 7%,
respectively. 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 and Yen from our operations to service
all our Dollar and Yen denominated debt. Consequently, we have to use revenues
generated in Pesos or other currencies to service our Dollar and Yen
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, or any of the other currencies of
the countries in which we operate, compared to the Dollar or the Yen could
adversely affect our ability to service our debt. During 2004, Mexico and
Spain, our main non-U.S. Dollar denominated operations, generated
approximately half of our sales (approximately 33% and 16%, respectively),
before eliminations resulting from consolidation. In 2004, approximately 22%
of our sales were generated in the United States, with the remaining 29% of
our sales being generated in several countries, with a number of currencies
having material depreciations against the Dollar and the Yen. During 2004, the
Peso appreciated 0.9% against the Dollar and depreciated 3.9% against the Yen,
while the Euro appreciated 7.1% against the Dollar and appreciated 2.6%
against the Yen.
In connection with our acquisition of RMC, we incurred a substantial
amount of debt denominated in Pounds. As of March 31, 2005, approximately
U.S.$1.3 billion, or 12%, of our outstanding indebtedness was Pound
denominated. However, we believe that our generation of revenues in Pounds
will be sufficient to service these obligations.
Our derivative instruments may have adverse effects on the market for our
securities.
We have equity forward contracts in our own stock, which we entered
into as a means of meeting our obligations that may require us to deliver
significant numbers of shares of our stock under our employee stock option
programs. The estimated fair value of these equity forward contracts is linked
to the market price of our CPOs or ADSs. As of December 31, 2004, the notional
amount of our outstanding obligations under our equity forward contracts was
approximately U.S.$1.2 billion, with an estimated fair value gain of U.S.$66.2
million. Pursuant to the terms of our equity forward contracts, if the shares
underlying our equity forward agreements suffer a substantial decrease in
market value, we could be required to compensate for the decrease in market
value. If we default on this obligation, the counterparties to our equity
forward contracts have the option of either requiring us to repurchase the
underlying shares or selling the underlying shares into the market, which may
adversely affect the price of our CPOs and ADSs.
4
We are disputing some tax claims, an adverse resolution of which may result in
a significant additional tax expense.
We have received notices from the Mexican tax authorities of tax
claims in respect of the tax years from 1992 through 1996 for an aggregate
amount of approximately Ps3.6 billion, including interest and penalties
through December 31, 2004. An adverse resolution of these claims could
materially reduce our net income. 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.
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.
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.
In 2004, the largest percentage of our net sales (33%) and total
assets (23%), at year-end, were in Mexico. 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.
As of and for the year ended December 31, 2004, we had operations in
the United States (22% of net sales and 16% of total assets), Spain (16% of
net sales and 12% of total assets), Venezuela (4% of net sales and 3% of total
assets), Central America and the Caribbean (8% of net sales and 5% of total
assets), Colombia (3% of net sales and 3% of total assets), the Philippines
(2% of net sales and 3% of total assets), other Asian countries, including
Thailand (2% of total assets), and Egypt (2% of net sales and 2% of total
assets). With the recent acquisition of RMC, our geographic diversity has
significantly increased. In addition to Spain and the United States, RMC has
operations in 20 countries including the United Kingdom, France, Germany,
Croatia, Poland and Latvia. As in the case of Mexico, adverse economic
conditions in any of these countries may produce a negative impact on our net
income from our operations in that country.
In recent years, Venezuela has experienced considerable volatility
and depreciation of its currency, high interest rates, political instability
and declining asset values. Additionally, Venezuela has experienced 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
5
controls on specified products, including cement. Although the political
uncertainty in Venezuela has diminished since the August 2004 referendum on
President Chavez's presidency, following which President Chavez has
consolidated his majority in Congress and his control over the Supreme Court,
these foreign exchange and price controls remain in place. These developments
have had and may continue to have an impact on cement prices and an adverse
effect on the construction sector in Venezuela, reducing demand for cement and
ready-mix concrete, which may continue to affect our sales and net income
adversely.
We believe that Egypt also represents an important market for our
future growth. Rising instability in the Middle East, however, has resulted
from, among other things, civil unrest, extremism, the continued deterioration
of Israeli-Palestinian relations and the recent 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, will not be
drawn into the conflict. In Egypt, extremists have engaged in a sometimes
violent campaign against the government in recent years. There can be no
assurance that extremists will not escalate their opposition in Egypt or that
the government will continue to be successful in maintaining the prevailing
levels of domestic order and stability. Since 2000, the Egyptian government
devalued the pound four times, and in January 2003, it decided to let the
pound trade as a freely floating currency. During 2003, the Egyptian pound
depreciated approximately 35% against the Dollar; while during 2004, the
Egyptian pound appreciated against the Dollar by approximately 1%. The
potential impact of the floating exchange rate system and of measures by the
Egyptian government aimed at improving Egypt's investment climate continues to
be uncertain. Weakened investor confidence as a result of currency instability
as well as any of the other foregoing circumstances could have a material
adverse effect on the political and economic stability of Egypt and
consequently on our Egyptian operations.
The September 11, 2001 terrorist attacks on the World Trade Center
and the Pentagon temporarily disrupted the trading markets in the United
States and caused declines in major stock markets around the world. Since
those attacks, there have been terrorist attacks in Indonesia and Spain and
ongoing threats of future terrorist attacks in the United States and abroad.
In response to these terrorist attacks and threats, the United States has
instituted several anti-terrorism measures, most notably, the formation of the
Office of Homeland Security, a formal declaration of war against terrorism and
the ongoing armed conflicts in Iraq and Afghanistan. Although it is not
possible at this time to determine the long-term effect of these terrorist
threats and attacks and the consequent response by the United States,
including the conflicts in Iraq and Afghanistan, 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. In addition, current and projected United States budget
deficits may have an adverse effect on the public construction sector.
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, 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. 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. 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. We cannot predict what effect, if any,
this action will have on our 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. See Item 4 --
"Information on the Company -- Europe, Asia and Africa -- Our Asian Operations
- -- Our Indonesian Equity Investment" and "-- Regulatory Matters and Legal
Proceedings -- Other Legal Proceedings."
6
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, or 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.
7
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
1.2% in 2000, appreciated against the Dollar by 4.7% in 2001, depreciated
against the Dollar by 13% in 2002, depreciated against the Dollar by 8.3% in
2003 and appreciated against the Dollar by 0.9% in 2004. 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
---------- ----------- ------ -------
2000..................... 9.62 9.46 10.10 9.19 9.62 9.46 10.09 9.18
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
Monthly (2004-2005)
October.............. 11.54 -- 11.54 11.24 11.54 -- 11.54 11.24
November............. 11.23 -- 11.53 11.23 11.24 -- 11.53 11.24
December............. 11.14 -- 11.35 11.11 11.15 -- 11.33 11.11
January.............. 11.19 -- 11.39 11.17 11.21 -- 11.41 11.17
February............. 11.10 -- 11.21 11.08 11.09 -- 11.21 11.04
March................ 11.16 -- 11.31 10.99 11.18 -- 11.33 10.98
April................ 11.06 -- 11.25 11.04 11.08 -- 11.23 11.04
(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 April 29, 2005, the noon buying rate for Pesos was Ps11.08 to
U.S.$1.00 and the CEMEX accounting rate was Ps11.06 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."
8
Selected Consolidated Financial Information
The financial data set forth below as of and for each of the five
years ended December 31, 2004 have been derived from our audited consolidated
financial statements. The financial data set forth below as of December 31,
2004 and 2003 and for each of the three years ended December 31, 2004, 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 2004 annual general
meeting, which took place on April 28, 2005.
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, 2004.
See note 24 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, 2004:
Annual Weighted Cumulative Weighted
Average Factor Average Factor to
December 31, 2004
--------------------- -------------------------
2000...................................... 0.9900 1.2686
2001...................................... 1.0916 1.2814
2002...................................... 1.1049 1.1738
2003...................................... 1.0624 1.0624
--------------------------------------------- -------------------------- -------------------------
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 Ps11.14 to U.S.$1.00, the CEMEX accounting rate as of
December 31, 2004. 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, 2004 was Ps11.15 to
U.S.$1.00 and on April 29, 2005 was Ps11.08 to U.S.$1.00. From December 31,
2004 through April 29, 2005, the Peso appreciated by approximately 0.6%
against the Dollar, based on the noon buying rate for Pesos.
9
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Selected Consolidated Financial Information
As of and for the year ended December 31,
-----------------------------------------------------------------------------
2000 2001 2002 2003 2004 2004
---------- --------- ---------- --------- ---------- -----------
(in millions of constant Pesos as of December 31, 2004 and
Dollars, except ratios and share and per share amounts)
Income Statement Information:
Net sales.................................... Ps 68,595 Ps 81,350 Ps 79,725 Ps 85,553 Ps 90,784 U.S.$ 8,149
Cost of sales(1)............................. (38,329) (45,758) (44,541) (49,319) (51,092) (4,586)
Gross profit................................. 30,266 35,592 35,184 36,234 39,692 3,563
Operating expenses........................... (10,081) (16,165) (19,217) (18,857) (19,064) (1,711)
Operating income............................. 20,185 19,427 15,967 17,377 20,628 1,852
Comprehensive financing income (cost), net(2) (2,122) 3,110 (4,013) (3,194) 1,485 133
Other income (expense), net.................. (2,860) (4,899) (4,744) (5,454) (5,390) (484)
Income before income tax, business assets tax,
employees' statutory profit sharing and
equity in income of affiliates.......... 15,203 17,638 7,210 8,729 16,723 1,501
Minority interest............................ 952 1,802 452 363 233 21
Majority interest net income................. 12,195 13,840 6,339 7,508 14,562 1,307
Earnings per share(3)(4)..................... 2.95 3.24 1.41 1.58 2.92 0.26
Dividends per share(3)(5)(6)................. 0.77 0.82 0.85 0.82 0.87 0.08
Number of shares outstanding(3)(7)........... 4,169 4,379 4,562 4,861 5,093 5,093
Balance Sheet Information:
Cash and temporary investments............... 3,760 5,034 4,400 3,479 3,814 342
Net working capital investment(8)............ 11,301 10,959 8,523 6,875 5,850 525
Property, machinery and equipment, net....... 110,247 105,051 109,212 110,642 107,094 9,613
Total assets................................. 192,320 190,707 194,154 191,250 193,623 17,381
Short-term debt.............................. 36,144 12,074 16,977 15,870 11,627 1,044
Long-term debt............................... 33,060 51,053 53,294 54,176 54,439 4,887
Minority interest(9)......................... 29,261 23,211 14,704 6,352 4,333 389
Stockholders' equity (excluding minority
interest)(10)........................... 64,082 72,577 69,992 74,445 87,234 7,831
Book value per share(3)(7)................... 15.36 16.57 15.34 15.32 17.13 1.53
Other Financial Information:
Operating margin............................. 29.4% 23.9% 20.0% 20.3% 22.7% 22.7%
EBITDA(11) 24,769 26,505 23,359 25,173 28,276 2,538
Ratio of EBITDA to interest expense, capital
securities dividends and preferred equity
dividends............................... 4.00 4.39 5.23 5.27 6.82 6.82
Investment in property, machinery and equipment,
net..................................... 4,860 6,002 5,166 4,703 4,835 434
Depreciation and amortization................ 5,968 9,314 9,324 9,850 9,551 857
Net resources provided by operating
activities(12).......................... 21,237 27,733 20,271 18,704 24,828 2,229
Basic earnings per CPO(3)(4)................. 8.85 9.72 4.23 4.74 8.76 0.79
As of and for the year ended December 31,
-----------------------------------------------------------------------------
2000 2001 2002 2003 2004 2004
---------- --------- ---------- --------- ---------- -----------
(in millions of constant Pesos as of December 31, 2004 and Dollars, except
per share amounts)
US. GAAP (13):
Income Statement Information:
Majority net sales........................... Ps 64,631 Ps 72,753 Ps 73,649 Ps 84,047 Ps 89,857 U.S.$8,066
Operating income............................. 15,731 11,629 11,904 14,340 16,512 1,482
Majority net income.......................... 10,037 11,640 6,182 8,720 17,965 1,613
Basic earnings per share..................... 2.44 2.90 1.38 1.84 3.60 0.32
Diluted earnings per share................... 2.40 2.87 1.38 1.80 3.58 0.32
Balance Sheet Information:
Total assets................................. 190,718 178,789 185,611 196,340 206,359 18,524
Total long-term debt......................... 33,150 43,088 45,125 47,204 43,639 3,917
Shares subject to mandatory redemption (14).. -- -- -- 782 -- --
Minority interest............................ 7,811 8,783 5,689 5,711 4,536 407
Other mezzanine items (14)................... 26,865 18,611 14,331 -- -- --
Total majority stockholders' equity.......... 50,436 53,788 56,591 74,955 92,633 8,315
(footnotes on next page)
10
______________
(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, 2004, approximately 96.6% of our outstanding share capital
was represented by CPOs. On April 28, 2005, our shareholders approved a
new stock split, which we expect to occur in July 2005. 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. The proportional equity interest participation of
existing shareholders will not change as a result of the stock split.
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, 2000 through 2004 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,
-------------------------------------------------------------------------
2000 2001 2002 2003 2004 2004
-------- --------- ---------- --------- --------- -----------
(in constant Pesos as of December 31, 2004 and Dollars, except share
amounts)
Pro forma per share information under
Mexican GAAP:
Earnings per share..................... Ps 1.48 Ps 1.62 Ps 0.71 Ps 0.79 Ps 1.46 U.S.$ 0.13
Dividends per share.................... 0.39 0.41 0.43 0.41 0.44 0.04
Book value per share................... 7.68 8.29 7.67 7.66 8.57 0.77
Basic earnings per CPO................ 4.43 4.86 2.12 2.37 4.38 0.40
Pro forma per share information under
U.S. GAAP:
Basic earnings per share............... 1.22 1.45 0.69 0.92 1.80 0.16
Diluted earnings per share............. 1.20 1.44 0.69 0.90 1.79 0.16
Pro forma number of shares:
Number of shares outstanding........... 8,338 8,758 9,124 9,722 10,186 10,186
(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, 2004, were as follows: 2001, Ps2.31 per CPO (or Ps0.77
per share); 2002, Ps2.46 per CPO (or Ps0.82 per share); 2003, Ps2.55 per
CPO (or Ps0.85 per share); and 2004, Ps2.46 per CPO (or Ps0.82 per
share). As a result of dividend elections made by shareholders, in 2001,
Ps99 million in cash was paid and approximately 70 million additional
CPOs were issued in respect of dividends declared for the 2000 fiscal
year; in 2002, Ps273 million in cash was paid and approximately 64
million additional CPOs were issued in respect of dividends declared for
the 2001 fiscal year; in 2003, Ps71 million in cash was paid and
approximately 99 million additional CPOs were issued in respect of
dividends declared for the 2002 fiscal year; and in 2004, Ps167 million
in cash was paid and approximately 75 million additional CPOs were issued
in respect of dividends declared for the 2003 fiscal year. For purposes
of the table, dividends declared at each year's annual shareholders'
meeting for each period are reflected as dividends for the preceding
year. At our 2004 annual shareholders' meeting, which was held on April
28, 2005, our shareholders approved a dividend of Ps2.60 per CPO (Ps0.87
per share) for the 2004 fiscal year. Shareholders will be entitled to
receive the dividend in either stock or cash consistent with our past
practices.
(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.
(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, 2000, 2001 and
2002 includes a notional amount of U.S.$1.5 billion (Ps16.7 billion),
U.S.$900 million (Ps10.0 billion) and U.S.$650 million (Ps7.2 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 (Ps735 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.$17 million
(Ps207.4 million) in 2000, U.S.$76.1 million (Ps913.8 million) in 2001,
U.S.$23.2 million (Ps275.9 million) in 2002 and U.S.$12.5 million
(Ps153.6 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
(Ps66.1 million), were recorded as part of financial expenses in our
income statement.
11
(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 (Ps1,095.1 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 (Ps201.6 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) 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 the 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,
-------------------------------------------------------------------------
2000 2001 2002 2003 2004 2004
---------- --------- ---------- ---------- --------- ----------
(in millions of constant Pesos as of December 31, 2004 and Dollars)
Reconciliation of EBITDA to operating income
EBITDA........................................ Ps 24,769 Ps 26,505 Ps 23,359 Ps 25,173 Ps 28,276 U.S.$2,538
Less:
Depreciation and amortization expense.... 4,584 7,078 7,392 7,796 7,648 686
Operating income.............................. 20,185 19,427 15,967 17,377 20,628 1,852
(12) 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.
(13) We have restated the information at and for the years ended December 31,
2000, 2001, 2002 and 2003 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 24 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.
(14) 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
relate 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 24(m) to our consolidated financial statements
included elsewhere in this annual report.
12
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
("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 the 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.
CEMEX is the third largest cement company in the world, based on
installed capacity as of December 31, 2004 of approximately 81.7 million tons.
We are one of the world's largest traders of cement and clinker, having traded
over 10 million tons of cement and clinker in 2004. 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. We are a global cement manufacturer with operations in North, Central
and South America, Europe, the Caribbean, Asia and Africa. Following the March
2005 acquisition of RMC, based on year-end 2004 numbers, CEMEX had an
installed capacity of approximately 98.7 million tons of cement, enhancing its
position as the third largest cement company in the world. CEMEX, with RMC, is
now the largest ready-mix concrete company in the world with an annual
production in 2004 of of 75 million cubic meters of ready-mix concrete and is
the fourth largest aggregates company in the world with an annual production
in 2004 of 170 million tons of aggregates. As of December 31, 2004, we had
worldwide assets of approximately Ps193.6 billion (U.S.$17.4 billion) (without
giving effect to the RMC acquisition or the recent sale of several U.S. assets
described below). On April 29, 2005, we had an equity market capitalization of
approximately Ps135.2 billion (U.S.$12.2 billion).
As of December 31, 2004, our main cement production facilities were
located in Mexico, Spain, Venezuela, Colombia, the United States, Egypt, the
Philippines, Thailand, Costa Rica, the Dominican Republic, Panama, Nicaragua
and Puerto Rico. As of December 31, 2004, our assets, cement plants and
installed capacity, on an unconsolidated basis, were as set forth below.
Installed cement capacity, which refers to theoretical annual cement
production capacity, represents gray cement equivalent capacity, which counts
each ton of white cement capacity as approximately two tons of gray cement
capacity. It also includes, generally, our proportional interest in the
installed capacity of companies in which we hold a minority interest, but does
not include our proportional interest in installed capacity derived from our
18.8% interest in RMC as of December 31, 2004.
13
As of December 31, 2004(1)
----------------------------------------------
Assets Installed
(in billions Capacity
of constant Number of (millions of
Pesos) Cement Plants tons per annum)
------------ ------------- ---------------
North America
Mexico........................................................ Ps 64.4 15 27.2
United States................................................. 44.8 13 14.3
Europe, Asia and Africa
Spain......................................................... 32.8 8 11.0
Asia.......................................................... 12.2 4 10.9
Egypt......................................................... 6.0 1 4.9
South America, Central America and the Caribbean
Venezuela..................................................... 8.5 3 4.6
Colombia...................................................... 9.2 5 4.8
Central America and the Caribbean............................. 13.6 5 3.7
Cement and Clinker Trading Assets and Other Operations............. 83.5 -- 0.3
__________
(1) The information in the table does not give effect to the following
transactions, which described below: (i) the acquisition of RMC that was
completed on March 1, 2005, (ii) the sale of U.S. assets completed on
March 31, 2005 and (iii) the sale of our 11.92% interest in Cementos Bio
Bio, S.A. announced on April 26, 2005.
In the above table, "Asia" includes our Asian subsidiaries, and, for
purposes of the columns labeled "Assets" and "Installed Capacity," includes
our 25.5% interest, as of December 31, 2004, in Gresik. As of December 31,
2004, 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, "Central America and the Caribbean" includes our
subsidiaries in Costa Rica, the Dominican Republic, Panama, Nicaragua, Puerto
Rico and other assets in the Caribbean region. In the above table, "Cement and
Clinker Trading Assets and Other Operations" includes our 11.9% interest as of
December 31, 2004 in Cementos Bio Bio, S.A., a Chilean cement producer having
three cement plants with an installed capacity of approximately 2.25 million
tons, and intercompany accounts receivable of CEMEX (the parent company only)
in the amount of Ps33.8 billion, which are eliminated in consolidation.
During the last 15 years, 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.$1.7 billion of
RMC's debt, was approximately U.S.$5.8 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.$99.7 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.
14
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., or PRCC. The aggregate value of the
transaction was approximately U.S.$281.0 million, including
approximately U.S.$100.8 million of assumed net debt.
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, to 77.7%. Through quarterly share exchanges (CAH
shares for CEMEX CPOs) with CAH investors in 2003 and 2004, 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, thereby increasing our total
equity interest in CAH to 99.1%.
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 Phillipine 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).
o In November 2000, through a tender offer and subsequent merger,
we acquired 100% of the outstanding shares of common stock of
Southdown, Inc., or Southdown, a U.S. cement producer. The total
cost of the acquisition of Southdown was approximately U.S.$2.8
billion. In March 2001, through a corporate restructuring, we
integrated the Southdown operations with our other U.S.
operations and "Southdown" changed its legal name to CEMEX, Inc.
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 and the operations of these plants represented approximately 10% of our
U.S. operations' operating cash flow for the year ended December 31, 2004.
On April 26, 2005, we announced the divestiture of our 11.92%
interest in Cementos Bio Bio, S.A., a cement company in Chile, for
approximately U.S.$65 million. The proceeds from the sale will be applied to
reduce debt.
For the year ended December 31, 2004, our net sales, before
eliminations resulting from consolidation, were divided among the countries in
which we operate as follows:
15
[GRAPHIC OMITTED]
For a description of a breakdown of total revenues by geographic
markets for each of the years ended December 31, 2002, 2003 and 2004, please
see Item 5 -- "Operating and Financial Review and Prospects."
RMC Business Overview
RMC is a leading international producer and supplier of materials,
products and services used primarily in the construction industry. It has
operating units in 22 countries, primarily in Europe and the United States,
and it employs over 26,000 people worldwide. The geographic distribution of
RMC's cement operations is shown in the following table.
As of December 31, 2004
---------------------------------
Installed
Capacity
Number of (millions of
Cement Plants tons per annum)
--------------- ---------------
North America
United States................................................. 1 0.9
Europe, Asia and Africa
United Kingdom................................................ 3 2.7
Germany....................................................... 3 6.4
Croatia....................................................... 3 2.6
Latvia........................................................ 1 0.4
Poland........................................................ 2 3.1
Lithuania(1).................................................. -- 0.9
--------------- ---------------
Total 13 17.0
__________
(1) Includes our proportional interest in a cement plant (34.5%).
16
RMC is one of Europe's largest producers of cement and one of the
world's largest suppliers of ready-mix concrete and aggregates. In 2004, it
sold 14.4 million tons of cement, 51.4 million cubic meters of ready-mix
concrete and 131.6 million tons of aggregates.
RMC's cement assets include 13 cement plants and 8 cement grinding
mills. The cement plants are located in Croatia, Germany, Latvia, Poland, the
U.K. and the U.S. RMC's total cement capacity is 17 million tons.
CEMEX and RMC both have operations in the U.S. and Spain. In the
U.S., RMC's primary businesses are in California (aggregates, cement and
concrete), the Carolinas and Georgia (concrete), Florida (aggregates and
concrete) and the southwest states of Arizona, New Mexico and Texas
(aggregates and concrete). In Spain (aggregates and concrete), the business is
predominantly located around Madrid, Barcelona, Valencia and Alicante.
The revenue information set forth below with respect to RMC's
operations for the year ended December 31, 2004 has been derived from RMC's
audited annual financial statements for 2004. RMC's financial statements were
prepared by RMC in accordance with U.K. GAAP, which differs in significant
respects from Mexican GAAP.
For the year ended December 31, 2004, RMC's revenues from continuing
operations, before revenues from unconsolidated joint ventures and associated
entities of approximately (pound)351.7 million, were approximately
(pound)4,121.1 million and were divided by geographic region as follows:
[GRAPHIC OMITTED]
For further description of RMC's operations, see "--Description of
RMC Operations."
17
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 used in some
construction applications. Ready-mix concrete is the mixture of cement,
aggregates such as sand and gravel and water.||
Aggregates are naturally occurring sand and gravel or crushed stone
such as granite, limestone and sandstone and are used in the production of
ready-mixed concrete, roadstone, concrete products, lime, cement and mortar in
the construction industry. Aggregates are obtained either 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 in different proportions in a large storage area. The mix is
usually dried by the application of heat in order to remove humidity acquired
in the quarry. The crushed raw materials are fed in pre-established
proportions, which vary depending on the type of cement to be produced, into a
grinding process, which mixes the various materials more thoroughly and
reduces them further in size in preparation for the kiln. In the kiln, the raw
materials are calcined, or processed, at a very high temperature, to produce
clinker. Clinker is the intermediate product used in the manufacture of cement
obtained from the mixture of limestone and clay with iron oxide.
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, 2004, 47 of our 54 operative production plants used the dry
process, five used the wet process and two used both processes. Three of the
seven production plants that use the wet process are located in Venezuela. The
remaining four production plants that use the wet process are located in
Colombia, Nicaragua, and the Philippines. In addition, nine of RMC's cement
plants used the dry process, and four used the wet process. In the wet
process, the raw materials are mixed with water to form slurry which is fed
into the 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. Finally, 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
The production of ready-mix concrete is made of cement, with fine and
coarse aggregate, water and admixtures (which control properties of the
concrete including plasticity, pumpability, freeze-thaw resistance, strength
and setting time). The hardening of concrete occurs due to the chemical
reaction of hydration -- the addition of water fills the voids in the mixture,
turning it into a solid mass.
User Base
In most of the markets in which we compete, cement is the primary
building material in the industrial and residential construction sectors. 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.
18
Our Business Strategy
We seek to continue to strengthen our global leadership by growing
profitably through integrated positions along the cement value chain and
maximizing our overall performance by employing the following strategies:
Focus on our core business of cement, ready-mix and aggregates
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 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.
By selectively participating in markets that have long-term growth
potential, and by purchasing operations that benefit from our management and
turnaround expertise and assets that further integrate our existing portfolio,
in most cases, we have been able to increase our cash flow and return on
capital employed.
We normally consider opportunities for, and routinely engage in
preliminary discussions concerning, acquisitions.
Allocate capital effectively
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.
Leverage platforms to achieve optimal operating standards and quickly
integrate acquisitions
By continuing to produce cement at 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
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 aforementioned platforms has allowed us to integrate our
acquisitions more rapidly and efficiently.
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.
19
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 will strengthen our distribution network, foster greater
loyalty among distributors and further fortify our commercial network. With
Construrama, we are enhancing the operating and service standards of our
distributors, providing them with training, a standard image and national
publicity. Our other strategy, 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;
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 senior 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.
20
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, 2004. 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.|
[OBJECT OMITTED]
21
North America
As of and for the year ended December 31, 2004, North America, which
includes our operations in Mexico and the United States, represented
approximately 55% of our net sales, 50% of our total installed capacity and
39% of our total assets.
Our Mexican Operations
Overview
Our Mexican operations represented approximately 33% of our net sales
in 2004.
At December 31, 2004, 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.
At December 31, 2004, CEMEX Mexico owned approximately 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.
Since the early 1970s, we have pursued a growth strategy designed to
strengthen our core operations and to expand our activities beyond our
traditional market in northeastern Mexico. This strategy has transformed our
Mexican operations from a regional participant into the leading Mexican cement
manufacturer. The process was largely completed with our acquisition of
Cementos Tolteca, S.A. de C.V. in 1989, which increased our installed capacity
for cement production by 6.5 million tons. Since the Cementos Tolteca
acquisition, we have added 7.0 million tons of installed capacity in Mexico
through acquisitions, expansion, modernization and the construction of new
plants. Our largest new construction project in Mexico in the 1990s was the
Tepeaca plant, which began operations in 1995 and had an installed capacity as
of December 31, 2004 of 3.3 million tons. During the second quarter of 2002,
the production operations at our oldest plant (Hidalgo) were halted and remain
suspended due to concerns about cost effectiveness. We do not anticipate
resuming production operations at this plant in 2005. We do not presently
anticipate any significant capacity expansion in our Mexican operations in
2005.
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. By the
end of 2004, 700 independent concessionaries with close to 2,100 stores were
integrated into the Construrama program in more than 610 towns and cities
throughout Mexico. By the end of 2005, we expect to have approximately 2,250
stores under the Construrama program.
The Mexican Cement Industry
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 of concrete 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 2004 accounted for
around 74% 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 50% 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.
22
Competition
In the early 1970s, the Mexican cement industry was regionally
fragmented. However, over the last 30 years, the Mexican cement industry has
consolidated into a national market, thus becoming increasingly competitive.
As of December 31, 2004, according to publicly available information, 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; 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.
Our Mexican Operating Network
[GRAPHIC OMITTED]
(1) In 2002, production operations at the Hidalgo cement plant were
halted and remain suspended. We do not anticipate resuming
production operations at this plant in 2005.
Currently, we operate 14 plants (not including Hidalgo) and 78
distribution centers (70 land terminals and 8 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.
23
We believe that geographic diversification in Mexico is important
because:
o it decreases the effect of regional cyclicality on total demand
for our Mexican operations' products;
o it places our Mexican operations in physical proximity to
customers in each major region of Mexico, allowing more
cost-effective distribution; and
o it allows us to optimize production processes by shifting output
to those facilities better suited to service the areas with the
highest demand.
Products and Distribution Channels
Our domestic cement sales represented approximately 97% in 2002, 97%
in 2003 and 96% in 2004 of our total Mexican cement sales revenues.
Cement. 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 2004, our Mexican operations sold approximately 74% 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 2004.
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 in the commodity market. 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. Our domestic cement sales
volumes increased 4% in 2002, 4% in 2003 and 2% in 2004. In addition, we own
the registered trademark for the "Construrama" brand name for construction
material stores.
Ready-Mix Concrete. Ready-mix concrete sales volumes by our Mexican
operations increased 10% in 2002, 13% in 2003 and 16% in 2004. For the year
ended December 31, 2004, ready-mix concrete sales represented 23% of our
Mexican operations' total cement sales volume.
Demand for ready-mix concrete in Mexico depends on various factors
over which we have no control. These include the overall rate of growth of the
Mexican economy and plans of the Mexican government regarding major
infrastructure and housing projects.
Exports. Our Mexican operations export a portion of their cement
production. Exports of cement and clinker by our Mexican operations decreased
25% in 2002 and 24% in 2003 and increased 37% in 2004. In 2004, approximately
79% of our exports from Mexico were to the United States, 20% 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. Imports of cement and clinker into the U.S. from Mexico are subject to
anti-dumping duties. See "Regulatory Matters and Legal Proceedings -- U.S.
Anti-Dumping Rulings -- Mexico" below.
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 with Petruleos Mexicanos,
or PEMEX, pursuant to which PEMEX agreed to supply us with 1,750,000 tons of
petcoke per year, 850,000 tons per year coming from PEMEX's refinery in Madero
commencing in 2002 with respect to the first contract and 900,000 tons per
year coming from PEMEX's Cadereyta refinery commencing in 2003 with respect to
the second contract. Petcoke is petroleum coke, a solid or fixed carbon
substance that remains after the distillation of hydrocarbons in petroleum and
24
that may be used as fuel in the production of cement. 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
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 almost 2% (based on a yearly average) of the
total fuel consumption for our Mexican operations in 2004, and we expect to
increase this percentage to around 3% during 2005.
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. 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,
2004, after eight months of operation, the power plant has supplied
electricity to 10 of our cement plants in Mexico covering 83% of their needs
for electricity and has represented an approximate 21% decrease in the cost of
electricity.
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, 2004, we operated 14 wholly-owned cement plants
(not including Hidalgo) located throughout Mexico, with a total installed
capacity of 27.2 million tons per year. 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 remaining 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 2004 production
levels. As of December 31, 2004, all our production plants in Mexico utilized
the dry process.
As of December 31, 2004, we had a network of 70 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 237 ready-mix concrete plants throughout 79
cities in Mexico and 1,701 ready-mix concrete delivery trucks.
Capital Investments
We made capital expenditures of approximately U.S.$94.8 million in
2002, U.S.$109.4 million in 2003 and U.S.$90.3 million in 2004 in our Mexican
operations. We currently expect to make capital expenditures of approximately
U.S.$74.7 million in our Mexican operations during 2005.
Our U.S. Operations
Overview
As of December 31, 2004, we held 100% of CEMEX, Inc., our operating
subsidiary in the United States.
Our U.S. operations represented approximately 22% of our net sales in
2004. As of December 31, 2004, we had a cement manufacturing capacity of
approximately 14.3 million tons per year in our United States operations,
including nearly 0.7 million tons in proportional interests through minority
holdings. RMC's U.S. operations, which are being incorporated into our U.S.
operations following our acquisition of RMC in March 2005, are described
below.
As of December 31, 2004, we operated a geographically diverse base of
13 cement plants located in Alabama, California, Colorado, Florida, Georgia,
Illinois, Kentucky, Michigan, Ohio, Tennessee and Texas. As of that date, we
also had 53 rail or water served active cement distribution terminals in the
United States and one in Canada. We also market ready-mix concrete products in
four of our largest cement markets, California, Arizona, Texas, and Florida,
and mine, process and sell construction aggregates in these four states as
well. In addition, with the acquisition of Mineral Resource Technologies, Inc.
in August 2003, CEMEX, Inc. has achieved a competitive position in the growing
fly ash
25
market. 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.
On March 31, 2005, CEMEX, Inc. sold its 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, and the operations of these plants represented
approximately 10% of CEMEX, Inc.'s operating cash flow for the year ended
December 31, 2004.
RMC operates one cement plant in Davenport, California as well as two
nearby terminals in northern California, one of them in a port facility. It
has more than 200 ready-mix plants located in the Carolinas, Florida, Georgia,
Texas, New Mexico, Nevada, Arizona and northern California and aggregates
facilities in the Carolinas, Arizona, California, Florida, Georgia, Missouri,
New Mexico, Nevada and Texas. RMC owns regional pipe and precast businesses,
along with block and paver plants in the Carolinas, Georgia and Florida. CEMEX
believes that by combining the acquired assets of RMC with its installed
cement capacity in the United States, it will be the largest cement and
ready-mix supplier in the United States, based on volumes sold, and an
important supplier of aggregates.
For the year ended December 31, 2004, RMC's operations in the United
States generated revenues of approximately (pound)935 million.
The Cement Industry in the United States
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. CEMEX, Inc.'s 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 70% 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. According to the 2004 U.S. Geological Survey, approximately 4,000
companies operated approximately 6,500 quarries and pits.
Our United States Cement Operating Network
26
[GRAPHIC OMITTED]
The map reflects our cement plants and cement terminals as of the
date of this annual report, after giving effect to the acquisition of RMC and
the sale of assets in the Great Lakes region.
Products and Distribution Channels
CEMEX, Inc. delivers 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 CEMEX, Inc. delivers 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. As
discussed below, cement demand in the United States has become less dependent
upon the more cyclical residential and commercial sectors since the mid 1980s
as the public sector has grown significantly. Because of the distribution of
operations across the U.S., we are able to achieve stability of cash flows
should market conditions deteriorate in any one region of the U.S.
Cement. Our cement operations represented approximately 62% of our
2004 U.S. operations revenues. Our U.S. operations sales volumes decreased
5.3% in 2002 due to the economic downturn in the United States, increased 2%
in 2003 and increased 9% in 2004 due to 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, industrial and commercial and public sectors. 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 counter-cyclical public sector, particularly cement-intensive public
infrastructure spending. In 2004, according to our estimates, public sector
spending accounted for approximately 52% 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 over 90% in the last 3
years.
27
Ready-Mix Concrete. Concrete operations represented approximately 27%
of our 2004 revenues in the U.S. We have ready-mix operations in California,
Arizona, Texas and Florida. Our concrete operations in those states purchase
most of their cement requirements from our cement operations in the U.S.
Aggregates. Our aggregates operations include mining, processing and
selling construction aggregates in California, Arizona, Texas and Florida.
Aggregates operations represented approximately 6% of our 2004 U.S. revenues.
At 2004 production levels, it is anticipated that over 80% of our construction
aggregates reserves in the U.S. will last for 10 years or more.
Production Costs
The largest cost components of our plants are electricity and fuel,
which accounted for approximately 36% of CEMEX, Inc.'s total production costs
in 2004. CEMEX, Inc. is 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 2004, the use of alternative fuels offset the effect on our fuel
costs of a significant increase in coal prices. Power costs in 2004
represented approximately 18% of Cemex, Inc.'s cash manufacturing cost, which
represents production cost before depreciation. We have improved the
efficiency of CEMEX, Inc.'s 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, 2004, we operated 13 cement manufacturing plants
in the U.S., with a total installed capacity of 14.3 million tons per year,
including nearly 0.7 million tons in proportional interests through minority
holdings. All our cement production facilities are wholly owned except for the
Balcones plant, which is leased, and the Louisville plant, which is owned by
Kosmos Cement Company, a joint venture in which CEMEX, Inc. owns a 75%
interest and a subsidiary of Dyckerhoff AG owns a 25% interest.
As of the date of this annual report, after giving effect to the
acquisition of RMC and the sale of assets in the Great Lakes region, we
operated 12 cement plants in the U.S., with a total installed capacity of
approximately 13.2 million tons per year.
As of December 31, 2004, we operated a distribution network of 97
ready-mix concrete plants, 54 cement terminals, six of which are deep-water
terminals, and 24 aggregate locations throughout the U.S. Also, we distributed
fly ash through 20 terminals and 13 third-party-owned utility plants, which
operate both as sources of fly ash and distribution terminals.
Capital Investments
We made capital expenditures of approximately U.S.$95.9 million in
2002, U.S.$96.6 million in 2003 and U.S.$111.1 million in 2004 in our U.S.
operations. We currently expect to make capital expenditures of approximately
U.S.$96.5 million in our U.S. operations during 2005, excluding those related
to RMC's U.S. operations.
28
Europe, Asia and Africa
As of December 31, 2004, our business in Europe, Asia and Africa,
which included our majority-owned operations in Spain, the Philippines,
Thailand and Egypt, as well as our minority interests in Indonesia and other
Asian investments, represented approximately 20% of our net sales, 33% of our
total installed capacity and 19% of our total assets.
Our Spanish Operations
Overview
As of December 31, 2004, we held 99.7% of CEMEX Espana, S.A., or
CEMEX Espana. Our Spanish operations represented approximately 16% of our net
sales in 2004. We conduct our Spanish operations through our operating
subsidiary CEMEX Espana, S.A. or CEMEX Espana. CEMEX Espana is also a holding
company for most of our international operations. Our cement activities in
Spain are conducted by CEMEX Espana itself and Cementos Especiales de las
Islas, S.A. a joint venture 50% owned by Cemex Espana. 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. This does not include the aggregates and
ready-mix concrete activities of RMC's subsidiaries.
The Spanish Cement Industry
In 2004, the construction sector of the Spanish economy grew 4.4%,
primarily as a result of the growth of construction in the residential sector
of the Spanish economy. Cement consumption in Spain increased 4.7% in 2002,
4.4% in 2003 and 3.9% in 2004. Our domestic cement and clinker sales volumes
in Spain increased approximately 2.5% in 2002, 4.5% in 2003 and 3.3% in 2004.
During the past several years, the level of cement imports into Spain
has been influenced by the strength of domestic demand. Cement imports
increased 5.5% in 2002, decreased 25% in 2003 and decreased 14.6% in 2004.
Clinker imports have demonstrated an intense dynamism, with increases of 18.2%
in 2002, 25.6% in 2003 and 6.3% in 2004. 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. Nonetheless, sales from imports have
been increasing in the center of Spain.
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 1.5 million tons in 2004 to meet strong domestic demand. Our Spanish
operations' cement and clinker export volumes increased 5% in 2002, decreased
21% in 2003 and decreased 23% in 2004.
Competition
According to the Asociaciun de Fabricantes de Cemento de Espana, or
OFICEMEN, the Spanish cement trade organization, as of December 31, 2004,
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.
OFICEMEN reported that, based on 2004 sales, CEMEX Espana had a
market share of 21.8% in gray and white cement, making us the leader in the
Spanish cement industry. We believe that we maintain this leading market
position because of our customer service and our geographic diversification,
which includes extensive distribution channels that enable us to cope with
downturns in demand more effectively than many of our competitors because we
are able to shift our production to serve areas with the strongest demand and
prices.
29
Our Spanish Operating Network (Including RMC Assets)
[GRAPHIC OMITTED]
Products and Distribution Channels. CEMEX Espana offers various types
of cement, targeting specific products to specific markets and users. In 2004,
approximately 20% 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.
Exports. 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 2004, 91.4% consisted of
white cement and 8.6% consisted of gray cement. In 2004, 71% of our exports
from Spain were to the United States, 15% to Europe and 14% to Africa.
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 policy. 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 2004, we burned meal flour, organic waste and tires as fuel, achieving in
2004 a 2.1% substitution rate for petcoke. During 2005, we expect to increase
the quantity of those alternative fuels and initiated the burning of rice
husks and plastics.
Description of Properties, Plants and Equipment
As of December 31, 2004, our Spanish operations operated eight plants
located in Spain, with a cement equivalent capacity of 11.0 million tons,
including 860,000 tons of white cement. We also operated 77 ready-mix concrete
plants, including 16 aggregate and 10 mortar plants. CEMEX Espana also owns
two cement mills, one of
30
which is operated through a joint venture 50%-owned by CEMEX Espana, and 31
distribution centers, including 11 land and 19 marine terminals.
As of December 31, 2004, CEMEX Espana owned 8 limestone quarries
located in close proximity to its plants, which have useful lives ranging from
10 to 30 years, assuming 2004 production levels. Additionally, we have rights
to expand those reserves to 50 years of limestone reserves, assuming 2004
production levels.
RMC has ready-mix concrete and aggregates operations in Spain through
a joint-venture association with another producer. The joint venture operates
a network of 121 ready-mix concrete plants and 12 aggregates quarries, which
are predominantly located around Madrid, Barcelona, Valencia and Alicante.
Capital Investments
We made capital expenditures of approximately U.S.$61.1 million in
2002, U.S.$53.9 million in 2003 and U.S.$54.5 million in 2004 in our Spanish
operations. We currently expect to make capital expenditures of approximately
U.S.$48.2 million in our Spanish operations during 2005, excluding those
related to RMC's Spanish operations.
Our Asian Operations
As of December 31, 2004, our business in Asia, which includes our
operations in the Philippines and Thailand, as well as our minority interests
in Indonesia and other assets in Asia, represented approximately 2% of our net
sales, 13% of our total installed capacity and 4% of our total assets.
Our Philippine Operations
As of December 31, 2004, we held through CAH, 99.1% of the economic
benefits of our two operating subsidiaries in the Philippines, Solid, and APO
Cement Corporation, or APO.
During 2004, cement consumption in the Philippine market, which is
primarily retail, totaled 12.4 million tons. Although the Philippines has
largely recovered from the 1997 Asian economic recession, industry demand for
cement decreased by 2.1% in 2004 compared to 2003.
As of December 31, 2004, 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 the Cement Manufacturers' Association of
the Philippines. Major global cement producers own approximately 88% of this
capacity. Our major competitors in the Philippine cement market are Holcim,
which has interests in seven local cement plants, and Lafarge, which has
interests in eight local cement plants.
Our Philippine operations include three plants with a total capacity
of 5.8 million tons per year and two marine distribution terminals. Our cement
plants include two Solid plants, with five wet process production lines and
one dry process production line and an installed capacity of 2.8 million tons,
serving the Manila metropolitan region; and the APO plant, with two dry
process production lines and a jetty terminal for local and export markets
with installed capacity of 3.0 million tons, serving the Visayas, North
Mindanao and South of Luzon regions.
We made capital expenditures of approximately U.S.$12.1 million in
2002, U.S.$1.7 million in 2003 and U.S.$2.4 million in 2004 in our Philippine
operations. We currently expect to make capital expenditures of approximately
U.S.$4.7 million in our Philippine operations during 2005.
Our Indonesian Equity Investment
As of December 31, 2004, 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.
31
On October 31, 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, commencing
November 1, 2001, 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.
On November 1, 2001, the People's Representative Assembly of West Sumatra
issued a decision approving this declaration. We believe the provincial
administration lacks legal authority to direct or interfere with the affairs
of Semen Padang. Since the attempt by the West Sumatra provincial
administration in November 2001 to arrogate to itself the management of Semen
Padang, several groups opposed to any further sale of Indonesia's stock
ownership in Gresik have threatened strikes and other actions that would
affect our Indonesian operations. Further attempts to reassume control at
Semen Padang, including shareholder-approved changes in management, have been
met with resistance and lawsuits by various interest groups. 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, 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.
As a result of these difficulties, 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.
For a description of legal proceedings relating to Gresik, please see
"Regulatory Matters and Legal Proceedings -- Other Legal Proceedings."
The Indonesian cement industry was the largest in South East Asia in
2004, accounting for about 24% of the approximately 126 million tons of cement
consumed in South East Asia in 2004, according to our estimates. Indonesian
domestic cement demand increased approximately 6.8% in 2002, 1.0% in 2003 and
9.8% in 2004. As of December 31, 2004, 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, 2004, 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, 2004, Gresik was operating at
approximately 91% capacity utilization, including export sales. During 2004,
Gresik exported approximately 14% of its total sales volume, mainly through
its own efforts and, to a lesser extent, through CEMEX's trading operations.
Gresik exports mainly to Bangladesh and Africa.
Despite the continuing economic and political problems experienced by
Indonesia and the difficulties involving Gresik described above, the
Indonesian cement market has been important to our Asian expansion strategy
due to its strategic location, size, potential as an anchor for our South East
Asian trading network and the significant growth potential of the Indonesian
economy.
Our Thai Operations
According to our estimates, at December 31, 2004, the cement industry
in Thailand had a total of 13 cement plants, with an aggregate annual
installed capacity of approximately 54.5 million tons. We estimate that there
are five major cement producers in Thailand, four of which represent 99% of
installed capacity and 97% of the market. Our major competitors in the
Thailand market, which have a significantly larger presence than CEMEX
(Thailand), are Siam Cement, Holcim, TPI Polene and Italcementi.
32
CEMEX (Thailand) owns one dry process cement plant located north of
Bangkok which has been operating at full capacity. As of December 31, 2004,
CEMEX (Thailand) had an installed capacity of approximately 720,000 tons.
We made capital expenditures of approximately U.S.$7.1 million in
2002, U.S.$1.72 million in 2003 and U.S.$2.7 million in 2004 in our Thai
operations. We currently expect to make capital expenditures of approximately
U.S.$3.6 million in our Thai operations during 2005.
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.
Our Egyptian Operations
Overview
As of December 31, 2004, we had a 95.8% interest in Assiut, which has
an installed capacity of approximately 4.9 million tons.
The Egyptian Cement Industry
The Egyptian cement market consumed approximately 23.6 million tons
of cement during 2004. Cement consumption decreased by 8.4% in 2004, despite
the beginning of an economic recovery.
Competition. As of December 31, 2004, the Egyptian cement industry
had a total of ten cement producers, with an aggregate annual installed cement
capacity of approximately 39 million tons. According to the Egyptian Cement
Council, during 2004, Holcim (Egyptian Cement Company), Lafarge (Alexandria
Portland Cement and Beni Suef Cement) and CEMEX (Assiut Cement Company), the
three largest cement producers in the world, constituted approximately 40% of
the total cement sales in Egypt. Other significant competitors in the Egyptian
market are Suez and Tourah Cement Companies (Italcementi), and Helwan Portland
Cement Company, Ameriyah (Cimpor), National, Sinai, Misr Beni Suef and Misr
Quena Cement Companies.
Products and Distribution Channels
We have followed a diversification strategy that focuses on
manufacturing cement products with higher margins and have invested in
building our brand. As part of our brand strategy, we have had success selling
value-added cement products for specialized use.
As a result of the retail nature of the Egyptian market, over 90% of
our cement sales volumes are typically sold in bags. Through our commercial
strategy we have been able to serve retail customers throughout the country
directly without having to depend on wholesalers and distributors.
Description of Properties, Plant and Equipment
As of December 31, 2004, Assiut operated one cement plant with an
installed capacity of approximately 4.9 million tons with three dry process
production lines. The plant is located approximately 200 miles south of Cairo.
Assiut's cement plant serves the upper Nile region of Egypt, as well as Cairo
and the delta region, Egypt's main cement market.
Capital Investments
We made capital expenditures of approximately U.S.$27.2 million in
2002, U.S.$14.1 million in 2003 and U.S.$8.5 million in 2004 in our Egyptian
operations. We currently expect to make capital expenditures of approximately
U.S.$10.7 million in our Egyptian operations during 2005.
33
South America, Central America and the Caribbean
As of December 31, 2004, our business in South America, Central
America and the Caribbean, which includes our operations in Venezuela,
Colombia, Costa Rica, the Dominican Republic, Panama, Nicaragua and Puerto
Rico, as well as other assets in the Caribbean, represented approximately 15%
of our net sales, 17% of our total installed capacity and 11% of our total
assets.
Our Venezuelan Operations
Overview
Our Venezuelan operations represented approximately 4% of our net
sales in 2004. As of December 31, 2004, we held a 75.7% interest in CEMEX
Venezuela, S.A.C.A., or CEMEX Venezuela, a company listed on the Caracas Stock
Exchange. CEMEX Venezuela also serves as the holding company for our interests
in the Dominican Republic, Panama and Trinidad. CEMEX Venezuela is the largest
cement producer in Venezuela, based on an installed capacity of 4.6 million
tons as of December 31, 2004.
The Venezuelan Cement Industry
Cement consumption in Venezuela grew 31.3% in 2004 compared to 2003
according to the Venezuelan Cement Producer Association as the Venezuelan
economy began to recover from Venezuela's political and economic turmoil
during 2003. A nation-wide general strike that began in December 2002 caused a
significant reduction in oil production and had a material adverse effect on
Venezuela's oil-dependent economy in 2003. In 2004, average inflation in
Venezuela reached 19.2%, the Venezuelan Bolivar depreciated 20% against the
Dollar and gross domestic product (GDP) increased 17.3%. In February 2003,
Venezuelan authorities imposed foreign exchange controls and implemented price
controls on many products, including cement.
Competition. As of December 31, 2004, the Venezuelan cement industry
included five cement producers, with a total installed capacity of
approximately 10.1 million tons, according to our estimates. We estimate that
CEMEX Venezuela's installed capacity in 2004 represented approximately 46% of
that total, almost twice that of its next largest competitor. Our global
competitors, Holcim and Lafarge, own controlling interests in Venezuela's
second and third largest cement producers, respectively.
In 2004, 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.
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.|
34
[GRAPHIC OMITTED]
As of December 31, 2004, 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 2004 with 30 ready-mix production plants
throughout Venezuela.
Distribution Channels
Transport by land is handled partially by CEMEX Venezuela. During
2004, 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.
Exports
During 2004, exports from Venezuela represented approximately 30% 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 2004, 75% of our exports from Venezuela were to the United States, and 25%
were to the Caribbean.
Description of Properties, Plants and Equipment
As of December 31, 2004, CEMEX Venezuela operated three wholly-owned
cement plants, Lara, Mara and Pertigalete, with a combined installed cement
capacity of approximately 4.6 million tons. CEMEX Venezuela also operates the
Guayana grinding facility with a cement capacity of 375,000 tons. All the
plants are strategically located to serve both domestic areas with the highest
levels of cement consumption and export markets. CEMEX Venezuela also owns 30
ready-mix concrete production facilities, one mortar plant and 12 distribution
centers. CEMEX Venezuela owns four limestone quarries with reserves sufficient
for over 100 years at 2004 production levels.
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 natural gas as fuel. CEMEX Venezuela
has its own electricity generating facilities, which are powered by natural
gas and diesel fuel.
As of December 31, 2004, 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. CEMEX Venezuela's cement is
transported either in bulk or in bags.
35
Capital Investments
We made capital expenditures of approximately U.S.$13.6 million in
2002, U.S.$10.8 million in 2003 and U.S.$13.6 million in 2004 in our
Venezuelan operations. We currently expect to make capital expenditures of
approximately U.S.$12.9 million in our Venezuelan operations during 2005.
Our Colombian Operations
Overview
As of December 31, 2004, we owned approximately 99.6% of the ordinary
shares of CEMEX Colombia, S.A., or CEMEX Colombia. Our Colombian operations
represented approximately 3% of our net sales in 2004.
As of December 31, 2004, 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 2004, 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, 2004. 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
Competition. The Sindicato Antioqueno, or Argos, which either owns or
has interests in eight of Colombia's eighteen cement plants, has dominated the
Colombian cement industry. 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.
36
Our Colombian Operating Network
[GRAPHIC OMITTED]
CEMEX Colombia owns quarries with minimum reserves sufficient for
over 100 years at 2004 production levels. In addition to mining its own raw
materials, CEMEX Colombia also purchases raw materials from third parties. The
majority of CEMEX Colombia's cement is distributed through independent
distributors.
CEMEX Colombia's principal concrete product is ready-mix concrete,
produced to client specifications and delivered directly to job sites. CEMEX
Colombia also produces other specialized cement-based building materials.
CEMEX Colombia operates its ready-mix concrete business through 22
ready-mix plants. CEMEX Colombia also uses 11 portable ready-mix plants, which
allow concrete to be mixed at major building sites, reducing transportation
costs and eliminating the need to acquire additional permanent ready-mix
concrete sites.
Description of Properties, Plants and Equipment
As of December 31, 2004, 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. The Ibague
plant serves the Urban Triangle, while Cucuta and Bucaramanga plants, located
in the northeastern part of the country, serve local and coastal markets. The
La Esperanza cement plant and the Santa Rosa clinker mill are close to Bogota.
CEMEX Colombia also has an internal electricity generating capacity of 24.7
megawatts through a leased facility. In addition, CEMEX Colombia owns two land
distribution centers, one mortar plant, 22 ready-mix concrete plants, one
concrete products plant, eight aggregate mines and six aggregates operations.
Capital Investments
We made capital expenditures of approximately U.S.$5.2 million in
2002, U.S.$6.0 million in 2003 and U.S.$9.3 million in 2004 in our Colombian
operations. We currently expect to make capital investments of approximately
U.S.$6.7 million in our Colombian operations during 2005.
37
Other South American Investments
Our Equity Investment in Chile
As of December 31, 2004, we held an 11.9% interest in Cementos Bio
Bio, S.A., or Cementos Bio Bio, with an installed capacity of approximately
2.3 million tons. On April 26, 2005, we announced the sale of our interest in
Cementos Bio Bio. Cementos Bio Bio owns and operates three cement plants and
has 24 ready-mix concrete plants.
Central America and the Caribbean
As of and for the year ended December 31, 2004, Central America and
the Caribbean, which includes our operations in Costa Rica, the Dominican
Republic, Panama, Nicaragua, Puerto Rico and other assets in the Caribbean,
represented approximately 8% of our net sales, 5% of our total installed
capacity and 5% of our total assets.
Through our investments in Costa Rica, Panama and Nicaragua, we have
established a strategic presence in the mainland markets of Central America.
Our Costa Rican Operations
As of December 31, 2004, we owned a 98.7% interest in CEMEX (Costa
Rica), S.A., or CEMEX (Costa Rica). Approximately 1.1 million tons of cement
were sold in Costa Rica during 2004, 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 Industria Nacional de Cemento, an affiliate of Holcim. We estimate
that the two companies control roughly equal proportions of the market.
Our Costa Rican operations' cement plant has one dry process
production line with an installed capacity of 850,000 tons. Our grinding mill
in northwest Costa Rica has a grinding capacity of 657,000 tons. Our second
grinding mill in San Jose has a capacity of 163,000 tons. During 2004, exports
of cement by our Costa Rican operations represented approximately 31% of our
total cement production in Costa Rica. In 2004, 45% of our exports from Costa
Rica were to Nicaragua, 28% to El Salvador, and 27% to Guatemala.
We made capital expenditures of approximately U.S.$5.2 million in
2002, U.S.$7.1 million in 2003 and U.S.$3.1 million in 2004 in our Costa Rican
operations. We currently expect to make capital expenditures of approximately
U.S.$3.6 million in our Costa Rican operations during 2005.
Our Dominican Republic Operations
As of December 31, 2004, we owned 99.9% of Cementos Nacionales, a
cement producer in the Dominican Republic with an installed capacity of 2.4
million tons of cement, seven distribution centers and seven ready-mix
concrete plants. We also have a 25 year lease arrangement with the Dominican
Republic government related to the mining of gypsum, which enables us to
supply all local and regional gypsum requirements.
In June 2003, Cementos Nacionales 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 would increase
our total clinker production capacity in the Dominican Republic to 2.2 million
tons per year, is expected to begin operations by the end of 2005. As of
December 31, 2004, we have invested approximately U.S.$52 million in this
project, and we expect to invest the remaining U.S.$78 million during 2005.
In 2004, Dominican Republic cement consumption reached 2.9 million
tons, and some cement imports were necessary to fulfill domestic demand.
Cementos Nacionales serves the cement market throughout the Dominican
Republic. Its principal competitors are Cementos Cibao, a local competitor,
Cemento Colon, an affiliate of Holcim, Cenentos Andinos, a competitor of
Colombian origin and Domicen, a competitor of Italian origin.
38
As of December 31, 2004, Cementos Nacionales was the leading cement
producer in the Dominican Republic, based on installed capacity as reported by
International Cement Review in the Global Cement Report. Cementos Nacionales'
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.
Cementos Nacionales currently owns one dry process cement plant in
San Pedro de Macoris with an installed capacity of 0.7 million tons per year
of clinker, in addition to seven ready-mix concrete production plants, three
grinding mills with an installed capacity of 2.4 million tons per year, 7
distribution centers located throughout the country and two marine terminals.
During 2004, our Dominican Republic clinker production facilities operated at
full capacity and our grinding mills operated at 75% capacity.
We made capital expenditures of approximately U.S.$9.0 million in
2002, U.S.$13.4 million in 2003 and U.S.$56.3 million in 2004 in our Dominican
Republic operations. We currently expect to make capital investments of
approximately U.S.$85.8 million in our Dominican Republic operations during
2005.
Our Panamanian Operations
As of December 31, 2004, we owned a 99.3% interest in Cemento Bayano.
Approximately one million cubic meters of ready-mix concrete were
sold in Panama during 2004, according to the General Comptroller of the
Republic of Panama (Contraloria General de la Republica de Panama). Panamanian
cement consumption increased 17% in 2004, according to our estimates. The
Panamanian cement industry includes two cement producers, Cemento Bayano and
Cemento Panama, an affiliate of Holcim and Cementos del Caribe.
Our operations in Panama include one dry production process cement
plant, with an installed capacity for cement production of approximately
402,000 tons per year. In addition, Cemento Bayano owns and operates eleven
ready-mix concrete plants located in Panama City, Colon, Aguadulce, Arraijan
and in Chiriqui. In December 2003, Cemento Bayano acquired a new quarry to
supply aggregates for its ready-mix operations for approximately U.S.$4
million.
We made capital expenditures of approximately U.S.$3.9 million in
2002, U.S.$7.6 million in 2003 and U.S.$6.3 million in 2004 in our Panamanian
operations. We currently expect to make capital expenditures of approximately
U.S.$8.5 million in our Panamanian operations during 2005.
Our Nicaragua Operations
CEMEX Nicaragua leases and operates one cement plant with five kilns
utilizing the wet production process and an installed milling capacity of
470,000 tons. Since March 2003, we have leased a 100,000 ton milling plant in
Managua, which has been used exclusively for pet-coke milling.
According to our estimates, Nicaraguan cement production during 2004
grew 16.9% compared to 2003. The increase was a result of increased public
sector investment and increased private investment attributable to an
improvement in the perceived business climate.
According to our estimates, approximately 600,000 tons of cement were
sold in Nicaragua during 2004. Two market participants compete in the
Nicaraguan cement industry: CEMEX Nicaragua and Holcim.
We made capital expenditures of approximately U.S.$3.9 million in
2002, U.S.$4.6 million in 2003 and U.S.$2.8 million in 2004 in our Nicaraguan
operations. We currently expect to make capital expenditures of approximately
U.S.$8.2 million in our Nicaraguan operations during 2005.
Our Puerto Rico Operations
Our Puerto Rican operations represented approximately 20.7% of our
cement sales volumes in the Caribbean region in 2004. As of December 31, 2004,
we owned 100% of Puerto Rican Cement Company, Inc., or PRCC.
39
In 2004, Puerto Rican cement consumption reached 1.8 million tons.
PRCC serves the cement market throughout Puerto Rico. The Puerto Rican cement
industry in 2004 was comprised of two cement producers, PRCC, and San Juan
Cement Co., an affiliate of Italcementi.
Our operations in Puerto Rico include one cement plant utilizing the
dry production process, with an installed cement capacity of approximately 1.1
million tons per year. In addition, PRCC owns and operates ten ready-mix
concrete facilities, mainly serving the sector of the Puerto Rican market
located on the eastern part of the island.
We made capital expenditures of approximately U.S.$14.8 million in
2002, U.S.$26.0 million in 2003 and U.S.$8.3 million in 2004 in our Puerto
Rican operations. We currently expect to make capital investments of
approximately U.S.$9.2 million in our Puerto Rican operations during 2005.
Our Other Caribbean Operations
We believe that the Caribbean region holds considerable strategic
importance because of its geographic location. Our network of seven marine
terminals in the region facilitates 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 and one is in the
Cayman Islands.
Our Trading Operations
We traded more than 10 million tons of cement and clinker in 2004.
Approximately 60% of this amount consisted of exports from our operations in
Venezuela, Mexico, Egypt, Philippines, Costa Rica, Spain, Puerto Rico and
Nicaragua. Approximately 40% was purchased from third parties in countries
such as South Korea, China, Turkey, Egypt, Israel, Thailand, Venezuela,
Cyprus, Indonesia, Portugal, Spain, Colombia and Tunisia. During 2004, we
conducted trading activities in 75 countries.
To enhance our trading operations in the Mediterranean region, we are
currently building three grinding mills in Italy, two of which will have an
installed capacity of approximately 750 thousand tons per year and the third
of which will have an installed capacity of 450 thousand tons per year. Two
mills [are expected to begin] operating during the second quarter of 2005,
while the third mill, with an installed capacity of 450 thousand tons per
year, is expected to start operating in 2006. With respect to these
operations, we made capital investments of approximately U.S.$13 million
during 2003 and approximately U.S.$33 million during 2004. We currently expect
to make capital investments of approximately U.S.$44 million in Italy during
2005.
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.
RMC traded around 3 million tons of cement and clinker during 2004.
Approximately 60% of this amount was traded among its subsidiaries and the
remaining 40% was purchased from third parties not affiliated with RMC or
CEMEX.
40
Description of RMC Operations
Set forth below is a brief description of RMC's world-wide
operations, which include significant operations in the United Kingdom, the
United States, Germany and France, as well as operations in other countries in
Europe and the rest of the world. As described above, we completed our
acquisition of RMC on March 1, 2005, and we are currently involved in the
post-merger integration process for these operations.
The revenue information set forth below with respect to RMC's
operations for the year ended December 31, 2004 has been derived from RMC's
audited annual financial statements for 2004. RMC's financial statements were
prepared by RMC in accordance with U.K. GAAP, which differs in significant
respects from Mexican GAAP.
For the year ended December 31, 2004, RMC's revenues from continuing
operations, before revenues from unconsolidated joint ventures and associated
entities of approximately (pound)351.7 million, were (pound)4,121.1 million.
As of the date of this annual report, we have not finalized our
budget for capital expenditures related to RMC's operations for 2005. However,
we do not expect RMC-related capital expenditures to exceed U.S. $450 million
in 2005.
United Kingdom
Overview
RMC is a leading provider of building materials in the United Kingdom
with vertically integrated cement, ready-mix concrete and aggregates
operations. RMC is also an important asphalt producer in the United Kingdom,
with a significant share of the roof tile, concrete-block paving, and
concrete-block segments.
For the year ended December 31, 2004, RMC's operations in the United
Kingdom generated revenues of approximately (pound)1,071 million.
The U.K. Cement Industry
According to Cembureau, the representative organization of the cement
industry in Europe, total construction output in the U.K. grew 3.5% in 2004
compared to 2003. The increase in total construction output in 2004 was
primarily driven by an increase in residential construction. In addition,
total cement consumption remained flat at approximately 13.6 million tons.
Competition
RMC's primary competitors in the U.K. are Lafarge, Castle, Hanson,
Tarmac and Aggregate Industries, each with varying regional and product
strengths. The high-volume south-eastern market is well-served by RMC's
raw-material sources and manufacturing plants.
RMC's U.K. Operating Network
[GRAPHIC OMITTED]
41
Description of Properties, Plants and Equipment
As of December 31, 2004, RMC operated three cement plants located in
the United Kingdom, with an installed cement capacity of 2.7 million tons per
year. RMC also operated 323 ready-mix concrete plants and 134 aggregate
quarries in the United Kingdom. RMC also owns a grinding mill and six marine
import terminals in the United Kingdom. In addition, RMC has operating units
dedicated to the asphalt, block, tile and paving businesses in the United
Kingdom.
United States
For a description of RMC's operations in the United States, please
see "-- North America -- Our U.S. Operations" above.
Germany
Overview
RMC is a leading provider of building materials in Germany, with
vertically integrated cement, ready-mix concrete and aggregates operations.
RMC maintains a nationwide network for ready-mix concrete and aggregates in
Germany. RMC's German operations provide its customers with high-quality raw
materials, versatile concrete products, and intelligent building solutions.
For the year ended December 31, 2004, RMC's operations in Germany
generated revenues of approximately (pound)570 million.
The German Cement Industry
According to Cembureau, total construction in Germany declined 17% in
2004 compared to 2003. The decrease was primarily driven by a decrease in
non-residential construction. Total cement consumption in 2004 was 28 million
tons, a decline of 3% compared to 2003.
Competition
RMC's 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.
RMC's German Operating Network
[GRAPHIC OMITTED]
42
Description of Properties, Plants and Equipment
As of December 31, 2004, RMC operated three cement plants in Germany,
with an installed cement capacity of 6.4 million tons per year. RMC also
operated three cement grinding mills, 182 ready-mix concrete plants, 44
aggregate quarries and two land terminals in Germany.
France
Overview
RMC is a leading ready-mix concrete producer in France. RMC is also a
leading producer of aggregates in France and transports a significant quantity
of materials by waterway.
For the year ended December 31, 2004, RMC's operations in France
generated revenues of approximately (pound)432 million.
The French Cement Industry
According to Cembureau, total construction output in France grew by
3.3% in 2004 compared to 2003. The increase was primarily driven by an
increase in residential construction. Cement consumption grew 3.0% to 21.3
million tons compared to the prior year.
Competition
RMC's main competitors in the ready-mix market in France include
Lafarge, Holcim, Italcementi and Vicat. RMC's main competitors in the
aggregates market in France include Lafarge, Italcementi, Colas and Eurovia.
Many of RMC's major competitors benefit from manufacturing their own supply of
cement within France, while RMC must rely on third party cement producers in
France.
Description of Properties, Plants and Equipment
As of December 31, 2004, RMC operated 223 ready-mix concrete plants
in France, one maritime cement terminal located in LeHavre, on the northern
coast of France, and 48 aggregates quarries.
Rest of Europe
For the year ended December 31, 2004, RMC's operations in the rest of
Europe, which consist of its operations in 13 European countries other than
the U.K., Germany and France, generated revenues of approximately (pound)918
million.
In Austria, RMC is a leading participant in the concrete, pumping,
aggregates and pre-cast concrete markets and also produces ready-mix concrete
and admixtures. RMC operates 38 ready-mix concrete plants and 26 aggregate
quarries in Austria.
RMC is the largest cement producer in Croatia based on installed
capacity. Its three cement plants, with an installed capacity of 2.6 million
tons per year, and six cement terminals serve predominantly the coastal and
the central northwest region of the country. RMC's ready-mix concrete
operations in Croatia are located in the western part of the country with two
ready-mix facilities and an aggregates quarry.
RMC is a leading provider of building materials in Poland serving the
cement, ready-mix concrete and aggregates markets. RMC operates two cement
plants in Poland, with a total installed cement capacity of 3.1 million tons
per year. RMC operates two grinding mills, three aggregates quarries, and 28
ready-mix concrete plants in Poland.
RMC is Latvia's only cement producer and operates one cement plant
with an installed cement capacity of 0.4 million tons per year. RMC is a
leading ready-mix producer and supplier in Latvia with three ready-mix
concrete plants. RMC's Latvian operations also produce other concrete products
and limestone flour.
43
RMC is a leading producer of ready-mix concrete and aggregates
markets in the Czech Republic where it operates 46 ready-mix concrete plants
and seven aggregates quarries. RMC also distributes cement in the Czech
Republic and operates two cement grinding mills, with an installed milling
cement capacity of 336 thousand tons per year, and one cement terminal.
RMC's operations in Ireland produce and deliver sand, stone and
gravel as well as ready-mix concrete, mortar, and concrete products. RMC owns
44 ready-mix concrete plants and 23 aggregate quarries in Ireland. RMC is also
involved in the production and distribution of pre-cast, pre-stressed and
architectural pre-cast products for distribution throughout Ireland. In
addition, RMC is involved in waste management in Northern Ireland and owns
three maritime cement terminals for cement importation and distribution for
Northern Ireland and the Isle of Man.
RMC has aggregates and ready-mix concrete operations in Spain,
Hungary and Portugal. In addition, RMC operates 18 ready-mix concrete plants
in Denmark. In Finland, Norway and Sweden, RMC, through Embra, a leading
bulk-cement importer in the Nordic region, operates 11 maritime cement
terminals.
Rest of the World
For the year ended December 31, 2004, RMC's operations outside the
United Kingdom, the United States and Europe, generated revenues of
approximately (pound)195 million.
RMC is a leading producer and supplier of raw materials for the
construction industry in Israel. In addition to ready-mix concrete products,
RMC produces a diverse range of building materials and infrastructure products
in Israel. RMC operates 62 ready-mix concrete plants and 13 aggregates
quarries in Israel.
In the United Arab Emirates (UAE), RMC operates 16 ready-mix concrete
plants serving the markets of Dubai, Abu Dhabi, Ras Al Khaimah and Sharjah. In
addition, RMC operates an aggregates quarry in the UAE.
RMC is a leading ready-mix concrete producer in Malaysia, with a
significant share in the country's major urban hubs. RMC operates 26 ready-mix
concrete plants and five aggregates quarries in Malaysia.
RMC's ready-mix concrete operations in Argentina, consist of three
ready-mix concrete plants. In Jamaica, RMC has operations related to the
production of calcined lime.
44
Regulatory Matters and Legal Proceedings
A description of material regulatory and legal matters affecting us
is provided below.
Tariffs
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.
Spain, as a member of the European Union, is subject to the uniform
European Union commercial policy. There is no tariff on cement imported into
Spain from another European Union country or on cement exported from Spain 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 Spain currently pay no tariff.
Environmental Matters
We use processes that are designed to protect 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.
European Union directives imposing stricter environmental standards
are expected to be implemented in Spain by 2007. For the purpose of adopting
the directives, on July 3, 2002, Spain promulgated Law 16/2002, which
establishes mechanisms for the prevention and integrated control of pollution.
The new law requires that factories operating in Spain receive an integrated
environmental authorization from the relevant regulatory body at the
autonomous region level, generally the department of the environment. This new
law came into force on July 3, 2002; however, due to a transitional period,
existing industries need not comply until October 30, 2007. In anticipation of
our compliance by this date, one of our eight plants in Spain has already
received the required authorization. With respect to our other plants, we
already comply or believe that we would be able to comply with the requisite
standards, if necessary, without significant expenditures. In addition, we are
not aware of any material environmental liabilities with respect to our
Spanish operations. We are currently evaluating the impact of the European
Union directives on RMC's European operations.
CEMEX Venezuela's cement production plants are subject to and comply
with Venezuelan environmental regulations. The Ministerio del Ambiente y los
Recursos Naturales, or Ministry of the Environment and Natural Resources, is
the regulatory body in Venezuela with jurisdiction over environmental matters.
CEMEX Venezuela has decreased the emission levels of cement dust, through dust
extraction equipment installed in all its cement plants.
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, including our
Hidalgo plant, which temporarily halted operations in 2002, 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 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
Indusrty Certificate. The Certificates for Atotonilco, Huichapan, Merida,
Yaqui, Hermosillo, Tamuin, Valles and Zaptoltic were renewed in 2004; the
Certificates for Barrientos, Torreon
45
and Guadalajara are scheduled to be renewed in 2005; and the Certificates for
Monterrey, Ensenada and Tepeaca are scheduled to be renewed in 2006. The
Certificate of the Hildalgo plant has expired, and since the plant is no
longer in operation, the Certificate will not be renewed. 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. 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. During 2004, the Ensenada, Yaqui, Hermosillo, Guadalajara,
Zapotiltic, Merida, Monterrey, Torreon, Valles, Tamuin, Barrientos,
Atotonilco, Tepeaca and Huichapan plants substituted with alternative fuels
approximately 5.76%, 3.43%, 2.65%, 0.74%, 0.03%, 2.56%, 1.34%, 6.02%, 0.02%,
1.26%, 4.75%, 0.58%, 0.01% and 3.90%, respectively, of their total fuel used.
Overall, approximately 1.98% of the total fuel used in the 14 cement plants
was comprised of alternative substituted fuels.
Between 1999 and 2004, our Mexican operations have invested 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.
As of December 31, 2004, our eight cement plants in Spain and our
cement mill in Tenerife, Spain have received the ISO 14001 certification for
environmental management systems.
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
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.
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.
46
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 filed a petition for a "changed circumstances" review. The ITC decided
in December 2001 not to initiate such a review. CEMEX 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.
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.
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.
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 our
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.
47
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 Department upon review.
(effective 5/5/1997) 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 Department upon review.
(effective 5/4/1998) Liquidation suspended pending NAFTA panel review.
8/1/98-7/31/99 37.49%, 49.58% (effective 38.65% determined by the Commerce Department upon review.
3/17/1999) Liquidation suspended pending NAFTA panel review.
8/1/99-7/31/00 49.58%, 45.98% (effective 50.98% determined by the Commerce Department upon review.
3/16/2000) Liquidation suspended pending appeal to NAFTA panel review.
8/1/00-7/31/01 49.58%, 38.65% (effective 73.74% determined by the Commerce Department upon review.
5/14/2001) Liquidation suspended pending appeal to NAFTA panel review.
8/1/01-7/31/02 38.65%, 50.98% 80.75% determined by the Commerce Department upon review.
(effective 3/19/2002) Liquidation suspended pending appeal to NAFTA panel review.
8/1/02 - 7/31/03 50.98%, 73.74% (effective 54.97% determined by the Commerce Department upon review.
1/14/2003) Liquidation suspended pending appeal to NAFTA Panel.
8/1/03 - 7/31/04 73.74%, U.S.$52.41 per Subject to review by the Commerce Department.
ton
(effective 10/15/2003)
8/01/04 - to date U.S.$52.41 per ton, Subject to review by the Commerce Department.
U.S.$32.85 per ton
(effective 12/29/2004)
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.
48
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, 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.
Tax Matters
As of December 31, 2004, 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
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. We have 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, our operating subsidiaries in Philippines, for
deficiencies in the amount of income tax paid in prior tax years amounting to
a total of approximately PhP3,069.1 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, 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 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. 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 (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
49
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 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 we own 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. We
cannot predict what effect, if any, this action will have on our 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. For a more detailed description of our
investment in Gresik and the ongoing difficulties with Semen Padang, please
see "Europe, Asia and Africa -- Our Asian Operations -- Our Indonesian Equity
Investment" above.
50
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 are 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.
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
brought against RMC that have arisen in the ordinary course of business. We
believe we have made adequate provisions to cover both current or 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.
51
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
Securties and Exchange Commission.
This annual report also includes statistical data regarding the
production, distribution, marketing and sale of cement, ready-mix concrete and
clinker. 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.
These financial statements do not reflect the consolidation of RMC, which
occurred on March 1, 2005, or asset sales subsequent to December 31, 2004. Our
financial statements have been prepared in accordance with Mexican GAAP, which
differ in significant respects from U.S. GAAP. See note 24 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 5.6% in 2002, 3.9% in
2003 and 5.4% in 2004. 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, 2004. 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 include the number of
s of cement sold to our operations in other countries. Likewise, unless
otherwise indicated, the net sales financial information presented in this
annual report for our operations in each country
52
include the Mexican Peso amount of sales derived from sales of cement to our
operations in other countries, 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, 2002, 2003, and 2004 by
principal geographic area expressed as an approximate percentage of our total
consolidated group before eliminations resulting from consolidation. We
operate in countries 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 in which we operate compared
to the Mexican Peso and the rate of inflation of each of these countries. 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.
Central
% America
% United % % % % % and the %
Mexico States Spain Venezuela Colombia Egypt Philippines Caribbean Others Combined Elimination Consolidated
(in millions of constant Mexican Pesos as of December 31, 2004, except percentages)
Net Sales For the
Period Ended:
December 31, 2002 34% 24% 14% 4% 3% 2% 2% 7% 10% 88,383 (8,658) 79,725
December 31, 2003 34% 22% 16% 4% 3% 2% 2% 8% 9% 93,331 (7,778) 85,553
December 31, 2004 33% 22% 16% 4% 3% 2% 2% 8% 10% 99,045 (8,261) 90,784
Operating Income
For the Period
Ended:
December 31, 2002 72% 21% 18% 8% 6% 1% -- 7% -33% 15,967 -- 15,967
December 31, 2003 70% 14% 18% 7% 6% 2% -- 7% -24% 17,377 -- 17,377
December 31, 2004 60% 16% 18% 6% 6% 3% 1% 9% -16% 20,628 -- 20,628
Total Assets at:
December 31, 2002 24% 19% 9% 3% 3% 2% 4% 5% 31% 278,868 (84,714) 194,154
December 31, 2003 22% 18% 14% 3% 3% 2% 3% 5% 30% 272,444 (81,194) 191,250
December 31, 2004 23% 16% 12% 3% 3% 2% 3% 5% 33% 274,977 (81,354) 193,623
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. Our overall strategy is to structure our
worldwide operations to take greatest advantage of opportunities provided
under the tax laws of the various jurisdictions 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
53
current tax assessments will be judged in our favor. Significant judgment is
required to appropriately assess the amounts of tax assets. We record tax
assets when we believe that the recoverability of the asset is determined to
be more likely than not in accordance with established accounting principles.
If this determination cannot be made, a valuation allowance is established to
reduce the carrying value of the asset.
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. The result is reflected as an increase in the carrying value of each
item. 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
difference between the inflation of the country and the factor utilized to
restate a fixed asset of foreign origin 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 3N 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 and as a vehicle to reduce financing costs, as well as: (i) hedges
of contractual cash flows and forecasted transactions, (ii) hedges of CEMEX's
net investments in foreign subsidiaries, and (iii) hedges of the future
exercise of options under our stock option programs. These instruments have
been negotiated with institutions with significant financial capacity;
therefore, we consider the risk of non-compliance with the obligations agreed
to by such counterparties to be minimal. Some of these instruments have been
designated as hedges of our debt or equity instruments. In other cases,
although some derivatives complement our financial strategy, they have not
been designated as hedge instruments because accounting hedge requirements
were not met.
Effective January 1, 2001, in accordance with Bulletin C-2 "Financial
Instruments", we recognize all derivative financial instruments 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 occurred.
There are several exemptions to the general rule
54
for transactions that we designate and that meet several hedging requirements
(see note 3N to our consolidated financial statements included elsewhere in
this annual report). Premiums paid or received on hedge derivative instruments
are deferred and amortized over the life of the underlying hedged instrument
or immediately when they are settled; in other cases, premiums are recorded in
the income statement, at the time that they are received or paid. See notes 12
and 17 to our consolidated financial statements included elsewhere in this
annual report.
Pursuant to the accounting principles established by Bulletin C-2,
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 a valuation effect at the reporting date, and the final cash
inflows or outflows that we will receive or make to our counterparties will
not be known until settlement of the derivative instruments occurs. The
estimated fair values of derivative instruments determined for us and used by
us for recognition and disclosure purposes in the financial statements and
their notes, are supported by 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. 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 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.
Transactions in our own stock
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 view 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. Also, in some
cases, the obligations
55
underlying the related transactions are required to be reflected at market
value, with the changes in such value reflected in our income statement. There
is 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.
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, 2002, 2003 and 2004, our
consolidated results reflect the following transactions:
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. The acquisition
of the remaining 81.2% of RMC, which as of December 31, 2004 was
subject to clearances by several regulatory agencies, was
consummated on March 1, 2005.
o In August 2004, we acquired 6.83% (695,065 shares) of equity in
CEMEX Asia Holdings, Ltd., or CAH, a subsidiary originally
created to co-invest with institutional investors in Asian
cement operations for approximately U.S.$70 million. In
addition, in 2004, 1,398,602 CAH shares were exchanged for
27,850,713 CPOs with an approximate value of U.S.$172 million
(Ps1,916.0 million). In 2003, 84,763 CAH shares were exchanged
for 1,683,822 CPOs, with an approximate value of U.S.$7.8
million (Ps93.2 million). In July 2002, we increased our equity
interest in CAH to 77.7%. Exchanges during 2003 and 2004
resulted from agreements entered into on July 12, 2002, through
which, in 2003, 1,483,365 CAH shares were acquired by a forward
exchange requiring delivery of 28,195,213 CPOs. In April 2003,
the original settlement date was modified regarding 1,398,602
CAH shares which were acquired during 2004. In 2002, 25,429 CAH
shares were acquired for U.S.$2.3 million. For accounting
purposes, the 1,483,365 CAH shares have been consolidated since
July 2002, recognizing an account payable of U.S.$140 million,
equivalent to the price of 28,195,213 CPOs as of the date of the
exchange agreements. In 2004, we recorded a loss in
stockholders' equity of approximately Ps1,000.4 million
representing the excess in the price paid over the book value of
the CAH shares held by minority interests. Through the
transactions mentioned above, our stake in CAH increased to
99.1%.
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.$99.7 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 as part of the U.S. asset sale described
elsewhere in this document.
o In July and August 2002, through a tender offer and subsequent
merger, we acquired 100% of the outstanding shares of PRCC. The
aggregate value of the transaction was approximately U.S.$281.0
million, including approximately U.S.$100.8 million of assumed
net debt.
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 Solid, for approximately U.S.$95
million.
56
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, 2002, 2003, and
2004 expressed as a percentage of net sales.
Year Ended December 31,
--------------------------------------
2002 2003 2004
------ ------- -------
Net sales............................................................ 100.0 100.0 100.0
Cost of sales........................................................ (55.9) (57.6) (56.3)
------ ------- -------
Gross profit.................................................... 44.1 42.4 43.7
Operating expenses:..................................................
Administrative.................................................... (12.6) (11.1) (10.2)
Selling........................................................... (11.5) (11.0) (10.8)
------ ------- -------
Total operating expenses....................................... (24.1) (22.1) (21.0)
------ ------- -------
Operating income................................................. 20.0 20.3 22.7
Net comprehensive financing income (cost):
Financial expense................................................. (5.1) (5.3) (4.6)
Financial income.................................................. 0.7 0.2 0.3
Foreign exchange gain (loss), net................................. (1.2) (2.4) (0.3)
Gain (loss) on valuation of marketable securities and other
Investments.................................................... (4.8) (0.8) 1.5
Monetary position gain............................................ 5.4 4.6 4.7
------ ------- -------
Net comprehensive financing income (cost)......................... (5.0) (3.7) 1.6
------ ------- -------
Other expenses, net.................................................. (5.9) (6.4) (5.9)
Income before income tax, business assets tax, employees'
Statutory profit sharing and equity in income of affiliates..... 9.1 10.2 18.4
------ ------- -------
Income tax and business assets tax, net.............................. (0.8) (1.3) (2.3)
Employees' statutory profit sharing.................................. (0.2) (0.2) (0.4)
Total income taxes, business assets tax and employees' statutory
------ ------- -------
Profit sharing.................................................. (1.0) (1.5) (2.7)
Income before equity in income of affiliates...................... 8.1 8.7 15.7
Equity in income of affiliates....................................... 0.5 0.5 0.6
------ ------- -------
Consolidated net income.............................................. 8.6 9.2 16.3
------ ------- -------
Minority interest net income......................................... 0.6 0.4 0.3
------ ------- -------
Majority interest net income......................................... 8.0 8.8 16.0
------ ------- -------
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Overview
Summarized in the table below are the percentage (%) increases (+)
and decreases (-) in 2004 compared to 2003 in our net sales, before
eliminations resulting from consolidation, sales volumes and prices for the
major countries in which we have operations. Variations in net sales
determined on the basis of constant Mexican Pesos include the appreciation or
depreciation which occurred during the period between the country's local
currency 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 country's local currency:
57
- ------------------ ------------------------------------------- ------------------------- ----------- ------------------------
Net Sales
- ------------------ ------------ ----------------- ------------ ------------------------- ----------- ------------------------
Approximate Export Average Domestic
currency Domestic Sales Sales Prices in local
fluctuations, Variations Volumes Volumes currency
Variations net of in constant
in local inflation Mexican
Country currency effects Pesos Cement Ready-Mix Cement Cement Ready-Mix
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Mexico +4.5% -0.9% +3.6% +2% +16% +37% -3% -1%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
United States +14.0% -7.6% +6.4% +9% +8% N/A +5% +11%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Spain +5.6% +0.4% +6.0% +3% +2% -23% +3% +5%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Venezuela +10.6% -8.1% +2.5% +20% +13% +26% -12% -2%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Colombia +11.7% -8.1% +3.6% +8% +13% N/A -8% +8%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Central America
and the Caribbean +4.7% +3.6% +8.3% Flat -1% N/A +7% +5%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Philippines +19.8% -14.5% +5.3% -2% -95% -49% +35% -14%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
Egypt +42.3% -10.8% +31.5% -6% +86% +173 +32% 13%
- ------------------ ------------ ----------------- ------------ ----------- ------------- ----------- ---------- -------------
N/A = Not Applicable
- ------------------------------------------------------------------------------------------------------------------------------------
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% from Ps85,553 million in 2003 to Ps90,784
million in 2004, and our operating income increased approximately 19% from
Ps17,377 million in 2003 to Ps20,628 million in 2004.
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 the Philippines and Egypt and
lower domestic cement prices in Mexico, Venezuela and Colombia. 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.
Additionally, set forth below is a quantitative and qualitative
analysis of the effects of the various factors affecting our net sales on a
country-by-country basis.
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 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. 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' total 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.
58
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. 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' total 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' total 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.
Venezuela
---------
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 is increasing as
confidence in the economy recovers.
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,
74.6% was shipped to the United States and 25.4% to the Caribbean and South
America. For the year ended December 31, 2004, sales of ready-mix concrete in
Venezuela represented approximately 20% of our Venezuelan operations' total
net sales.
Our Venezuelan operations' average domestic sales price of cement
decreased approximately 12% in Bolivar terms in 2004 compared to 2003, while
the average domestic sales price of ready-mix concrete decreased approximately
2% in Bolivar terms over the same period.
As a result of the growth in domestic cement and ready-mix sales
volumes, net sales in Venezuela, in Bolivar terms, increased approximately 11%
in 2004 compared to 2003.
59
Colombia
--------
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. Our Colombian
operations' average sales price of cement decreased 8% in Colombian Peso terms
in 2004 compared to 2003, while the average domestic sales price of ready-mix
concrete increased approximately 8% in Colombian Peso terms over the same
period. For the year ended December 31, 2004, sales of ready-mix concrete in
Colombia represented approximately 36% of our Colombian operations' total net
sales.
As a result of the increases in domestic cement and ready-mix
concrete sales volumes and the increase in the average sales price of
ready-mix concrete, partially offset by the decrease in the average sales
price of cement, net sales in Colombia, in Colombian Peso terms, increased
approximately 12% in 2004 compared to 2003.
Central America and the Caribbean
---------------------------------
Our Central American and Caribbean operations consist of our
operations in Costa Rica, the Dominican Republic, Panama, Nicaragua and Puerto
Rico, as well as several cement terminals 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 Central American and Caribbean
operations' domestic cement sales volumes remained flat in 2004 compared to
2003. Our Caribbean region trading operations' cement sales volumes increased
approximately 7% in 2004 compared to 2003, primarily as a result of sales to
Panama and Guadaloupe. Our Central American and Caribbean operations'
ready-mix concrete sales volumes decreased approximately 1% in 2004 compared
to 2003, primarily due to a decrease in sales in the Dominican Republic. For
the year ended December 31, 2004, sales of ready-mix concrete in Central
America and the Caribbean represented approximately 16% of our Central
American and Caribbean operations' total net sales.
Our Central American and Caribbean operations' average domestic
cement sales price increased approximately 7% in Dollar terms in 2004 compared
to 2003, while the average ready-mix concrete sales price increased
approximately 5% in Dollar terms over the same period.
As a result of the increases in domestic cement and ready-mix
concrete sales average price, net sales in our Central American and Caribbean
region, in Dollar terms, increased approximately 5% in 2004 compared to 2003,
due in part to the appreciation of the Dominican peso.
The Philippines
---------------
Our Philippine operations' domestic cement sales volumes decreased
approximately 2% in 2004 compared to 2003, primarily as a result of decreased
demand in the public works sector due to reductions in government spending on
infrastructure, which was offset by a 35% increase, in Philippine Peso terms,
in the average domestic sales price of cement over the same periods. Our
ready-mix concrete sales volumes in the Philippines decreased approximately
95% in 2004 compared to 2003, while the average ready-mix concrete price
decreased approximately 14% in Philippine Peso terms over the same periods.
The decrease in ready-mix concrete sales volumes was primarily attributable to
a decrease in public sector spending. Our Philippine operations' ready-mix
concrete business, which began in 2001, is still under development and
represents a relatively small portion of our overall Philippine operations.
For the year ended December 31, 2004, sales of ready-mix concrete in the
Philippines represented less than 1% of our Philippine operations' total net
sales.
Primarily as a result of the increase in the average cement sales
prices which were partially offset by the decrease in domestic cement volumes,
net sales in the Philippines, in Philippine Peso terms, increased
approximately 20% in 2004 compared to 2003.
Egypt
-----
Our Egyptian 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 government
infrastructure
60
spending. However, this lower domestic volume was partially offset by a more
than 173% increase in exports compared to 2003. Our Egyptian operations'
export volumes represented 30% of their total volume in 2004. During 2004, 23%
of our Egyptian exports were directed to Africa while 77% were sold to Europe.
Furthermore, our Egyptian operations' ready-mix 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 market. For the year ended December 31,
2004, sales of ready-mix concrete in Egypt represented approximately 5% of our
Egyptian operations' total net sales.
In 2004, net sales in Egyptian pound terms from our Egyptian
operations increased 42% compared to 2003 net sales primarily due to a 32%
increase in domestic prices, as well as an increase in exports and ready-mix
sales.
Cost of Sales
Our cost of sales, including depreciation, increased 4% from Ps49,319
million in 2003 to Ps51,092 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 Ps36,234 million in 2003 to
Ps39,692 million in 2004 in constant Peso terms. Our gross margin increased
from 42.4% in 2003 to 43.7% in 2004, as a result of higher average prices in
most of our markets. The increase in our gross profit is 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 Ps18,857 million in 2003 to
Ps19,064 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 22.1% in 2003 to 21.0% in 2004.
Operating Income
For the reasons mentioned above, our operating income increased 19%
from Ps17,377 million in 2003 to Ps20,628 million in 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
61
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 (4,545) Ps (4,147)
Financial income........................................ 199 261
Results from valuation and liquidation of financial instruments (712) 1,335
Foreign exchange gain (loss), net ...................... (2,049) (263)
Monetary position gain.................................. 3,913 4,299
-------------- -------------
Net comprehensive financing income (expense)........ Ps (3,194) Ps 1,485
============== =============
Our net comprehensive financing result improved from an expense of
Ps3,194 million in 2003 to an income of Ps1,485 million in 2004. The
components of the change are shown above. Our financial expense was Ps4,545
million for 2003 compared to Ps4,147 million for 2004, a decrease of 9%. The
decrease was primarily attributable to lower average levels of debt
outstanding during the year, 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 Ps199 million in 2003 to Ps261 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
Ps712 million in 2003 to a gain of Ps1,335 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 Ps2,049 million in 2003 to a loss of Ps263
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 Ps3,913
million during 2003 to a gain of Ps4,299 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 consist of equity forward contracts entered into to hedge
potential 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 Ps1,335 million in 2004 recognized in the item
results from valuation and liquidation of financial instruments, a net
valuation loss of approximately Ps585 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, and an approximate
valuation gain of Ps130 million is attributable to changes in the fair value
of our marketable securities. These losses were offset by an approximate gain
of Ps673 million resulting from changes in the fair value of our interest rate
derivatives, and an approximate gain of Ps1,118 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
62
contracts that hedge the potential exercise of our executive stock option
programs over the costs associated with the intrinsic value of our executives'
options, is 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 are 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 is 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.$132.1 million (Ps1,471.6 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 Ps5,390 million compared to
Ps5,454 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 Ps643 million compared with Ps153 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 Ps1,070 million in 2003 to Ps2,044 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 Ps203 million
during 2003 to Ps330 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.
For the reasons described above, our consolidated net income (before
deducting the portion allocable to minority interest) for 2004 increased 88%,
from Ps7,872 million in 2003 to Ps14,795 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 Ps7,508 million in 2003 to Ps14,562 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.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Overview
Summarized in the table below are the percentage (%) increases (+)
and decreases (-) in 2003 compared to 2002 in our net sales, before
eliminations resulting from consolidation, sales volumes and prices for the
major countries in which we have operations. Variations in net sales
determined on the basis of constant Mexican Pesos include the appreciation or
depreciation which occurred during the period between the country's local
currency 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 country's local currency:
63
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales
- ---------------------------------------------------------------------------------------------------------------------------
Approximate Export Average Domestic
currency Variations Domestic Sales Volumes Sales Prices in local currency
fluctuations, in Volumes
Variations net of constant
in local inflation Mexican
Country currency effects Pesos Cement Ready-Mix Cement Cement Reasy-Mix
- ---------------------------------------------------------------------------------------------------------------------------
Mexico +15.3% -11.6% +3.7% +4% +13% -24% +2% -2%
- ---------------------------------------------------------------------------------------------------------------------------
United States -1.0% -2.0% -3.0% +2% +4% N/A -2% Flat
- ---------------------------------------------------------------------------------------------------------------------------
Spain +3.5% +17.5% +21.0% +5% +5% -21% -1% Flat
- ---------------------------------------------------------------------------------------------------------------------------
Venezuela -5.7% +8.7% +3.0% -13% -6% +17% +3% +6%
- ---------------------------------------------------------------------------------------------------------------------------
Colombia +11.4% +0.2% +11.6% +1% +34% N/A +6% +4%
- ---------------------------------------------------------------------------------------------------------------------------
Central America
and the
Caribbean +14.1% +1.90% +16.0% +7% +72% N/A -1% -4%
- ---------------------------------------------------------------------------------------------------------------------------
Philippines +6.1% -5.3% +0.8% -2.3% +86% +44% +4% -9%
- ---------------------------------------------------------------------------------------------------------------------------
Egypt +20.6% -32.5% -11.9% -12% +193% N/A +22% +13%
- ---------------------------------------------------------------------------------------------------------------------------
N/A = Not Applicable
On a consolidated basis, our cement sales volumes increased
approximately 5%, from 61.8 million tons in 2002 to 64.7 million tons in 2003,
and our ready-mix concrete sales volumes increased approximately 13%, from
19.2 million cubic meters in 2002 to 21.7 million cubic meters in 2003. Our
net sales increased approximately 7% from Ps79,725million in 2002 to Ps85,553
million in 2003, and our operating income increased approximately 9% from
Ps15,967 million in 2002 to Ps17,377 million in 2003.
Net Sales
Our net sales increase of 7% during 2003 was primarily attributable
to higher sales volumes in most of our markets, and the consolidation of the
results of operations of PRCC for the entire year in 2003 compared to just
five months in 2002, which were partially offset by a decrease in domestic
cement sales volumes in Venezuela, the Philippines and Egypt and lower
domestic cement prices in the United States and Central America and the
Caribbean. Of our consolidated net sales in 2002 and 2003, approximately 76%
and 73%, respectively, were derived from sales of cement, approximately 19%
and 22%, respectively, from sales of ready-mix concrete and approximately 5%
in both years from sales of other construction materials and services.
Additionally, set forth below is a quantitative and qualitative
analysis of the effects of the various factors affecting our net sales on a
country-by-country basis.
Mexico
------
Our Mexican operations' domestic gray cement sales volumes increased
approximately 4% in 2003 compared to 2002, and ready-mix concrete sales
volumes increased approximately 13% during the same period. The increase in
sales volumes resulted primarily from increased demand in the public sector,
particularly from infrastructure projects and social housing, while the
industrial and commercial sectors remained stable during the year. However,
the sales volumes increases were partially offset by a significant decrease in
cement export volumes. Our Mexican operations' cement export volumes, which
represented 5% of our Mexican cement sales volumes in 2003, decreased
approximately 24% in 2003 compared to 2002, despite stable exports to the U.S.
market, due mainly to a reduction in our exports from Mexico to the Caribbean
region. Responsibility for exports to the Caribbean region has been assumed by
our Venezuelan operations. Of our Mexican operations' cement export volumes
during 2003, 71.4% was shipped to the United States, 27.4% to Central America
and the Caribbean and 1.2% to South America. The average cement price in
Mexico increased approximately 2% in constant Peso terms in 2003 compared to
2002, and the average ready-mix concrete price decreased approximately 2% in
constant Peso terms over the same period (these prices increased 6% and 0.1%,
respectively, in nominal Peso terms). For the year ended December 31, 2003,
sales of ready-mix concrete in Mexico represented approximately 22% of our
Mexican operations' total net sales.
As a result of the increases in cement and ready-mix concrete sales
volumes and the increase in the average domestic cement price, partially
offset by a decrease in the average ready-mix prices, net sales in Mexico, in
constant Peso terms, increased approximately 4% in 2003 compared to 2002,
despite the decline in cement export volumes.
64
United States
-------------
Our United States operations' cement sales volumes, which include
cement purchased from our other operations, increased approximately 2% in 2003
compared to 2002, and ready-mix concrete sales volumes increased approximately
4% over the same period. The increases in sales volumes was primarily
attributable to strong demand from the cement-intensive public works sector,
in particular street and highway construction, and the residential sector
during the second half of 2003, while the industrial and commercial sectors
reversed their downward trend. The average sales price of cement decreased
approximately 2% in Dollar terms during 2003 compared to 2002. The average
price of ready-mix concrete remained flat during 2003 compared to 2002. For
the year ended December 31, 2003, sales of ready-mix concrete in the U.S.
represented approximately 26% of our U.S. operations' total net sales.
As a result of the decrease in the average sales price of cement and
the sale of some of our mineral products businesses, net sales in the United
States declined approximately 1% in U.S. Dollar terms in 2003 compared to
2002, despite the increases in cement and ready-mix concrete sales volumes.
Spain
-----
Our Spanish operations' domestic cement sales volumes increased
approximately 5% in 2003 compared to 2002, and ready-mix concrete sales
volumes increased approximately 5% during the same period. The increase in
sales volumes was primarily driven by strong residential construction activity
and increased spending in public works due to Spain's infrastructure program.
Our Spanish operations' cement export volumes, which represented 3% of our
Spanish cement sales volumes in 2003, decreased approximately 21% in 2003
compared to 2002 primarily due to increased domestic demand. Of our Spanish
operations' total cement export volumes during 2003, 47.8% was shipped to the
United States, 31.4% to Africa and 20.8% to Europe and the Middle East. The
average sales price of cement decreased approximately 1% in Euro terms during
2003 compared to 2002, and the average price of ready-mix concrete remained
flat in Euro terms over the same period. For the year ended December 31, 2003,
sales of ready-mix concrete in Spain represented approximately 25% of our
Spanish operations' total net sales.
As a result of the increases in cement and ready-mix concrete sales
volumes, net sales in Spain, in Euro terms, increased approximately 3.5% in
2003 compared to 2002, despite the decline in cement export volumes and in
domestic cement prices.
Venezuela
---------
Our Venezuelan operations' domestic cement sales volumes decreased
approximately 13% in 2003 compared to 2002, while ready-mix concrete sales
volumes decreased approximately 6% during the same period. The decreases in
sales volumes and ready-mix concrete sales volumes were mainly driven by the
downturn in construction activity in Venezuela and limited government spending
on infrastructure as a result of the continuing political and economic turmoil
in Venezuela, which were partially offset by increased demand from the
self-construction sector.
Our Venezuelan operations' cement export volumes, which represented
56% of our Venezuelan cement sales volumes in 2003, increased approximately
17% in 2003 compared to 2002. The increase in cement export volumes was due to
an increased focus on the export market to offset the contraction of the local
market. Of our Venezuelan operations' total cement export volumes during 2003,
63.6% was shipped to the United States and 36.4% to the Caribbean and South
America. For the year ended December 31, 2003, sales of ready-mix concrete in
Venezuela represented approximately 20% of our Venezuelan operations' total
net sales.
Our Venezuelan operations' average domestic sales price of cement
increased approximately 3% in Bolivar terms in 2003 compared to 2002, while
the average domestic sales price of ready-mix concrete increased approximately
6% in Bolivar terms over the same period.
As a result of the decreases in domestic cement and ready-mix sales
volumes, net sales in Venezuela, in Bolivar terms, decreased approximately
5.7% in 2003 compared to 2002.
65
Colombia
--------
Our Colombian operations' domestic cement sales volumes increased
approximately 1% in 2003 compared to 2002, primarily as a result of increased
demand from the private residential construction sector. Our Colombian
operations' ready-mix concrete sales volumes increased approximately 34% in
2003 compared to 2002, primarily as a result of an increase in government
spending on infrastructure, particularly on transportation. For the year ended
December 31, 2003, sales of ready-mix concrete in Colombia represented
approximately 33% of our Colombian operations' net sales.
Our Colombian operations' average sales price of cement increased 6%
in Colombian Peso terms in 2003 compared to 2002, while the average domestic
sales price of ready-mix concrete increased approximately 4% in Colombian Peso
terms over the same period.
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 Colombia, in Colombian Peso
terms, increased approximately 11.4% in 2003 compared to 2002.
Central America and the Caribbean
---------------------------------
Our Central American and Caribbean operations consist of our
operations in Costa Rica, the Dominican Republic, Panama, Nicaragua and Puerto
Rico, as well as several cement terminals 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 Central American and Caribbean
operations' domestic cement sales volumes increased approximately 7% in 2003
compared to 2002, primarily as a result of the inclusion of our Puerto Rican
operations in our consolidated results for the entire year in 2003
(representing approximately 22% of our total cement sales volume in the region
during 2003) and just five months (August through December) for 2002.
Excluding our trading operations in the Caribbean region, domestic cement
sales volumes increased 7% in 2003 compared to 2002. Our Caribbean region
trading operations' cement sales volumes increased approximately 36% in 2003
compared to 2002, primarily as a result of exports to the United States from
the Caribbean region instead of from Venezuela for several months in the
beginning of 2003 due to the political and economic turmoil and general labor
strikes in Venezuela at that time, as well as increased sales of white cement
to several Central American countries during the third quarter of 2003. Our
Central American and Caribbean operations' ready-mix concrete sales volumes
increased approximately 72% in 2003 compared to 2002, primarily due to the
inclusion of our Puerto Rican operations for the entire year in 2003, which
operations represented approximately 60% of our total ready-mix concrete sales
volumes in the region. We also benefited from higher volumes in most of our
markets in the region during 2003 and the inclusion of a full year of
ready-mix concrete sales in Costa Rica, since these ready-mix operations in
Costa Rica only began in the third quarter of 2002. For the year ended
December 31, 2003, sales of ready-mix concrete in Central America and the
Caribbean represented approximately 16% of our Central American and Caribbean
operations' total net sales.
Our Central American and Caribbean operations' average domestic
cement sales price decreased approximately 1% in Dollar terms in 2003 compared
to 2002, while the average ready-mix concrete sales price decreased
approximately 4% in Dollar terms over the same period.
As a result of the increases in domestic cement and ready-mix
concrete sales volumes, net sales in our Central American and Caribbean
region, in Dollar terms, increased approximately 14.1% in 2003 compared to
2002, despite the decline in the average sales price of both domestic cement
and ready-mix concrete prices.
The Philippines
---------------
Our Philippine operations' domestic cement sales volumes decreased
approximately 2.3% in 2003 compared to 2002, primarily as a result of
decreased demand in the public works sector due to reductions in government
spending on infrastructure, which was offset by a 4% increase, in Philippine
Peso terms, in the average domestic sales price of cement over the same
periods. Our ready-mix concrete sales volumes in the Philippines increased
approximately 86% in 2003 compared to 2002, while the average ready-mix
concrete price decreased approximately 9% in Philippine Peso terms over the
same periods. The increase in ready-mix concrete sales volumes was primarily
attributable to a weak economic
66
environment during 2002 and new construction contracts in 2003. For the year
ended December 31, 2003, sales of ready-mix concrete in the Philippines
represented approximately 1% of our Philippine operations' total net sales.
As a result of the increases in ready-mix concrete sales volumes and
in the average 777cement sales price, which were partially offset by decreases
in domestic cement volumes and in the average ready-mix concrete sales price,
net sales in the Philippines, in Philippine Peso terms, increased approximately
6% in 2003 compared to 2002.
Egypt
-----
Our Egyptian operations' domestic cement sales volumes decreased
approximately 12% in 2003 compared to 2002, primarily as a result of
exceptionally high cement volumes in 2002 and decreased demand in the
commercial and tourism sectors. These factors, however, were partially offset
by increased government spending on infrastructure and a strong
self-construction sector. The decrease in domestic sales volumes was also
partially offset by a 22% increase, in Egyptian pound terms, in the average
domestic sales price of cement in 2003 compared to 2002, which was primarily
due to our commercial strategy. Our Egyptian operations' cement export volumes
represented 13% of our Egyptian cement sales volumes in 2003. We only began
exporting cement from Egypt during the second quarter of 2003. Of our Egyptian
operations' cement export volumes during 2003, 61% was shipped to Africa and
39% was shipped to Europe and the Middle East. Our Egyptian operations'
ready-mix sales volumes increased 193% in 2003 compared to 2002, primarily
because sales volumes in 2002 were negligible. For the year ended December 31,
2003, sales of ready-mix concrete in Egypt represented approximately 3% of our
Egyptian operations' total net sales.
As a result of the decrease in cement sales volumes combined with the
offsetting increase in domestic cement sales prices, net sales in Egypt, in
Egyptian pound terms, increased approximately 21% in 2003 compared to 2002.
Cost of Sales
Our cost of sales, including depreciation, increased 11% from
Ps44,541 million in 2002 to Ps49,319 million in 2003 in constant Peso terms,
primarily as a result of a higher percentage of sales of ready-mix concrete
and other products, which have a higher cost of sales as compared to cement,
as well as increased energy and insurance costs, and the consolidation of our
Puerto Rican operations for the entire year in 2003 compared to just five
months in 2002, which represented approximately 13% of the increase. As a
percentage of sales, cost of sales increased 1.7% from 55.9% in 2002 to 57.6%
in 2003.
Gross Profit
Our gross profit increased by 3% from Ps35,184 million in 2002 to
Ps36,234 million in 2003 in constant Peso terms. Our gross margin decreased
from 44.1% in 2002 to 42.4% in 2003, as a result of the changes in our product
mix described above. The increase in our gross profit is primarily
attributable to the 7% increase in our net sales in 2003 compared to 2002,
partially offset by the 11% increase in our cost of sales in 2003 compared to
2002.
Operating Expenses
Our operating expenses decreased 2% from Ps19,217 million in 2002 to
Ps18,857 million in 2003 in constant Peso terms, primarily as a result of our
continuing cost-reduction efforts, including reductions in corporate overhead
and travel expenses. As a percentage of sales, our operating expenses
decreased from 24.1% in 2002 to 22.1% in 2003.
Operating Income
For the reasons mentioned above, our operating income increased 9%
from Ps15,967 million in 2002 to Ps17,377 million in 2003.
Comprehensive Financing Income (Expense)
The following table indicates the break down of our comprehensive
financing result in 2002 and 2003.
67
Year Ended December 31,
--------------------------------
2002 2003
-------------- -------------
(in millions of constant Pesos)
Net comprehensive financing income (expense):
Financial expense....................................... Ps (4,052) Ps (4,545)
Financial income........................................ 543 199
Results from valuation and liquidation of financial
instruments......................................... (3,856) (712)
Foreign exchange gain (loss), net....................... (939) (2,049)
Monetary position gain.................................. 4,291 3,913
-------------- -------------
Net comprehensive financing result.................. Ps (4,013) Ps (3,194)
============== =============
Our net comprehensive financing result improved from an expense of
Ps4,013 million in 2002 to an expense of Ps3,194 million in 2003. The
components of the change are shown above. Our financial expense was Ps4,052
million in 2002 compared to Ps4,545 million for 2003, an increase of 12%. The
increase was primarily attributable to a higher level of interest rates swaps
at a level above current market rates during 2003, which were entered into in
an effort to shift our interest rate profile to more fixed rates. Our
financial income decreased 63% from Ps543 million in 2002 to Ps199 million in
2003 as a result of the decline in interest rates. Our net foreign exchange
results deteriorated from a loss of Ps939 million in 2002 to a loss of Ps2,049
million in 2003. The foreign exchange loss in 2003 is primarily attributable
to the depreciation of the Peso against the Dollar and the appreciation of the
Japanese Yen against the Dollar as compared to the foreign exchange loss in
2002, which also was primarily attributable to the depreciation of the Peso
against the Dollar, but was partially offset by the depreciation of the
Japanese Yen against the Dollar. Our results from valuation and liquidation of
financial instruments improved from a loss of Ps3,856 million in 2002 to a
loss of Ps712 million in 2003, primarily attributable to valuation
improvements from our derivative financial instruments portfolio (discussed
below) during 2003. 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) decreased from a gain of Ps4,291 million during 2002 to a
gain of Ps3,913 million during 2003, mainly as a result of the decrease in the
weighted average inflation index used in the determination of the monetary
position result, combined with the decrease in our monetary liabilities in
2003 compared to 2002.
Derivative Financial Instruments
For the years ended December 31, 2002 and 2003, our derivative
financial instruments that have a potential impact on our comprehensive
financing result consist of equity forward contracts entered into to hedge
potential 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), other interest rate derivatives and interest rate
derivatives related to energy projects. Of the loss of Ps712 million in 2003
recognized in the item results on valuation and liquidation of financial
instruments, an approximate loss of Ps1,045 million is attributable to changes
in the fair value of our interest rate derivatives, while an approximate loss
of Ps85 million resulted from changes in the fair value of our foreign
currency derivatives. These losses were partially offset by a net valuation
gain of approximately Ps364 million resulting from 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
Ps54 million resulting from changes in the fair value of our marketable
securities. These valuation effects accounted for substantially all the loss
recorded in 2003 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 2003 compared to 2002. 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, is 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 are attributable to the increase, during 2003, in the market price of our
listed securities (ADSs and CPOs) as compared to 2002. The estimated fair value
68
loss of our interest rate derivatives is primarily attributable to the
continuing decline in market interest rates, as we had fixed our interest rate
profile at a level above current market rates.
Other Expenses, Net
Our other expenses, net were Ps5,454 million in 2003 compared to
Ps4,744 million in 2002, a 15% increase. The increase was primarily
attributable to the recognition of impairment charges on several long-lived
assets during 2003 of approximately Ps1,188 million compared with Ps109
million in 2002. See notes 10 and 11 to our consolidated financial statements
included elsewhere in this annual report.
Excluding impairment charges, other expenses decreased approximately
8% in 2003 as compared to 2002, mainly as a result of lower anti-dumping duty
expense during 2003 compared to 2002 and also the absence of the extraordinary
expense incurred during 2002 as a result of the premium paid on our cash
tender offer for our 12 3/4% notes due 2006, the consent fee paid in
connection with our consent solicitation for our 9.625% notes due 2009 and a
non-recurring expense related to the termination of our distribution agreement
in Taiwan. See notes 12 and 22F 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 12.3% in 2003 compared to 9.3% in 2002.
Our tax expense, which primarily consists of income taxes and business assets
tax, increased 60% from Ps668 million in 2002 to Ps1,070 million in 2003. The
increase was attributable to higher taxable income in 2003 as compared to
2002. Our average statutory income tax rate was approximately 34% in 2003 and
approximately 35% in 2002.
Employees' statutory profit sharing increased from Ps126 million
during 2002 to Ps203 million during 2003 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.
For the reasons described above, our consolidated net income (before
deducting the portion allocable to minority interest) for 2003 increased 16%,
from Ps6,791 million in 2002 to Ps7,872 million in 2003. The percentage of our
consolidated net income allocable to minority interests decreased from 6.6% in
2002 to 4.6% in 2003, as a result of our prepayment in October 2003 of the
remaining portion of the preferred equity balance of the preferred equity
transaction related to the financing of our acquisition of Southdown, Inc.,
now CEMEX, Inc., in 2000. Majority interest net income increased by 18%, from
Ps6,339 million in 2002 to Ps7,508 million in 2003, mainly as a result of our
increase in net sales, the decrease in our valuation losses on derivative
financial instruments and a lower portion of consolidated net income allocable
to minority interests, partially offset by the increases in our foreign
exchange loss, the decrease in our monetary position gain, the increase in our
other expenses and higher income taxes. As a percentage of net sales, majority
interest net income increased from 8.0% in 2002 to 8.8% in 2003.
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
69
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 Ps20.3 billion in 2002,
Ps18.7 billion in 2003 and Ps24.8 in 2004. See our Statement of Changes in the
Financial Position included elsewhere in this annual report.
Our Indebtedness
As of December 31, 2004, we had approximately U.S.$5.9 billion
(Ps66.1 billion) of total debt, of which approximately 18% was short-term and
82% was long-term. Approximately 36% of our long-term debt at December 31,
2004, or U.S.$1.8 billion (Ps19.9 billion), is to be paid in 2006, unless
extended. As of December 31, 2004, after giving effect to our cross currency
swap arrangements discussed elsewhere in this annual report, 56% of our
consolidated debt was Dollar-denominated, 15% was Euro-denominated, 14% was
Pound-denominated, 14% was Japanese Yen-denominated, and immaterial amounts
were denominated in other currencies, The weighted average interest rates paid
by us in 2004 in our main currencies were 4.9% on our Dollar-denominated debt,
1.5% on our Yen-denominated debt, 3.5% on our Euro-denominated debt and 5.5%
on our British 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 U.S.$3.1 billion
(Ps34.4 billion), as of December 31, 2004. 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 24(x) to our
consolidated financial statements included elsewhere in this annual report.
As of December 31, 2004, we and our subsidiaries had lines of credit
totaling Ps38.2 billion at annual rates of interest ranging from 0.5% to
15.5%, in accordance with the currency in which they were negotiated. The
unused amounts of those lines of credit totaled approximately Ps20.9 billion
as of December 31, 2004. In addition to these lines of credit, from time to
time we borrow money from banks and other financial institutions. This credit
line information as of December 31, 2004, does not include lines of credit
agreed to with financial institutions for approximately U.S.$5.1 billion in
connection with the acquisition of RMC. See note 2 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 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, 2004, we were in
compliance with all the financial covenants in our own and our subsidiaries'
debt instruments.
In addition, a considerable amount of our debt is subject to credit
ratings triggers that require us to pay a step-up in the coupon rate of the
affected notes in the event that certain minimum credit ratings are not
maintained. Significantly, the CEMEX, Inc. Note and Guarantee Agreement, dated
March 15, 2001, described under Item 10
70
"Additional Information -- Material Contracts," requires us to make all
reasonable efforts to ensure that the notes issued pursuant to that agreement
maintain a private letter rating of at least BBB- by Standard & Poor's and Baa3
by Moody's. If the notes fail to maintain this required rating, we would have
to pay a step-up in the coupon rate and, if, after a continuous period of two
years, the notes have not re-attained these ratings, we would have to repay
them or obtain a waiver of this requirement. As of December 31, 2004, the notes
were rated BBB- by Standard & Poor's and Baa3 by Moody's.
In order to finance the acquistion of RMC, we used the proceeds of
three credit facilities, each dated September 24, 2004, with an initial total
aggregate amount of US$5.8 billion and with weighted average life of 3.0
years. However, some of these credit facilities were intended to be temporary
arrangements. In these cases, we have already begun refinancing the original
indebtedness. The following is a description of these three credit facilities.
o On September 24, 2004, we entered into a 364 day credit
agreement with CEMEX Mexico and Empresas Tolteca de Mexico as
joint obligors, for a total aggregate principal amount of
U.S.$500 million. The proceeds of this credit agreement were
used in connection with the acquisition of RMC. On March 7,
2005, this facility was reduced to U.S.$300 million.
o On September 24, 2004, New Sunward Holding B.V. entered into
a series of agreement facilities. The facility was a
U.S.$1.25 billion multi-currency term loan guaranteed by
CEMEX, CEMEX Mexico and Empresas Tolteca de Mexico and
consists 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
in connection with the RMC acquisition. This facility was
fully repaid on April 13, 2005.
o On September 24, 2004, CEMEX Espana entered into a series of
agreement facilities. The facility is a U.S.$3.8 billion
multi-currency term loan. The indebtedness is guaranteed by
Cemex Caracas Investments, B.V., Cemex Caracas II
Investments, B.V. Cemex Egyptian Investments, B.V., Cemex
Manila Investments, B.V. and Cemex American Holdings, B.V.
and consists of three tranches. The first tranche is 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 is 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 is 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 will be used, as
required, to refinance RMC debt. All other proceeds were used
to finance the acquisition of RMC.
As of March 31, 2005, after the completion of our acquisition of RMC,
we reported U.S.$11.8 billion of outstanding indebtedness, including
indebtedness assumed from RMC. The following is a description of the material
indebtedness assumed from RMC.
o On October 18, 2002, RMC entered into a (pound)1,000,000,000
Term and Revolving Credit Agreement 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. On March 16, 2005, CEMEX Espana and RMC
entered into an amended and restated agreement relating to
these facilities. The amendments to the original agreement
include a waiver of the provision requiring mandatory
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.
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.$120,000,000
71
aggregate principal amount of 8.40% Senior Notes due 2010,
U.S.$90,000,000 aggregate principal amount of 8.50% Senior
Notes due 2012 and U.S.$45,000,000 aggregate principal amount
of 8.72% Senior Notes due 2020.
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
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, described above.
Our Preferred Equity Arrangements
In November 2000, we formed a Dutch subsidiary which issued preferred
equity for an amount of U.S.$1.5 billion (Ps16.7 billion) to provide funds for
our acquisition of CEMEX, Inc., formerly Southdown. 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, in
connection with the establishment of the new U.S.$1.15 billion senior
unsecured term loan facility by our Dutch subsidiary described under Item 10
"Additional Information Material Contracts," we redeemed before maturity all
the U.S.$650 million (Ps7,241 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 years ended December 31, 2002 and 2003 preferred
equity dividends amounted to approximately U.S.$23.2 million and U.S.$12.5
million respectively.
In October 2004, we liquidated the remaining 9.66% Putable Capital
Securities for approximately U.S.$66 million (Ps735.2 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 (Ps238.8 million) was recognized against
stockholders' equity. The balance outstanding as of December 31, 2003 was
U.S.$66 million (Ps788.1 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
years ended December 31, 2002 and 2003, capital securities dividends amounted
to approximately U.S.$11.9 million and U.S.$6.4 million, respectively. 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 (Ps66.1 million), were recorded as part of financial expenses
in our income statement.
Our Equity Arrangements
In December 1995, we entered into a transaction in which one of our
Mexican subsidiaries transferred some of its cement assets to a trust, while,
simultaneously, a third party purchased a beneficial interest in the trust for
approximately U.S.$123.5 million in exchange for notes issued by the trust. We
had the right to reacquire these assets on various dates until 2007. In
December 2003, we acquired the remaining assets for approximately U.S.$75.9
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 years ended
December 31, 2002 and 2003, the expense
72
generated by retaining the option to re-acquire the assets amounted to
approximately U.S.$13.2 million and U.S.$14.5 million, respectively, and was
included as financial expense in our income statements.
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 Ps1,053 million
was paid. This amount was recognized against 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 Equity Derivative Forward Arrangements
In connection with our appreciation warrants transaction, during
1999, we entered into equity forward contracts with a number of banks and
other financial institutions with an original maturity in December 2002,
pursuant to which the banks purchased our ADSs and shares of common stock of
CEMEX Espana, our Spanish subsidiary. In December 2002, we agreed with the
banks to settle the forward transactions for cash and simultaneously enter
into new forward transactions with the same banks on similar terms to the
original forward transactions with respect to the underlying ADSs and CEMEX
Espana shares, maturing on December 12, 2003. Under the new forward contracts,
the banks retained the 24,008,313 ADSs and 33,751,566 CEMEX Espana shares
underlying the original forward contracts, for which they agreed to pay us an
aggregate price of approximately U.S.$828.5 million, or the notional amount.
We agreed with the banks that the purchase price payable to us under the new
forward contracts would be netted against the adjusted forward settlement
price of the original forward contracts and any advance payments made by us in
connection with the closing of the new forward contracts. Upon closing of the
new forward transactions, we made an advance payment to the banks of
approximately U.S.$380.1 million of the forward purchase price, U.S.$285
million of which represented payment in full of the portion of the forward
purchase price relating to the CEMEX Espana shares and U.S.$95.1 million of
which was an advance payment against the final forward purchase price. As of
December 13, 2002, the adjusted forward settlement price of the new forward
contracts was U.S.$448.4 million. In December 2002, as a result of the net
settlement and renegotiation of the forward contracts, we recognized, in
accordance with Mexican GAAP, a loss of approximately U.S.$98.3 million
(Ps1,104.9 million) in our stockholders' equity, arising from changes in the
valuation of the underlying shares.
In October 2003, in connection with a non-dilutive equity offering by
the banks of all the ADSs underlying those forward contracts, which had
increased to 25,457,378 ADSs as a result of stock dividends through June 2003,
we agreed with the banks to settle those forward contracts for cash. As a
result of the final settlement in October 2003, we
73
recognized a gain of approximately U.S.$18.1 million (Ps203.4 million) in our
stockholders' equity, arising from changes in the valuation of the ADSs from
December 2002 through October 2003.
For accounting purposes under Mexican GAAP, 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. With respect to the portion of the
forward contracts relating to CEMEX Espana shares, the sale of the CEMEX
Espana shares to the banks was not considered to be a sale under Mexican GAAP
because we continued to retain the economic and voting rights associated with
these shares and were obligated to repurchase them upon termination of the
forward contracts, and because our obligations to the banks relating to those
shares were prepaid. As a result, the transaction did not have any effect on
minority interests, in either our income statements or our balance sheets.
As of December 31, 2003 and 2004, we were also subject to equity
forward contracts with different maturities until October 2006, for notional
amounts of U.S.$789.3 million and U.S.$1,112 million, respectively, covering
29,314,561 ADSs in 2003 and 30,644,267 ADSs in 2004. These equity forward
contracts were entered into to hedge the future exercise of the options
granted under our executive programs (see notes 16 and 17). Starting in 2001,
changes in the estimated fair value of these contracts have been recognized in
the balance sheet against the income statement, as a component of the costs
generated by the option programs. As of December 31, 2003 and 2004, the
estimated fair value of these contracts was a gain of approximately U.S.$28.0
million (Ps334.3 million) and a gain of approximately U.S.$44.8 million
(Ps499.1 million), respectively.
As of December 31, 2003 we had forward contracts maturing in August
and September 2004, for a notional amount of U.S.$122.9 million that covered
23,622,500 CPOs and presented a fair value gain of approximately U.S.$1.8
million (Ps21.5 million). These contracts were negotiated to hedge the
purchase of CAH shares through the exchange for our CPOs (see note 9A). During
2004, the contracts were liquidated, resulting in gains of U.S.$14.5 million
(Ps161.5 million) that were recognized in stockholders' equity.
In addition, as of December 31, 2003 and 2004, we had forward
contracts for notional amounts of U.S.$172.8 million and U.S.$45.2 million,
respectively, with varying maturities until January 2006, covering a total of
5,268,939 ADSs in 2003 and 1,364,061 ADSs in 2004. 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 will be
recognized in earnings. As of December 31, 2004 and 2003, the estimated fair
value of these contracts was a gain of U.S.$6.0 million (Ps66.8 million) and a
loss of U.S.$27.1 million (Ps323.6 million), respectively. During 2004,
contracts representing 2,509,524 CPOs that were held to meet our obligations
to deliver shares under the warrants program (see note 16F) were settled,
resulting in a gain of U.S.$2.6 million (Ps29.0 million) which was recognized
in stockholders' equity.
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,
2003 and 2004 were Ps6,507 million (U.S.$584.1 million) and Ps7,114 million
(U.S.$638.6 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 Ps127 million (U.S.$11.4 million) in
2002, Ps114 million (U.S.$10.2 million) in 2003 and Ps126 million (U.S.$11.3
million) in 2004. The proceeds obtained through these programs have been used
primarily to reduce net debt.
74
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 2003 annual shareholders' meeting held on
April 29, 2004, our shareholders approved a stock repurchase program in an
amount of up to Ps6 billion (approximately U.S.$539 million) to be implemented
between April 2004 and April 2005. See note 15A to our consolidated financial
statements included elsewhere in this annual report. This program expired in
April 2005 and no CPOs were repurchased under this 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.$539 million) to be implemented
between April 2005 and April 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 also has the
responsibility for developing new processes, equipment and methods to optimize
operational efficiencies and reduce our costs. For example, we have developed
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. We believe this has
helped us to keep or increase our market share in many of the markets in which
we operate.
We have five laboratories dedicated to our R&D efforts. Four 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 technology,
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 cementitious materials and products, concretes, and aggregates, as
well as the production processes related to them.
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 2003 and 2004, 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 U.S.$40.9 million and U.S.$34.7 million,
respectively. In addition, in 2003 and 2004, we capitalized approximately
U.S.$11.3 million and U.S.$9.9 million, respectively, related to internal use
software development. See note 11 to our consolidated financial statements
included elsewhere in this annual report.
Trend Information
Overview
We believe 2004 was a successful year, and our actual performance
exceeded our expectations. Our average price for both cement and ready-mix
products increased, partly as a result of stronger exchange rates. Therefore,
we are entering 2005 with higher average dollar prices, which should maintain
our positive pricing momentum.
75
We took proactive steps to minimize our energy cost per ton. These
efforts -- including a shift to fuels whose prices are less correlated to spot
markets and the development of self-supply power-generation projects -- have
paid off. Despite significant increases in the price of various energy inputs,
our average energy cost per ton in 2004 increased by only 3 percent, which was
more than offset by improving prices in many of our markets. We believe that
energy prices will increase by about 12 percent per ton in 2005, or about one
dollar per ton of cement produced. We expect this increase to be more than
offset by our ongoing efficiency programs and, to a lesser extent, higher
average prices.
Demand in markets such as Spain, whose outlook was negative at the
beginning of 2004, grew significantly during the second half of the year. The
housing and public-works sectors continued to be primary drivers of demand.
Our cement volumes in the United States exceeded our initial
expectations, growing in 2004 at close to three times the pace of GDP. Led by
strong fundamentals, construction spending was driven by the residential and
street-and-highway sectors. The U.S. economic expansion continues to offer
good prospects for the year ahead.
Domestic demand and prices improved for most of the markets in our
portfolio, and we feel we are well positioned for mid-cycle organic growth
during 2005.
Outlook for Our Major Markets
The following is a discussion of our outlook for our three major
markets, Mexico, the United States and Spain, which together generated
approximately 71% of our net sales in 2004.
In Mexico, we expect GDP to grow driven in part by the healthy
recovery in the U.S. manufacturing sector, which has been the main driver of
exports from Mexico. Remittances from workers abroad, which in 2004 reached a
record U.S.$16 billion, should also contribute to greater consumer spending.
For 2005, we expect foreign direct investments and remittances from the United
States to remain at the same high levels that we saw in 2004, contributing to
greater economic activity.
In 2004, cement and ready-mix volumes grew over 2003 driven mainly by
government infrastructure spending and by an increase in the construction of
low- and middle-income housing, both of which offset a flat self-construction
sector. The lack of growth in self-construction is primarily due to the fact
that the moderate increase in aggregate disposable income was offset by the
significant price increases in other building materials such as steel.
We are optimistic that a positive trend in cement consumption will
occur. For 2005, we expect cement volumes to increase over 2004 and to be
driven mainly by government spending on streets and highways, public
buildings, and other infrastructure projects and by an increase in the
construction of low- and middle-income housing as the electoral cycle shifts
into high gear with the 2006 presidential election approaching.
We also expect the Mexican government's financial condition to remain
sound as a result of fiscal prudence and robust oil prices.
In the United States, the increase in volumes in 2004 exceeded our
expectations. The main drivers of demand were the residential and the public
sector. We expect cement volumes to grow in 2005 over 2004 driven by
infrastructure and industrial-and-commercial sector. The residential sector is
expected to decline during 2005 due to stronger buying last year and moderate
mortgage interest-rate increases in 2005.
We expect cement volumes to grow in 2005 in line with, or slightly in
excess, GDP growth, with an adjustment for the sale of assets in the Great
Lakes region.
2004 was a very favorable year for CEMEX in the United States, and
the price outlook for 2005 indicates a continuation of this trend due to
favorable demand conditions and relatively low inventories as a result of the
mild winter conditions during December.
In Spain, GDP experienced one of the strongest growth rates in Europe
in 2004 and is expected to grow at a similar rate in 2005. The
stronger-than-expected GDP growth, combined with a robust construction sector
during
76
the year and better-than-expected weather in November and December, led
to a full-year increase in cement volumes, which exceed our expectations.
The residential sector was a stellar performer and was one of the
main drivers of cement demand. This growth has been driven by a favorable
mortgage environment, positive economic performance, and migration dynamics.
For 2005, the residential sector is expected to slightly decline, although
housing starts are expected to remain at high levels.
Public-works spending remains an important component of cement
consumption in Spain. The successor to the 2000 infrastructure plan is being
finalized and is expected to start this year and run until 2020. The new
program contemplates increases in spending compared to the previous one. For
2005 we expect a slight decrease as the new government revises its own
infrastructure plan for the coming years.
We are encouraged by the government's plan to legalize immigrants who
can document their employment and speak Spanish. This plan will have a
positive impact on demographics that will benefit cement consumption in the
medium term.
Summary of Material Contractual Obligations and Commercial Commitments
As of December 31, 2004, our subsidiaries had future commitments for
the purchase of raw materials for an approximate amount of U.S.$172.3 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 April
29, 2004. As of December 31, 2004, after eight months of operations, the power
plant has supplied electricity to 10 of our cement plants in Mexico covering
83% of their needs for electricity and representing an approximately 21%
decrease in the cost of electricity.
In March 2002, the distribution contract in Taiwan that we had
entered into with Universe Company on March 31, 2000, was terminated. As a
result, for the year ended December 31, 2002, we recognized a loss of
approximately U.S.$17.3 million (Ps209.1 million) within other expenses, net.
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, 2004:
77
Payments Due by Period
----------------------------------------------------------------
(In millions of U.S. Dollars)
Within 2-3 4-5 After
Contractual Obligations (1) Total 1 Year Years Years 5 Years
- ----------------------------------------------------- --------- ------- ------ ------ ------------
Long-Term Bank Loans and Notes Payable............ 5,448 561 3,018 1,321 548
Capital Lease Obligations......................... 2 2 - - -
--------- ------- ------ ------ ------------
Total Debt (2).............................. 5,450 563 3,018 1,321 548
Operating Leases (3).............................. 485 110 173 112 90
Unconditional Purchase Obligations Under Equity
Forward Contracts (4)......................... 1,157 531 626 - -
(1) The data set forth in this table are expressed in nominal terms and do not
include financing expenses.
(2) Total long-term debt including maturities is presented in note 12 to our
consolidated financial statements included elsewhere in this annual
report. In addition, as of December 31, 2004, we had lines of credit
totaling approximately U.S.$3.8 billion, of which the available portion
amounted to approximately U.S.$2.1 billion.
(3) 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 include the lease
of a cement plant in New Braunfels, Texas, which expires on September 9,
2009. We have an option to purchase this plant at the termination of the
lease for fair value and an early buy-out option that can be exercised in
January 2007 for a fixed amount.
(4) The scenario under which the amounts presented under this line item are
determined assumes that, upon settlement of our equity forward contracts,
we will repurchase all the underlying CPOs or ADSs. Even when this
scenario is possible, we consider that it is not probable considering
that in order for such a repurchase to take place, all the underlying
transactions to which the equity forward contracts are related, such as
our employee stock option programs, would expire unexercised (out of the
money). Also, the scenario does not take into account that we may elect
net cash settlement at maturity of the equity forward contracts and
permit our counterparties to sell the underlying CPOs into the market, in
which case, the expected cash flow would be materially different. As of
December 31, 2004, the aggregate estimated fair value of these contracts
was a gain of approximately U.S.$66.2 million. The total amount of
U.S.$531 million due in the short term is related to the contracts that
hedge our employee stock option programs. We expect that these contracts
will be refinanced from time to time relative to the underlying hedged
items. In addition, we have provided third party standby letters of
credit for the benefit of our counterparties in the equity forward
contracts and other financial transactions in the amount of U.S.$25.8
million at December 31, 2004. For accounting purposes these letters of
credit represent contingent obligations. See note 22A to our consolidated
financial statements included elsewhere in this annual report.
Off-Balance Sheet Arrangements
The only off-balance sheet arrangements we have that are reasonably
likely to have a material effect on our financial condition, operating
results, liquidity or capital resources are a portion of our equity forward
contracts with a notional amount of approximately U.S.$45.2 million as of
December 31, 2004, which are not recognized on the balance sheet at fair
value. See "--Liquidity and Capital Resources -- Our Equity Derivative
Financing Transactions" and note 17A to our consolidated financial statements
included elsewhere in this annual report.
Qualitative and Quantitative Market Disclosure
Our Derivative Financial Instruments
In compliance with the procedures and controls established by our
risk management committee, we have entered into various derivative financial
instrument transactions in order to manage our exposure to market risks
resulting from changes in interest rates, foreign exchange rates and the price
of our common stock. We actively evaluate the creditworthiness of the
financial institutions and corporations that are counterparties to our
derivative financial instruments, and we believe that they have the financial
capacity to meet their obligations in relation to these instruments.
The fair value of derivative financial instruments is based on
estimated settlement costs or quoted market prices and are supported by
confirmations of these values received from the counterparties to these
financial instruments. The notional amounts of derivative financial instrument
agreements are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss.
78
(U.S.$ millions)
-----------------------------------------------------------------
At December 31, 2003 At December 31, 2004
---------------------- -----------------------
Notional Estimated Notional Estimated
Derivative Instruments amount fair value amount fair value Maturity Date
- ------------------------------ -------- ---------- -------- ---------- -------------
Equity forward contracts...... 1,085.0 16.4 1,157.2 66.2 Jan 05-Sep 06
Foreign exchange forward
contracts..................... 1,445.9 (191.6) 4,897.9 63.4 Jan 05-Nov 07
Interest rates swaps.......... 1,850.0 (228.1) 1,950.0 (174.2) Jan 08-Oct 09
Cross currency swaps.......... 1,446.6 262.0 1,118.0 208.5 Apr 05-Dec 08
Interest rate swap options.... 200 (24.9) -- -- --
Derivatives related to energy. 174.5 (7.4) 168.1 (6.3) May 2017
Our Equity Derivative Forward Contracts
A substantial portion of our equity derivative forward contracts held
as of December 31, 2003 and 2004, with notional amounts of U.S.$789.3 million
and U.S.$1,112 million, respectively, 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). Beginning in 2001, the changes in the estimated fair
value of these forwards have been 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.$28.0 million and a gain of approximately U.S.$44.8 million as of December
31, 2003 and 2004, respectively.
In addition, as of December 31, 2003 and 2004, we held equity forward
contracts, including the appreciation warrant related forward contracts at
December 31, 2003, for notional amounts of U.S.$295.7 million and U.S.$45.2
million, respectively. These are accounted for as equity instruments, and
gains and losses are recognized as an adjustment to stockholders' equity upon
settlement. See "-- Liquidity and Capital Resources -- Our Equity Derivative
Forward Arrangements" and notes 16 and 17 to our consolidated financial
statements included elsewhere in this annual report.
Our Foreign Exchange Forward Contracts
A portion of our foreign exchange forward contracts held as of
December 31, 2003 and 2004, with notional amounts of U.S.$559.3 million and
U.S.$956.6 million, respectively, are accounted for at their estimated market
value as hedge instruments for our net investments in foreign subsidiaries.
Gains or losses are recognized as an adjustment to stockholders' equity within
the related foreign currency translation adjustment. In addition, as of
December 31, 2003 and 2004, we held foreign exchange options for notional
amounts of U.S.$886.6 million and U.S.$488.4 million, respectively, which
mature on different dates until June 2005. These accounted for estimated fair
value losses of approximately U.S.$57.2 million (Ps683.0 million) in 2003 and
U.S.$19.2 million (Ps213.9 million) in 2004, recognized in the income
statement.
As of December 31, 2004, we held structured foreign exchange forward
contracts, collars and digital options for a notional amount of U.S.$3,452.9
million that were entered into in September 2004 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 is 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.$132.1 million (Ps1,471.6 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.$102.4 million (Ps1,140.7million) and was recognized in earnings. See note
17 to our consolidated financial statements included elsewhere in this annual
report.
Our Interest Rate Swaps
As of December 31, 2003 and 2004, we were parties to interest rate
swaps for notional amounts of U.S.$1,850 million and U.S.$1,950.0 million,
respectively, entered into in order to hedge contractual cash flows (interest
payments)
79
of underlying debt negotiated at floating rates. These interest rate
swaps, are part of, and complement, our financial strategy. However, they do
not meet the accounting hedge criteria. Consequently, changes in the estimated
fair value of these instruments were recognized in earnings, with the
exception of changes in the fair value of contracts with a notional amount of
U.S.$800 million as of December 31, 2003, which were designated as accounting
hedges of contractual cash flows (interest payments) of the related floating
rate debt. Therefore, changes in the estimated fair value of these instruments
were recognized in stockholders' equity and will be reversed in the income
statement as the financial expense of the related debt is accrued. Periodic
payments under the contracts are recognized in the income statements 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.
During 2004, the notional amount of interest rate swaps increased by
U.S.$100 million as compared to 2003. This increase was mainly due to new
interest rate swaps for notional amounts totaling U.S.$200 million, negotiated
upon the exercise of our interest rate options ("swaptions"), which was
partially offset by the early settlement of interest rate swaps and cap
options for notional amounts totaling U.S.$100 million. See "-- Our Interest
Rate Swap Options," "-- Our Other Interest Rate Swap Options" and note 12A to
our consolidated financial statements included elsewhere in this annual
report.
Our Cross Currency Swaps
As of December 31, 2003 and 2004, we held cross currency swap
contracts related to our short-term and long-term financial debt portfolio.
See the table above. 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 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, 2003 and 2004, we recognized net
assets of U.S.$262.0 million (Ps3,128.7 million) and U.S.$208.5 million
(Ps2,322.7 million), respectively, related to the estimated fair value of the
short-term and long-term cross currency swap contracts, of which,
o U.S.$364.5 million (Ps4,352.7 million) as of December 31, 2003 and
U.S.$300.7 million (Ps3,349.8 million) as of December 31, 2004
relate to prepayments made to Yen and Dollar denominated
obligations under our cross currency swaps, thereby decreasing the
carrying amounts of the related debt, and
o A loss of approximately U.S.$102.5 million (Ps1,224.0 million) in
2003 and a loss of approximately U.S.$92.2 million (Ps1,027.1
million) in 2004 represented the contracts' estimated fair value
before prepayment effects and includes:
o Losses of approximately U.S.$171.9 million (Ps2,052.8
million) in 2003 and approximately U.S.$131.8 million
(Ps1,468.3 million) in 2004, 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 as part of the related debt
carrying amount,
80
o Gains of approximately U.S.$12.2 million (Ps145.7 million) in
2003 and approximately U.S.$10.9 million (Ps121.4 million) in
2004, 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.$57.2 million
(Ps683.0 million) in 2003 and approximately U.S.$28.7 million
(Ps319.7 million) in 2004, 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, 2003 and 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 is presented as if such financial liabilities had been effectively
negotiated in the exchange currency instead of in the originally contracted
currency. For the years ended December 31, 2003 and 2004, the changes in the
estimated fair value of our cross currency swap contracts, excluding
prepayment effects in 2003 and 2004, resulted in a loss of approximately
U.S.$149.7 million (Ps1,787.6 million) and a loss of approximately U.S.$192.2
million (Ps2,341.8 million), respectively, which were recognized within the
comprehensive financing result.
Our Interest Rate Swap Options
As of December 31, 2003, we held call option contracts negotiated
with financial institutions to exchange floating for fixed interest rates
(swaptions) for a notional amount of U.S.$200 million. For the sale of these
options, we received premiums of approximately U.S.$25 million (Ps297.3
million) in 2003. During 2003, U.S.$800 million of the U.S.$1,000 million
notional amount of the swaptions held by us as of December 31, 2002 matured,
and we entered into interest rate swaps for a notional amount of U.S.$800
million in connection with the counterparties' elections under the swaptions
to receive from us fixed interest rates and pay to us floating interest rates
for a five-year period. The remaining swaptions for notional amounts totaling
U.S.$200 million were scheduled to mature in October 2004. However, these
options were exercised in July 2004, and the counterparties elected to
negotiate new interest rate swaps with us. Under the new interest rate swaps,
they receive from us fixed interest rates and pay to us floating interest
rates for a five-year period. These swaptions granted the counterparties the
option to elect, at maturity of the options and at current market rates, to
receive from us fixed rates and pay us variable rates for a five-year period
or request net settlement in cash. For the year ended December 31, 2003,
premiums received, as well as the changes in the estimated fair value of these
contracts, which represented a gain of approximately U.S.$1.6 million (Ps19.1
million), were recognized in the comprehensive financing result. During 2003,
the call options that expired resulted in a loss of approximately U.S.$23.9
(Ps285.4 million), respectively, which were recognized in the comprehensive
financing result. See note 12A to our consolidated financial statements
included elsewhere in this annual report.
Our Derivatives Related to Energy Projects
As of December 31, 2003 and 2004, we had an interest rate swap
maturing in May 2017, for a notional amount of U.S.$162.1 million and
U.S.$159.0 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. See
note 22F to our consolidated financial statements included elsewhere in this
annual report. 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.$174.5 million and U.S.$168.1 million in 2003 and 2004,
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 (Ps262.7 million) in 2001. As of
December 31, 2003 and 2004, the combined estimated fair value of the swap and
floor contracts, amounting to approximate losses of U.S.$7.4 million (Ps88.4
million) and U.S.$6.3 million (Ps70.2 million), respectively, were recorded in
the comprehensive financing result for each period. As of December 31, 2003
and 2004, 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 18C to our consolidated financial
statements included elsewhere in this annual report.
81
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,
2004. 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 Mexican Pesos and U.S. 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, 2004. 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, 2004 and is summarized as follows:
Expected maturity dates as of December 31, 2004
---------------------------------------------------------------------
After Fair
Debt 2005 2006 2007 2008 2009 2010 Total Value
- ------------------------------ ------- ------- ------- ------- ------- ------- ------- -------
(Millions of U.S. Dollars equivalents of debt denominated in foreign currencies)
Variable rate................. 559 1,348 1,147 59 216 37 3,366 3,366
Average interest rate......... 3.89% 4.27% 4.70% 5.15% 5.55% 6.20% -- --
Fixed rate.................... 4 441 82 663 383 511 2,084 2,316
Average interest rate......... 5.55% 5.45% 5.35% 5.24% 5.38% 5.65% -- --
As of December 31, 2004, 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, 2004, 62% of
our foreign currency denominated long-term debt bears floating rates at a
weighted average interest rate of LIBOR plus 45 basis points, after giving
effect to our interest rate swaps and cross currency swaps. As of December 31,
2004 we also held interest rate swaps for a notional amount of U.S.$1,950.0
million and with a fair value loss of approximately U.S.$174.2 million during
2004. Pursuant to these interest rate swaps, we receive variable rates and
deliver fixed rates over the notional amount. These derivatives, even when 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, 2004 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.$23.2 million (Ps258.4 million).
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, 2004, approximately 33% of our
sales, before eliminations resulting from consolidation, were generated in
Mexico, 22% in the United States, 16% in Spain, 4% in Venezuela, 8% in Central
America and the Caribbean, 3% in Colombia, 2% in the Philippines, 2% in Egypt
and 10% from other regions and our cement and clinker trading activities. As
of December 31, 2004, our debt, considering the effects in the original
currencies generated by our cross currency swaps, amounted to Ps66.1 billion,
of which approximately 56% was Dollar-denominated, 15% was Euro-denominated,
14% was Yen-denominated and 14% was British Pound-denominated; therefore, we
have a foreign currency exposure arising from the Dollar-denominated debt, the
Euro-denominated debt, the Yen-denominated debt and the British
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 -- As of December 31, 2004, we have to pay our
Dollar, Yen and Pound denominated debt with revenues generated in Pesos or
other currencies, as we do not generate sufficient revenue in Dollars and Yen
from our operations to service all our Dollar and Yen denominated debt, which
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. In March
2005, we concluded our acquisition of RMC, an entity that will have
82
substantial revenues denominated in Pounds and Euros. Consequently, we believe
that we will generate sufficient reserves in these currencies to mitigate our
foreign currency risk.
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, 2004, the estimated fair value of
these instruments was a gain of approximately U.S.$208.5 million (Ps2,322.7
million). The potential change in the fair value of these contracts as of
December 31, 2004 that would result from a hypothetical, instantaneous
appreciation of 10% in the exchange rate of the Yen against the Dollar,
combined with a depreciation of 10% in the exchange rate of the Mexican Peso
against the Dollar, would be a loss of approximately U.S.$96.3 million
(Ps1,072.8 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, 2004, excluding our foreign exchange derivatives for notional
amounts totaling U.S.$3,452.9 million entered into to hedge the firm
commitment for our acquisition of RMC, was a loss of approximately U.S.$171.1
million (Ps1,906.1 million). The potential change in the fair value of these
derivatives as of December 31, 2004 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.$143.2 million (Ps1,595.2 million), which would be partially
offset by a corresponding foreign translation gain as a result of our net
investment in foreign subsidiaries.
Equity Risk
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
until December 31, 2004, the effects were recognized in the income statement
or as part of stockholders' equity, depending upon their designation and the
underlying instrument or program being hedged. 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 and our subsidiaries'
stock market price.
As previously discussed, we have entered into equity forward
contracts on our own stock, pursuing different goals such as hedging our
several Dollar denominated stock option programs. See "-- Liquidity and
Capital Resources." As of December 31, 2004, the estimated fair market value
of our equity forward contracts was a gain of approximately U.S.$66.2 million.
The potential change in the fair value as of December 31, 2004 that would
result from a hypothetical, instantaneous decrease of 10% in the market value
of our stock would be a loss of approximately U.S.$116.6 million (Ps1,298.9
million).
Investments, Acquisitions and Divestitures
The transactions described below represent our principal investments,
acquisitions and divestitures completed during 2002, 2003, and 2004.
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
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,
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.$1.7 billion of RMC's debt, was
approximately U.S.$5.8 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.$99.7 million. Located in Dixon, Illinois, the single cement facility has
an annual production capacity of 560,000 tons. This
83
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, Cementos Nacionales 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 would increase
our total clinker production capacity in the Dominican Republic to 2.2 million
tons per year, is expected to start operations by the end of 2005. We have
invested approximately U.S.$52 million in this project as of year end 2004 and
we expect to invest the remaining U.S.$78 million during 2005.
In July and August 2002, through a tender offer and subsequent
merger, we acquired 100% of the outstanding shares of PRCC. The aggregate
value of the transaction was approximately U.S.$281.0 million, including
approximately U.S.$100.8 million of assumed net debt.
On July 12, 2002, we purchased 25,429 shares of common stock
(approximately 0.3% of the outstanding share capital) of CAH from a CAH
investor for a purchase price of approximately U.S.$2.3 million, increasing
our equity interest in CAH to 77.7%. At the same time, we entered into
agreements to purchase an additional 1,483,365 shares of CAH common stock
(approximately 14.6% of the outstanding share capital) from several other CAH
investors in exchange for 28,195,213 CEMEX CPOs (subject to anti-dilution
adjustments), which exchange was originally scheduled to take place in four
equal quarterly tranches commencing on March 31, 2003. The exchange of 84,763
of these CAH shares took place in four quarterly tranches in 2003 as
originally scheduled. In April 2003, we amended the terms of the July 12, 2002
agreements with respect to the remaining 1,398,602 of the CAH shares. Instead
of purchasing those CAH shares in four equal quarterly tranches during 2003,
we agreed to purchase those CAH shares in four equal quarterly tranches
commencing on March 31, 2004. In 2004, 1398,602 CAH shares were exchanged for
27,850,713 CPOs with an approximate value of U.S.$172 million (Ps1,916.0
million). In August 2004, a subsidiary acquired a 6.83% equity interest in CAH
(695,065 shares) for approximately U.S.$70 million. Notwithstanding the
amendments, for accounting purposes, the CAH shares to be received by us in
exchange for CEMEX CPOs were considered to be owned by us effective as of July
12, 2002. As a result of these transactions, we have increased our stake in
CAH to 99.1%.
On July 31, 2002, we purchased, through a indirect wholly-owned
subsidiary, the remaining 30% economic interest that was not previously
acquired by CAH in Solid, for approximately U.S.$95 million. At December 31,
2004, as a consequence of this transaction and the increase of our stake in
CAH, as described above, our proportionate economic interest in Solid was
approximately 99.1%.
In May 2001, we acquired through CAH a 100% economic interest in
Saraburi Cement Company, now known as CEMEX (Thailand) Co. Ltd. or CEMEX
(Thailand), which then had an installed capacity of approximately 700,000
tons, for a total consideration of approximately U.S.$73 million. As a result
of the increase of our stake in CAH, as described above, at December 31, 2004,
our proportionate economic interest in CEMEX (Thailand) through CAH was
approximately 99.1%.
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 Ps5,166 million (U.S.$463.7 million) in 2002,
Ps4,703 million (U.S.$422.2 million) in 2003 and Ps4,835 million (U.S.$434
million) in 2004. 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
During 2002, CEMEX, Inc. sold its specialty mineral products
business, composed of one quarry in each of Virginia, New Jersey and
Massachusetts and two quarries in Pennsylvania, and other related assets for
approximately U.S.$49 million.
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
84
sold was approximately two million tons per year and the operations of these
plants represented approximately 10% of our U.S. operations' operating cash
flow for the year ended December 31, 2004.
On April 26, 2005, we announced the divestiture of our 11.92%
interest in Cementos Bio Bio, S.A., a cement company in Chile, for
approximately U.S.$65 million. The proceeds from the sale will be applied to
reduce debt.
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 24 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,
2002, 2003, and 2004 amounted to Ps6,182 million, Ps8,720 million and Ps17,965
million, respectively, compared to majority net income under Mexican GAAP for
the years ended December 31, 2002, 2003 and 2004 of approximately Ps6,339
million, Ps7,508 million and Ps14,562 million, respectively. See note 24 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
the accounting of all share-based payment transactions, with a primary focus
on transactions 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. SFAS123R
requires the entity 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 24(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 SFAS123R 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.
SFAS 123R will be effective for CEMEX as of January 1, 2006 and will
apply to all awards granted after the effective date and to awards modified,
repurchased, or cancelled after that date. 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 24(r) to our
financial
85
statements included elsewhere in this annual report) will apply SFAS123R 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, if we elect to
grant new equity awards to employees, SFAS 123R may have a material impact in
our net income under U.S. GAAP (see pro forma historical information on
footnote 24(r) to our financial statements included elsewhere in this annual
report). In respect of expected non-vested awards as of the adoption date, we
consider that their cost will not have a material effect given that they are
very few outstanding after the restructuring process of employee' stock option
programs undertaken during 2004.
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 will be effective for us for inventory costs incurred on or
after January 1, 2006. We do not expect any material impact 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 will be effective
for us for nonmonetary asset exchanges occurring on or after January 1, 2006.
We do not expect any material impact from the adoption of this statement.
86
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, 2004. Where applicable, we have indicated recently
announced appointments that became effective as of March 1, 2005. The terms of
office of the executive officers are indefinite.
Lorenzo H. Zambrano, Joined CEMEX in 1968. During his
Chief Executive Officer career with 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, the International Advisory
Board of Citigroup, and the
Chairman's Council of Daimler
Chrysler AG. 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, and a
member of the Stanford Business
School's advisory board.
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 Villareal and
Mauricio Zambrano Villareal, both
members of our board of directors.
Hector Medina, Joined CEMEX in 1988. He has held
Executive Vice President of several positions in CEMEX,
Planning and Finance including director of 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. Mr. Medina
is a member of the board of
directors of Cementos Chihuahua,
Cia 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.
87
Armando J. Garcia Segovia, Initially joined CEMEX in 1975
Executive Vice President and rejoined CEMEX in 1985. He has
of Development served as director of 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
Executive Vice President of as director of administration of
Administration CEMEX Espana 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
President of CEMEX as director of trading from 1988 to
North America Region and 1992, president of CEMEX USA
Trading from 1992 to 1994, 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 of ITESM and holds
an M.B.A. from the Johnson School
of Management at Cornell
University.
Fernando Gonzalez, Joined CEMEX in 1989 and has served
President of the European as vice-president-human resources
Region, Effective March 1, from 1992 to 1994, vice-president-
2005 strategic planning from 1994 to
1998, president of CEMEX Venezuela
from 1998 to 2000, president of
CEMEX Asiafrom 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. 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.
88
Jose Luis Saenz de Miera, Joined CEMEX Espana in 1993 as
President of the Iberia, Middle general manager of administration
East, Africa and Asia Region, and finance, and in 1994 he was
Effective March 1, 2005 appointed president of CEMEX 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
President of CEMEX South occupied several senior management
America and the Caribbean, positions, including commercial
Effective March 1, 2005 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
Chief Financial Officer as chief 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
General Counsel as 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.
Board of Directors
Set forth below are the names of the members of the our board of
directors. The members of our board of directors serve for one-year terms. At
our 2004 annual shareholders' meeting held on April 28, 2005, 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,
and a first cousin of Rogelio
Zambrano Lozano, a member of our
board of directors.
Armando J. Garcia Segovia See "-- Senior Management."
89
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, and of
Lorenzo Milmo Zambrano, a 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., and Compania
de Vidrio Industrial, S.A. de C.V.
He is a brother of Mauricio
Zambrano Villarreal, a member of
our board of directors.
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
90
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.
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 Cuervo, S.A. de C.V.,
Laboratorio Sanfer-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.
91
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, a
member 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 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.
Set forth below are the names of the members of our 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."
Compensation of Our Directors and Members of Our Senior Management
For the year ended December 31, 2004, 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 Ps221.8 million. Approximately Ps26 million of this
amount was paid pursuant to the bonus plan described below under "-- Employee
Stock Option Plan (ESOP)." During 2004, 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, received options to acquire 8,248,489 CPOs at
a weighted average exercise price of U.S.$5.08 per CPO. These options expire
in 2013 and 2014. As of December 31, 2004, the members of our board of
directors, alternate members of our board of directors and senior managers had
exercised options covering 6,105,227 of these CPOs. After these exercises and
giving
92
effect to anti-dilution provisions in the options, the number of underlying
CPOs was 2,427,588, and the adjusted weighted average exercise price per CPO
was U.S.$5.79 as of December 31, 2004.
In addition, approximately Ps11.7 million was set aside or accrued to
provide pension, retirement or similar benefits.
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,
2004, after giving effect to the exchange program implemented in November 2001
described below, options to acquire 3,410,155 CPOs remain outstanding under
this program, with a weighted average exercise price of approximately Ps30.11
per CPO. As of December 31, 2004, the outstanding options under this program
had a weighted average remaining tenure of approximately 3.0 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.
Certain key executives participate in a bonus plan that pays a
percentage of the median salary of their corresponding pay-grade. This bonus
is calculated and paid annually, 50% in cash and 50% in CPOs under an ESOP.
CEMEX, Inc. ESOP
As a result of the acquisition of CEMEX, Inc. (formerly Southdown) 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 market price of
one ADS as of 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, 2004, considering the options granted as a
result of the exchange program implemented in 2001, the options granted
thereunder, and the exercise of options that has occurred through that date,
options to acquire 1,925,452 ADSs, remain outstanding under this program.
These options have a weighted average exercise price of approximately
U.S.$4.89 per CPO or U.S.$24.45 per ADS as each ADS currently represents five
CPOs. The number of options under these ADS programs are presented below in
terms of CPO equivalents and do not give effect to the 2-for-1 stock split we
expect to occur in July 2005.
Stock options activity during 2003 and 2004, the balance of options
outstanding as of December 31, 2003 and 2004 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, 2004, the following ESOP options to purchase our
securities were outstanding:
93
Number of CPOs or Range of exercise prices
Title of security CPO equivalents per CPOs or CPO
underlying options underlying options Expiration Date equivalents
- --------------------- -------------------- --------------- ------------------------
CPOs (Pesos) 3,410,155 2005-2011 Ps14.97 - 37.84
CPOs (Dollars) (may
be instantly
cash-settled) 3,455,402 2011-2013 U.S.$4.22 - 5.82
CPOs (Dollars)
(US$7.50 knock-out;
receive restricted
CPOs)(1) 1,240,689 2012 U.S.$5.13
CPOs (Dollars)
(US$8.50 knock-out;
receive restricted
CPOs) 137,673,590 2012-2014 U.S.$5.79 - 7.47
CPOs (Dollars)
(Unlimited upside;
receive restricted
CPOs) 18,323,866 2012 U.S.$7.47
CEMEX, Inc. ESOP 9,627,260 2011-2013 U.S.$3.89 - 5.58
__________________
(1) On January 17, 2005, the closing CPO market price reached
U.S.$7.50, and, as a result, all existing options were
automatically exercised.
As of December 31, 2004, our senior management and directors held the
following ESOP options to acquire our securities:
Number of CPOs or Range of exercise prices
Title of security CPO equivalents per CPOs or CPO
underlying options underlying options Expiration Date equivalents
- ------------------- ------------------ --------------- ------------------------
CPOs (Dollars)
(US$8.50 knock-out;
receive restricted
CPOs) 43,833,077 2012-2014 U.S.$5.79 - 7.47
CPOs (Dollars)
(Unlimited upside;
receive restricted
CPOs) 6,182,954 2012 U.S.$7.47
94
As of December 31, 2004, our employees and former employees, other
than senior management and directors, held the following ESOP options to
acquire our securities:
Number of CPOs or Range of exercise prices
Title of security CPO equivalents per CPOs or CPO
underlying options underlying options Expiration Date equivalents
- -------------------- ------------------ --------------- ------------------------
CPOs (Pesos) 3,410,155 2005-2011 Ps14.97 - 37.84
CPOs (Dollars) (may
be instantly
cash-settled) 3,455,402 2011-2013 U.S.$4.22 - 5.82
CPOs (Dollars)
(US$7.50 knock-out;
receive restricted
CPOs)(1) 1,240,689 2012 U.S.$5.13
CPOs (Dollars)
(US$8.50 knock-out;
receive restricted
CPOs) 93,840,513 2012-2014 U.S.$5.79 - 7.47
CPOs (Dollars)
(Unlimited upside;
receive restricted
CPOs) 12,140,912 2012 U.S.$7.47
CEMEX, Inc. ESOP 9,627,260 2011-2013 U.S.$3.89 - 5.58
__________________
(1) On January 17, 2005, the closing CPO market price reached
U.S.$7.50, and, as a result, all existing options were
automatically exercised.
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, 2004, 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, 1,876,830 options to acquire 2,154,413 CPOs remained
outstanding under this program, with an exercise price of approximately
U.S.$5.22 per CPO. As of December 31, 2004, the outstanding options under this
program had a remaining tenure of approximately 7.4 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, participants
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 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.
95
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.
As of December 31, 2004, considering the options granted under the
exchange offer, the exercise of options through that date, and the result of
the 2004 voluntary early exercise program described below, 1,190,224 options
to acquire 1,240,689 CPOs remained outstanding under this program, with an
exercise price of approximately U.S.$5.13 per CPO. As of December 31, 2004,
the outstanding options under this program had a remaining tenure of
approximately 7.5 years.
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 have an initial
strike price of US$7.4661, which is US$0.50 above the closing CPO market price
on the date on which the old options were exercised, and which will grow at a
rate of 5.5% per annum. The new options will expire after 7.5 years. 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 will be
automatically exercised if the closing CPO market price reaches U.S.$8.50,
while the remaining 18,323,866 options will not have an automatic exercise
threshold. Holders of these options will receive an annual payment of
U.S.$0.11 net of taxes per option outstanding as of the payment date. This
payment will grow annually at a 10% rate.
For accounting purposes under Mexican and U.S. GAAP, as of December
31, 2004, we accounted for the new options, including the U.S.$0.11 per option
payment made to employees, under the February 2004 voluntary exchange program,
under the intrinsic value method through earnings in the same manner as we
currently do under existing plans. See notes 3W and 16 to our consolidated
financial statements included elsewhere in this annual report.
Voluntary Employee Stock Option Plan (VESOP)
During 1998 and 1999, we established voluntary employee stock option
plans, or VESOPs, pursuant to which managers and senior executives elected to
purchase options to acquire up to 36,468,375 CPOs. These VESOP options,
exercisable quarterly over a period of five years, had a predefined exercise
price in U.S. Dollars which increased quarterly, thereby taking into account
the funding cost in the market. As of December 31, 2004, all these options had
expired.
During 2002, we established an additional VESOP, pursuant to which
managers and senior executives were entitled to purchase, on a monthly basis,
new options for up to an aggregate number equal to the total number of options
exercised during the same period by other executives under the November 2001
ESOP voluntary exchange program. During 2002, we sold 2,120,395 of these VESOP
options and received a premium equivalent to a percentage of the CPO price,
which amounted to approximately U.S.$1.5 million (Ps17.8 million). As of
December 31, 2004, after giving effect to exercises of these options and
anti-dilution provisions, the number of CPOs underlying these options was
40,177, with a weighted average exercise price of approximately U.S.$5.92 per
CPO.
96
In January 2003, we established a new VESOP through which our
employees who held options under our old VESOPs, as well as members of our
senior management and other eligible executives, elected to purchase
38,583,989 new options for a premium of approximately U.S.$9.7 million
(Ps107.0 million). The new options, which had an increasing U.S. Dollar
exercise price of approximately U.S.$3.58 per CPO, equal to the closing market
price of one CPO at the date of sale, and a five-year term, contained an
automatic mandatory exercise condition that would be triggered when the CPO
market price reached a certain level. The CPO market price reached this level
in September 2003 and, as a result, all the options were exercised. Employees
and directors who exercised their options under the new VESOP received the
corresponding gain in CPOs, which they were obligated to hold in their
entirety for a period of two years after exercise. Following the second
anniversary of the exercise date, one half of the CPOs acquired under the
VESOP may be sold by the holder, and the remaining CPOs may be sold following
the third anniversary of the exercise date.
In connection with the new VESOP, in March 2003 we repurchased
29,001,358 appreciation warrants from several of the eligible executives, at a
price per appreciation warrant of Ps3.70, the market price for our
appreciation warrants on February 6, 2003, the date of the offer to purchase
appreciation warrants from the executives. Executives with then outstanding
loans from CEMEX used the proceeds from the repurchase of 5,942,724
appreciation warrants to repay these loans. The remaining proceeds were used
to partially pay for the subscription for options under our new VESOP program.
Also, as part of the new VESOP program, in March 2003 we repurchased from some
of the eligible executives and directors options covering 294,074 CPOs under
our old VESOPs at a price per option of U.S.$0.0096, and options covering
8,158,574 CPOs under our old VESOPs at a price per option of U.S.$0.1164.
These prices represented a fraction of the theoretical value of the options on
January 6, 2003, the date of the offer to purchase the options from the
executives and directors. The proceeds from the repurchase of the options
under the old VESOPs were used to subscribe for options under our new VESOP,
as mandated by the new VESOP program.
As of December 31, 2004, all options under the new VESOP had been
exercised and no options remained outstanding thereunder.
As of December 31, 2004, the following VESOP options to acquire our
securities were outstanding.
Title of security Number of CPOs Option Range of exercise
underlying options underlying options Expiration Date Purchase Price price per CPO
- --------------------- ------------------ --------------- ------------------ -------------------
CPOs 40,177 2011 U.S.$0.76 - 0.63 U.S.$5.92
As of December 31, 2004, no member of our senior management or board
of directors held any VESOP options to acquire our securities.
97
Employees
The information set forth in this section does not take into account
the RMC acquisition or the sale of U.S. assets in the Great Lakes region, both
of which occured after December 31, 2004.
As of December 31, 2004, we had approximately 26,679 employees
worldwide, which represented an increase of 2.75% from year-end 2003.
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:
Central
America
United and the
Mexico States* Spain Venezuela Colombia Egypt Philippine Thailand Caribbean Others Total
------ ------- ----- --------- -------- ----- ---------- -------- --------- ------ -----
2002 9,184 4,608 3,035 2,334 858 891 692 220 2,569 2,361 26,752
2003 8,942 4,709 2,963 1,700 800 873 669 224 2,599 2,486 25,965
2004 9,857 4,977 2,833 1,770 743 929 603 233 2,593 2,141 26,679
* 2003 and 2004 include Dixon-Marquette Cement
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. Approximately
one-fourth of our employees in the United States are represented by unions,
with the largest number being members of the International Brotherhood of
Boilermakers. With the exception of the non-union facility located in Florida,
collective bargaining agreements are in effect at all our U.S. cement plants
and have various expiration dates ending from 2005 through 2011. During 2004,
we reached agreements with two of our plants, and one plant agreement
(Clinchfield, Georgia) is pending. Our Spanish union employees have contracts
that are renewable every two to three years on a company-by-company basis.
Each of our subsidiary companies operating CEMEX Venezuela's plants has its
own union, and each company has separately negotiated three-year labor
contracts with the union employees of the relevant plants. A single union
represents the union employees of the Bucaramanga and Cucuta cement plants in
Colombia. There are also collective agreements with non union workers at the
Caracolito cement plant, Santa Rosa cement plant and all ready-mix plants in
Colombia. Our relationships with both union representatives and non union
workers are good. Our Panamanian union, which is the only autonomous union in
the country that is not affiliated with any union confederation or official
group, has one labor contract that is renewable every four years. Our
Philippine union employees are represented by four unions and have collective
bargaining agreements that have a term of five years, which are typically
renegotiated in the third and fifth years of the term. Our Egyptian union
employees are represented by one union. We consider labor relations with our
employees to be satisfactory. In 2003, approximately 1,800 former union
employees in Egypt filed individual lawsuits against Assiut, claiming unfair
employment practices relating to the implementation of an employee early
retirement program. A total of 850 of these lawsuits have already been
dismissed by the court, and we do not consider the amount sought by the
remaining plaintiffs to be material to our operations.
Share Ownership
As of March 31, 2005, our senior management and directors and their
immediate families owned, collectively, approximately 6.34% 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.
98
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 May 9, 2005, as of March 31,
2005, Southeastern Asset Management, Inc., an investment adviser registered
under the U.S. Investment Advisers Act of 1940, as amended, beneficially owned
35,289,836 ADSs and 12,540,300 CPOs, representing 188,989,480 CPOs or
approximately 10.2% 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, 2005, our outstanding capital stock consisted of
3,704,060,248 Series A shares and 1,852,030,124 Series B shares, in each case
including shares held by our subsidiaries.
As of March 31, 2005, a total of 3,580,343,222 Series A shares and
1,790,171,611 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, 2005, through our subsidiaries, we owned
approximately 153.8 million CPOs, representing approximately 8.3% of our
outstanding CPOs and 8.6% of our outstanding voting stock. An additional 162
million CPOs, representing approximately 8.7% of our outstanding CPOs and 9%
of our outstanding voting stock, were held subject to equity derivative and
other transactions. 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.
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, 2005, we had 359 ADS holders of record in the United
States, holding approximately 53% of our outstanding CPOs.
On April 28, 2005, our shareholders approved a new stock split, which
we expect to occur in July 2005. 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. The number of our existing ADSs will not change as a
result of the stock split; instead the ratio of CPOs to ADSs will be modified
so that each existing ADS will represent ten new CPOs following the stock
split and the CPO trust amendment.
99
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 2004, the largest aggregate
amount of loans we had outstanding to our directors and members of senior
management was Ps1,654,384. As of March 31, 2005, the amount outstanding was
Ps10,743,274, with an average interest rate of 1.9% per annum. The increase is
a result of the appointment of an additional executive officer who had a
pre-existing loan from us.
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 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, 2004, 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"
and "-- Our use of equity derivative financing may have adverse effects on the
market for our securities and our subsidiaries' securities and may adversely
affect our ability to achieve operating efficiencies as a combined group."
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. 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.
100
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,
2004:
Dividends Per Share
----------------------------
Constant Pesos Dollars
-------------- -------
2000.................................. 0.66 0.06
2001.................................. 0.77 0.07
2002.................................. 0.82 0.07
2003.................................. 0.85 0.08
2004.................................. 0.82 0.07
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, 2004, were as follows: 2000, Ps1.98 per CPO (or
Ps0.66 per share); 2001, Ps2.31 per CPO (or Ps0.77 per share); 2002, Ps2.46
per CPO (or Ps0.82 per share); 2003, Ps2.55 per CPO (or Ps0.85 per share); and
2004, Ps2.46 per CPO (or Ps0.82 per share). As a result of dividend elections
made by shareholders, in 2000, Ps331 million in cash was paid and 59 million
additional CPOs were issued in respect of dividends declared for the 1999
fiscal year; in 2001, Ps99 million in cash was paid and 70 million additional
CPOs were issued in respect of dividends declared for the 2000 fiscal year; in
2002, Ps273 million in cash was paid and 64 million additional CPOs were
issued in respect of dividends declared for the 2001 fiscal year; in 2003,
Ps71 million in cash was paid and 99 million additional CPOs were issued in
respect of dividends declared for the 2002 fiscal year; and in 2004, Ps167
million in cash was paid and 75 million additional CPOs were issued in respect
of dividends declared for the 2003 fiscal year.
At our 2004 annual shareholders' meeting, which was held on April 28,
2005, our shareholders approved a dividend of Ps2.60 per CPO (Ps0.87 per
share) for the 2004 fiscal year. Shareholders will be entitled to receive the
dividend in either stock or cash consistent with our past practices. In order
to have sufficient shares to issue to those shareholders who choose to 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 Ps4,815,278,332, through the issuance of up to 240 million
series A shares and 120 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, which will be determined once the
final number of CPOs required to be issued in connection with the dividend is
established and will be based on the then current market price of our CPO on
the Mexican Stock Exchange, minus the 20% discount at which those CPOs will be
issued.
Significant Changes
Except as described herein, no significant change has occurred since
the date of our consolidated financial statements included in this annual
report.
101
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 five CPOs,
are listed on the NYSE and trade under the symbol "CX." Until their expiration
on December 21, 2004, our appreciation warrants were listed on the Mexican
Stock Exchange and our ADWs, each of which represented five appreciation
warrants, were listed on the NYSE. Following our November 2001 exchange offer
of new appreciation warrants and new ADWs for our old appreciation warrants
and old ADWs, the trading of our old appreciation warrants and old ADWs
substantially declined and formally ceased upon their expiration on December
13, 2002. The following table sets forth, for the periods indicated, the
reported highest and lowest market quotations in nominal Pesos for CPOs, old
appreciation warrants and new appreciation warrants on the Mexican Stock
Exchange and the high and low sales prices in Dollars for ADSs, old ADWs and
new ADWs on the NYSE.
Old New
appreciation appreciation
Calendar Period CPOs(1) ADSs(2) warrants(3) Old ADWs(4) warrants(5) New ADWs(6)
- ----------------------- ------------- -------------- ------------ ----------- ------------- ---------------
Yearly High Low High Low High Low High Low High Low High Low
- ------ ---- --- ---- --- ---- --- ---- --- ---- --- ---- ---
2000................... Ps53.80 Ps32.50 U.S.$28.75 U.S.$17.19 Ps8.50 Ps2.00 Ps4.75 Ps1.00 -- -- -- --
2001................... 51.65 34.50 28.30 17.63 4.85 2.00 2.85 1.00 -- -- -- --
2002................... 61.82 39.10 33.00 19.25 6.00 3.00 3.88 0.01 Ps 8.50 Ps 3.00 U.S.$4.60 U.S.$1.22
2003................... 59.50 35.65 26.64 16.31 -- -- -- -- 7.00 2.50 3.20 0.95
2004................... 82.00 58.30 36.56 25.97 20.60 6.80 9.60 2.80
Quarterly
2003
First quarter 48.66 35.65 23.35 16.31 -- -- -- -- 4.00 2.50 1.80 0.95
Second quarter 48.58 37.62 23.10 17.44 -- -- -- -- 3.80 2.50 1.65 1.00
Third quarter 57.70 46.20 26.20 22.06 -- -- -- -- 5.30 3.10 2.25 1.35
Fourth quarter 59.50 51.49 26.64 23.20 -- -- -- -- 7.00 4.90 3.20 2.05
2004
First quarter (7) 66.50 58.30 29.96 26.20 9.40 6.80 3.75 2.80
Second quarter 70.50 60.39 31.35 25.97 11.00 7.20 4.30 3.00
Third quarter 71.25 62.21 31.31 26.95 10.50 9.50 4.25 3.60
Fourth quarter 82.00 62.39 36.56 27.14 20.60 9.00 9.60 3.61
Monthly
2004-2005
October 67.60 62.39 29.96 27.14 -- -- -- -- 9.50 9.00 3.70 3.61
November 72.40 66.50 32.21 28.85 -- -- -- -- 14.50 9.00 6.20 3.70
December 82.00 72.20 36.56 32.23 -- -- -- -- 20.60 15.00 9.60 6.29
January 85.00 78.00 37.72 34.55 -- -- -- -- -- -- -- --
February 90.80 83.80 40.97 37.50 -- -- -- -- -- -- -- --
March 93.50 80.51 42.52 35.83 -- -- -- -- -- -- -- --
April 84.40 75.50 38.30 34.13 -- -- -- -- -- -- -- --
___________
Source: Based on data of the Mexican Stock Exc hange and the NYSE.
(1) As of December 31, 2004, approximately 96. 6% of our outstanding share
capital was represented by CPOs.
(2) The ADSs began trading on the NYSE on September 15, 1999.
(3) The old appreciation w arrants began trading on the Mexican Stock
Exchange on December 13, 1999 an d expired on December 13, 2002.
(4) The old ADWs began trading on the NYSE on December 13, 1999 and expired
on December 13, 2002.
(5) The new appreciation warrants began trading on the Mexican Stock
Exchange on December 24, 2001 and expired on Decem ber 21, 2004.
(6) The new ADWs were initially listed for tr ading on the NYSE on December
24, 2001, but were not actually traded un til January 4, 2002. The new
ADWs expired on December 21, 2004.
(7) In January 2004, we purchased 90,018,042 new appreciation warrants
(including new appreciation warrants repr esented by new ADWs) through a
modified "Dutch Auction" cash tender offe r we launched in November
2003, which allowed holders to tender their new appreciation warrants
and new ADWs at a price in Pesos not greater than Ps8.10 per new
appreciation warrant (Ps40.50 per new ADW) nor less th an Ps5.10 per new
appreciation warrant (Ps25.50 per new ADW), as specifi ed by them.
Pursuant to the terms of the offer, which expired on Janu ary 26, 2004,
we purchased such new appreciation warrants and new ADWs on a pro rata
basis (except for odd lot tenders, which were purchased on a priority
basis) at a final purchase price of Ps8.10 per new apprecia tion warrant
(Ps40.50 per new ADW). All new appreciation warrants and new ADWs not
accepted because of proration were promptly returned. Following the
completion of the offer, approximately 11,668,132 new appreciation
warrants (including new appreciation warrants represented by new ADWs)
were held by persons other than CEMEX and its subsidiaries.
On April 29, 2005, the last reported closing price for CPOs on the
Mexican Stock Exchange was Ps79.62 per CPO and the last reported closing price
for ADSs on the NYSE was U.S.$36.00 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 are 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 exchange
offer
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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, 2004, approximately 96.6% of our outstanding
share capital was represented by CPOs, a portion of which is represented by
ADSs.
As of December 31, 2004, our capital stock consisted of 6,091,092,807
issued shares. As of December 31, 2004, series A shares represented 66.6% of
our capital stock, or 4,060,728,538 shares, of which 3,703,634244 shares were
subscribed and paid, 249,133,670 shares were treasury shares and 107,960,624
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, 2004, series B shares
represented 33.4% of our capital stock, or 2,030,364,269 shares, of which
1,851,817,122 shares were subscribed and paid, 124,566,835 shares were
treasury shares and 53,980,312 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, 2004, 3,267,000,000 shares
corresponded to the fixed portion of our capital stock and 2,824,092,807
shares corresponded to the variable portion of our capital stock.
At the 2004 annual shareholders' meeting held on April 28, 2005, in
connection with their approval of a dividend for the 2004 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
Ps4,815,278,332, through the issuance of up to 240 million series A shares and
120 million series B shares, to be represented by new CPOs. The final amount
of the capital increase will be determined by our board of directors once the
final number of CPOs required to be issued in connection with the dividend is
established and will be based on the then current market price of our CPO on
the Mexican Stock Exchange, minus the 20% discount at which those CPOs will be
issued. See Item 8 -- "Financial Information -- Dividends" above. In addition,
at the 2004 annual shareholders' meeting, our shareholders approved the
cancellation of 249,133,670 series A treasury shares and 124,566,835 series B
treasury shares.
In addition, at a general extraordinary meeting of shareholders held
on April 28, 2005, our shareholders approved a new stock split, which we
expect to occur in July 2005. 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. The number of our existing ADSs will not change as a
result of the stock split; instead the ratio of CPOs to ADSs will be modified
so that each existing ADS will represent ten new CPOs following the stock
split and the CPO trust amendment.
As of 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
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:
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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 Ps38.3 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.
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
105
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 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;
106
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;
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.
107
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 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.
108
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 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.
109
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.
Material Contracts
On March 15, 2001, CEMEX, Inc., as issuer, CEMEX Espana S.A. (formerly
Compania Valenciana de Cementos Portland, S.A.), as parent guarantor and
Sandworth Plaza Holding B.V., Cemex Caracas Investments B.V., Cemex Caribe
Investments B.V., Cemex Manila Investments B.V., Valcem International B.V., as
subsidiary guarantors, and several institutional purchasers, entered into a
Note and Guarantee Agreement in connection with the private placement and
issuance by CEMEX, Inc. of U.S.$315,000,000 aggregate principal amount of
Series A 7.66% Guaranteed Senior Notes due 2006, (euro)50,000,000 aggregate
principal amount of Series B 6.89% Guaranteed Senior Notes due 2006 and
U.S.$396,000,000 aggregate principal amount of Series C 7.91% Guaranteed Senior
Notes due 2008. The proceeds of the private placement were used to repay debt.
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.
The proceeds of the private placement were used to repay debt.
On August 8, 2003, we entered into a First Amended and Restated
Reimbursement and Credit Agreement and a related Depositary Agreement with
several lenders to increase the amount available under our U.S. commercial
paper program from U.S.$275 to U.S.$400 million. CEMEX Mexico and Empresas
Tolteca de Mexico, two of our Mexican subsidiaries, are guarantors of our
obligations under the First Amended and Restated Reimbursement and Credit
Agreement. This program was cancelled on July 8, 2004.
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 is a
two-year Euro denominated loan in the amount of (euro)256,365,000. The second
tranche is a three-year Dollar denominated loan in the amount of
U.S.$550,000,000. The third tranche is 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 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 is a five-year
multi-currency term loan facility with a variable interest rate; the second
facility is a 364-day multi-currency revolving credit facility; and the third
facility is a five-year Yen denominated term loan facility with a fixed
interest rate. The proceeds of these facilities were used to prepay CEMEX
Espana's outstanding revolving credit facility and for general corporate
purposes. On February 17, 2005, CEMEX, as borrower, requested a 364-day
extension of the 364-day multi-currency revolving credit facility (up to an
aggregate amount of (euro)100,000,000). As of March 18, 2005, the term of the
facility was extended.
110
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.
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 September 24, 2004, New Sunward Holding B.V., entered into a
series of agreement facilities. The facility is a U.S.$1.25 billion
multi-currency term loan guaranteed by CEMEX, CEMEX Mexico and Empresas
Tolteca de Mexico and consists of two tranches. The first tranche is 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 is 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 in connection with the RMC acquisition.
This facility was fully repaid on April 13, 2005.
On September 24, 2004, CEMEX Espana entered into a series of
agreement facilities. The facility is a U.S.$3.8 billion multi-currency term
loan. The indebtedness is guaranteed by Cemex Caracas Investments, B.V., Cemex
Caracas II Investments, B.V. Cemex Egyptian Investments, B.V., Cemex Manila
Investments, B.V. and Cemex American Holdings, B.V. and consists of three
tranches. The first tranche is 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 is 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 is 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 will be used, as required, to refinance RMC debt.
All other proceeds were used to finance the acquisition of RMC.
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 include a waiver of the provision requiring
mandatory 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
111
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.
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.
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."
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.
112
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, 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;
o a corporation or other entity taxable as a corporation or a
partnership 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);
113
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
dividend 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.
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.
Dividends paid in Pesos, including the amount of Mexican withholding
tax thereon, 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, 2009, 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 American Stock Exchange and (ii) we are eligible for the
benefits of the comprehensive income tax treaty between Mexico and 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."
114
A U.S. Shareholder may elect to deduct in computing its taxable
income or, subject to specific complex limitations on foreign tax credits
generally, credit against its U.S. Federal income tax liability, Mexican
withholding tax at the rate applicable to such shareholder. For purposes of
calculating the U.S. foreign tax credit, dividends paid by us generally will
constitute foreign source "passive income," or in the case of some U.S.
Shareholders, "financial services income." U.S. Shareholders should consult
their tax advisors regarding the availability of, and limitations on, any such
foreign tax credit.
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, 2009, generally will be subject to a maximum United States Federal income
tax rate of 15 percent. Gains on the sale or exchange of CPOs or ADSs held for
one year or less will be treated as short-term capital gain and taxed as
ordinary income at the U.S. Shareholder's marginal income tax rate. 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.
115
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, 2004. Based on such evaluation, such officers have concluded that
CEMEX's disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to CEMEX (including its
consolidated subsidiaries) required to be included in CEMEX's reports filed or
submitted under the Exchange Act.
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 2004 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, 2004. Based on such
evaluation, such officers have concluded that CEMEX Mexico's disclosure
controls and procedures are effective in alerting them on a timely basis to
material information relating to CEMEX Mexico (including its consolidated
subsidiaries) required to be included in CEMEX Mexico's reports filed or
submitted under the Exchange Act.
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
2004 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,
2004. Based on such evaluation, such officers have concluded that Empresas
Tolteca's disclosure controls and procedures are effective in alerting them on
a timely basis to material information relating to Empresas Tolteca (including
its consolidated subsidiaries) required to be included in Empresas Tolteca's
reports filed or submitted under the Exchange Act.
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
2004 that have materially affected, or are reasonably likely to materially
affect, Empresas Tolteca's internal control over financial reporting.
116
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 of our
employees, 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 del Valle Campestre
Garza Garcia, Nuevo Leon, Mexico 66265.
Attn: Luis Hernandez or Daniel Azcona
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 Ps46.3 million in fiscal year 2004 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 2003, KPMG
Cardenas Dosal, S.C. in Mexico and KPMG firms worldwide billed us
approximately Ps48.4 million for these services.
Audit-Related Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG
firms worldwide billed us approximately Ps4.6 million in fiscal year 2004 for
assurance and related services reasonably related to the performance of our
audit. In fiscal year 2003, KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide charged us approximately Ps6.2 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 Ps33.5 million in fiscal year 2004 for tax
compliance, tax advice and tax planning. KPMG Cardenas Dosal, S.C. in Mexico
and KPMG firms worldwide billed us approximately Ps31.7 million for
tax-related services in fiscal year 2003.
All Other Fees: KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide billed us Ps13.6 million in fiscal year 2004 for products and
services other than those comprising audit fees, audit-related fees and tax
fees. In fiscal year 2003, KPMG Cardenas Dosal, S.C. in Mexico and KPMG firms
worldwide charged us Ps7.1 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.
During 2004, 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.
117
Item 16E - Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
The following table sets forth, for the periods indicated,
information regarding purchases of any of our equity securities registered
pursuant to Section 12 of the Exchange Act made by us or on our behalf or by
or on behalf of any affiliated purchaser (as that term is defined in Rule
10b-18(a)(3) under the Exchange Act):
Maximum Number
Total Number of (or Approximate
Securities Dollar Value) of
Purchased as Part Securities that May
Total Number Average of Publicly Yet be Purchased
of Securities Price Paid Announced Plans Under the Plans or
Period Purchased per Security or Programs Programs
- -------------------------------- ------------------ ----------------- ------------------- -----------------------
Appreciation Warrants
January 2004(1)................. 90,018,042 Ps8.10 90,018,042 0
February 2004................... 0 0 0
March 2004...................... 0 0 0
April 2004...................... 0 0 0
May 2004........................ 0 0 0
June 2004....................... 0 0 0
July 2004....................... 0 0 0
August 2004..................... 0 0 0
September 2004.................. 0 0 0
October 2004.................... 0 0 0
November 2004(2)................ 438,800 Ps10.85 0 0
December 2004(3)................ 260,000 Ps17.61 0 0
------------------ ----------------- ------------------- -----------------------
Total....................... 90,716,842 Ps8.14 90,018,042 0
_______________
(1) In January 2004, we purchased 90,018,042 appreciation warrants (including
appreciation warrants represented by ADWs) through a modified "Dutch
Auction" cash tender offer we launched in November 2003, which allowed
holders to tender their appreciation warrants and ADWs at a price in
Pesos not greater than Ps8.10 per appreciation warrant (Ps40.50 per ADW)
nor less than Ps5.10 per appreciation warrant (Ps25.50 per ADW), as
specified by them. Pursuant to the terms of the offer, which expired on
January 26, 2004, we purchased such appreciation warrants and ADWs on a
pro rata basis (except for odd lot tenders, which were purchased on a
priority basis) at a final purchase price of Ps8.10 per appreciation
warrant (Ps40.50 per ADW). All appreciation warrants and ADWs not
accepted because of proration were promptly returned. Following the
completion of the offer, approximately 11,668,132 new appreciation
warrants (including appreciation warrants represented by ADWs) were held
by persons other than CEMEX and its subsidiaries.
(2) In November 2004, we purchased 438,800 appreciation warrants, including
43,500 appreciation warrants represented by ADWs. The average price paid
listed above includes the price of the appreciation warrants represented
by ADWs, which were purchased for approximately U.S.$1.00 (Ps 11.09) per
appreciation warrant.
(3) In December 2004, we purchased, at maturity pursuant to their terms,
260,000 appreciation warrants, including 64,000 appreciation warrants
represented by ADWs. The average price paid listed above includes the
price of the appreciation warrants represented by ADWs, which were
purchased for approximately U.S.$1.60 (Ps 17.89) per appreciation
warrant.
118
PART III
Item 17 - Financial Statements
Not applicable.
Item 18 - Financial Statements
See pages F-1 through F-80, 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.
(b)
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)
2.8 Form of appreciation warrant deed. (b)
2.9 Form of CPO Purchasing and Disbursing Agreement. (c)
2.10 Form of appreciation warrant certificate. (c)
2.11 Form of Warrant Deposit Agreement among CEMEX, S.A. de C.V., Depositary
and holders and beneficial owners of American
Depositary Warrants. (c)
2.12 Form of American Depositary Warrant Receipt (included in Exhibit 2.10).
(c)
4.1 Note and Guarantee Agreement dated as of March 15, 2001, by and among
CEMEX, Inc., as issuer, Compania Valenciana de Cementos Portland,
S.A., as parent guarantor and Sandworth Plaza Holding B.V., Cemex
Caracas Investments B.V., Cemex Caribe Investments B.V., Cemex Manila
Investments B.V., Valcem International B.V., as subsidiary guarantors,
and the several purchasers named therein, in connection with the
offering and issuance by CEMEX, Inc. of U.S.$315,000,000 aggregate
principal amount of Series A Guaranteed Senior Notes due 2006,
(euro)50,000,000 aggregate principal amount of Series B Guaranteed
Senior Notes due 2006 and U.S.$396,000,000 aggregate principal amount
of Series C Guaranteed Senior Notes due 2008. (d)
4.2 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. (g)
4.3 First Amended and Restated Reimbursement and Credit Agreement dated as
of August 8, 2003, by and among, CEMEX, S.A. de C.V., as Issuer, CEMEX
Mexico, S.A. de C.V. and Empresas Tolteca de Mexico, S.A. de C.V., as
Guarantors, Barclays Bank PLC, New York Branch, as Issuing Bank,
Documentation Agent and Administrative Agent, the several lenders
party thereto and Barclays Capital, The Investment Banking Division of
Barclays Bank PLC, as Joint Arranger and Banc of America Securities
LLC, as Joint Arranger and Syndication Agent., for an aggregate
principal amount of U.S.$400,000,000. (g)
4.4 $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. (g)
4.5 Early Termination Amendment to ABN AMRO Special Corporate Services
B.V. Forward Contract, dated as of October 15, 2003. (g)
119
4.6 Early Termination Amendment to Citibank, N.A. Forward Contract, dated
as of October 15, 2003. (g)
4.7 Early Termination Amendment to Credit Suisse First Boston
International Forward Contract, dated as of October 15, 2003. (g)
4.8 Early Termination Amendment to Deutsche Bank AG, London Branch,
Forward Contract, dated as of October 15, 2003. (g)
4.9 Early Termination Amendment to ING Bank, N.V. Forward Contract, dated
as of October 15, 2003. (g)
4.10 Early Termination Amendment to JPMorgan Chase Bank Forward Contract,
dated as of October 15, 2003. (g)
4.11 Early Termination Amendment to Societe Generale Forward Contract,
dated as of October 15, 2003. (g)
4.12 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. (g)
4.13 (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. (g)
4.14 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. (h)
4.15 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. (h)
4.16 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. (h)
4.17 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. (h)
4.18 Implementation Agreement, dated September 27, 2004, by and between
CEMEX UK Limited and RMC Group p.l.c. (h)
4.19 Scheme of Arrangement, dated October 25, 2004, pursuant to which
CEMEX UK Limited acquired the outstanding shares of RMC Group
p.l.c. (h)
4.20 Asset Purchase Agreement by and between CEMEX, Inc. and Votorantim
Participacoes S.A., dated as of February 4, 2005. (h)
4.20.1 Amendment No. 1 to Asset Purchase Agreement, dated as of March 31,
2005, by and between CEMEX, Inc. and Votorantim Participacoes S.A. (h)
4.21 (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., Cemez 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.
(h)
4.22 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
120
Documentation Agent, Joint Lead Arranger and Joint Bookrunner,
Barclays Bank PLC, Citibank, N.A., and Citibank, N.A., Nassau, Bahamas
Branch as Lenders. (h)
8.1 List of subsidiaries of CEMEX, S.A. de C.V. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
_______________
(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 Amendment No. 2 to the Registration
Statement on Form F-4 of CEMEX, S.A. de C.V. (Registration No.
333-13956), filed with the Securities and Exchange Commission on November
19, 2001.
(d) Incorporated by reference to Amendment No. 1 to the annual report on Form
20-F/A of CEMEX, S.A. de C.V. filed with the Securities and Exchange
Commission on November 19, 2001.
(e) Incorporated by reference to the annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April
8, 2002.
(f) Incorporated by reference to the annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April
8, 2003.
(g) Incorporated by reference to the annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on May 11,
2004.
(h) Filed herewith.
121
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: May 27, 2005
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: May 27, 2005
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: May 27, 2005
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 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.(b)
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)
2.8 Form of appreciation warrant deed. (b)
2.9 Form of CPO Purchasing and Disbursing Agreement. (c)
2.10 Form of appreciation warrant certificate. (c)
2.11 Form of Warrant Deposit Agreement among CEMEX, S.A. de C.V., Depositary
and holders and beneficial owners of American
Depositary Warrants. (c)
2.12 Form of American Depositary Warrant Receipt (included in Exhibit 2.10).
(c)
4.1 Note and Guarantee Agreement dated as of March 15, 2001, by and among
CEMEX, Inc., as issuer, Compania Valenciana de Cementos Portland,
S.A., as parent guarantor and Sandworth Plaza Holding B.V., Cemex
Caracas Investments B.V., Cemex Caribe Investments B.V., Cemex Manila
Investments B.V., Valcem International B.V., as subsidiary guarantors,
and the several purchasers named therein, in connection with the
offering and issuance by CEMEX, Inc. of U.S.$315,000,000 aggregate
principal amount of Series A Guaranteed Senior Notes due 2006,
(euro)50,000,000 aggregate principal amount of Series B Guaranteed
Senior Notes due 2006 and U.S.$396,000,000 aggregate principal amount
of Series C Guaranteed Senior Notes due 2008. (d)
4.2 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. (g)
4.3 First Amended and Restated Reimbursement and Credit Agreement dated as
of August 8, 2003, by and among, CEMEX, S.A. de C.V., as Issuer, CEMEX
Mexico, S.A. de C.V. and Empresas Tolteca de Mexico, S.A. de C.V., as
Guarantors, Barclays Bank PLC, New York Branch, as Issuing Bank,
Documentation Agent and Administrative Agent, the several lenders
party thereto and Barclays Capital, The Investment Banking Division of
Barclays Bank PLC, as Joint Arranger and Banc of America Securities
LLC, as Joint Arranger and Syndication Agent., for an aggregate
principal amount of U.S.$400,000,000. (g)
4.4 $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. (g)
4.5 Early Termination Amendment to ABN AMRO Special Corporate Services
B.V. Forward Contract, dated as of October 15, 2003. (g)
4.6 Early Termination Amendment to Citibank, N.A. Forward Contract, dated
as of October 15, 2003. (g)
Exhibit
No. Description
- ------- -----------
4.7 Early Termination Amendment to Credit Suisse First Boston
International Forward Contract, dated as of October 15, 2003. (g)
4.8 Early Termination Amendment to Deutsche Bank AG, London Branch,
Forward Contract, dated as of October 15, 2003. (g)
4.9 Early Termination Amendment to ING Bank, N.V. Forward Contract, dated
as of October 15, 2003. (g)
4.10 Early Termination Amendment to JPMorgan Chase Bank Forward Contract,
dated as of October 15, 2003. (g)
4.11 Early Termination Amendment to Societe Generale Forward Contract,
dated as of October 15, 2003. (g)
4.12 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. (g)
4.13 (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. (g)
4.14 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. (h)
4.15 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. (h)
4.16 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. (h)
4.17 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. (h)
4.18 Implementation Agreement, dated September 27, 2004, by and between
CEMEX UK Limited and RMC Group p.l.c. (h)
4.19 Scheme of Arrangement, dated October 25, 2004, pursuant to which
CEMEX UK Limited acquired the outstanding shares of RMC Group p.l.c.
(h)
4.20 Asset Purchase Agreement by and between CEMEX, Inc. and Votorantim
Participacoes S.A., dated as of February 4, 2005. (h)
4.20.1 Amendment No. 1 to Asset Purchase Agreement, dated as of March 31,
2005, by and between CEMEX, Inc. and Votorantim Participacoes S.A. (h)
4.21 (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., Cemez Egyptian Investments B.V., Cemex Manila
Investments B.V., Cemex American Holdings B.V. and Cemex Shipping
Exhibit
No. Description
- ------- -----------
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.
(h)
4.22 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. (h)
8.1 List of subsidiaries of CEMEX, S.A. de C.V. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
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. (h)
________________________
(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 Amendment No. 2 to the Registration
Statement on Form F-4 of CEMEX, S.A. de C.V. (Registration No.
333-13956), filed with the Securities and Exchange Commission on November
19, 2001.
(d) Incorporated by reference to Amendment No. 1 to the annual report on Form
20-F/A of CEMEX, S .A. de C.V. filed with the Securities and Exchange
Commission on November 19, 2001.
(e) Incorporated by reference to the annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April 8,
2002.
(f) Incorporated by reference to the annual report on Form 20-F of CEMEX,
S.A. de C.V. filed with the Securities and Exchange Commission on April
8, 2003.
(g) Incorporated by refernce to the annual report on Form 20-F of CEMEX, S.A.
de C.V. filed with the Securities and Exchange Commission on May 11,
2004.
(h) Filed herewith.
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, 2003 and 2004.... F-3
Audited consolidated statements of income for the years ended
December 31, 2002, 2003 and 2004........................................ F-4
Audited statements of changes in stockholders' equity for the years
ended December 31, 2002, 2003 and 2004.................................. F-5
Audited consolidated statements of changes in financial position
for the years ended December 31, 2002, 2003 and 2004.................... 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-11
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, 2003 and 2004, and the related consolidated
statements of income, changes in stockholders' equity and changes in financial
position for each of the years ended December 31, 2002, 2003 and 2004. 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 misstatement 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, 2003 and 2004,
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, 2002, 2003 and 2004, 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, 2002, 2003, and 2004, and stockholders' equity as of
December 31, 2003 and 2004, to the extent summarized in note 24 to the
consolidated financial statements.
KPMG Cardenas Dosal, S.C.
/s/Leandro Castillo Parada
Monterrey, N.L., Mexico
January 15, 2005, except for note 24,
which is as of March 31, 2005
F-2
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Balance Sheets
(Millions of constant Mexican pesos as of December 31, 2004
and millions of U.S. dollars)
December 31, (unaudited)
2004
Assets 2003 2004 (note 3A)
------------------------------ ---------------
Current Assets
Cash and investments (note 4)....................................... Ps 3,479.5 3,813.5 U.S.$ 342.3
Trade accounts receivable, less allowance for doubtful accounts 4,767.8 428.0
(note 5)........................................................... 5,606.9
Other receivables (note 6).......................................... 4,826.9 5,064.4 454.6
Inventories (note 7)................................................ 7,100.1 7,046.8 632.6
Other current assets (note 8)....................................... 796.3 1,048.8 94.1
------------------------------ ---------------
Total current assets............................................ 21,809.7 21,741.3 1,951.6
------------------------------
Investments and Noncurrent Receivables (note 9)
Investments in affiliated companies................................. 7,349.3 16,903.3 1,517.4
Other noncurrent accounts receivable................................ 2,199.1 3,644.9 327.2
------------------------------ ---------------
Total investments and noncurrent receivables.................... 9,548.4 20,548.2 1,844.6
------------------------------
Properties, Machinery and Equipment (note 10)
Land and buildings ................................................. 55,321.1 55,194.9 4,954.7
Machinery and equipment ............................................ 158,701.3 155,381.2 13,948.0
Accumulated depreciation ........................................... (105,842.2) (107,057.6) (9,610.2)
Construction in progress............................................ 2,461.7 3,575.3 320.9
------------------------------ ---------------
Net properties, machinery and equipment......................... 110,641.9 107,093.8 9,613.4
------------------------------ ---------------
Intangible Assets and Deferred Charges (note 11)....................... 49,250.6 44,239.6 3,971.2
------------------------------ ---------------
Total Assets.................................................... Ps 191,250.6 193,622.9 U.S.$ 17,380.8
------------------------------ ---------------
Liabilities and Stockholders' Equity
Current Liabilities
Bank loans (note 12)................................................ Ps 2,634.1 5,031.9 U.S.$ 451.7
Notes payable (note 12)............................................. 3,173.0 319.9 28.7
Current maturities of long-term debt (note 12) ..................... 10,062.8 6,275.2 563.3
Trade accounts payable.............................................. 5,831.9 5,964.6 535.4
Other accounts payable and accrued expenses (note 6)................ 12,084.4 9,282.1 833.2
------------------------------ ---------------
Total current liabilities ...................................... 33,786.2 26,873.7 2,412.3
------------------------------ ---------------
Long-Term Debt (note 12)
Bank loans ......................................................... 29,678.5 30,302.4 2,720.2
Notes payable ...................................................... 34,560.4 30,412.3 2,730.0
Current maturities of long-term debt ............................... (10,062.8) (6,275.2) (563.3)
------------------------------ ---------------
Total long-term debt ........................................... 54,176.1 54,439.5 4,886.9
------------------------------ ---------------
Other Noncurrent Liabilities
Pension and other postretirement benefits (note 14)................. 664.1 656.4 58.9
Deferred income taxes (note 18B).................................... 12,580.5 12,828.3 1,151.6
Other noncurrent liabilities (note 13).............................. 9,246.5 7,258.2 651.5
------------------------------ ---------------
Total other noncurrent liabilities ............................. 22,491.1 20,742.9 1,862.0
------------------------------ ---------------
Total Liabilities............................................... 110,453.4 102,056.1 9,161.2
------------------------------ ---------------
Stockholders' Equity (note 15)
Majority interest:
Common stock-historical cost basis................................ 59.1 61.7 5.5
Common stock-accumulated inflation adjustments ................... 3,624.5 3,624.6 325.4
Additional paid-in capital........................................ 38,171.5 41,339.8 3,710.9
Deficit in equity restatement .................................... (73,101.3) (73,725.9) (6,618.1)
Cumulative initial deferred income tax effects (note 3K).......... (6,100.2) (6,100.2) (547.6)
Retained earnings ................................................ 104,282.8 107,471.8 9,647.4
Net income........................................................ 7,508.4 14,562.3 1,307.2
------------------------------ ---------------
Total majority interest ........................................ 74,444.8 87,234.1 7,830.7
Minority interest (note 15E)........................................ 6,352.4 4,332.7 388.9
------------------------------ ---------------
Total stockholders' equity ..................................... 80,797.2 91,566.8 8,219.6
------------------------------ ---------------
Total Liabilities and Stockholders' Equity...................... Ps 191,250.6 193,622.9 U.S.$ 17,380.8
------------------------------ ---------------
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, 2004
and millions of U.S. dollars, except for earnings per share)
Years ended December 31, (unaudited)
2004
2002 2003 2004 (note 3A)
- -------------------------------------------------------------------------------------------------------- -----------
Net sales........................................................ Ps 79,724.6 85,552.6 90,783.9 U.S.$ 8,149.3
Cost of sales.................................................... (44,540.6) (49,318.4) (51,091.9) (4,586.3)
----------------------------------- -----------
Gross profit.................................................. 35,184.0 36,234.2 39,692.0 3,563.0
----------------------------------- -----------
Operating expenses:
Administrative.............................................. (10,022.3) (9,483.0) (9,225.5) (828.1)
Selling..................................................... (9,195.0) (9,374.1) (9,838.8) (883.2)
----------------------------------- -----------
Total operating expenses.................................. (19,217.3) (18,857.1) (19,064.3) (1,711.3)
----------------------------------- -----------
Operating Income.............................................. 15,966.7 17,377.1 20,627.7 1,851.70
----------------------------------- -----------
Comprehensive financing result:
Financial expense........................................... (4,051.7) (4,545.5) (4,146.6) (372.2)
Financial income............................................ 543.5 199.3 260.9 23.4
Results from valuation and liquidation of financial
instruments............................................... (3,856.2) (711.4) 1,335.1 119.8
Foreign exchange result, net................................ (939.4) (2,049.1) (262.5) (23.6)
Monetary position result.................................... 4,290.6 3,912.8 4,298.6 385.9
----------------------------------- -----------
Net comprehensive financing result........................ (4,013.2) (3,193.9) 1,485.5 133.3
----------------------------------- -----------
----------------------------------- -----------
Other expense, net (notes 7, 10 and 11).......................... (4,743.2) (5,454.0) (5,390.2) (483.9)
----------------------------------- -----------
Income before income taxes, employees' statutory profit
sharing and equity in income of affiliates.................. 7,210.3 8,729.2 16,723.0 1,501.1
----------------------------------- -----------
Income tax and business assets tax, net (note 18A)............... (668.1) (1,070.0) (2,043.6) (183.4)
Employees' statutory profit sharing (note 18A)................... (125.5) (202.9) (330.2) (29.7)
----------------------------------- -----------
Total income tax, business assets tax and employees'
statutory profit sharing.................................... (793.6) (1,272.9) (2,373.8) (213.1)
----------------------------------- -----------
Income before equity in income of affiliates.................. 6,416.7 7,456.3 14,349.2 1,288.0
Equity in income of affiliates................................... 374.1 415.2 446.3 40.1
----------------------------------- -----------
Consolidated net income....................................... 6,790.8 7,871.5 14,795.5 1,328.1
Minority interest net income.................................. 451.6 363.1 233.2 20.9
----------------------------------- -----------
Majority interest net income.................................. Ps 6,339.2 7,508.4 14,562.3 U.S.$ 1,307.2
- -------------------------------------------------------------------------------------------------------- -----------
Basic earnings per share (notes 3A and 21)..................... Ps 1.41 1.58 2.92 U.S.$ 0.26
Diluted earnings per share (notes 3A and 21)................... Ps 1.41 1.55 2.90 U.S.$ 0.26
- -------------------------------------------------------------------------------------------------------- -----------
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, 2004
and millions of U.S. dollars)
Cumulative
initial Total
Additional Deficit in deferred Total stock
Common paid-in equity income tax Retained majority Minority holders'
Stock capital restatement effects earnings interest interest equity
- ----------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 2001.......... Ps 3,677.4 30,369.1 (61,933.4) (6,100.2) 106,563.3 72,576.2 23,211.6 95,787.8
Dividends (Ps0.82 pesos per share) .... 2.4 3,374.0 - - (3,984.1) (607.7) - (607.7)
Issuance of common stock (note 16A) ... 0.1 79.8 - - - 79.9 79.9
Share repurchase program (note 15A).... (0.3) - - - (425.3) (425.6) (425.6)
Restatement of investments and other
transactions relating to minority
interest............................. - - - - - - (8,959.0) (8,959.0)
Investment by subsidiaries (note 9).... - - 269.6 - - 269.6 - 269.6
Comprehensive net income (loss)
(note 15G)........................... - - (8,239.9) - 6,339.2 (1,900.7) 451.6 (1,449.1)
---------------------------------------------------------------------------------------
Balances at December 31, 2002.......... 3,679.6 33,822.9 (69,903.7) (6,100.2) 108,493.1 69,991.7 14,704.2 84,695.9
Dividends (Ps0.85 pesos per share) .... 3.6 3,895.8 - - (4,210.3) (310.9) - (310.9)
Issuance of common stock (note 16A) ... 0.1 45.2 - - - 45.3 - 45.3
Share repurchase program (note 15A).... 0.3 407.6 - - - 407.9 - 407.9
Restatement of investments and other
transactions relating to minority
interest............................. - - - - - - (8,714.9) (8,714.9)
Investment by subsidiaries (note 9).... - - (2,865.9) - - (2,865.9) - (2,865.9)
Comprehensive net income (loss)
(note 15G)........................... - - (331.7) - 7,508.4 7,176.7 363.1 7,539.8
---------------------------------------------------------------------------------------
Balances at December 31, 2003.......... 3,683.6 38,171.5 (73,101.3) (6,100.2) 111,791.2 74,444.8 6,352.4 80,797.2
Dividends (Ps0.82 pesos per share)..... 2.6 4,154.2 - - (4,319.4) (162.6) - (162.6)
Issuance of common stock (note 16A) ... 0.1 67.1 - - - 67.2 - 67.2
Liquidation of optional instruments
(note 15F)........................... - (1,053.0) - - - (1,053.0) - (1,053.0)
Restatement of investments and other
transactions relating to minority
interest............................. - - - - - - (2,252.9) (2,252.9)
Investment by subsidiaries (note 9).... - - (3,274.0) - - (3,274.0) - (3,274.0)
Comprehensive net income (loss)
(note 15G)........................... - - 2,649.4 - 14,562.3 17,211.7 233.2 17,444.9
---------------------------------------------------------------------------------------
Balances at December 31, 2004.......... Ps 3,686.3 41,339.8 (73,725.9) (6,100.2) 122,034.1 87,234.1 4,332.7 91,566.8
---------------------------------------------------------------------------------------
Balances at December 31, 2004
(note 3A)(unaudited)...............U.S.$ 330.9 3,710.9 (6,618.1) (547.6) 10,954.6 7,830.7 388.9 8,219.6
- ----------------------------------------------------------------------------------------------------------------------------------
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, 2004
and millions of U.S. dollars)
Years ended December 31, (unaudited)
2004
2002 2003 2004 (note 3A)
------------------------------------------------------------------------------------------------------------- ------------
Operating activities
Majority interest net income................................. Ps 6,339.2 7,508.4 14,562.3 U.S.$ 1,307.2
Charges to operations which did not require resources:
Depreciation of properties, machinery and equipment........ 6,363.0 6,866.0 6,681.4 599.8
Amortization of deferred charges and credits, net.......... 2,961.0 2,983.6 2,869.9 257.6
Impairment of properties and intangible assets............. 109.4 1,257.0 1,567.8 140.7
Pensions, and other postretirement benefits................ 242.3 491.3 470.5 42.2
Deferred income tax charged to results..................... (483.6) (465.6) 1,261.1 113.2
Equity in income of affiliates............................. (374.1) (415.2) (446.3) (40.1)
Minority interest.......................................... 451.6 363.1 233.2 20.9
Resources provided by operating activities.............. 15,608.8 18,588.6 27,199.9 2,441.5
------------- ------------ ------------ ------------
Changes in working capital, excluding acquisition effects:
Trade accounts receivable, net............................. 2,612.1 (671.8) 736.1 66.1
Other accounts receivables and other assets................ 1,265.9 270.2 (332.9) (29.9)
Inventories................................................ (386.1) 1,628.4 (151.2) (13.6)
Trade accounts payable..................................... 619.3 849.9 156.7 14.1
Other accounts payable and accrued expenses................ 550.8 (1,961.3) (2,780.2) (249.6)
Net change in working capital........................... 4,662.0 115.4 (2,371.5) (212.9)
------------- ------------ ------------ ------------
Net resources provided by operating activities.......... 20,270.8 18,704.0 24,828.4 2,228.6
------------- ------------ ------------ ------------
Financing activities
Proceeds from bank loans (repayments), net................... 3,057.3 (3,248.8) (5,734.3) (514.7)
Notes payable, net, excluding foreign exchange effect........ (363.2) 1,290.0 (7,090.4) (636.5)
Bank loans financing the acquisition of RMC Group p.l.c...... - - 8,756.0 786.0
Investment by subsidiaries................................... (5.3) (23.9) - -
Liquidation of optional instruments.......................... - - (1,053.0) (94.5)
Dividends paid............................................... (3,984.1) (4,210.3) (4,319.4) (387.7)
Issuance of common stock from reinvestment of dividends...... 3,376.4 3,899.4 4,156.8 373.1
Issuance of common stock under stock option programs......... 79.9 45.3 67.2 6.0
Repurchase of preferred stock by subsidiaries................ (4,920.2) (7,801.5) (791.0) (71.0)
Disposal (acquisition) of shares under repurchase program.... (425.6) 407.9 - -
Other financing activities, net.............................. 3,594.7 3,743.2 (1,824.9) (163.8)
------------- ------------ ------------ ------------
Resources provided by (used in) financing activities.... 409.9 (5,898.7) (7,833.0) (703.1)
------------- ------------ ------------ ------------
Investing activities
Properties, machinery and equipment, net..................... (5,166.2) (4,703.2) (4,834.9) (434.0)
Acquisition of subsidiaries and affiliates................... (3,210.9) (973.5) (186.4) (16.7)
Investment in RMC Group p.l.c................................ - - (8,756.0) (786.0)
Disposal of assets........................................... 653.8 167.1 709.3 63.7
Minority interest............................................ (3,474.5) (913.3) (1,461.9) (131.2)
Deferred charges............................................. (2,263.7) (604.1) 1,551.6 139.3
Other investments and monetary foreign currency effect....... (7,852.2) (6,699.3) (3,683.1) (330.6)
------------- ------------ ------------ ------------
Resources used in investing activities.................. (21,313.7) (13,726.3) (16,661.4) (1,495.5)
------------- ------------ ------------ ------------
Increase (Decrease) in cash and investments ............ (633.0) (921.0) 334.0 30.0
Cash and investments at beginning of year............... 5,033.5 4,400.5 3,479.5 312.3
------------- ------------ ------------ ------------
Cash and investments at end of year..................... Ps 4,400.5 3,479.5 3,813.5 U.S.$ 342.3
------------------------------------------------------------------------------------------------------------- ------------
See accompanying notes to consolidated financial statements.
F-6
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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, as well as providing services to the construction industry.
2. OUTSTANDING EVENT IN 2004
On September 27, 2004, CEMEX announced a public offer to purchase the
outstanding shares of RMC Group p.l.c. ("RMC") for approximately U.S.$4,100
million in cash. Including the assumption of debt, the enterprise value of the
transaction is approximately U.S.$5,800 million. RMC, headquartered in the
United Kingdom, is a leading international producer and supplier of materials,
products and services used primarily in the construction industry. RMC is one
of Europe's largest producers of cement and one of the world's largest
suppliers of ready-mix concrete and aggregates. As part of the acquisition
process in 2004, CEMEX acquired approximately 18.8% of RMC shares for
(pound)432 million (U.S.$786 million). In 2003, according to public
information, RMC sold approximately 15.7 million tons of cement, 55.5 million
cubic meters of ready-mix concrete and 158 million tons of aggregates.
The boards of directors of both companies approved the transaction on September
27, 2004, subject to shareholder approval in the case of RMC and clearance from
antitrust authorities in Europe and the United States of America. On November
17, 2004, more than 99% of RMC shareholders approved the transaction in an
extraordinary shareholders meeting; consequently, shareholders were committed
to sell their shares to CEMEX. On December 8, 2004, the European Commission
authorized the transaction under the European Community's Merger Regulation. As
of December 31, 2004, the acquisition of RMC is pending pre-merger clearance
from the anti-trust authorities in the United States of America, which could be
received at the end of January or at the beginning of February 2005.
On March 1, 2005, after receiving pending clearances, CEMEX completed the
acquisition of RMC (note 24(w)).
3. SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION AND DISCLOSURE
The accompanying financial statements have been prepared in accordance with
Generally Accepted Accounting Principles in Mexico ("Mexican GAAP"), which
recognize the effects of inflation on the financial information. All amounts
herein are presented in constant Mexican pesos ("pesos" or "Ps") and, for the
year 2004 amounts in the financial statements, also in dollars of the United
States of America ("dollars" or "U.S.$"), the latter being unaudited and
presented solely for the convenience of the reader at the rate of U.S.$1 =
Ps11.14, the CEMEX accounting rate on December 31, 2004.
When reference is made to "(pound)" or pounds, it means U.K. pounds sterling.
Except when specific references are made to "U.S. dollar millions", "earnings
per share", and "option prices", 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. Each CPO represents the participation in two series "A"
shares and one 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"). Each ADS represents 5 CPOs. See note 24(w(unaudited)) for a
description of the Company's proposed stock split, approved at the April 28,
2005 extraordinary stockholders' meeting.
Certain amounts reported in the consolidated financial statements and their
notes as of December 31, 2003 and 2002 have been reclassified to conform to the
2004 presentation.
B) RESTATEMENT OF COMPARATIVE FINANCIAL STATEMENTS
The restatement factors applied to the 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.
2001 to 2002 2002 to 2003 2003 to 2004
-------------- ------------- ---------------
Restatement factor using weighted average inflation......... 1.0916 1.1049 1.0624
Restatement factor using Mexican inflation.................. 1.0559 1.0387 1.0539
-------------- ------------- ---------------
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, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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. As of December 31, 2004, 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.......................3 Costa Rica 98.7
Assiut Cement Company......................... Egypt 95.8
CEMEX Colombia, S.A. .........................4 Colombia 99.6
Cementos Bayano, S.A. ........................ Panama 99.3
Cementos Nacionales, S.A...................... Dominican Republic 99.9
Puerto Rican Cement Company, Inc.............. Puerto Rico 100.0
CEMEX Asia Holdings Ltd.......................5 Singapore 99.1
Solid Cement Corporation....................6 Philippines 99.1
APO Cement Corporation......................6 Philippines 99.1
CEMEX (Thailand) Co. Ltd....................7 Thailand 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.
and Centro Distribuidor de Cemento, S.A. de C.V. ("Cedice"). Through Cedice, CEMEX Mexico indirectly holds CEMEX
Espana, S.A. and subsidiaries.
2. In June 2002, Compania Valenciana de Cementos Portland, S.A. changed its legal name to CEMEX Espana, S.A. ("CEMEX
Espana").
3. In July 2003, Cementos del Pacifico, S.A. changed its legal name to CEMEX (Costa Rica), S.A.
4. In August 2002, Cementos Diamante, S.A. changed its legal name to CEMEX Colombia, S.A.
5. In August 2004, 6.83% of CEMEX Asia Holdings Ltd. ("CAH") shares were acquired, which in addition to the shares
exchange occurred in July 2002, increased the interest in CAH to approximately 99.1% (see note 9A).
6. Represents the Company's interest held through CAH. The direct economic benefits of CAH in Solid and APO Cement
Corporation is 100%. On December 23, 2002, Rizal was merged with Solid.
7. In July 2002, Saraburi Cement Company Ltd. changed its legal name to CEMEX (Thailand) Co. Ltd.
D) FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FOREIGN CURRENCY
FINANCIAL STATEMENTS
Transactions denominated in foreign currencies are recorded at the exchange
rates prevalent 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-8
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
E) CASH AND INVESTMENTS (note 4)
Investments include fixed-income securities with original maturities of three
months or less, as well as marketable securities readily convertible into cash.
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.
F) INVENTORIES AND COST OF SALES (note 7)
Inventories are recognized at the lower of replacement cost or market value.
Replacement cost is based upon the latest purchase price 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, 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.
G) 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
inflation effects.
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.
H) PROPERTIES, MACHINERY AND EQUIPMENT (note 10)
Properties, machinery and equipment are presented at their restated value,
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 are depreciated by the straight-line method over the
estimated useful lives, which fluctuate from 50 years for administrative
buildings to 10 to 35 years for industrial buildings, machinery and equipment.
Properties, machinery and equipment are subject to periodic impairment
evaluations (see note 3U).
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.
I) INTANGIBLE ASSETS, DEFERRED CHARGES AND AMORTIZATION (note 11)
In accordance with Bulletin C-8, Intangible Assets, 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 demonstrated. 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, except for goodwill, is calculated under the straight-line
method.
Intangible assets acquired in a business combination are separately accounted
for at fair value at the acquisition date, unless the value cannot be
reasonably estimated, in which case, such amounts are included as part of
goodwill, which was amortized until December 31, 2004, in accordance with
current accounting standards. Until that date, CEMEX amortized goodwill 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 December 31, 2004 was
amortized over a maximum period of 20 years. Starting January 1, 2005, in
compliance with the rules established by the new Bulletin B-7 (see note 23),
goodwill balances will cease to be amortized but will remain subject to
periodic impairment tests.
F-9
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Direct costs incurred in debt issuances are capitalized and amortized as part
of the effective interest rate of each transaction over its maturity. These
costs include discounts on debt issuance, bank fees, fees paid to attorneys,
agents, printers and consultants. Likewise, direct costs incurred in the
development stage of computer software for internal use are capitalized and
amortized through the operating results over the estimated useful life of the
software, which is approximately 4 years.
Preoperative expenses and other deferred charges recognized in prior years
under former Bulletin C-8 will continue to be amortized over their original
periods. Intangible assets are subject to impairment evaluations (see note 3U).
The adoption of Bulletin C-8 only affected the grouping of intangible assets in
the categories indicated above (see note 11).
J) 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
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 under these plans. 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, other postretirement benefits, including 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, as a result of modifications to Bulletin D-3, "Labor
Obligations", the costs related to postretirement benefits will be recognized
over the estimated active service life of the employees.
K) INCOME TAX ("IT"), BUSINESS ASSETS TAX ("BAT"), EMPLOYEES' STATUTORY
PROFIT SHARING ("ESPS") AND DEFERRED INCOME TAXES (note 18)
The IT, BAT and 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, 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 of the period and the taxable income of 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".
Consolidated balances of assets and liabilities and their corresponding taxable
amounts substantially differ from those of the Parent Company. The cumulative
initial deferred income tax effects presented in the statement of changes in
stockholders equity correspond 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".
L) 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).
M) 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 (see notes 3D 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 (see note 3N).
F-10
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
N) 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 foreign exchange rates of debt
agreements, as a vehicle to reduce financing costs (see note 12) and as an
alternative source of financing (see note 17), as well as hedges of: (i)
forecasted transactions, (ii) net assets in foreign subsidiaries and (iii)
executive stock option programs. These instruments have been 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. As of December 31, 2004 and 2003, some of these
instruments have been designated as hedges of debt or equity instruments. In
other cases, although some derivatives complement the Company's financial
strategy, such derivatives have not been designated as hedge instruments as
accounting hedge requirements were not met.
Effective January 1, 2001, in accordance with Bulletin C-2, "Financial
Instruments", the Company recognizes all derivative financial instruments 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.
The exceptions to the rule, as they refer to the transactions designated by the
Company and that meet hedging requirements, are the following:
a) Beginning in 2002, changes in the estimated fair value of interest rate
swaps to exchange floating rates for fixed rates, designated as accounting
hedges of the cash flows related to interest rates of a portion of
contracted debt, as well as those instruments negotiated to hedge the
interest rates at which certain forecasted debt is expected to be
contracted or renegotiated, are recognized temporarily in stockholders'
equity (note 15G) and 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) The 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 recorded in stockholders' equity, as part of the
foreign currency translation result (notes 3D and 15D). The accumulated
effect in stockholders' equity will be reversed through the income
statement upon disposition of the foreign investment.
c) Beginning in 2001, changes in the estimated fair value of those equity
forward contracts that cover the executive stock option programs are
recorded through the income statement in the comprehensive financing
result, as part of the costs related to such programs. The results derived
from equity forward contracts on the Company's own shares not designated
as hedges of the stock option programs, as well as from equity instruments
(such as the appreciation warrants refered to in note 15F), are recognized
in stockholders' equity upon settlement (notes 16 and 17).
d) Changes in fair value of foreign currency derivative instruments
negotiated to hedge a firm commitment, are recognized through
stockholders' equity, 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 earnings. In 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 equity is reclassified to earnings when the purchase
occurs.
For balance sheet presentation purposes, a portion of the assets or liabilities
resulting from the estimated fair value recognition of Cross Currency Swaps
("CCS"), is reclassified as part of the carrying amount of the underlying debt
instruments, thereby reflecting the cash flows expected to be received or paid
upon liquidation of such instruments. CCS are negotiated to change the profile
of the interest rate and currency of existing debt, required to present the
indebtedness as if it had been originally negotiated in the exchanged interest
rates and currencies. The non-reclassified portion, resulting from the
difference between the forward exchange rates and those in effect as of the
balance sheet date, is recognized as other assets or other liabilities, both
short and long term, depending on the maturity of the contracts. As a result of
new accounting pronouncements, starting January 1, 2005, the above
reclassification will be discontinued; therefore, for balance sheet
presentation, debt will remain in the original currencies and rates (note 23).
F-11
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The periodic cash flows generated by interest rate swaps and CCS are recognized
as financial expense, adjusting the effective interest rate of the related
debt. For all other derivative instruments, cash flows are recognized within
the same item where the effects of the primary instrument subject to the
accounting or economic hedge relationship are classified. In the case of
derivatives not associated with an identified exposure, related cash flows are
recognized in earnings as part of the results from valuation and liquidation of
financial instruments. Premiums paid on hedge derivative instruments are
deferred and amortized over the life of the instrument or immediately upon
settlement. In other cases, premiums are recognized in earnings when paid or
received.
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.
O) REVENUE RECOGNITION
Revenue is recognized upon shipment of cement and ready-mix concrete 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, through goods delivered or services rendered, and there is no
condition or uncertainty implying a reversal thereof.
P) CONTINGENCIES AND COMMITMENTS
Obligations or losses, related to contingencies, are recognized as liabilities
in the balance sheet when present obligations exist, 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,
considering 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.
Q) COMPREHENSIVE NET INCOME (LOSS) (note 15G)
The Company presents comprehensive net income (loss) and its components as a
single item in the statement of changes in stockholders' equity. Comprehensive
net income (loss) represents the change in stockholders' equity during a period
for transactions and other events not representing contributions, reductions or
distributions of capital.
R) USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect reported amounts of 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 estimations and
assumptions include the book value of fixed assets, allowances for doubtful
accounts, inventories and assets for deferred IT, the fair market values of
financial instruments and, the assets and liabilities related to labor
obligations. Actual results could differ from these estimates.
S) CONCENTRATION OF CREDIT RISK
The Company 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 2002, 2003 and 2004, 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
T) OTHER INCOME AND EXPENSE
Other income and expense, in the statements of income, consists primarily of
goodwill amortization, anti-dumping duties, results from the sales of fixed
assets, impairment losses of long-lived assets, results from the early
extinguishment of debt and other unusual or non-recurrent transactions.
F-12
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
U) 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
of the period when such determination is made, resulting from the excess of
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.
V) ASSET RETIREMENT OBLIGATIONS (note 13)
Effective January 1, 2003, in accordance with Bulletin C-9, "Liabilities,
Accruals, Contingent Assets and Liabilities, and Commitments", CEMEX recognizes
unavoidable obligations, legal or assumed, to restore the site or the
environment when removing 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 to operating
results during its remaining useful life, while 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.
As of the implementation date, the Company had already created liabilities for
the known situations; however, an analysis was performed throughout all
subsidiaries in the different countries in order to identify additional
possible existing situations and proceed to calculate them and if applicable
reflect them in the accounting record. Asset retirement obligations in the case
of CEMEX are related mainly to future costs of demolition, cleaning and
reforestation, derived from commitments, both legal and 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. For
those situations identified and quantified, effective January 1, 2003, a
remediation liability was recorded for approximately Ps537.2, against fixed
assets for Ps388.1, deferred IT assets for Ps58.0 and an initial cumulative
effect for Ps91.1, which was recorded in stockholders' equity as an element of
comprehensive net income.
W) EXECUTIVE STOCK OPTION PROGRAMS (note 16)
The Company recognizes the cost associated with executive stock options
programs by means of the intrinsic value method, for those programs in which,
as of the granted date, is not known the exercise price at which the underlying
shares will be exercised, because this exercise price is growing (variable)
over the life of the options. Through the intrinsic value method, the changes
in the appreciation of options represented by the difference between the market
price of the CPO and the exercise price of the option is recognized as cost in
the Company's income statement, within the Comprehensive Financing Result. The
Company does not recognize cost for those programs in which the exercise price
is equal to the CPO price at the date of grant of the option and it remains
fixed for the life of the option.
4. CASH AND INVESTMENTS
Consolidated cash and investments as of December 31, 2003 and 2004 consists of:
2003 2004
--------------- ---------------
Cash and bank accounts................... Ps 1,767.1 1,615.7
Fixed-income securities.................. 1,367.4 1,720.4
Investments in marketable securities..... 345.0 477.4
--------------- ---------------
Ps 3,479.5 3,813.5
--------------- ---------------
F-13
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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. Trade accounts
receivable as of December 31, 2003 and 2004 include allowances for doubtful
accounts of Ps671.5 and Ps756.4, respectively.
The Company has established sales of trade accounts receivable programs with
financial institutions ("securitization programs"). These programs were
originally established in Mexico during 2002, in the United States during 2001
and in Spain in 2000. Through the securitization programs, CEMEX effectively
surrenders control, risks and the benefits associated with 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 (note 6). The
balances of receivables sold pursuant the securitization programs as of
December 31, 2003 and 2004 were Ps6,507.1 (U.S.$584.1million) and Ps7,114.0
(U.S.$638.6 million), respectively. The accounts receivable qualifying for sale
do not include amounts over certain days past due or concentrations over
certain limit 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 Ps127.4 (U.S.$11.4 million) in 2002, Ps113.6
(U.S.$10.2 million) in 2003 and Ps125.7 (U.S.$11.3 million) in 2004.
6. OTHER ACCOUNTS RECEIVABLE AND OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other accounts receivable as of December 31, 2003 and 2004 consist of:
2003 2004
--------------- ---------------
Non-trade receivables........................................................... Ps 1,688.6 1,210.1
Prepayments and receivables from valuation of derivative instruments
(notes 12 and 17)............................................................. 520.4 1,837.2
Interest and notes receivable................................................... 1,064.2 1,196.9
Advances for travel expenses and loans to employees............................. 326.1 432.8
Other refundable taxes.......................................................... 1,227.6 387.4
--------------- ---------------
Ps 4,826.9 5,064.4
--------------- ---------------
Non-trade receivables are mainly originated by the sale of assets. Interest and
notes receivable include Ps1,022.9 (U.S.$91.8 million) in 2003 and Ps1,161.6
(U.S.$ 104.3 million) in 2004, arising from securitization programs (note 5).
Other refundable taxes include Ps926.8 in 2003 for tax advances.
Other accounts payable and accrued expenses as of December 31, 2003 and 2004
consist of:
2003 2004
--------------- ---------------
Other accounts payable and accrued expenses..................................... Ps 2,648.0 1,856.8
Interest payable................................................................ 715.1 575.2
Tax payable..................................................................... 3,187.4 1,453.4
Dividends payable............................................................... 95.5 17.8
Provisions...................................................................... 3,135.5 3,584.4
Advances from customers......................................................... 915.2 812.9
Accounts payable from valuation of derivative instruments (notes 12 and 17)..... 1,387.7 981.6
--------------- ---------------
Ps 12,084.4 9,282.1
--------------- ---------------
Short-term provisions primarily consist of: (i) remuneration and other
personnel benefits accrued at the balance sheet date; (ii) accruals for
insurance payments; and (iii) accruals related to the portion of legal
assessments to be settled in short-term, such as the case of anti-dumping fees
(note 22C) and environmental remediations (note 22G). Commonly, these amounts
are revolving in nature and are to be settled and replaced by similar amounts
within the next 12 months.
F-14
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
7. INVENTORIES
Inventories in the consolidated balance sheet as of December 31, 2003 and 2004
are summarized as follows:
2003 2004
------------- -------------
Finished goods..................... Ps 1,467.9 1,676.1
Work-in-process.................... 1,921.6 1,603.7
Raw materials...................... 587.0 666.2
Supplies and spare parts........... 2,533.6 2,506.7
Advances to suppliers.............. 255.1 265.4
Inventory in transit............... 334.9 328.7
------------- -------------
Ps 7,100.1 7,046.8
============= ==============
In December 2004, based on periodic impairment analysis on the inventory
balances (note 3F), impairment losses of approximately U.S.$16.9 million
(Ps188.3) were recognized within other expenses.
8. OTHER CURRENT ASSETS
Other current assets in the consolidated balance sheet as of December 31, 2003
and 2004 consist of:
2003 2004
------------- -------------
Advance payments...................... Ps 376.0 471.1
Non-cement related assets............. 420.3 577.7
------------- -------------
Ps 796.3 1,048.8
============= ==============
Non-cement related assets are stated at their estimated realizable value and
mainly consist of (i) non-cement related assets acquired in business
combinations, (ii) various assets held for sale received from customers as
payment of trade receivables, and (iii) real estate held for sale.
9. INVESTMENTS AND NONCURRENT RECEIVABLES
A) INVESTMENTS IN SUBSIDIARIES AND AFFILIATED COMPANIES
As of December 31, 2003 and 2004, investments in affiliated companies,
accounted for by the equity method, are summarized as follows:
2003 2004
------------- -------------
Book value at acquisition date......... Ps 4,149.2 13,175.3
Equity in income and other
changes in stockholders' equity..... 3,200.1 3,728.0
------------- -------------
Ps 7,349.3 16,903.3
============= ==============
Investments held by subsidiaries in CEMEX shares, amounting to Ps9,814.6
(153,594,177 CPOs and 30,709,083 appreciation warrants) at December 31, 2003
and Ps12,512.1 (154,014,032 CPOs) at December 31, 2004, are offset against
majority interest stockholders' equity in the accompanying financial
statements.
F-15
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The Company's principal acquisitions and divestitures during 2002, 2003 and
2004 are as follows:
I. On September 27, 2004, as a result of a public offer to purchase the
outstanding shares of RMC, CEMEX acquired 50 million shares for
approximately (pound)432 million (U.S.$786 million), which represents
approximately 18.8% of RMC's outstanding stock. RMC, headquartered in the
United Kingdom, is a leading international producer and supplier of
materials, products and services used primarily in the construction
industry. The acquisition of the remaining 81.2% is subject to several
authorizations and may conclude during the first quarter of 2005 (see note
2).
II. On November 15, 2004, CEMEX announced that it had reached a preliminary
understanding with a Brazilian company to sell the cement plants in
Charlevoix, Michigan, and Dixon, Illinois, both located in the United
States. The transaction, valued at approximately U.S.$400 million, is
expected to close in the first quarter of 2005, subject to definitive
documentation and the satisfaction of customary conditions precedent. The
combined capacity of these plants is close to 2 million tons and in 2004
revenues from those operations represented around 10% of CEMEX operations
in that country.
III. In August 2004, a subsidiary acquired 6.83% (695,065 shares) of CAH equity
for approximately U.S.$70 million. In addition, in 2004, 1,398,602 CAH
shares were exchanged for 27,850,713 CPOs with an approximate value of
U.S.$172 million (Ps1,916.0). In 2003, 84,763 CAH shares were exchanged
for 1,683,822 CPOs, with an approximate value of U.S.$7.8 million
(Ps93.2). Exchanges during 2004 and 2003 resulted from the agreements
established on July 12, 2002, through which in 2003, 1,483,365 CAH shares
would be acquired by a forward exchange requiring delivery of 28,195,213
CPOs. In April 2003, the original settlement date was modified with
respect to 1,398,602 CAH shares, which were acquired during 2004. In 2002,
25,429 CAH shares were acquired for U.S.$2.3 million. For accounting
purposes, the 1,483,365 CAH shares were consolidated since July 2002,
recognizing an account payable of U.S.$140 million, equivalent to the
price of 28,195,213 CPOs as of the date of the exchange agreements. In
2004, CEMEX recorded a loss in stockholders' equity for approximately
Ps1,000.4 representing the excess in the price paid over the book value of
the CAH shares held by minority interests. Through the transactions
mentioned above, the Company's share in CAH increased to 99.1%.
IV. In August and September 2003, for a combined price of approximately
U.S.$99.7 million (Ps1,190.5), CEMEX, Inc. acquired Mineral Resource
Technologies, Inc. ("MRT"), a 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 operating results of MRT and the Dixon plant
are included in the consolidated financial statements since the respective
acquisition dates. During 2002, CEMEX, Inc. sold aggregate quarries and
other equipment for an approximate amount of U.S.$49 million.
V. On July 30, 2002, through a public tender offer, a subsidiary of the
Company acquired 100% of the outstanding shares of Puerto Rican Cement
Company, Inc. ("PRCC"), for approximately U.S.$180.2 million. As of
December 31, 2002, the consolidated financial statements include the
balance sheet of PRCC and the results of operations as of and for the
five-month period ended December 31, 2002.
VI. In July 2002, a Company subsidiary acquired the 30% remaining economic
interest of Solid from third parties for approximately U.S.$95 million.
Prior to this purchase, CEMEX indirectly had a 70% economic interest in
Solid through CAH. As a result of this acquisition and the subsequent
increases in CAH's equity interest held by CEMEX, the approximate indirect
economic interest of CEMEX in Solid increased from 54.2% to 99.1%.
Certain condensed financial information of Dixon and MRT, companies acquired in
2003, that were consolidated in the Company's financial statements in the year
of acquisition is presented below:
Total assets......................................... Ps 1,301.6
Total liabilities.................................... 119.4
Stockholders' equity................................. 1,182.2
---------------
Sales................................................ Ps 197.6
Operating income..................................... 12.2
Net income........................................... 12.1
---------------
F-16
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
As of December 31, 2003 and 2004, the consolidated investments in affiliated
companies are as follows:
% Equity
Activity Country interest 2003 2004
---------- ------------ ---------- ----------- -----------
RMC Group p.l.c. .................................. Concrete United 18.8 Ps - 9,186.8
Kingdom
PT Semen Gresik, Tbk............................... Cement Indonesia 25.5 2,919.4 2,774.3
Control Administrativo Mexicano, S.A. de C.V....... Cement Mexico 49.0 2,087.9 2,238.5
Trinidad Cement Limited............................ Cement Trinidad 20.0 341.0 297.8
Cementos Bio Bio, S.A.............................. Cement Chile 11.9 438.2 472.6
Cancem, S.A. de C.V................................ Cement Mexico 10.0 212.3 228.7
Lehigh White Cement Company........................ Cement U.S. 24.5 127.4 142.3
Societe des Ciments Antillais...................... Cement Antilles Fr. 26.1 170.8 198.6
Caribbean Cement Company Limited................... Cement Jamaica 5.0 109.0 116.7
Others............................................. - - - 943.3 1,247.0
----------- -----------
Ps 7,349.3 16,903.3
=========== ===========
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 Padang's administration designated by Gresik in May's 2003
stockholders' meeting. In September 2003, pursuant to a court order, the
management appointed by Gresik finally assumed its duties. In addition, the
former management failed to provide financial information to Gresik, required
for consolidation purposes. Therefore, the consolidated financial statements of
Gresik, at December 31, 2002, included unaudited information of Padang. The
external auditors of Gresik, who were also auditors of Padang, abstained from
giving an opinion since Padang represented around 16% of the combined net
assets. 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.
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. As a result of
this situation, 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 was constituted in May 2004 and held its first session
in July 2004, at which the Indonesian government objected the tribunal's
jurisdiction. As of December 31, 2004, the tribunal was still determining if it
has jurisdiction to hear the dispute. The resolution of in-depth issues can
take several years. Based on the information arising from the procedures
indicated before, CEMEX will evaluate its investment in conformity with its
accounting policies. As of December 31, 2003 and 2004, CEMEX used the best
information available in order to valuate and update its investment in Gresik.
F-17
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
B) NONCURRENT ACCOUNTS RECEIVABLE
Consolidated amounts include assets for the valuation of derivative instruments
(notes 12 and 17) of Ps1,206.0 in 2003 and Ps1,660.0 in 2004. Furthermore, they
include investments in private funds, recorded at fair value of U.S.$16.1
million (Ps192.3) in 2003 and U.S.$8.4 million (Ps93.3) in 2004. Of the private
funds in 2003, U.S.$9.3 million (Ps103.8) were reclassified to cash and
investments in 2004, since their liquidation is expected within a
three-month-period or less. In 2003 and 2004, approximately U.S.$7.3 million
(Ps87.2) and U.S.$2.3 million (Ps25.6) were contributed to these funds,
respectively.
10. PROPERTIES, PLANT AND EQUIPMENT
In December 2003 and 2004, based on periodic impairment analysis (note 3U),
losses of approximately Ps318.1 and Ps1,130.6, respectively, were recognized
within other expenses, derived from maritime terminals in the Asian region that
are out of service and the closing of cement assets in Mexico in 2003, and the
closing of cement assets in the Philippines and Mexico in 2004. The impaired
assets in Mexico in 2003 were first adjusted in 1999 when they ceased
operations to their estimated realizable value and their depreciation was
suspended. The approximate effect of having suspended the depreciation in 2002
was Ps43.3.
11. INTANGIBLE ASSETS AND DEFERRED CHARGES
As of December 31, 2003 and 2004, consolidated intangible assets of definite
and indefinite life and deferred charges, are summarized as follows:
2003 2004
--------------- --------------
Intangible assets of indefinite useful life:
Goodwill............................................... Ps 50,311.8 47,833.3
Accumulated amortization................................ (8,815.1) (10,213.1)
--------------- --------------
41,496.7 37,620.2
--------------- --------------
Intangible assets of definite useful life:
Cost of internally developed software................... 3,225.1 3,014.7
Additional minimum liability (note 14).................. 1,177.2 911.6
Accumulated amortization................................ (1,509.5) (1,937.4)
--------------- --------------
2,892.8 1,988.9
--------------- --------------
Deferred Charges:
Prepaid pension costs (note 14)......................... 412.0 440.3
Deferred financing costs................................ 619.7 551.5
Deferred income taxes (note 18B)........................ 2,276.8 1,913.9
Others.................................................. 3,316.0 3,567.0
Accumulated amortization ............................... (1,763.4) (1,842.2)
--------------- --------------
4,861.1 4,630.5
--------------- --------------
Ps 49,250.6 44,239.6
=============== ==============
As a result of the impairment evaluations (note 3U), CEMEX recognized within
other expenses, impairment losses of goodwill for Ps109.4 in 2002, Ps936.9 in
2003 and Ps248.9 in 2004. Such losses consist of those related to the Company's
information technology business unit, which were Ps109.4 in 2002, Ps167.2 in
2003 and Ps248.9 in 2004 and those related to the business units in the Asian
region in 2003 were Ps769.7.
The amortization expenses of intangible assets and deferred charges were
Ps2,961.0 in 2002, Ps2,983.6 in 2003 and Ps2,869.9 in 2004, of which, 65%, 69%
and 66% were recognized in other expenses, respectively, while the difference
in each year was recognized within operating expenses.
F-18
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
12. SHORT-TERM AND LONG-TERM BANK LOANS AND NOTES PAYABLE
As of December 31, 2003 and 2004, short-term and long-term consolidated debt,
by type of financing and currency, as well as the interest rates information,
which include the effects of the related derivative financial instruments, are
summarized as follows:
Weighted Amount %
As December 31, 2003 Original effective Carrying Relation to subject to subject to
rate rate amount (2) derivatives(1) derivatives derivatives
-----------------------------------------------------------------------------
Short-term bank loans
Lines of credit in Mexico...................... Variable 2.1% 783.4 - - -
Lines of credit in foreign countries........... Variable 1.0% 1,850.7 - - -
------------ -----------------------
2,634.1 - -
------------
Short-term notes payable
Mexican commercial paper programs............. Variable 6.3% 2,007.8 CCS 2,007.8 100.0%
Foreign commercial paper programs.............. Variable 2.6% 1,134.3 - - -
Other notes payable............................ Variable 7.4% 30.9 - - -
------------ -----------------------
3,173.0 2,007.8 63.3%
------------
5,807.1
Current maturities............................. 10,062.8
------------
15,869.9
============
Long-term bank loans
Syndicated, 2004 to 2007....................... Variable 2.2% 12,594.1 CCS 1,358.3 10.8%
Syndicated, 2004 to 2006....................... Fixed 7.4% 6,567.8 IRS 6,567.8 100.0%
Bank loans, 2004 to 2007....................... Variable 1.8% 7,821.9 - - -
Bank loans, 2004 to 2006....................... Fixed 7.4% 2,694.7 IRS 2,536.9 94.1%
------------ -----------------------
29,678.5 10,463.0 35.3%
------------
Long-term notes payable
Euro medium-term notes, 2004 to 2009........... Fixed 8.0% 3,871.7 CCS 797.9 20.6%
Medium-term notes, 2004 to 2007................ Variable 3.0% 7,796.6 CCS 6,883.0 88.3%
Medium-term notes, 2004 to 2015................ Fixed 5.8% 19,636.0 CCS 6,227.9 31.7%
Other notes, 2004 to 2010...................... Variable 2.1% 2,804.2 - - -
Other notes, 2004 to 2009...................... Fixed 6.6% 451.9 IRS 448.4 99.2%
------------ -----------------------
34,560.4 14,357.2 41.5%
------------
== 64,238.9
Current maturities............................. (10,062.8)
------------
54,176.1
============
Effective
Debt by currency(2) Total debt Short-term Effective rate Long-term rate
------------ ---------------------------------------------------
Dollar..................................... 47,613.8 5,287.8 4.4% 42,326.0 5.5%
Japanese yen............................... 9,573.9 4,799.9 0.6% 4,774.0 1.2%
Euros...................................... 12,443.7 5,591.6 2.8% 6,852.1 3.4%
Mexican pesos.............................. 251.5 102.4 7.3% 149.1 7.3%
Egyptian pounds............................ 114.7 76.8 11.3% 37.9 10.9%
Other currencies........................... 48.4 11.4 11.5% 37.0 12.6%
------------ ------------ -------------
70,046.0 15,869.9 54,176.1
============ ============ =============
s
F-19
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Weighted Amount %
As December 31, 2004 Original effective Carrying Relation to subject to subject to
rate rate amount (2) derivatives(1) derivatives derivatives
-----------------------------------------------------------------------------
Short-term bank loans
Lines of credit in Mexico...................... Variable 2.9% 530.5 CCS 744.3 100.0%
Lines of credit in foreign countries........... Variable 1.4% 4,501.4 - - -
------------ -----------------------
5,031.9 744.3 14.8%
------------
Short-term notes payable
Foreign commercial paper program............... Variable 2.5% 252.0 - - -
Other notes payable............................ Variable 7.4% 67.9 - - -
------------ -----------------------
319.9 - -
------------
5,351.8
Current maturities............................. 6,275.2
------------
11,627.0
============
Long-term bank loans
Syndicated loans, 2005 to 2009................. Variable 3.7% 22,391.4 - - -
Syndicated loans, 2005 to 2009................. Fixed 1.4% 2,098.7 - - -
Bank loans, 2005 to 2007....................... Variable 2.8% 5,734.3 - - -
Bank loans, 2005 to 2007....................... Fixed 7.4% 78.0 - - -
------------ -----------------------
30,302.4 - -
------------
Long-term notes payable
Euro medium-term notes, 2005 to 2009........... 1,263.3 - - -
Fixed 11.1%
Medium-term notes, 2005 to 2008................ Variable 3.7% 8,420.7 CCS 6,611.3 78.5%
Medium-term notes, 2005 to 2015................ Fixed 5.7% 19,576.8 CCS 5,098.4 26.0%
Other notes, 2005 to 2015...................... Variable 3.8% 955.4 - - -
Other notes, 2005 to 2009...................... Fixed 3.3% 196.1 - - -
------------ -----------------------
30,412.3 11,709.7 38.5%
------------
60,714.7
Current maturities............................. (6,275.2)
------------
54,439.5
============
Effective Effective
Debt by currency(2) Total debt Short-term Rate Long-term Rate
------------ --------------------------------------------------
Dollar......................................... 36,874.5 3,322.0 4.5% 33,552.5 4.9%
Japanese yen................................... 9,363.0 3,202.7 0.5% 6,160.3 1.5%
Euros.......................................... 10,089.8 4,898.8 2.7% 5,191.0 3.5%
Sterling pounds................................ 9,286.9 - - 9,286.9 5.5%
Mexican pesos.................................. 415.5 192.5 7.3% 223.0 5.3%
Egyptian pounds................................ 11.0 11.0 13.5% - -
Other currencies............................... 25.8 - - 25.8 15.6%
------------ ------------ ------------
66,066.5 11,627.0 54,439.5
============ ============ ============
(1) IRS or Interest Rate Swaps are instruments used to exchange interest rates
(note 12A). CCS or Cross Currency Swaps are instruments to exchange both
interest rates and currencies (note 12B).
(2) Include the effects for currencies exchange originated by the CCS.
F-20
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The most representative exchange rates to the financial debt are as follows:
2003 2004
------------- -------------
Mexican pesos per dollar..................... 11.24 11.14
Japanese yen per dollar...................... 107.39 102.49
Euros per dollar............................. 0.7948 0.7383
Sterling pounds per dollar................... 0.5599 0.5218
============= =============
The maturities of long-term debt as of December 31, 2004 are as follows:
Consolidated
-------------
2006...................................................... Ps 19,929.1
2007...................................................... 13,697.8
2008...................................................... 8,044.5
2009...................................................... 6,666.6
2010 and thereafter....................................... 6,101.5
-------------
Ps 54,439.5
=============
In the consolidated balance sheet at December 31, 2003 and 2004, there were
short-term debt transactions amounting to U.S.$395 million (Ps4,716.8) and
U.S.$847.2 million (Ps9,438.1), 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.
As of December 31, 2004, the Company and its subsidiaries have the following
lines of credit, both committed and subject to the banks' availability, at
annual interest rates ranging from 0.5% and 15.6%, depending on the negotiated
currency:
Line of credit Available
--------------- -------------
European commercial paper (U.S.$600 million).......... Ps 6,684.0 6,684.0
Revolving credit facility (U.S.$ 800 million)......... 8,912.0 5,102.1
Mexican commercial paper.............................. 3,000.0 3,000.0
Long-term credit in current account.................. 1,671.0 -
Other lines of credit in foreign subsidiaries......... 11,378.7 4,599.8
Other lines of credit from banks...................... 6,561.5 1,559.6
--------------- -------------
Ps 38,207.2 20,945.5
=============== =============
Credit lines information included in the table above does not include lines of
credit agreed with financial institutions for approximately U.S.$5,050 million
for the acquisition of RMC (note 2).
In June 2004, CEMEX negotiated a revolving syndicated line of credit maturing
in three years for U.S.$800 million. Resources from this transaction and other
lines of credit were used to prepay the remaining outstanding U.S.$700 million
of the multi-currency credit of U.S.$1,150 million negotiated in 2003 and to
liquidate the U.S. commercial paper program for U.S.$300 million. On October
15, 2003, a Dutch subsidiary negotiated a multi-currency credit for an
equivalent at that date of U.S.$1,150 million. Funds were obtained as follows:
Euro 256.4 million maturing in two years and U.S.$550 million and yen 32,688
million maturing in three years. Such amounts were used mainly to repay a
revolving credit facility of U.S.$400 million and for the early redemption in
2003 of the remaining outstanding prefered stock financing of U.S.$650 million
related to the purchase of CEMEX Inc. (note 15E).
In March 2004, CEMEX Spain negotiated a multi-currency syndicated loan of 400
million euros, divided as follows: 1) a 364-day revolving line of credit; 2) a
five-year multicurrency loan, and 3) a fixed rate 5-year credit denominated in
yen. In addition, in April 2004, CEMEX Spain through one of its subsidiaries,
made a private debt issuance of 11,068 million yen (U.S.$100.2 million) to a
group of insurance companies and pension funds in the United States. Proceeds
obtained from this transaction were used to refinance short-term debt and for
other general corporate purposes.
F-21
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
In October 2004, CEMEX completed a tender offer for its 9.625% Notes due in
2009 of U.S.$200 million and for the remaining outstanding balance of its 12.7%
Notes due in 2006 of U.S.$91.6 million, which had been previously reduced as a
result of a tender offer that culminated in 2002. In the 2004 offer,
U.S.$138.5million (Ps1,542.9) and U.S.$39.7 million (Ps442.3) of these notes
were retired, respectively. As of December 31, 2003, and as a result of the
tender offer in 2002, the Company had an outstanding balance of U.S.$91.6
million (Ps1,093.8) of its 12.7% Notes, which original amount was U.S.$300
million. As of December 31, 2004, the outstanding balance of the 9.625% Notes
was U.S.$61.6 million (Ps686.2) and of the 12.7% Notes was U.S.$51.9 million
(Ps578.2). Expenses related to the offer and the premiums paid to the notes
holders as a result of the early retirement, which amounted to approximately
U.S.$54 million (Ps657.9) in 2002 and U.S.$38 million (Ps423.3) in 2004, were
recognized within other expenses.
As of December 31, 2003 and 2004, in order to: (i) hedge contractual cash flows
of certain financial debt with floating rates or exchange floating for fixed
interest rates on a debt portion (note 12A), and (ii) reduce the financial cost
of debt originally contracted in dollars or pesos (note 12B), the Company has
negotiated derivative financial instruments related to short-term and long-term
debt, which are described below:
A) Interest Rate Swaps Contracts
As of December 31, 2003 and 2004, information with respect to interest rate
swaps ("IRS") related to short-term and long-term financial debt is summarized
as follows:
(U.S.dollar millions) Notional Debt CEMEX CEMEX Effective Estimated fair
Related debt amount currency Maturity date receives* pays rate value
-----------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps in 2003
---------------------------
Long-term
Syndicated loans...... U.S.$ 550 Dollar Mar 2008 LIBOR 6.5% 7.4% U.S.$ (70.3)
Bank loans............ 250 Dollar Mar 2008 LIBOR 5.4% 7.3% (33.4)
-------------- ----------------
800 (103.7)
Not assigned(1)
Long-term debt........ 1,050 Dollar Feb 2009 LIBOR 3.5% 2.3% (124.4)
-------------- ----------------
U.S.$1,850 U.S.$(228.1)
-------------- ----------------
Interest Rate Swaps in 2004
---------------------------
Not assigned(1)
Long-term debt........ U.S.$1,950 Dollar Oct 2009 L + 26 bps 5.6% 5.8% U.S.$(174.2)
-------------- ================
* LIBOR ("L") represents the London Interbank Offering Rate, used in the
market for debt denominated in U.S. dollars.
(1) These instruments have optionality.
As of December 31, 2003 and 2004, the non-assigned interest rate swaps
presented above, which are part of and complement the financial strategy of
CEMEX, however, do not meet the accounting hedge criteria, consequently,
changes in the estimated fair value of these instruments were recognized in
earnings. As of December 31, 2003 interest rate swaps with a notional amount of
U.S.$800 million were designated as accounting hedges of contractual cash flows
(interest payments) of the related floating rate debt. Therefore, changes in
the estimated fair value of these instruments were recognized in stockholders'
equity (note 3N).
During 2004, the notional amount of interest rate swaps increased by U.S.$100
million as compared to 2003. This increase was mainly due to a new interest
rate swap for a notional amount of U.S.$200 million, negotiated upon the
exercise of interest rate options ("swaptions"). The increase was partially
offset by the early settlement of interest rate swaps and cap options for a
notional of U.S$100 million. As of December 31, 2003, of the approximate loss
in the estimated fair value of interest rate swaps of U.S.$228.1 million
(Ps2,723.8), losses of approximately U.S.$126 million (Ps1,504.6) correspond to
the estimated fair value that swaptions, Forward Rate Agreements ("FRAs") and
the floor and cap options had upon expiration or settlement. These losses were
recognized in earnings of prior periods between origination of the contracts
and their termination.
F-22
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
During 2003 and 2004, due to changes in the interest rate mix of the financial
debt portfolio, interest rate swaps were settled in agreement with the
financial counterparties for notional amounts of U.S.$1,106 million and
U.S.$100 million, respectively. These settlements resulted in losses of
U.S$41.9 million (Ps500.4) in 2003 and losses of U.S.$8.3 million (Ps92.5) in
2004, corresponding to the estimated fair value of the contracts on the
settlement date, which were recognized in earnings in the respective periods.
As of December 31, 2003, there were swaptions for a notional amount of U.S.$200
million, with an estimated market loss of U.S.$24.9 million (Ps297.3),
negotiated to exchange floating for fixed interest rates. These options were
exercised in July 2004, and the counterparty elected to negotiate with CEMEX
new interest rate swaps receiving a fixed rate and paying a floating rate for a
five-year period. Likewise, during 2003, the Company sold and later settled
options for a notional amount of U.S.$400 million, resulting in a net gain of
approximately U.S.$1.1 million (Ps13.2). In 2002 and 2003, from the sale of
swaptions, CEMEX received premiums for approximately U.S.$57.6 million
(Ps701.8) and U.S.$25.0 million (Ps298.5), respectively. Premiums received as
well as changes in the estimated fair value of the options, which represented
losses of approximately U.S.$110.9 million (Ps1,351.3) in 2002 and gains of
approximately U.S.$1.6 million (Ps19.1) in 2003, were recognized in earnings of
each period. In addition, in 2002 and 2003, losses of approximately U.S.$92.3
million (Ps1,124.7) and U.S.$23.9 million (Ps285.4), respectively, were
recognized in earnings as a result of the settlement or termination of the
swaption contracts.
As of December 31, 2002, the Company held forward rate agreements ("FRAs") for
a notional amount of U.S.$650 million, negotiated in 2001 to fix the interest
rate of future debt issuances, which were not completed due to market
conditions. These instruments were designated at the end of 2002 as accounting
hedges of the interest rate of debt issuances, which were negotiated in 2003.
These contracts expired in June 2003 and new interest rate swaps were
negotiated. At maturity, an approximate loss of U.S.$37.6 million (Ps449.0) was
recognized in stockholders' equity and is being amortized to the financial
expense as part of the effective interest rate of the related debt. The amount
amortized was U.S$7.8 million (Ps93.1) in 2003 and U.S$4.3 million (Ps47.9) in
2004. The changes in the estimated fair value of these contracts during 2002
represented losses of approximately U.S.$33.7 million (Ps410.6), which were
recognized in earnings, except for a loss of U.S.$42.4 million (Ps506.3), which
was recognized in stockholders' equity, corresponding to the change in
valuation after these contracts were designated as accounting hedges.
As of December 31, 2002, there were floor and cap options for a notional amount
of U.S.$711 million, with maturity in March 2008. These options were settled in
May 2003, through the negotiation of interest rate swaps. These options were
structured as part of an interest rate swap for the same notional amount that
was settled in 2002. The changes in the estimated fair value of the floor and
cap options until settlement represented losses of approximately U.S.$55.2
million (Ps672.4) in 2002 and U.S.$0.1 million (Ps1.6) in 2003. These losses
were recognized in earnings in the respective periods.
B) Cross Currency Swap Contracts and Other Currency Instruments
As of December 31, 2004 and 2003, there were Cross Currency Swaps ("CCS"),
through which the Company exchanges the originally contracted interest rates
and currencies on notional amounts of related short-term and long-term debt.
During the life of the contracts, the cash flows related to the exchange of
interest rates under the CCS, match, in interest payment dates and conditions,
those of the underlying debt.
If there is no early settlement, at maturity of the contracts and the
underlying debt, the Company and the counterparty will exchange notional
amounts, so the Company will receive the cash flow in the currency of the
underlying debt necessary to cover its primary obligation, and will pay the
notional amount in the exchanged currency of the CCS. As a result, the original
financial risk profile related to interest rates and foreign exchange
variations of the underlying debt has been effectively exchanged.
F-23
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
As of December 31, 2003 and 2004, information with respect to the CCS is
summarized as follows:
Currencies Interest Rates
------------------------------------------------------
Amount in
(Amounts in millions) Notional Original new CEMEX CEMEX Effective Estimated
Related Debt Maturity date amount amount currency receives * pays * rate fair value
- -------------------------- -------------------------------------------------------------------------------------------------
CCS in 2003
Mexican peso to dollar
Short term notes........... Jan 2004 U.S.$ 168.1 Ps2,019 U.S.$ 168 N/A N/A 6.3% U.S.$ 0.8
------------- -----------
Mexican peso to dollar
Medium term notes.......... Nov 04-Dec 07 468.9 Ps 6,485 U.S.$ 469 TIIE+62 bps L+121bps 2.7% 74.4
Mexican peso to dollar
Medium term notes.......... Apr 05-Apr 07 233.3 Ps 3,579 U.S.$ 233 12.4% L+99 bps 1.9% 103.0
Mexican peso to dollar
Medium term notes.......... Mar 06-Dec 08 377.8 Ps 4,131 U.S.$ 378 8.6% 4.6% 3.8% 0.2
Mexican peso to dollar
Medium term notes.......... Oct 2007 79.9 Ps 850 U.S.$ 80 CETES+145bps 4.3% 4.3% (8.9)
Mexican peso to yen
Medium term notes.......... Jun 05-Jun 06 66.8 U.S.$ 67 Yen 1,904 L+127 bps 1.9% 9.3% 93.2
Mexican peso to yen
Euro-medium term notes..... Jun 05-Jan 06 51.8 Ps 1,672 Yen 6,008 8.8% 2.6% 1.3% (0.7)
------------- ------------
1,278.5 261.2
------------- ------------
U.S.$1,446.6 U.S.$262.0
============= =============
CCS in 2004
Dollar to yen
Short term notes........... Jun 2005 U.S.$ 66.8 U.S.$67 Yen 1,904 L+127 bps 1.9% 2.9% U.S.$ 92.9
------------- ------------
Mexican peso to dollar
Medium term notes.......... Jun 05-Jun 06 308.4 Ps 3,804 U.S.$ 308 TIIE+55 bps L+125bps 4.0% 33.3
Mexican peso to dollar
Medium term notes.......... Apr 05-Apr 07 233.3 Ps 3,369 U.S.$ 233 12.4% L+97 bps 3.3% 87.8
Mexican peso to dollar
Medium term notes.......... Mar 06-Dec 08 377.8 Ps 4,022 U.S.$ 378 8.6% 4.6% 3.9% 2.8
Mexican peso to dollar
Medium term notes.......... Oct 2007 79.9 Ps 800 U.S.$ 80 CETES+145bps 4.3% 4.3% (5.9)
Mexican peso to yen
Euro-medium term notes..... Jan 2006 51.8 Ps 602 Yen 6,008 8.8% 2.6% 1.3% (2.4)
------------- ------------
1,051.2 115.6
------------- ------------
U.S.$1,118.0 U.S.$208.5
============= =============
* LIBOR ("L") represents the London Interbank Offering Rate, used in the
market for debt denominated in U.S. dollars. TIIE represents the Interbank
Offering Rate in Mexico, and CETES are public debt instruments issued by
the Mexican government. As of December 31, 2004, the LIBOR rate was 2.56%,
the TIIE rate was 8.95% and the CETES yield was 8.61% per annum.
F-24
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The periodic cash flows underlying the CCS arising from the exchange of
interest rates are determined over the notional amounts in the exchanged
currency. The CCS have not been designated as accounting hedges; therefore,
changes in their estimated fair values are recognized through the income
statement. As mentioned in note 3N, portions of the assets and liabilities
resulting from the estimated fair value recognition of the CCS have been offset
for presentation purposes, in order to reflect the cash flows that the Company
expects to receive or pay upon settlement of these financial instruments.
Through this presentation, the book value of the financial indebtedness
directly related to the CCS is presented as if it had been effectively
negotiated in the exchanged currencies instead of in the originally negotiated
currencies. Assuming an early liquidation of the CCS, the related financial
liabilities and their corresponding interest expense would be established in
the rates and currencies originally contracted beginning as of the settlement
date.
As of December 31, 2003 and 2004, related to the estimated fair value of the
CCS, the Company recognized net assets of U.S.$262.0 million (Ps3,128.7) and
U.S.$208.5 million (Ps2,322.7), respectively, of which U.S.$364.5 million
(Ps4,352.7) in 2003 and U.S.$300.7 million (Ps3,349.8) in 2004 relates to a
prepayment made to yen and dollar denominated obligations under the CCS. This
is presented by decreasing the carrying amount of the related debt, while a
loss of U.S.$102.5 million (Ps1,224.0) in 2003 and a loss of U.S$92.2 million
(Ps1,027.1) in 2004 represents the net liabilities arising from the CCS'
estimated fair value without prepayment effects.
In accordance with presentation guidelines applied by the Company to the assets
or liabilities related to the CCS (note 3N); in connection to the net
liabilities without prepayment effects in 2003 and 2004 described in the
paragraph above, losses directly related to variations in exchange rates
between the origination of the CCS and the balance sheet date of approximately
U.S.$171.9 million (Ps2,052.8) in 2003 and U.S.$131.8 million (Ps1,468.3) in
2004, were presented as part of the related debt carrying amount. Likewise,
gains of approximately U.S.$12.2 million (Ps145.7) in 2003 and U.S.$10.9
million (Ps121.4) in 2004, corresponding to the periodic cash flows exchange
for interest rates, were presented as an adjustment of the related financing
interest payable. The remaining net assets of U.S.$57.2 million (Ps683.0) in
2003 and U.S.$28.7 million (Ps319.7) in 2004 were presented in the consolidated
balance sheet within short-term and long-term other assets, as applicable.
For the years ended December 31, 2002, 2003 and 2004, the changes in the
estimated fair value of the CCS, excluding the effects of prepayments, resulted
in losses of approximately U.S.$192.2 million (Ps2,341.8) and U.S.$149.7
million (Ps1,787.6) in 2002 and 2003, respectively, and a gain of approximately
U.S.$10.3 million (Ps114.7) in 2004. These results were recognized in earnings
of the respective periods.
Additionally, as of December 31, 2002, there were other currency instruments
for a notional amount of U.S.$104.5 million, related to financial debt expected
to be negotiated in the near future. These contracts matured in 2003, and a
loss of approximately U.S.$3.6 million (Ps43.0) was recognized in earnings. In
2002, these contracts had an estimated fair value loss of approximately
U.S.$6.8 million (Ps82.9), which was recognized in the income statement.
The estimated fair value of derivative instruments used for the exchange of
interest rates and/or currencies fluctuate over time and will be determined by
future interest rates and currency prices. These values should be viewed in
relation to the fair values of the underlying transactions and as part of the
Company's overall exposure to fluctuations in interest rates and foreign
exchange rates. The notional amounts of derivative instruments do not
necessarily represent amounts 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.
F-25
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
C) Guaranteed Debt
As of December 31, 2003 and 2004, CEMEX Mexico, S.A. de C.V. and Empresas
Tolteca de Mexico, S.A. de C.V. jointly, fully and unconditionally guaranteed
indebtedness of the Company for an aggregate amount of U.S.$3,145 million
(Ps37,555.6) and U.S.$3,087.8 million (Ps34,398.1), respectively. The combined
summarized financial information of these guarantors as of December 31, 2002,
2003 and 2004 is as follows:
2003 2004
----------- -----------
Assets............................. Ps 149,153.5 152,696.3
Liabilities........................ 68,528.2 105,235.5
Stockholders' equity............... 80,625.3 47,460.8
----------- -----------
2002
---------
Net sales.......................... Ps 25,535.0 25,931.6 26,037.3
Operating income................... 3,997.4 2,951.6 3,323.9
Net income......................... 509.6 6,412.5 17,167.8
---------- ----------- -----------
Certain debt contracts guaranteed by the Company and/or some of its
subsidiaries contain restrictive covenants limiting sale of assets, maintenance
of controlling interest on certain subsidiaries, limiting liens and requiring
compliance with financial ratios. The Company obtains waivers prior to the
occurrence of events of default.
13. OTHER NON-CURRENT LIABILITIES
As of December 31, 2003 and 2004, other non-current liabilities are integrated
as follows:
2003 2004
----------- -----------
Valuation of derivative financial
instruments (notes 12 and 17).................... Ps 5,225.9 3,690.8
Accruals for legal assessments
and other responsibilities....................... 1,691.7 1,371.4
Asset retirement obligations and
other environmental liabilities.................. 944.5 865.9
Other liabilities and deferred credits............. 1,384.4 1,330.1
----------- -----------
Ps 9,246.5 7,258.2
=========== ===========
Accounts payable 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 (note 22), 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.
During 2004, the balance of this caption decreased primarily as a result of the
reduction of Ps317.3 in the anti-dumping duties provision, and as a result of
the reduction of Ps1,228.2 in the accounts payable from valuation of derivative
financial instruments. Asset retirement obligations and other environmental
liabilities include the future estimated costs, mainly from demolition,
cleaning and reforestation of production sites at the end of their operation
(note 3V). The expected average period to settle these obligations is greater
than 15 years.
F-26
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
14. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
For the years ended December 31, 2002, 2003 and 2004, the net periodic cost of
pension plans and other postretirement benefits (note 3J), was Ps242.3, Ps491.3
and Ps470.5, respectively, and is described as follows:
Pensions Other benefits*
-------------------------------- --------------------------------
Components of net periodic cost: 2002 2003 2004 2002 2003 2004
------- -------- -------- -------- -------- --------
Service cost................................... Ps 291.8 305.4 308.0 30.3 33.3 40.4
Interest cost.................................. 286.0 302.6 362.4 45.9 48.2 34.4
Actuarial return on plan assets................ (424.2) (355.9) (397.8) (0.7) (0.7) (1.0)
Amortization of prior service cost, changes in )
assumptions and experience adjustments........ 50.6 139.4 131.7 14.6 16.0 (7.6
Results from extinguishment of obligations..... (50.3) 3.0 - (1.7) - -
------- -------- -------- -------- -------- --------
Ps 153.9 394.5 404.3 88.4 96.8 66.2
======= ======== ======== ======== ======== ========
As of December 31, 2003 and 2004, the reconciliation of the actuarial value of
pensions plans and other postretirement benefit obligations, as well as the
funded status (note 3J), are presented as follows:
Pensions Other benefits*
----------------------- -----------------------
2003 2004 2003 2004
--------- --------- --------- ----------
Change in benefit obligation:
Projected benefit obligation ("PBO") at beginning of year........ Ps 6,035.3 6,776.1 958.5 852.9
Service cost..................................................... 305.4 308.0 33.3 40.4
Interest cost.................................................... 302.6 362.4 48.2 34.4
Actuarial result and amendments.................................. 700.7 (311.9) (95.8) (223.5)
Acquisitions..................................................... - (1.0) - (0.2)
Initial valuation of other postretirement benefits............... - - 29.4 13.6
Foreign exchange fluctuations and inflation adjustments.......... (112.9) (198.1) (50.1) (34.5)
Extinguishment of obligations.................................... 2.0 (8.9) 2.3 -
Benefits paid.................................................... (457.0) (450.4) (72.9) (72.5)
---------- ---------- --------- ----------
Projected benefit obligation ("PBO") at end of year.............. 6,776.1 6,476.2 852.9 610.6
---------- ---------- --------- ----------
Change in plan assets:
Fair value of plan assets at beginning of year................... 5,360.3 5,852.3 18.9 36.2
Return on plan assets............................................ 863.6 476.0 2.2 1.0
Foreign exchange fluctuations and inflation adjustments.......... (223.5) (189.8) (1.8) (0.1)
Employer contributions........................................... 133.8 175.1 16.9 -
Extinguishment of obligations.................................... - (9.0) - -
Benefits paid from the funds..................................... (281.9) (345.8) - (16.9)
---------- ---------- --------- ----------
Fair value of plan assets at end of year......................... 5,852.3 5,958.8 36.2 20.2
---------- ---------- --------- ----------
Amounts recognized in the balance sheets consist of:
Funded status.................................................... 923.8 517.4 816.7 590.4
Prior service cost .............................................. (1,489.9) (1,403.5) (115.6) (15.0)
Net actuarial results............................................ (1,015.0) (456.4) (45.1) 71.6
---------- ---------- --------- ----------
Accrued benefit liability (prepayment)......................... (1,581.1) (1,342.5) 656.0 647.0
Additional minimum liability................................... 1,169.1 902.2 8.1 9.4
---------- ---------- --------- ----------
Net liability (prepayment) recognized........................ Ps (412.0) (440.3) 664.1 656.4
========== ========== ========= ==========
* The cost and the actuarial value of postretirement benefits, include the cost
and obligations of postretirement benefits other than pensions, such as
seniority premiums granted by law, as well as health care and life insurance
benefits that the Company grants to retirees.
F-27
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
As of December 31, 2003 and 2004, the combined actual benefit obligation
("ABO") of pensions and other postretirement benefits, equivalent to the PBO
not considering salary increases, amounted to Ps6,315.1 and Ps6,110.1,
respectively, of which the vested portion was Ps2,134.3 in 2003 and Ps2,065.3
in 2004.
An additional minimum liability (excess of the net actual liability over the
net projected liability) is recognized in those cases when the ABO less the
plan assets (net actual liability) is lower than the net projected liability.
At December 31, 2003 and 2004, the Company recognized a minimum liability
against an intangible asset for approximately Ps1,177.2 and Ps911.6,
respectively.
Prior service cost and net actuarial results are amortized over the estimated
service life of the employees under plan benefits. As of December 31, 2004, the
average estimated service life for pension plans and other postretirement
benefits is 13 years.
As of December 31, 2003 and 2004, the consolidated assets of the pension plans
and other postretirement benefits are valued at their estimated fair value and
are aggregated as follows:
2003 2004
------------ -------------
Fixed-income securities...................... Ps 2,626.3 1,940.3
Marketable securities........................ 2,532.0 3,497.1
Private Funds and other investments.......... 730.2 541.6
------------ -------------
Ps 5,888.5 5,979.0
============ =============
The Company applies real rates (nominal rates discounted for inflation) in the
actuarial assumptions used to determine postretirement benefit liabilities. The
most significant assumptions used in the determination of the net periodic cost
are summarized as follows:
2002 2003 2004
-------------- -------------- --------------
Range of discount rates used to reflect the obligations' 3.0% - 7.0% 4.5% - 8.0% 4.5% - 8.0%
present value..............................................
Weighted average rate of return on plan assets................. 7.8% 7.8% 7.6%
-------------- -------------- --------------
During 2003, the Company's units in Mexico implemented a voluntary early
retirement program, through which the retirement age was reduced by five years
and all employees meeting the new requirements were given the option to retire.
This program ended in May 2003, resulting in the early retirement of 230
employees and the increase of Ps604.4 in the projected benefit obligation and
the non-amortized prior service cost of pensions and other postretirement
benefits.
During 2002, the subsidiary of CEMEX in Spain, in agreement with its employees,
changed the structure of most of its defined benefit plans, replacing them with
defined contribution structures. In connection with this change, the subsidiary
contributed on behalf of its employees covered by the new plans, assets in an
amount equivalent to the obligation value as of the date of the exchange. These
assets were already restricted within the previous plans. As of December 31,
2002, the effect of writing off the PBO and the non-amortized items, net of the
assets contributed, are displayed on the table of the net periodic cost of
pension plans and other postretirement benefits.
F-28
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
15. STOCKHOLDERS' EQUITY
A) COMMON STOCK
The Company's common stock as of December 31, 2003 and 2004 is as follows:
2003 2004
------------------------------------- -------------------------------------
Series A (1) Series B (2) Series A (1) Series B (2)
----------------- ---------------- ---------------- -----------------
Subscribed and paid shares.............. 3,547,614,432 1,773,807,216 3,703,634,244 1,851,817,122
Treasury shares (3)..................... 287,097,712 143,548,856 249,133,670 124,566,835
Unissued shares authorized for Stock 6 4 2
Option Plans........................... 113,114,10 56,557,053 107,960,62 53,980,31
----------------- --------------- ---------------- -----------------
3,947,826,250 1,973,913,125 4,060,728,538 2,030,364,269
================= ================ ================ =================
(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 24, 2003 that were not subscribed.
Of the total number of shares, 3,267,000,000 in 2003 and 2004 correspond to the
fixed portion, while 2,654,739,375 in 2003 and 2,824,092,807 in 2004 correspond
to the variable portion.
On April 24, 2003, the annual stockholders' meeting approved: (i) a reserve for
share repurchases of up to Ps6,000.0 (nominal amount); (ii) an increase in the
variable common stock through the capitalization of retained earnings of up to
Ps3,664.4 (nominal amount), issuing shares as a stock dividend for up to
750,000,000 shares equivalent to up to 250,000,000 CPOs, at a subscription
price of Ps36.449 (nominal) per CPO, or instead, stockholders could have chosen
to receive Ps2.20 (nominal amount) in cash for each CPO. As a result, shares
equivalent to 98,841,944 CPOs were subscribed and paid, representing an
increase in common stock of Ps3.6 and in additional paid-in capital of
Ps3,895.8, considering a theoretical value of Ps0.0333 per CPO, while an
approximate cash payment through December 31, 2003 was made for Ps71.0; and
(iii) the cancellation of the corresponding shares held in the Company's
treasury.
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
600,000,000 shares equivalent to up 200,000,000 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 Ps2.6 and in additional paid-in capital of
Ps4,154.2 considering a theoretical value of Ps0.0333 per CPO, while an
approximate cash payment through December 31, 2004 was made for Ps167.4; and
(iii) the cancellation of the corresponding shares held in the Company's
treasury.
See note 24(w) for a description of the Company's proposed stock split,
approved at the April 28, 2005 extraordinary stockholders' meeting (unaudited).
B) RETAINED EARNINGS
Retained earnings as of December 31, 2004 include Ps90,496.4 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, 2004 include a share
repurchase reserve in the amount of Ps6,283.2. 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, 2004 the legal reserve amounted
to Ps1,591.1.
Earnings distributed as dividends, in excess of tax earnings, will be subject
to a tax payment at a 30% rate; consequently, shareholders would receive only
70% after tax.
F-29
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
C) EFFECTS OF INFLATION
The effects of inflation on majority interest stockholders' equity as of
December 31, 2004 are as follows:
Historical Inflation
cost adjustment Total
-------------- -------------- -------------
Common stock............................................... Ps 61.7 3,624.6 3,686.3
Additional paid-in capital................................. 24,056.6 17,283.2 41,339.8
Deficit in equity restatement.............................. - (73,725.9) (73,725.9)
Cumulative initial deferred income tax effects............. (4,697.9) (1,402.3) (6,100.2)
Retained earnings.......................................... 54,200.6 53,271.2 107,471.8
Net income................................................. Ps 14,059.8 502.5 14,562.3
============== ============== =============
D) FOREIGN CURRENCY TRANSLATION
The foreign currency translation results recorded in stockholders' equity are
summarized as follows:
Years ended December 31, 2002 2003 2004
-------------- -------------- -------------
Foreign currency translation adjustment................. Ps 7,477.6 5,491.8 3,250.7
Foreign exchange gain (loss) (1)........................ (3,024.7) (1,661.8) 163.1
-------------- -------------- -------------
P 4,452.9 3,830.0 3,413.8
============== ============== =============
(1) Foreign exchange results 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 of Ps177.7 in 2002, Ps63.1 in 2003 and Ps2.9 in
2004.
E) PREFERRED STOCK
In October 2003, CEMEX repurchased the remaining balance of preferred stock of
U.S.$650 million (Ps7,761.9), which was to mature in February and August 2004.
The preferred stock was issued in November 2000 by a Dutch subsidiary for
U.S.$1,500 million with an original maturity in May 2002 and was related to the
financing of the CEMEX Inc. (formerly Southdown, Inc.) acquisition. 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.$23.2 million (Ps275.9) in 2002 and U.S.$12.5 million
(Ps153.6) in 2003, were recognized as a part of minority interest in the
consolidated income statements.
In October 2004, the Company liquidated the remaining capital securities for
approximately U.S$66 million (Ps735.2). The preferred shares were issued in
1998 by a Spanish subsidiary for U.S.$250 million with an annual dividend rate
of 9.66%. In April 2002, through a tender offer, U.S.$184 million of capital
securities were redeemed. The amount paid to holders in excess of the nominal
amount of the capital securities pursuant the early redemption of approximately
U.S$20 million (Ps238.8) was recognized against stockholders' equity. The
balance outstanding as of December 31, 2003 was U.S$66 million (Ps788.1). As of
December 31, 2003, this transaction was recorded as minority interest. During
2004 and until its termination, as a result of new accounting pronouncements,
this transaction was recorded as financial debt. Preferred dividends declared
in 2002 and 2003 of approximately U.S.$11.9 million (Ps140.9) and U.S.$6.4
million (Ps78.0), respectively, were recognized as minority interest in the
consolidated income statements Meanwhile, preferred dividends declared on the
capital securities during 2004 of approximately U.S.$5.6 million (Ps66.1), were
recorded in earnings as part of financial expenses.
F-30
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
F) OTHER EQUITY TRANSACTIONS
In December 2004, 13,772,903 appreciation warrants ("warrants") remaining from
the public purchase offer that was announced in November 2003, and which was
concluded in January 2004, were settled upon maturity. Through the prior offer
90,018,042 warrants were repurchased. 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 Ps1,053 was paid. This
amount was recognized against stockholders' equity within additional paid-in
capital. In November and December 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 American Depositary Warrants ("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 expiration
date of the offer was January 26, 2004.
The single price at which CEMEX purchased the warrants and ADWs was determined
at the end of the tender offer period, and depended on the prices at which
warrants and ADWs were tendered by their holders, which were between a range
from Ps5.10 per warrant (Ps25.50 per ADW) to Ps8.10 per warrant (Ps40.50 per
ADW). The tender proposals were ordered starting from the lowest price per
warrant offered and so forth, until arriving at a price that covered the
maximum number of warrants, and which was used to acquire the 90,018,042
warrants. According to this procedure, a single price of Ps8.10 per warrant was
determined (representing Ps40.50 per ADW).
The warrants and ADWs subject to the offer were originally issued in December
1999 by means of a public offer on the MSE and the NYSE, in which 105 million
warrants and ADWs with a December 2002 maturity were sold. In December 2001, in
a simultaneous and voluntary public purchase and sale offer for the warrants
and exchange offer for the ADWs, outstanding as of the offer date, under a one
for one exchange ratio, 103,790,945 new warrants and ADWs with maturity in
December 2004 were issued. The warrants and ADWs that were not exchanged in
2001 expired in December 2002. 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 payable in CPOs. Until September 2003,
the CPOs and ADSs required to cover future exercises of the new warrants, as
well as the old 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 through trades on the MSE and the
NYSE, made by the Company and the banks holding the shares (see note 17A).
In addition, in December 2003, through the payment of U.S.$75.9 million
(Ps906.3), CEMEX exercised the option that it retained and repurchased the
assets related to a financial transaction through which, in December 1995, the
Company transferred financial assets to a trust, while simultaneously,
investors contributed U.S.$123.5 million 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 financial assets underlying in
the trust were stipulated. Therefore, as of December 31, 2002, the outstanding
balance of this transaction was approximately U.S.$90.6 million (Ps1,103.7).
Moreover, during the life of the transaction, the Company maintained an option
to reacquire the related financial assets at different dates. The cost of
retaining this option was recognized in earnings as part of the financial
expense for approximately U.S.$13.2 million (Ps160.6) in 2002 and U.S.$14.5
million (Ps173.2) in 2003. Until its settlement in December 2003, this
transaction was included as part of the minority interest in stockholders'
equity.
F-31
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
G) COMPREHENSIVE NET INCOME (LOSS)
The main items included in the comprehensive net income (loss) for the years
ended December 31, 2002, 2003 and 2004, are as follows:
2002 2003 2004
------------------------------------------------
Majority interest net income......................................... Ps 6,339.2 7,508.4 14,562.3
Deficit in equity restatement:
Effects from holding non-monetary assets............................ (11,082.7) (3,647.1) (2,876.6)
Foreign currency translation adjustment............................. 7,477.6 5,491.8 3,250.7
Capitalized foreign exchange result (note 15D) ..................... (3,024.7) (1,661.8) 163.1
Hedge derivative instruments (notes 12 and 17)...................... (2,548.4) 487.3 2,398.1
Deferred IT of the year recorded in stockholders' equity (note 18). 912.5 (228.7) 714.5
Excess of price paid over book value of minority interests.......... - - (1,000.4)
Equity instruments' early redemption results........................ (243.7) (694.1) -
Cumulative initial effects of asset retirement obligations.......... - (91.1) -
Inflation effect on equity(1)....................................... 269.5 12.0 -
------------------------------------------------
Total comprehensive income (loss) items........................... (8,239.9) (331.7) 2,649.4
------------------------------------------------
Majority comprehensive net income (loss).......................... (1,900.7) 7,176.7 17,211.7
Minority interest................................................. 451.6 363.1 233.2
------------------------------------------------
Consolidated comprehensive net income (loss)...................... Ps (1,449.1) 7,539.8 17,444.9
================================================
(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).
16. EXECUTIVE STOCK OPTION PROGRAMS
The information relating to stock option programs, presented in terms of
equivalent CPOs and considering the effect of the options exchange program
described below, is summarized as follows:
Restricted Variable Fixed Special Program Voluntary
Options Programs (A) Program (B) Program (C) (D) Programs (E)
--------------------------------------------------------------------------------
As of December 31, 2002................... - 98,592,824 6,575,525 4,963,775 16,049,305
Changes in 2003:
Granted................................... - 22,346,738 - 2,682,985 38,583,989
Cancelled................................. - (22,799) (533,608) - (9,700,280)
Exercised................................. - - (1,352,582) (17,500) (38,884,926)
--------------------------------------------------------------------------------
As of December 31, 2003................... - 120,916,763 4,689,335 7,629,260 6,048,088
Changes in 2004:
Granted................................... 273,582,522 14,554,323 - 2,742,505 -
Cancelled................................. - - - - -
Exercised................................. (121,517,922) (132,393,239) (1,998,466) (744,505) (6,013,088)
--------------------------------------------------------------------------------
As of December 31, 2004................... 152,064,600 3,077,847 2,690,869 9,627,260 35,000
================================================================================
Exercise Prices:
Options exercised during the year*........ U.S.$5.13 U.S.$5.07 Ps25.64 U.S.$4.65 U.S.$4.17
Options outstanding at year-end*.......... U.S.$7.32 U.S.$5.22 Ps30.11 U.S.$4.89 U.S.$5.92
Remaining average life.................... 7.7 years 7.4 years 3.0 years 8.1 years 3.5 years
Options fully vested...................... 93.3% 82.7% 96.9% 46.7% 100.0%
================================================================================
* Weighted average exercise price per CPO.
F-32
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
A) Restricted Programs
In February 2004, through a voluntary option exchange program with the purpose
of restructuring the employees' stock option programs, CEMEX invited employees
to exchange their existing options for new options of equal fair value but
different characteristics. The new options had an initial exercise price of
U.S$5.05 per CPO, which increases annually at a 7% rate, and includes a
mandatory exercise condition when the CPO price reaches U.S$7.50. Any gain that
would be obtained by an employee, resulting from the difference between the CPO
market value and the exercise price would be paid in form of CPOs, which would
be acquired at a 20% discount to market. These CPOs would be restricted for
sale for a minimum period of two years and a maximum of four years, depending
on the exercise date. This program intends that the employee would hold the
CPOs for a long period and, by limiting the potential for gains, the hedge
through equity forward contracts can be improved (note 17). As a result of the
exchange, 112,495,811 options from the variable program and 1,625,547 options
from the voluntary programs were redeemed, and 122,708,146 new options were
granted with a remaining tenure of 8.4 years. As consideration to the employees
resulting from the mandatory exercise condition and the sale restriction, CEMEX
has granted an annual payment of U.S$0.10 per option, net of taxes, growing
annually at a 10% rate, to all outstanding new options during their tenure.
In December 2004, through a voluntary early exercise program to continue the
restructuring of its employees' stock option programs, CEMEX provided employees
early exercise of their existing options in exchange for cash, equivalent to
the options' intrinsic value, and new options equivalent in value to the
exercised options' remaining time value. The new options had an initial
exercise price of U.S$7.46 per CPO, which was U.S.$0.50 higher than the CPO
market price at the exercise date. Any gain that would be obtained by the
employee, resulting from the difference between the CPO market value and the
exercise price would be paid in the form of CPOs, which would be restricted for
sale for a minimum period of two years and a maximum of four years, depending
on the exercise date. This program intended to make a more efficient hedge
through equity forward contracts (note 17). As a result of the early exercise,
16,580,004 options from the variable program, 120,827,370 options from the
February's 2004 restricted program and 399,848 options from the voluntary
programs were redeemed, and 139,151,236 new options, with an exercise price
increasing annually at a 5.5% rate, were granted with a remaining tenure of 7.5
years. Of the total number of new options, 120,827,370 options include a
mandatory exercise condition at a CPO price of U.S.$8.50. The remaining
18,323,866 do not have exercise conditions. The cost for the early exercise
program of approximately U.S.$61.1 million (Ps680.7), resulting from the 20%
discount to market in the purchase of CPOs, was recognized in earnings. As
consideration to the employees resulting from the initial exercise price being
above market, the mandatory exercise condition and the sale restriction, CEMEX
has granted an annual payment of U.S$0.11 per option, net of taxes, growing
annually at a 10% rate, to all outstanding new options during their tenure.
B) Variable Program
In November 2001, through a voluntary exchange program for options granted
under the fixed program, the Company initiated an annual stock option program
with exercise prices denominated in U.S. dollars increasing annually at a 7%
rate. The employees who exchanged their options resigned their rights to
subscribe CPOs in exchange for cash, equivalent to the options' intrinsic
value, and the issuance of 88,937,805 new options. The options under this
program have a 10-year tenure and the employees' option rights may be exercised
up to 25% annually during the first four years after having been granted,
except for those issued through the exchange, in which 50% of the options
exercise rights were vested immediately, with an additional 25% vesting over
each of the next two years. In 2004, as a result of the restricted option
programs, 129,075,815 options granted under the variable program were
exercised.
C) Fixed Program
From June 1995 through June 2001, CEMEX granted stock options with a fixed
exercise price in pesos, equivalent to the market price of the CPO at the grant
date and tenure of 10 years. Exercise prices are adjusted for stock dividends.
The employees option rights vest up to 25% annually during the first four years
after having been granted. As of December 31, 2003 and 2004, the new CPOs
issued pursuant to the exercise of said options generated an additional paid-in
capital of Ps45.2 and Ps67.1, respectively, and increased the number of
outstanding shares.
F-33
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
D) Special Program
Starting in 2001, a stock option program to purchase CEMEX ADSs was established
for eligible employees in the United States. The options granted have a fixed
exercise price in dollars, equivalent to the market price of ADSs as of the
grant date, and have a 10-year tenure. The employees' option rights vest up to
25% annually during the first four years 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.
E) Voluntary Programs
During 2004, 3,927,693 options from voluntary programs were exercised, out of
36,468,375 options sold and issued to employees during 1998 and 1999 with a 5
year-tenure. The exercise price was denominated in dollars and increased
annually reflecting the funding cost in the market. In 2003, 300,937 options
were exercised, while 9,700,280 options expired and were canceled.
As of December 31, 2004, there are 35,000 remaining options from voluntary
programs, out of 2,120,395 options sold and issued to employees in April and
May 2002. During 2004, mainly as a result of the exchange for restricted
options, 2,085,395 options were exercised. From the issuance of the options in
2002, a premium of approximately U.S.$1.5 million (Ps17.8) was received. The
exercise price of the options is denominated in dollars and increases annually
to reflect the funding cost in the market.
In September 2003, 38,583,989 options were exercised, which had been sold and
issued to employees in January 2003 in exchange for a premium of approximately
U.S.$9.7 million (Ps107). The options, which had an increasing U.S. dollar
exercise price of approximately U.S.$3.58 per CPO, initially equal to the CPO
market price at the date of the issuance of the option, and a five-year tenure,
contained a mandatory exercise condition in case the market CPO price reached a
specified level, a situation that occurred in 2003. According to agreed
conditions, the executives' gain was paid in form of CPOs, which have a sale
restriction for two years after exercise.
F) Options hedging activities
The potential exercise of options under the restricted, variable and voluntary
programs require the Company to have availability of the CPOs or ADSs
underlying the options; therefore, the Company has negotiated equity forward
contracts in its own stock (note 17A), in order 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.
Beginning in 2001, CEMEX recognizes the appreciation of the options under the
variable, special and voluntary programs, and in 2004 of the restricted
program, resulting from the difference between the CPO market price and the
exercise prices established in the options, as an expense in the income
statement, which for the years ended December 31, 2002, 2003 and 2004 was
U.S.$5.0 million (Ps60.9), U.S.$45.3 million (Ps541.0) and U.S.$50.6 million
(Ps563.7), respectively. Likewise, the Company recognizes through earnings the
changes in the estimated fair value of equity forward contracts designated as
hedges of these plans (note 17A), which resulted in a loss of approximately
U.S.$47.1 million (Ps573.9) in 2002, a gain of approximately U.S.$28 million
(Ps334.3) in 2003 and a gain of approximately U.S.$44.8 million (Ps499.1) in
2004.
As of December 31, 2004, a provision of approximately U.S.$50 million has been
generated against earnings, representing the net present value of expected
payments in connection with the sales restriction contained in the new
restricted programs. All costs related to the stock options programs, as well
as the valuation of the equity forward contracts, are recognized in the
Comprehensive Financing Result.
F-34
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
17. DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 2003 and 2004, the Company's derivative financial
instruments, other than those related to financial debt (note 12), are
summarized as follows:
2003 2004
---------------------------------- --------------------------------
U.S. dollars millions Notional Estimated fair Notional Estimated fair
amount value amount value
------------- ---------------- -------------- --------------
A) Equity forward contracts................. 1,085.0 16.4 1,157.2 66.2
B) Foreign exchange instruments............. 1,445.9 (191.6) 4,897.9 63.4
C) Derivatives related to energy projects... 174.5 (7.4) 168.1 (6.3)
============= ================ ============== ==============
Upon liquidation and at CEMEX's option, the equity forward contracts allow for
physical or net cash settlement of the estimated fair value. The effects at
settlement are recognized in the income statement or as part of stockholders'
equity, according to their characteristics and use. At maturity, if these
forward contracts are not settled or replaced, or if the Company defaults on
the agreements established with the financial counterparties, such
counterparties may sell the shares underlying the contracts. If any such sale
were to occur, it might have an adverse effect on CEMEX and/or its
subsidiaries' stock market price, may reduce the amount of dividends and other
distributions that the Company may receive from its subsidiaries, and/or may
create minority interests affecting the ability to operate the Company.
A) On October 26, 2003, through a secondary equity offering agreed by CEMEX,
launched simultaneously on the MSE and the NYSE, financial institutions
offered 29.325 million ADSs (25.5 million in the offer plus an optional
amount of 3.825 million ADSs in case of overallotments) held through
forward contracts. The acquirers purchased all ADSs including the optional
amount, resulting in the sale of 23.325 million ADSs (116.6 million CPOs)
and 30 million CPOs (6 million ADSs), at a price of U.S.$23.15 per ADS and
Ps52.07 per CPO. Of the total sale proceeds of approximately U.S.$660
million (Ps7,881.3), net of the offering expenses, the financial
institutions retained approximately U.S.$538 million (Ps6,424.4) as payment
for the liquidation of the related forward contracts, while approximately
U.S.$122 million (Ps1,456.9) was reimbursed to CEMEX. This transaction did
not increase the number of shares outstanding.
As of December 31, 2002, CEMEX held forward contracts for a notional amount
of U.S.$461.1 million. The maturity of these contracts was extended until
December 2003, covering 24,008,392 ADSs (120,041,960 CPOs) and 33.8 million
shares of CEMEX's subsidiary in Spain. In October 2003, these forwards were
settled through a secondary equity offering (see preceding paragraph) that
resulted in the write-off of accrued prepayments toward the forwards' final
settlement price of U.S.$101.7 million (Ps1,214.9), recognized as part of
other accounts receivable and a net gain in stockholders' equity of
approximately U.S.$19.5 million (Ps232.9). These contracts were negotiated
in 1999 to hedge future exercises under the 105 million warrants program
that was liquidated in 2004. The shares underlying these contracts were
sold by CEMEX during 1999 for approximately U.S.$905.7 million, and CEMEX
simultaneously prepaid approximately U.S.$439.9 million toward the
forwards' final settlement price. From execution of the contracts until
their settlement, pursuant to the prepayment made in 1999 and the Company's
retention of the economic and voting rights on the Spanish subsidiary's
shares underlying the contracts, such shares were considered as owned by
CEMEX.
As of December 31, 2003 and 2004, there are forward contracts with
different maturities until October 2006, for notional amounts of U.S.$789.3
million and U.S.$1,112 million, respectively, covering 29,314,561 ADSs in
2003 and 30,644,267 ADSs in 2004, which are designated to hedge the future
exercise of the options granted under the employee equity programs (note
16). Starting in 2001, changes in the estimated fair value of these
contracts have been recognized in the balance sheet against the income
statement, as a complement of the costs generated by the option programs.
As of December 31, 2003 and 2004, the estimated fair value of these
contracts were gains of approximately U.S.$28.0 million (Ps334.3) and
U.S.$44.8 million (Ps499.1), respectively.
As of December 31, 2003 there were forward contracts with maturities in
August and September 2004, for a notional amount of U.S.$122.9 million that
covered 23,622,500 CPOs and represented a fair value gain of approximately
U.S.$1.8 million (Ps21.5). These contracts were negotiated to hedge the
purchase of CAH shares through the exchange for the Company's CPOs (note
9A). During 2004, these contracts were liquidated resulting in gains of
U.S.$14.5 million (Ps161.5) that were recognized in stockholders' equity.
F-35
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
In addition, as of December 31, 2003 and 2004, there are forward contracts
for notional amounts of U.S.$172.8 million and U.S.$45.2 million,
respectively, with different maturities until January 2006, covering a
total of 5,268,939 ADSs in 2003 and 1,364,061 ADSs in 2004. 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, due to new accounting pronouncements, changes in
the fair value of these contracts will be recognized in earnings. As of
December 31, 2003 and 2004, the estimated fair value of these contracts was
a loss of U.S.$27.1 million (Ps323.6) and a gain of U.S.$6.0 million
(Ps66.8), respectively. During 2004, contracts representing 2,509,524 CPOs
that were held to meet the Company's requirements of shares under the
warrants program (note 15F) were settled, resulting in a gain of U.S.$2.6
million (Ps29.0), recognized in stockholders' equity.
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.$559.3 million and U.S.$956.6 million, at December
31, 2003 and 2004, 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 (see note 15D). In addition, as of December 31,
2003 and 2004, there are foreign exchange options for notional amounts of
U.S.$886.6 million and U.S.$488.4 million, respectively, with maturity in
June 2005. For the sale of these options, the Company received premiums of
approximately U.S.$62.8 million in 2003. The estimated fair value losses of
U.S.$57.2 million (Ps683.0) in 2003 and U.S.$19.2 million (Ps213.9) in 2004
were recognized in earnings.
Beginning in September 2004, in connection with the commitment to acquire
RMC (notes 2 and 9A) that is denominated in pounds sterling, CEMEX entered
into a foreign exchange hedge program. The program is oriented to hedge the
variability in cash flows associated with exchange fluctuations between the
U.S. dollar, the currency in which CEMEX will obtain the funds to purchase,
and pounds sterling. For this purpose, the Company negotiated foreign
exchange forwards, collars and digital options, for a combined notional
amount of U.S.$3,452.9 million. 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 approximately U.S.$132.1 million (Ps1,471.6),
was recognized in stockholders' equity in 2004, and will be reclassified to
earnings on the date when the purchase occurs, which is expected during the
first quarter of 2005. 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.$102.4 million (Ps1,140.7), which was
recognized in earnings.
C) As of December 31, 2003 and 2004, the Company had a interest rate swap
maturing in May 2017, with a notional amount of U.S.$162.1 million and
U.S.$159.0 million, respectively, negotiated to exchange floating for fixed
interest rates in connection with agreements entered into by the Company
for the acquisition of electric energy for a 20-year period (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.$174.5 million in 2003 and U.S.$168.1 million in 2004,
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. For the sale of this option the Company received a premium of
approximately U.S.$22 million (Ps262.7). As of December 31, 2003 and 2004,
the combined fair value of the swap and the floor option represented losses
of approximately U.S.$7.4 million (Ps88.4) and U.S.$6.3 million (Ps70.2),
respectively, recognized in earnings during the respected periods. 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.
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.
F-36
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 equity ownership.
Beginning in 2002, in the determination of consolidated IT, 60% of the taxable
result of the controlling entity should be considered, unless such entity
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 was scheduled to be decreased by 1% each year,
beginning in 2003, until it 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, the maximum of 60% for
tax consolidation was eliminated, except in those situations when the
subsidiaries had generated tax loss carryforwards in the period from 1999 to
2004 or the parent company from 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) benefit, presented in the income statements, is summarized as
follows:
2002 2003 2004
------------- ------------- ------------
Current income tax........................... Ps (1,053.9) (1,597.1) (994.2)
Deferred IT.................................. 461.9 539.9 (1,049.4)
Effects of inflation (note 3B)............... (76.1) (12.8) -
------------- ------------- ------------
Ps (668.1) (1,070.0) (2,043.6)
============= ============= ============
For the years ended December 31, 2002, 2003 and 2004, the total consolidated IT
includes expenses of Ps914.0, Ps1,484.0 and Ps1,258.7, respectively, from
foreign subsidiaries, and income of Ps245.9 in 2002, income of Ps414.0 in 2003
and expense of Ps784.9 in 2004 from Mexican subsidiaries.
For its operations in Mexico, 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. The Company and its
subsidiaries in Mexico must generate taxable income to preserve the benefit of
the tax loss carryforwards generated beginning in 1999. The tax loss
carryforwards at December 31, 2004 are as follows:
Amount of Year of
Year in which tax loss occurred carryforwards expiration
--------------- ------------
2000........................................ Ps 360.0 2010
2001........................................ 3,527.9 2011
2002........................................ 4,053.6 2012
2003........................................ 811.7 2013
---------------
Ps 8,753.2
===============
F-37
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The BAT law establishes a 1.8% tax levy on assets, restated for inflation in
the case of inventory and fixed assets, and after 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,
2004 is as follows:
Year in which BAT exceeded IT Amount of Year of
carryforwards expiration
-------------- ------------
1997....................................... Ps 150.4 2007
-------------- ------------
B) DEFERRED IT AND ESPS (see note 3K)
The deferred IT result in earnings represents the difference, in nominal pesos,
between the beginning of year balance and the year-end balance of the deferred
tax assets or liabilities. The tax effects of the main temporary differences
that generate the consolidated deferred tax assets and liabilities are
presented below:
2003 2004
----------------------------------
Deferred tax assets:
Tax loss carryforwards and other tax credits...................................... Ps 6,551.9 7,382.8
Accounts payable and accrued expenses............................................. 118.7 261.6
Trade accounts receivable......................................................... 9.0 6.7
Properties, plant and equipment................................................... (3,301.5) (3,342.0)
Others............................................................................ 23.5 (214.1)
----------------------------------
Total deferred tax assets....................................................... 3,401.6 4,095.0
Less - Valuation allowance...................................................... (1,124.8) (2,206.1)
----------------------------------
Net deferred tax assets....................................................... 2,276.8 1,888.9
----------------------------------
Deferred tax liabilities:
Tax loss carryforwards and other tax credits...................................... 7,337.3 5,889.5
Accounts payable and accrued expenses............................................. 2,044.8 3,579.7
Trade accounts receivable......................................................... 90.6 102.3
Properties, plant and equipment................................................... (17,864.9) (17,463.8)
Inventories....................................................................... (948.3) (156.6)
Others............................................................................ (460.7) (2,381.4)
----------------------------------
Total deferred tax liabilities.................................................. (9,801.2) (10,430.3)
Less - Valuation allowance........................................................ (2,779.3) (2,097.2)
----------------------------------
Net deferred tax liabilities.................................................. (12,580.5) (12,527.5)
----------------------------------
Net deferred tax position (liability)............................................. (10,303.7) (10,638.6)
Less - Deferred IT of acquired subsidiaries at the acquisition date............. (4,810.5) (4,810.5)
----------------------------------
Total effect of deferred IT in stockholders' equity at end of year................ (5,493.2) (5,828.1)
Total effect of deferred IT in stockholders' equity at beginning of year.......... (5,804.4) (5,493.2)
----------------------------------
Change in deferred IT for the period......................................... Ps 311.2 (334.9)
----------------------------------
The breakdown of the change in consolidated deferred income tax for the period
is as follows:
2002 2003 2004
------------ ------------- ------------
Deferred IT charged (credited) to the income statement.........Ps 461.9 539.9 (1,049.4)
Deferred IT applied directly to stockholders' equity........... 912.5 (228.7) 714.5
------------ ------------- ------------
Deferred IT income (expense) for the period............... Ps 1,374.4 311.2 (334.9)
============ ============= =============
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. Bulletin D-4 does not allow the offsetting of deferred tax assets and
liabilities relating to different tax jurisdictions.
F-38
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 income of Ps21.7 in 2002, expense of Ps74.3 in 2003 and expense
of Ps211.7 in 2004, reflected in the income statement.
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, as follows:
For the years ended December 31, 2002 2003 2004
---------- ---------- ---------
% % %
Approximate consolidated statutory tax rate......................... 35.0 34.0 33.0
Additional deductions and other deductible items................ (6.6) (15.8) (21.6)
Expenses and other non-deductible items......................... 1.0 1.2 1.9
Non-taxable sale of marketable securities and fixed assets...... (10.2 - 0.4
Difference between book and tax inflation....................... (5.6) (0.3) 1.6
Others (1)...................................................... (4.3) (6.8) (3.1)
---------- ---------- ---------
Effective consolidated tax rate..................................... 9.3 12.3 12.2
========== ========== ==========
(1) 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 of 30% and in 2006 of 29%, until
reaching a tax rate of 28% in 2007.
19. FOREIGN CURRENCY POSITION
As of December 31, 2004, the principal balances denominated in foreign
currencies, as well as non-monetary assets in Mexico of foreign origin, are
presented as follows:
U.S. dollars millions Mexico Foreign Total
---------------- ----------------- ----------------
Current assets.................................. 18.5 2,934.4 2,952.9
Noncurrent assets............................... 994.3 (1) 8,756.1 9,750.4
---------------- ----------------- ----------------
Total assets.................................. 1,012.8 11,690.5 12,703.3
================ ================ ================
Current liabilities............................. 255.0 1,561.5 1,816.5
Long-term liabilities........................... 2,170.9 3,616.7 5,787.6
---------------- ----------------- ----------------
Total liabilities............................. 2,425.9 5,178.2 7,604.1
================ ================ ================
(1)Non-monetary assets in Mexico of foreign origin.
The peso to dollar exchange rate as of December 31, 2002, 2003 and 2004 was
Ps10.38, Ps11.24 and Ps11.14 pesos per dollar, respectively. As of January 14,
2005, the exchange rate was Ps11.23 pesos per dollar.
Additionally, transactions of the Company's Mexican operations denominated in
foreign currencies during 2002, 2003 and 2004 are summarized as follows:
U.S. dollars millions 2002 2003 2004
---------- ---------- ----------
Export sales................................ 72.1 57.1 75.7
Import purchases............................ 92.5 90.5 88.3
Financial income............................ 11.1 7.5 12.5
Financial expense........................... 275.6 389.0 337.6
---------- ---------- ----------
F-39
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
20. GEOGRAPHIC SEGMENT DATA
The Company operates principally in the construction industry segment through
the production and marketing of cement and ready-mix concrete. The following
tables present, in accordance with the information analyzed for decision-making
by management, selected condensed financial information of the Company's main
business units for the years ended December 31, 2002, 2003 and 2004:
Net Sales Operating Income
-------------------------------------- ---------------------------------------
2002 2003 2004 2002 2003 2004
-------------------------------------- ---------------------------------------
Mexico........................... Ps 30,254.9 31,388.5 32,529.4 11,553.9 12,088.5 12,207.8
Spain............................ 11,987.1 14,505.1 15,370.9 2,795.7 3,167.0 3,735.2
United States.................... 21,326.0 20,684.0 21,999.2 3,286.7 2,443.9 2,894.3
Venezuela........................ 3,699.3 3,808.1 3,902.4 1,197.5 1,269.9 1,218.6
Colombia......................... 2,363.0 2,637.9 2,731.7 985.6 1,096.6 1,245.3
Caribbean and Central America.... 6,107.2 7,084.1 7,671.1 1,149.0 1,253.2 1,756.9
Philippines...................... 1,589.7 1,601.5 1,685.9 (76.9) (150.9) 301.8
Egypt............................ 1,825.9 1,608.3 2,114.7 235.6 355.4 638.7
Others........................... 9,230.1 10,013.0 11,039.9 (5,160.4) (4,146.5) (3,370.9)
-------------------------------------- ---------------------------------------
88,383.2 93,330.5 99,045.2 15,966.7 17,377.1 20,627.7
Eliminations..................... (8,658.6) (7,777.9) (8,261.3) - - -
-------------------------------------- ---------------------------------------
Consolidated..................... Ps 79,724.6 85,552.6 90,783.9 15,966.7 17,377.1 20,627.7
====================================== =======================================
In order to present integrally the operations of each geographic area, net
sales between geographic areas are presented under the caption "eliminations".
Depreciation and Amortization
--------------------------------------
2002 2003 2004
--------------------------------------
Mexico........................... Ps 1,890.8 1,747.6 1,817.7
Spain............................ 1,195.3 1,454.2 1,446.1
United States.................... 2,052.8 2,139.0 2,363.2
Venezuela........................ 616.8 674.8 591.9
Colombia......................... 564.7 881.9 430.4
Caribbean and Central America.... 471.1 639.9 610.4
Philippines...................... 494.7 472.0 390.0
Egypt............................ 516.7 376.5 198.6
Others........................... 1,521.1 1,463.7 1,703.0
--------------------------------------
Consolidated..................... Ps 9,324.0 9,849.6 9,551.3
======================================
For purposes of the preceding table, goodwill amortization reported by holding
companies has been allocated to the business geographic segment that originated
such goodwill amounts. Therefore, this information is not directly comparable
with the information of the individual entities, which are comprised in each
segment. Additionally, in the Company's consolidated income statement, goodwill
amortization is recognized as part of other expenses, net.
F-40
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Total assets and investment in fixed assets by geographic segment are
summarized as follows:
Total Assets Investment in Fixed Assets (2)
---------------------------------------- ------------------------------------
2003 2004 2003 2004
------------------ ------------------ ---------------- -----------------
Mexico............................... Ps 59,296.8 64,380.1 1,333.2 1,176.7
Spain................................ 37,381.4 32,796.3 706.3 601.3
United States........................ 49,695.0 44,771.8 1,176.9 1,223.8
Venezuela............................ 9,229.9 8,452.8 131.1 148.7
Colombia............................. 8,025.9 9,160.1 72.6 101.9
Caribbean and Central America........ 12,913.9 13,597.4 726.0 315.4
Philippines.......................... 8,360.6 8,020.8 20.3 26.0
Other Asian.......................... 4,556.6 4,207.9 21.2 34.9
Egypt................................ 4,408.9 6,043.5 171.7 92.8
Others (1)........................... 78,575.2 83,545.9 421.8 1,052.4
------------------ ------------------ ---------------- -----------------
272,444.2 274,976.6 4,781.1 4,773.9
Eliminations......................... (81,193.6) (81,353.7) - -
------------------ ------------------ ---------------- -----------------
Consolidated......................... Ps 191,250.6 193,622.9 4,781.1 4,773.9
================== ================== ================ =================
(1) Includes, in addition to trade maritime operating assets and other assets,
related party balances of the Parent Company of Ps37,236.3.3 and
Ps33,737.4 in 2003 and 2004, respectively, which are eliminated in
consolidation. In addition, other assets in 2004 include Ps9,186.8 related
to the investment in RMC (notes 2 and 9A).
(2) 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, net", which considers the
inflation effects in accordance with Bulletin B-10.
As of December 31, 2003 and 2004, of the consolidated financial debt amounting
to Ps70,045.9 and Ps66,066.5, respectively, approximately 35% in 2003 and 2004
was in the Parent Company, 14% in 2003 and 2004 in the United States, 16% in
2003 and 15% in 2004 in Spain and 35% in 2003 and 36% in 2004 was in other
countries, respectively. Of the 35% and 36% of such consolidated debt in other
countries in 2003 and 2004, respectively, 57% in 2003 and 62% in 2004 was in a
Dutch subsidiary, guaranteed by the subsidiaries conducting Mexican operations
and the Parent. The other 31% in 2003 and 24% in 2004 are in finance companies
in the United States, guaranteed by the subsidiaries conducting Spanish
operations.
F-41
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 on the weighted average
number of common shares outstanding and the effects of any transaction carried
out by the Company, which have a potentially dilutive effect on such number of
shares.
The amounts considered for calculations are summarized as follows:
Majority
Basic number of Diluted number of interest net Basic Diluted
shares shares income EPS EPS
---------------- ----------------- ------------- -------- --------
December 31, 2002.................... 4,487,527,392 4,496,213,613 Ps 6,339.2 Ps 1.41 Ps 1.41
December 31, 2003.................... 4,728,201,229 4,837,194,188 7,508.4 1.58 1.55
December 31, 2004.................... 4,993,682,521 5,019,632,767 14,562.3 2.92 2.90
---------------- ----------------- ------------- -------- --------
The difference between the basic and diluted average number of shares in 2002,
2003 and 2004 is attributable to the additional shares to be issued under the
Company's fixed employee stock option programs (see note 16). In addition,
beginning in 2003, the Company includes 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, 2003 and 2004, CEMEX, S.A. de C.V. had signed as guarantor
of loans made to certain subsidiaries for approximately U.S.$1,322.0 million
and U.S.$1,355.0 million, respectively. As of the same dates, the Company and
certain subsidiaries have 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.$55.0 million
and U.S.$25.8 million, respectively.
B) TAX ASSESSMENTS
The Company 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 its verification attributions. These tax
assessments are for an amount of approximately Ps3,638.6 as of December 31,
2004. The tax assessments result primarily from: (i) recalculation 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 reduction of BAT by the controlling entity on the grounds
that the creditable amount should be in proportion to the equity interest it
has over the controlled entities. The companies involved are using the
available defense actions granted by law in order to cancel the tax claims.
The Philippine Bureau of Internal Revenue ("BIR") assessed APO and Solid, which
are CEMEX subsidiaries in Philippines. The assessments, which relate to
different tax periods, are for an amount of approximately 3,069.1 million of
Philippines pesos (approximately U.S.$54.8 million) as of December 31, 2004.
The tax assessments result primarily from: (i) disallowance of APO's income tax
holiday related income from 1998 to 2001; and (ii) deficiencies in national
taxes of APO for the 1999 period and Solid for the 2000 period. In the first
case, the tax credit is in process with the Court of Tax Appeal ("CTA"). In the
second case, both companies continue to submit relevant evidence to the BIR to
contest these assessments. The companies 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 for deficiency in the payment of taxes. Finalization of the assessments
was held in abeyance by the BIR as APO and Solid continue to present evidence
to dispute the BIR findings.
F-42
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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, certain subsidiaries of the Company, as importers of
record, have been subject to payment of anti-dumping duty deposits, estimated
on imports of gray Portland cement and clinker from Mexico since April 1990.
The order is likely to continue for an indefinite period, until the United
States of America ("United States") government determines, taking into
consideration the World Trade Organization new rules, that conditions for
imposing the order no longer exist; the cancellation or suspension of the order
would follow. In the last quarter of 2000, the United States government
continued the order, a resolution that will prevail until it makes a new
review. During December 2001, the United States government through the
International Trade Commission denied the Company's request to initiate a new
review.
As of December 31, 2004, the Company has accrued a liability 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 DOC in its
administrative reviews for all periods under review.
As of December 31, 2004, the Company is in the fourteenth review period by the
DOC and expects a preliminary resolution in the second half of 2005. The DOC
published, during September 2003, the final resolution with respect to the
twelfth administrative review period, and on December 20, 2004, the DOC issued
the final resolution for the thirteenth review period, determining an
anti-dumping margin of 80.75% and 54.97% for these periods, respectively. With
respect to the first five review periods, the seventh, twelfth and thirteenth
review period, the DOC has issued a final resolution of the anti-dumping
duties. Referring to the remaining review periods, the final resolutions are
suspended until all the procedures before the North America Free Trade
Agreement Panel are concluded. As a result, the final amounts may differ from
those liabilities recorded in the consolidated financial statements. CEMEX and
its subsidiaries have defended their position in this matter and will continue
to do so through available means in order to determine the actual dumping
margins within each period of the administration reviews carried out by the
DOC.
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. APO, Rizal and Solid (Rizal and Solid merged in
December 2002) are among the cement producers under investigation and have
received their anti-dumping questionnaires from the International Trade
Commission under the Ministry of Economic Affairs ("ITC-MOEA"). Rizal and Solid
replied to the ITC-MOEA by confirming that they have not been exporting cement
or clinker during the review period. Furthermore, APO contested the allegation
of "injury" in the anti-dumping proceedings before the ITC-MOEA. At the end of
the same year ITC-MOEA informed the petitioners and the respondent producers of
the results of the preliminary investigation and determined that there were
reasonable indicators that the Taiwanese industry has incurred material damage
due to imports of cement and clinker from South Korea and the Philippines that
allegedly is sold in Taiwan at a price below market price. In order to comply
with regulations of anti-dumping duties in Taiwan, the ITC-MOEA transferred
this investigation to the MOF. In November 2001, APO received supplemental
questionnaires by the MOF. The answer to these questionnaires was presented by
APO during November and December 2001.
In January 2002, the MOF notified the petitioners and respondent producers, on
a preliminary resolution, of findings that there might be dumping and that the
investigation would continue, but without imposing any anti-dumping duty. In
June 2002, the ITC-MOEA informed the petitioners and respondent producers of
its resolution that the imports from South Korea and the Philippines had caused
material damage to the Taiwanese industry. In July 2002, the MOF gave notice of
a cement and clinker import duty, from imports on South Korea and the
Philippines, beginning in July 19, 2002. The imposed tariff was 42% on imports
from APO, Rizal and Solid (Rizal and Solid merged in December 2002). 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 will not appeal this
resolution.
F-43
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
D) LEASES
CEMEX has entered into various non-cancelable 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:
U.S. dollars
Year ending December 31, millions
------------------------------------------------------------------------------
2005............................................................. 110.2
2006............................................................. 93.7
2007............................................................. 79.3
2008............................................................. 68.7
2009............................................................. 42.9
2010............................................................. 54.3
2011 and thereafter.............................................. 35.6
-------------
484.7
=============
Rental expense for the years ended December 31, 2002, 2003, and 2004 was
approximately U.S.$57 million (Ps680.6), U.S.$56 million (Ps668.7) and U.S.$114
million (Ps1,270.0), respectively.
E) PLEDGE ASSETS
As of December 31, 2003 and 2004, there are liabilities amounting to U.S.$27.1
million and U.S.$2.2 million, respectively, secured by properties, machinery
and equipment.
F) COMMITMENTS
As of December 31, 2003 and 2004, the Company has future commitments for the
purchase of raw materials for an approximate amount of U.S.$113.0 million and
U.S.$172.3 million, respectively.
During 1999, the Company entered into agreements with an international
partnership, which built and currently operates an electrical energy generating
plant. According to the agreements, CEMEX will purchase, starting from the
beginning of operations of the plant, all the energy generated for a term of no
less than 20 years. The electrical energy generating plant started commercial
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. By means of this
transaction, CEMEX expects to have significant decreases in its electrical
energy costs, and the supply is expected to be sufficient to cover
approximately 80% of the electrical energy needs of CEMEX in Mexico. The
Company is not required to make any capital investment in the project. At
December 31, 2004, after eight months of operations, the energy generated by
the plant has supplied electricity to 10 cement plants of CEMEX in Mexico,
covering 83% of its needs and decreasing the electricity cost by 21%.
In March 2002, the distribution contract in Taiwan that CEMEX had with Universe
Company since March 31, 2000, was terminated. As a result, for the year ended
December 31, 2002, CEMEX recognized a loss of approximately U.S.$17.3 million
(Ps209.1) within other expenses, net.
F-44
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
G) OTHER CONTINGENCIES
During 2004, in Colombia four claims were notified in protection of the public
interest, which involve CEMEX Concretos de Colombia as co-accused. The first
proceeding was received on April 14 and the last on December 16. The plaintiffs
demand that the use of a raw material offered by the ready-mix concrete
industry resulted in extreme danger to the public underground transportation
system in Bogota, known as Transmilenio, disputing that the basis of the
material supplied by CEMEX Concretos Colombia, S.A., together with other
suppliers, did not meet technical standards offered by the producers (quality
deficiencies) and/or that suppliers provided insufficient or incorrect
information about the product. The four claims intend for suppliers to repair
the damage in order to guarantee the service during the period for which it was
originally designed (20 years). Nevertheless, the claims do not estimate
damages (repair costs). CEMEX Concretos de Colombia, S.A. has been defending
its interests and will continue to do so during the following year. One of the
proceedings was disregarded by the court based on arguments presented by CEMEX
Concretos de Colombia, S.A. All other claims are in their initial phase. CEMEX
Concretos de Colombia, S.A. has promptly responded to each of the proceedings
notified. At this early stage, it is neither possible to determine the amount
of damages nor other situations that the company may confront. Typically, this
process will continue for several years before its final resolution.
As of December 31 2004, CEMEX, Inc., the Company's subsidiary in the United
States, has accrued liabilities specifically relating to environmental matters
in the aggregate amount of approximately U.S.$28.3 million. 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 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 May 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 the amount of approximately
U.S.$60 million. As of December 31, 2004, as a result of the depreciation of
the Colombian peso, this amount has decreased to approximately U.S.$55 million.
This proceeding has reached the evidentiary stage. Typically, proceedings of
this nature take several years before a final resolution is reached.
In May 1999, several companies filed a lawsuit against two subsidiaries of the
Company in Colombia, alleging that the Ibague plants were causing capacity
production damage to their lands due to the pollution they generate. On January
13, 2004, CEMEX Colombia, S.A. was notified that the court's decision was that
plaintiffs should be paid in the amount of approximately U.S$8.8 million. On
January 15, 2004, CEMEX Colombia, S.A. appealed the decision, which was
accepted and sent to the Superior Court of Ibague. On March 23, 2004, CEMEX
presented arguments that sustained the appeal. The claim is under review in the
Court of Appeals. Typically, this process will continue for several years
before its final resolution.
F-45
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
23. NEW ACCOUNTING PRONUNCEMENTS
In April 2004, the Mexican Institute of Public Accountants issued Bulletin B-7,
"Business Acquisitions", which is effective for acquisitions beginning on
January 1, 2005. The most important aspects are: a) adoption of the purchase
method as the sole valuation method for the accounting of acquired business and
investment in associates, pursuant to which the pooling of interests method for
the recognition and initial valuation of the net assets acquired was
eliminated; b) requiring the allocation of the purchase price to all assets
acquired and liabilities assumed based on their fair value as of the
acquisition date; c) modification of the accounting treatment of goodwill
pursuant to which of which amortization of goodwill is eliminated, while this
item remains subject to periodic impairment evaluations; d) establishment of
specific rules for the accounting for the acquisition of minority interests and
for transfers of assets or exchange of shares between entities under common
control; and e) including additional regulations to Bulletin C-8 "Intangible
Assets", to identify, value and recognize intangible assets in a business
combination. The Company estimates that the adoption of this bulletin will have
no significant impact on its financial position or operating results.
In March 2004, the Mexican Institute of Public Accountants issued Bulletin
C-10, "Derivative Financial Instruments and Hedging Activities", which is
effective beginning January 1, 2005. Bulletin C-10 details and supplements
issues related to the accounting of derivative financial instruments and
supersedes other dispositions related to hedging activities established
previously by Bulletin C-2, "Financial Instruments". Among other aspects,
Bulletin C-10 confirms the rule of Bulletin C-2, in the respect that all
derivative financial instruments should be recognized as assets or liabilities
at fair value. The Bulletin also establishes criteria for segregation of
embedded derivatives and rules to classify and value from origination,
financial assets and liabilities resulting from derivative financial
instruments, as well as to value and classify hedging instruments. In addition,
the Bulletin widens disclosure requirements regarding a company's exposure to
financial risks. Beginning in 2001, CEMEX applies accounting policies for the
valuation and recognition of derivative financial instruments that are
consistent with those of new Bulletin C-10. Therefore, except for the
requirement to evaluate effectiveness when there is a hedge of debt over the
net investment in a foreign subsidiary, and the presentation effect described
in the paragraph below, and subject to the conclusion of the analysis, the
Company estimates that the adoption of this bulletin will have no significant
impact on its financial position or operating results.
Starting in 2001, the Company has effectively changed the original profile of
interest rates and currencies of financial debt associated to Cross Currency
Swaps ("CCS") (note 12). Accordingly, debt subject to these instruments has
been presented in the currencies negotiated in the CCS, through the recognition
within debt, of the assets or liabilities resulting from the valuation of the
derivative instruments. New Bulletin C-10 considers that such criteria
represent the synthetic presentation of two financial instruments as if it
would be a single instrument, and specifically prohibits such presentation. For
this reason, beginning in 2005, the Company will recognize the assets and
liabilities resulting from the valuation of CCS separately from the financial
debt, through which such debt will be presented in the currencies originally
negotiated. This presentation effect will have no significant impact on its
financial position or operating results.
In January 2004, the Mexican Institute of Public Accountants revised Bulletin
D-3, "Labor Obligations". The new requirements are effective from the issuance
date of the Bulletin, except for the new rules for postemployment obligations
(severance payments), which are effective beginning on January 1, 2005. The
most relevant change of new Bulletin D-3 is the requirement to value and
recognize postemployment obligations in a manner similar to pensions and other
postretirement benefits. This means recognizing the costs associated to these
obligations during the service life of the employees, while the accounting rule
until December 31, 2004 was to recognize these costs as they were incurred. The
other new rules of the revised Bulletin, such as postretirement benefits,
health care or life insurance, were already accounted for in accordance with
the Bulletin, based on the supplementary application of International
Accounting Standards. The Company does not anticipate any material impact on
stockholders' equity or net income, except for the cost to be determined in
2005 for postemployment obligations (severance payments), which is expected to
be similar to the expense currently recognized on the basis of the "as
incurred" accounting method.
F-46
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
24. 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, 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 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, 2002, 2003 and 2004, and
their effect on consolidated net income and earnings per share, are presented
below:
Years ended December 31,
---------------------------------------
2002 2003 2004
------------- ------------ -----------
Net income reported under Mexican GAAP...................................... Ps 6,339.2 7,508.4 14,562.3
Inflation adjustment (*).................................................... (427.5) (60.1) -
------------- ------------ -----------
Net income reported under Mexican GAAP after inflation adjustment........... 5,911.7 7,448.3 14,562.3
Approximate additional U.S. GAAP adjustments:
1. Amortization of goodwill (note 24(a))....................................... 1,822.6 2,051.3 883.4
2. Deferred income taxes (note 24(b)).......................................... 2,441.7 (65.1) 382.7
3. Deferred employees' statutory profit sharing (note 24(b))................... (204.9) 94.1 (55.9)
4. Other employee benefits (note 24(c))........................................ (33.5) 91.1 27.6
5. Capitalized interest (note 24(d))........................................... (42.2) (48.2) 9.9
6. Minority interest (note 24(e)):
a) Financing transactions................................................... (176.0) (184.4) -
b) Effect of U.S. GAAP adjustments.......................................... 35.4 (25.7) (31.5)
7. Hedge accounting (note 24(l))............................................... (2,693.0) (871.3) 184.3
8. Depreciation (note 24(f))................................................... 13.8 51.4 19.1
9. Accruals for contingencies (note 24(g))..................................... 8.0 (114.8) (32.1)
10. Equity in net income of affiliated companies (note 24(h))................... 12.5 (10.2) (7.9)
11. Inflation adjustment of fixed assets (note 24(i))........................... (397.5) (276.1) (239.7)
12. Temporary equity from forward contracts (note 24(j))........................ (567.0) 780.4 -
13. Derivative instruments and equity forward contracts in CEMEX's stock (notes
24(l) and 24(m))......................................................... - 437.4 1,938.4
14. Other U.S. GAAP adjustments (note 24(k)).................................... (520.9) (271.0) 61.9
15. Monetary effect of U.S. GAAP adjustments.................................... 571.6 307.6 262.9
------------- ------------ -----------
Approximate U.S. GAAP adjustments before cumulative effect of accounting
change................................................................... 270.6 1,946.5 3,403.1
------------- ------------ -----------
Approximate net income under U.S. GAAP before cumulative effect of
accounting change........................................................ 6,182.3 9,394.8 17,965.4
Cumulative effect of accounting change (notes 24(k) and 24(m)).............. - (675.2) -
------------- ------------ -----------
Approximate net income under U.S. GAAP after cumulative effect of
accounting change........................................................ Ps 6,182.3 8,719.6 17,965.4
============= ============ ===========
Basic EPS under U.S. GAAP before cumulative effect of accounting change......... Ps 1.38 1.99 3.60
Diluted EPS under U.S. GAAP before cumulative effect of accounting change....... 1.38 1.94 3.58
============= ============ ===========
Basic EPS under U.S. GAAP after cumulative effect of accounting change.......... Ps 1.38 1.84 3.60
Diluted EPS under U.S. GAAP after cumulative effect of accounting change........ 1.38 1.80 3.58
============= ============ ===========
F-47
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
At December 31, 2003 and 2004, 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,
-------------------------
2003 2004
----------- -------------
Total stockholders' equity reported under Mexican GAAP....................................... Ps 80,797.2 91,566.8
Inflation adjustment (*)..................................................................... (646.5) -
----------- -------------
Total stockholders' equity reported under Mexican GAAP after inflation adjustment............ 80,150.7 91,566.8
Approximate additional U.S. GAAP adjustments:
1. Goodwill, net (note 24(a))................................................................... 1,329.8 5,621.5
2. Deferred income taxes (note 24(b))........................................................... 809.6 990.3
3. Deferred employees' statutory profit sharing (note 24(b)).................................... (3,170.2) (3,059.4)
4. Other employee benefits (note 24(c))......................................................... (185.3) (148.8)
5. Capitalized interest (note 24(d))............................................................ (551.7) (505.8)
6. Minority interest--effect of financing transactions (note 24(e))............................. (788.1) -
7. Minority interest--U.S. GAAP presentation (note 24(e))....................................... (5,711.2) (4,536.4)
8. Depreciation (note 24(f)).................................................................... (58.1) (78.7)
9. Accruals for contingencies (note 24(g))...................................................... 33.1 -
10. Investment in net assets of affiliated companies (note 24(h))................................ (257.1) (267.4)
11. Inflation adjustment for machinery and equipment (note 24(i))................................ 3,973.8 3,208.9
12. Derivative instruments and equity forward contracts in CEMEX's stock (notes 24(l) and 24(m)). 418.4 238.7
13. Other U.S. GAAP adjustments (note 24(k))..................................................... (483.2) (396.7)
----------- -------------
Approximate U.S. GAAP adjustments before cumulative effect of accounting change.............. (4,640.2) 1,066.2
----------- -------------
Approximate stockholders' equity under U.S. GAAP before cumulative effect of accounting
change..................................................................................... 75,510.5 92,633.0
Cumulative effect of accounting change (notes 24 (k) and (m)) (555.9) -
----------- -------------
Approximate stockholders' equity under U.S. GAAP after cumulative effect of accounting change Ps 74,954.6 92,633.0
=========== =============
(*) Adjustment that reverses the restatement of prior periods into constant
pesos as of December 31, 2004, using the CEMEX weighted average inflation
factor (note 3B), and restates such prior periods into constant pesos as of
December 31, 2004 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 24, were restated using the Mexican
inflation index, with the exception of those amounts of prior periods that
are also disclosed in notes 1 to 23, which were not restated in note 24 using
the Mexican inflation in order to have more straightforward cross-references
between note 24 and the Mexican GAAP notes.
Net income and stockholders' equity reconciliations to U.S. GAAP for the year
ended December 31, 2003 have been prepared on a basis that is substantially
consistent with the accounting principles applied in our Annual Report on Form
20-F for the year ended December 31, 2002, except for 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"), as of and for the year ended December 31,
2003 (notes 24(k) and 24(m)). The term "SFAS" as used herein refers to
Statements of Financial Accounting Standards.
(a) 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,
eliminated the amortization of goodwill under U.S. GAAP (note 24(s)); and (iii)
the difference between goodwill amounts carried in the reporting unit's
functional currency, restated by the inflation factor of the reporting unit's
country and then translated into Mexican pesos at the exchange rates prevailing
at the reporting date, under U.S. GAAP, against goodwill amounts carried in the
currencies of the reporting units' holding companies, translated into pesos and
then restated using the Mexican inflation index under Mexican GAAP.
For the years ended December 31, 2002, 2003 and 2004, amortization of goodwill
is reflected as other expenses under Mexican GAAP.
For purposes of reconciliation to U.S. GAAP, CEMEX adopted in 2002, SFAS 142
and SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(note 24(s)). As a result of this adoption, effective January 1, 2002,
amortization ceased for goodwill under U.S. GAAP; therefore, beginning in 2002,
goodwill amortization recorded under Mexican GAAP is adjusted for purposes of
the reconciliation of net income and stockholders' equity to U.S. GAAP.
F-48
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 24(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.
During 2004, CEMEX exchanged its CPOs for CAH shares (note 9A), resulting an
excess in the fair value of the assets delivered over the fair value of the
assets received of approximately Ps1,000.4, which were recognized as an
adjustment to stockholders' equity under Mexican GAAP. This amount has been
charged to earnings in the reconciliation of net income to U.S. GAAP. The
reclassification under U.S. GAAP had no effect on stockholders' equity.
(b) Deferred Income Taxes ("IT") and Employees' Statutory Profit Sharing
("ESPS")
For U.S. GAAP purposes, CEMEX accounts for income taxes utilizing SFAS 109,
Accounting for Income Taxes ("SFAS 109"), which requires the asset and
liability method of accounting for deferred income taxes. Under the asset and
liability method, 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, 2003 and 2004 are presented below:
2003 2004
------------ -----------
Deferred tax assets:
Net operating loss and assets tax carryforwards........................................ Ps 13,778.1 13,272.3
Trade accounts receivable.............................................................. 98.9 109.0
Accounts payable and accrued expenses.................................................. 1,797.7 3,841.3
Other.................................................................................. 23.3 655.6
------------ -----------
Total gross deferred tax assets........................................................ 15,698.0 17,878.2
Less valuation allowance............................................................... 3,873.0 4,303.3
------------ -----------
Total deferred tax assets under U.S. GAAP............................................ 11,825.0 13,574.9
------------ -----------
Deferred tax liabilities:
Property, plant and equipment.......................................................... 22,452.0 21,982.1
Inventories............................................................................ 940.7 156.6
Other.................................................................................. (20.2) 3,265.3
------------ -----------
Total deferred tax liability under U.S. GAAP......................................... 23,372.5 25,404.0
------------ -----------
Net deferred tax liability under U.S. GAAP............................................. 11,547.5 11,829.1
Less--U.S. GAAP deferred IT liability of acquired subsidiaries at date of acquisition... 6,907.8 6,991.3
------------ -----------
Net deferred IT effect in stockholders' equity under U.S. GAAP......................... 4,639.7 4,837.8
Less-- Deferred IT effect in stockholders' equity under Mexican GAAP (note 18B)........ 5,493.2 5,828.1
------------ -----------
Income in reconciliation of stockholders' equity to U.S. GAAP.......................... 835.5 990.3
Inflation adjustment (note 3B)......................................................... (43.9) -
------------ -----------
Net income in reconciliation of stockholders' equity to U.S. GAAP...................... Ps 809.6 990.3
============ ===========
Management considers that there is existing evidence that, in the future, the
Company will generate sufficient taxable income to realize the tax benefits
associated with the deferred 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 deferred tax assets' valuation
allowance would be increased by a charge to income.
F-49
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
CEMEX records a valuation allowance for the estimated amount of the recoverable
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 2003 and 2004 CEMEX increased
the valuation allowance by approximately Ps2,743.4 and Ps430.3, respectively.
Under Mexican GAAP, CEMEX determines deferred income tax through the asset and
liability method (notes 3K and 18B), in a manner similar to U.S. GAAP.
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 as of January 1, 2000, which was
recorded directly to stockholders' equity and therefore, does 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, 2003 and
2004 are presented below:
-----------------------------
2003 2004
------------- -------------
Deferred assets:
Employee benefits............................................................... Ps 27.3 18.6
Trade accounts receivable....................................................... 23.5 24.3
Other........................................................................... 110.3 70.3
------------- -------------
Gross deferred assets under U.S. GAAP.............................................. 161.1 113.2
------------- -------------
Deferred liabilities:
Property, plant and equipment................................................... 3,077.7 2,970.5
Inventories..................................................................... 117.5 1.3
Other........................................................................... 136.1 200.8
------------- -------------
Gross deferred liabilities under U.S. GAAP......................................... 3,331.3 3,172.6
------------- -------------
Net deferred liabilities under U.S. GAAP........................................... Ps 3,170.2 3,059.4
============= =============
In the condensed financial information presented under U.S. GAAP in note 24(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 income of Ps21.7 in 2002, expense of Ps74.3 in 2003 and expense
of Ps211.7 in 2004, determined under Mexican GAAP, were reversed.
(c) Other Employee Benefits
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 Ps6.0 in 2002 and Ps1.3 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
F-50
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Under Mexican GAAP, severance payments, which are not part of a business
restructuring or a substitution for pension benefits, are recognized in
earnings in the period in which they are paid. Under U.S. GAAP, post-employment
benefits, including severance payments, for former or inactive employees,
excluding retirement benefits, are accrued over an employee's service life. For
the years ended December 31, 2002, 2003 and 2004, severance provisions recorded
for U.S. GAAP purposes resulted in expense of Ps27.5, income of Ps92.4 and
income of Ps27.6, respectively, with an accrual of Ps185.3 and Ps148.8 at
December 31, 2003 and 2004, respectively. Severance payments relating to any
specific event or restructuring are excluded from the calculation under SFAS
112, Employers' Accounting for Postemployment Benefits. Beginning in January 1,
2005, according to newly issued Mexican GAAP provisions, companies must accrue
severance payments, which are not part of a business restructuring, over an
employee's estimated service life (note 23).
Pension and other benefits
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
and, 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.
Most of CEMEX's health care benefits are self-insured and administered on cost
plus fee arrangements with major insurance companies or provided through health
maintenance organizations. 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.
(e) Minority Interest
Financing Transactions
For U.S. GAAP presentation purposes (note 24(o)), related to the preferred
stock described in note 15E, preferred dividends declared in 2002 were
recognized as part of the minority interest in the consolidated income
statements under both Mexican and U.S. GAAP. As a result of the adoption of
SFAS 150 during 2003, preferred dividends declared in 2003 were classified as
interest expense under U.S. GAAP.
For U.S. GAAP presentation purposes (note 24(o)), in respect to the capital
securities described in note 15E, capital securities dividends declared in 2002
were recorded as part of the minority interest in the consolidated income
statements under both Mexican and U.S. GAAP. As a result of the adoption of
SFAS 150 during 2003, capital securities dividends declared in 2003 were
classified as interest expense. During 2004, as a result of newly issued
Mexican GAAP effective January 1, 2004, this transaction was treated as
financial debt until its liquidation; consequently, dividends declared in 2004
were recorded as interest expense under both Mexican and U.S. GAAP.
U.S. GAAP adjustments on 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
24(o)). At December 31, 2003 and 2004, 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
F-51
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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, 2002, 2003 and 2004, income of Ps13.8, Ps51.4 and Ps19.1,
respectively, were 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 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
During 1999, CEMEX entered into equity forward in its own ADSs with an original
maturity in December 2002, in connection with its appreciation warrants (notes
15F and 17A). In December 2002, prior to their expiration, CEMEX renegotiated
the extension of the contracts until December 2003 and recognized a loss of
approximately U.S$98.3 million (Ps1,173.7) within stockholders' equity under
Mexican GAAP, representing the difference between the cash redemption amount of
the contracts and the market value of the underlying shares at origination of
the agreements. The counterparties deducted the Company's loss amount from the
prepayments made by CEMEX toward the forward contracts' final price. The
renewed contracts were settled during October 2003 in connection with a
secondary equity offering (note 17A), resulting in a gain of approximately
U.S.$19.5 million (Ps232.9), 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 ADSs sale
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
expense of approximately Ps567.0 in 2002 and income of Ps780.4 in 2003. The
amount of income in 2003 includes: (i) a net gain of U.S.$19.5 million from the
secondary equity offering; (ii) income of U.S.$101.7 million from 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 (iii) expense of U.S.$6.4 million
from prepayments made in 2003 treated as preferred dividends. The loss of
U.S.$98.3 million and the gain of U.S.$19.5 million recognized in stockholders'
equity under Mexican GAAP in 2002 and 2003, respectively, were not reclassified
through net income in the reconciliation to U.S. GAAP, since such amounts were
periodically charged to earnings under U.S. GAAP as part of the preferred
dividends.
(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
F-52
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
the software. Costs related to the preliminary project stage and the
post-implementation/operations stage are expensed as incurred.
Beginning in 2001, CEMEX implemented the policy of capitalizing the direct
costs associated with developing and implementing of internal-use software
(note 11) resulting in a capitalization under Mexican GAAP for the years ended
December 31, 2002, 2003 and 2004 of U.S.$90.1 million (Ps1,097.8), U.S.$11.3
million (Ps134.9) and U.S.$9.9 million (Ps110.3), respectively. The estimated
average useful lives period to amortize these capitalized costs is between 3
and 5 years. As a result, in the reconciliation of net income to U.S. GAAP for
the years ended December 31, 2002, 2003 and 2004, the reconciling item refers
exclusively to the amortization of the capitalized amount under U.S. GAAP until
December 2000, which led to expenses of Ps214.5 in 2002, Ps366.3 in 2003 and
Ps27.7 in 2004, respectively, with a net effect of income in the stockholders'
equity reconciliation to U.S. GAAP at December 31, 2003 of Ps26.8.
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 expense of Ps306.4 in 2002,
income of Ps95.3 in 2003 and income of Ps89.6 in 2004. During 2003 and 2004,
all amounts capitalized under Mexican GAAP also met the requirements for
capitalization under U.S. GAAP. Accordingly, the reconciliation of net income
to U.S. GAAP for the years ended December 31, 2003 and 2004 only includes
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 Ps510.0 and Ps396.7 at
December 31, 2003 and 2004, 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 incur a legal or constructive obligation
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
basically the same requirement as SFAS 143. The difference between Mexican GAAP
and U.S. GAAP on 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 includes the reclassification of the cumulative effect from
adoption from stockholders' equity under Mexican GAAP to net income under U.S.
GAAP (notes 3V and 13).
As mentioned in note 3V, during 2003, an asset retirement liability was
recorded in the amount of approximately Ps537.2, against fixed assets of
Ps388.1, deferred IT assets of Ps58.0 and an initial cumulative effect of
Ps91.1, recorded in stockholders' equity under Mexican GAAP and in earnings
under U.S. GAAP.
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.
Reclassifications--Non-cement related assets (note 8) of Ps420.3 and Ps577.7,
as of December 31, 2003 and 2004, respectively, were reclassified to long-term
assets for purposes of the condensed financial information under U.S. GAAP in
note 24(o). These assets are stated at their estimated fair value. Estimated
costs to sell these assets are not significant.
(l) Financial Instruments
Derivative Financial Instruments (notes 3N, 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
F-53
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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
3N), 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, providing
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 23).
At December 31, 2003 and 2004, 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
24(o), which are explained as follows:
o In connection with the fair value recognition of the derivatives related to
the Company'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, the Company 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 U.S.$132.1 million (Ps1,471.6). This gain was reclassified to
earnings under Mexican GAAP in March 2005, the date when the purchase
occurred. For purposes of the reconciliation of net income to U.S. GAAP, this
gain was reclassified from stockholders' equity to earnings in 2004, as SFAS
133, does not permit to establish a cash flow hedging relationship in a
transaction that involves a business combination.
o As discussed in note 12B, as of December 31, 2003 and 2004, related to the
estimated fair value of Cross Currency Swaps ("CCS"), CEMEX recognized net
assets of U.S.$262.0 million (Ps3,128.7) and U.S.$208.5 million (Ps2,322.7),
respectively. Under U.S. GAAP, these 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 24(o).
As a result, under U.S. GAAP at December 31, 2003, in respect to the portion
of the estimated fair value attributable to changes in the exchange rates,
short-term and long-term debt increased U.S.$171.9 million (Ps2,052.8),
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.$12.2 million (Ps145.7) against
current assets. At December 31, 2004, in respect to the portion of the
estimated fair value attributable to changes in the exchange rates,
short-term and long-term debt increased U.S.$131.8 million (Ps1,468.3),
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 million (Ps121.4) against
current assets.
See note 24(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 24(j) and 24(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, 2003 and 2004, 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
F-54
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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, 2004 is summarized as follows:
At December 31, 2004 Estimated fair
Carrying amount value
--------------- --------------
Bank loans....................................... Ps 30,302.4 30,304.0
Notes payable.................................... 30,412.3 32,994.8
--------------- --------------
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 Ps2,693.0 in
2002, and expense of Ps871.3 in 2003 and income of Ps184.3 in 2004, 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 equity 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 equity 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 equity 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
equity shares, or if variations are inversely related to changes in the fair
value of the issuer's equity 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 equity 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.
Mandatorily Redeemable Instruments
As described in notes 15E and 24(e), CEMEX held capital securities for the
outstanding amount of U.S.$66 million (Ps735.2) at December 31, 2003 that were
liquidated in October 2004. The capital securities were a mandatorily
F-55
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
redeemable financial instrument, presented under minority interest under
Mexican GAAP. For the year ended December 31, 2002, capital securities
dividends were recognized in the income statement within minority interest for
both Mexican GAAP and U.S. GAAP. As a result of the adoption of SFAS 150, for
purposes of the reconciliation of stockholders' equity to U.S. GAAP as of
December 31, 2003, capital securities were recognized at their outstanding
amount (equivalent to fair value) as a separate component within liabilities
(note 24(o)), for approximately Ps735.2 (U.S.$66 million) against minority
interest, which is considered a component of consolidated stockholders' equity
under Mexican GAAP. In the condensed financial information under U.S. GAAP in
note 24(o) for the year ended December 31, 2003, capital securities dividends
in the income statement were reclassified from minority interest under Mexican
GAAP to a separate item of interest expense under U.S. GAAP (note 15E).
Equity Forward Contracts in CEMEX's own Shares
As described in notes 16 and 17A, as of December 31, 2003 and 2004, CEMEX held
equity forward contracts negotiated to hedge future exercises under its stock
option programs, for notional amounts of U.S.$789.3 million and U.S.$1,112
million, respectively. Since January 1, 2001, under Mexican GAAP, these forward
contracts, which can be physically or net cash settled at CEMEX's option, have
been recognized at their estimated fair value as assets or liabilities in the
balance sheet and changes in fair value have been recorded in earnings for the
years ended December 31, 2002, 2003 and 2004. The accounting treatment given to
these contracts since 2001 is consistent with SFAS 150 and, therefore, with
respect to these forwards, no reconciling adjustments are required pursuant to
the implementation of the Statement.
In addition, as of December 31, 2003 and 2004, CEMEX held other equity forward
contracts (note 17A), for notional amounts of U.S.$295.7 million and U.S.$45.2
million, respectively, which can be physically or net cash settled at CEMEX's
option and which are considered as equity transactions under Mexican GAAP.
For U.S. GAAP. 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 reconciliations of stockholders' equity and net
income to U.S. GAAP as of and for the year ended December 31, 2003, a net
liability of approximately U.S.$11.6 million (Ps138.5) was recognized against
the cumulative effect from the change in accounting principle, which
represented an expense of approximately U.S.$49.1 million (Ps585.7) and a gain
related to changes in fair value during 2003 amounting to approximately
U.S.$36.9 million (Ps440.9).
Related to the equity forwards in the Company's own, during 2004, upon
settlement of several contracts, CEMEX recognized a gain of approximately
U.S.$38.6million (Ps430.3) under Mexican GAAP within stockholders' equity.
Under U.S. GAAP, instruments with a variety of settlement options should 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.
There are no other instruments subject to SFAS 150 other than those previously
described.
(n) Supplemental Debt Information
At December 31, 2003 and 2004, 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.$395 million (Ps4,716.8) and U.S.$847.2 million
(Ps9,438.1), 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 24(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.
(o) Condensed Financial Information under U.S. GAAP
The following table presents consolidated condensed income statements for the
years ended December 31, 2002, 2003 and 2004, 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:
F-56
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Years ended December 31,
------------------------------------------
Statements of income 2002 2003 2004
------------- ------------- --------------
Net sales..................................................................Ps 73,648.6 84,046.9 89,857.0
Gross profit............................................................... 31,806.8 35,058.2 37,900.7
Operating income........................................................... 11,903.8 14,339.9 16,511.5
Comprehensive financial result............................................. (6,461.9) (2,988.6) 3,858.3
Other expenses, net........................................................ (1,049.8) (1,183.2) (1,077.3)
Income tax (including deferred)............................................ 1,729.4 (1,171.3) (1,635.2)
Equity in income of affiliates............................................. 497.5 564.6 572.7
------------- ------------- --------------
Consolidated net income.................................................... 6,619.0 9,561.4 18,230.0
Minority interest net income............................................... 436.7 166.6 264.6
------------- ------------- --------------
Majority interest net income before cumulative effect of accounting change. 6,182.3 9,394.8 17,965.4
Cumulative effect of accounting change..................................... - (675.2) -
------------- ------------- --------------
Majority interest net income...............................................Ps 6,182.3 8,719.6 17,965.4
============= ============= ==============
The following table presents consolidated condensed balance sheets at December
31, 2003 and 2004, prepared under U.S. GAAP, including all differences and
reclassifications as compared to Mexican GAAP described in this note 24:
At December 31,
----------------------------------
Balance sheets 2003 2004
------------------ --------------
Current assets.................................................................Ps 21,975.2 24,545.6
Investments and non-current assets............................................. 10,013.6 21,113.1
Property, machinery and equipment.............................................. 112,670.2 109,542.3
Deferred charges............................................................... 51,680.5 51,158.4
------------------ --------------
Total assets............................................................... 196,339.5 206,359.4
================== ==============
Current liabilities............................................................ 37,971.9 36,239.7
Long-term debt................................................................. 47,204.0 43,639.4
Shares subject to mandatory redemption:
Putable capital securities (see note 15E).................................. 781.8 -
Other non-current liabilities.................................................. 29,716.0 29,310.9
------------------ --------------
Total liabilities.......................................................... 115,673.7 109,190.0
------------------ --------------
Minority interest.......................................................... 5,711.2 4,536.4
------------------ --------------
Stockholders' equity including cumulative effect of accounting change...... 74,954.6 92,633.0
================== ==============
Total liabilities and stockholders' equity.................................Ps 196,339.5 206,359.4
================== ==============
The prior period amounts presented in the tables above were restated to
constant pesos as of December 31, 2004 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 (see note
3B).
(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, 2002, 2003 and 2004, 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:
F-57
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Years ended December 31,
----------------------------------------------
2002 2003 2004
--------------- -------------- ---------------
Net cash provided by operating activities........................... Ps 9,526.4 9,771.8 21,884.3
Net cash used in financing activities............................... (1,323.7) (4,874.0) (3,722.7)
Net cash used in investing activities............................... (8,380.4) (5,419.4) (17,733.5)
=============== ============== ===============
Net cash flow from operating activities reflects cash payments for interest and
income taxes as follows:
Years ended December 31,
----------------------------------------------
2002 2003 2004
--------------- -------------- ---------------
Interest paid....................................................... Ps 3,467.1 4,897.4 3,654.4
Income taxes paid................................................... 1,350.3 576.2 1,314.2
=============== ============== ===============
Non-cash activities are comprised of the following:
Liabilities assumed through the acquisition of businesses were Ps1,873.7 in
2002 and Ps137.8 in 2003. In 2004, in connection with the acquisition of the
18.8% equity interest in RMC (see note 9A) and other minor acquisition during
the year, new financings and other liabilities for approximately U.S.$835.7
million (Ps9,309.7) were assumed.
(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,
2002 and 2003 and balance sheet information as of December 31, 2003, in
constant Mexican pesos as of December 31, 2004, using the Mexican inflation
index:
Years ended December 31, 2002 2003
-------------------- --------------------
Sales............................................................... Ps 74,348.3 84,868.1
Gross profit........................................................ 32,811.4 35,944.3
Operating income.................................................... 14,889.9 17,238.2
Majority interest net income........................................ 5,911.7 7,448.3
==================== ====================
At December 31, 2003
--------------------
Current assets...................................................... Ps 21,635.2
Non-current assets.................................................. 168,085.1
Current liabilities................................................. 33,515.9
Non-current liabilities............................................. 76,053.7
Majority interest stockholders' equity.............................. 73,849.1
Minority interest stockholders' equity.............................. 6,301.6
====================
(r) Stock Option Programs
For financial reporting under Mexican GAAP, CEMEX accounts 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 cost 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 is recognized for the fixed program (note 16C), while
compensation cost is periodically determined, beginning in 2001, for the
variable program (note 16B) and the voluntary programs (note 16E), beginning in
2002, for the special program (note 16D), and beginning in 2004, for the
restricted program.
Stock options activity during 2003 and 2004, the balance of options outstanding
at December 31, 2003 and 2004 and other general information regarding CEMEX's
stock option programs is presented in note 16. The availability of CPOs for the
potential future exercise of the programs is hedged through equity forward
contracts in CEMEX's own stock (note 17A).
F-58
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Under U.S. GAAP, SFAS 123, Accounting for Stock-Based Compensation, requires
compensation cost for stock option plans 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.
Had compensation cost be determined under SFAS 123, based on the fair value of
stock options at the grant date using an option pricing model, CEMEX's net
income and earnings per share would have been as follows:
For the year ended December 31, 2002 Special Variable Voluntary
program program programs Total
------------ ----------- ------------ --------------
Net income, as reported (Mexican GAAP)........................Ps 6,339.2
Cost of options granted according to SFAS 123.............. (9.9) (186.3) (21.0) (217.2)
Reversal of cost recognized under APB 25 3................. - - 60.9 60.9
------------ ----------- ------------ --------------
Approximate net income, pro forma............................. 6,182.9
==============
Basic earnings per share, as reported.........................Ps 1.41
--------------
Basic earnings per share, pro forma...........................Ps 1.37
==============
For the year ended December 31, 2003 Special Variable Voluntary
program program programs Total
------------ ----------- ------------ --------------
Net income, as reported (Mexican GAAP)........................Ps 7,508.4
Cost of options granted according to SFAS 123 1............ (14.6) (184.2) - (198.8)
Reversal of cost recognized under APB 25 3................. 62.9 389.1 31.2 483.2
------------ ----------- ------------ --------------
Approximate net income, pro forma............................. 7,792.8
==============
Basic earnings per share, as reported.........................Ps 1.58
--------------
Basic earnings per share, pro forma...........................Ps 1.65
==============
For the year ended December 31, 2004 Restricted Special Variable Voluntary
program program program programs Total
------------ ------------ ------------ ------------
Net income, as reported (Mexican GAAP).............Ps 14,562.3
Cost of options granted according to SFAS 123 2. (1,366.7) (23.0) (1.2) - (1,390.9)
Reversal of cost (income) under APB 25 3........ 224.6 159.7 (240.6) (84.5) 59.2
------------ ------------ ------------ ------------ ------------
Approximate net income, pro forma.................. 13,230.6
==============
Basic earnings per share, as reported..............Ps 2.92
------------
Basic earnings per share, pro forma................Ps 2.65
==============
1 The cost of the voluntary program granted in 2003 under the fair value
approach (SFAS 123) amounting to approximately Ps227.4 is not presented,
since net income under Mexican GAAP includes the liquidation cost of
approximately Ps740.3 related to such program, which was fully exercised
during the year (note 16 E).
2 As a result of the early exercise in December 2004, CEMEX recognized a
liquidation cost of approximately U.S.$61.1 million (Ps680.7) 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, of which approximately 99.6% and
98.5% were exercised, respectively. Consequently, the pro forma expense
under SFAS 123 includes approximately U.S.$0.1 million (Ps1.2) related to
the variable program and U.S.$2.1 million (Ps23.2) related to the
restricted program, corresponding to the 0.4% and 1.5% of options under
these programs, respectively, that were not exercised.
3 The amount of expense (income) recognized under Mexican GAAP and reversed
for purposes of the pro forma disclosure under U.S. GAAP, reflects only the
change between the initial balance and the year-end balance of the
provision created for under the intrinsic value method, and do 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.
F-59
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The assumptions for the valuation model for the options granted during each
year were as follows:
2002 2003 2004
============== ============== ==============
Expected dividend yield..................................... 2% 2% 2%
Volatility.................................................. 25% 25% 25%
Range of risk free interest rates........................... 3.6% - 4.8% 3.7% - 4.5% 4.0% - 4.6%
Weighted average tenure..................................... 9.8 years 7 years 8 years
-------------- -------------- --------------
(s) Impairment of Long Lived Assets
As mentioned in note 24(a), 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, the 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, 2002, 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 both amortizable and non-amortizable intangible
assets, while undiscounted cash flow analyses are used to assess long-lived
asset impairment. If an assessment indicates impairment, the impaired asset is
written down to its fair value based on the best information available. 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, 2002, 2003
and 2004, 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.
F-60
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Approximate goodwill by reporting unit under U.S. GAAP is summarized as
follows:
Inflation and
December 31, Goodwill Impairment currency December 31,
2002 acquired (1) charges fluctuation (2) 2003
---------------- --------------- --------------- --------------- --------------
United States................ Ps 15,760.5 212.7 - 1,075.1 17,048.3
Mexico....................... 6,621.0 - - - 6,621.0
Spain........................ 9,219.1 - - 2,592.1 11,811.2
Colombia..................... 3,421.1 - - 481.7 3,902.8
The Philippines.............. 1,918.3 (568.6) 1,394.9
- 45.2
Dominican Republic........... 422.8 348.0
- - (74.8)
Thailand..................... 437.3 504.8
- - 67.5
The Caribbean................ 416.5 444.1
- - 27.6
Venezuela.................... 287.4 333.8
- - 46.4
Egypt........................ 299.6 245.7
- - (53.9)
Costa Rica................... 302.8 325.5
- - 22.7
Other reporting units (3).... 1,346.5 (360.8) 1,466.6
- 480.9
Affiliates (note 9A)......... 582.6 590.6
- - 8.0
---------------- --------------- --------------- --------------- --------------
Ps 41,035.5 212.7 (929.4) 4,718.5 45,037.3
================ =============== =============== =============== ==============
Inflation and
currency
December 31, Goodwill Impairment fluctuation December 31,
2003 acquired (1) charges (2) 2004
---------------- --------------- --------------- --------------- --------------
United States................ Ps 17,048.3 100.3 - (500.9) 16,647.7
Mexico....................... 6,621.0 - - - 6,621.0
Spain........................ 11,811.2 - - 555.2 12,366.4
Colombia..................... 3,902.8 - - 616.7 4,519.5
The Philippines.............. 1,394.9 - - (4.7) 1,390.2
Dominican Republic........... 348.0 - - 118.0 466.0
Thailand..................... 504.8 - - (4.9) 499.9
The Caribbean................ 444.1 - - (12.6) 431.5
Venezuela.................... 333.8 - - (22.1) 311.7
Egypt........................ 245.7 - - (0.4) 245.3
Costa Rica................... 325.5 - - (13.7) 311.8
Other reporting units (3).... 1,466.6 - (248.9) (57.0) 1,160.7
Affiliates (note 9A)......... 590.6 - - (4.0) 586.6
---------------- --------------- --------------- --------------- --------------
Ps 45,037.3 100.3 (248.9) 669.6 45,558.3
================ =============== =============== =============== ==============
1. During 2003 (note 9A), CEMEX acquired a raw materials supplier and a cement
plant and quarry in the United States for a combined purchase price of
approximately U.S.$99.7 million (Ps1,110.7). In addition, during 2004 CEMEX
acquired a ready-mix company in the state of Georgia for approximately
U.S.$16.7 million (Ps186.0).
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, 2004 using Mexican
inflation, applied to the goodwill balances at the beginning of the year.
3. Other reporting units are primarily integrated by CEMEX's cement operations
in Puerto Rico and Panama, the ready-mix concrete operations in France and
the reporting unit engaged in software development projects.
(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).
F-61
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
(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.
As of and for the years ended December 31, 2003 and 2004, 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, 2003 and 2004, 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, 2003 and 2004, 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.
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
reveive 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 evalued to determine if they are VIE's 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, will sell 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, 2003 and 2004, CEMEX has not consolidated any asset,
liability or operating result of such partnership.
(v) 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 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
F-62
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
value, classifying an award as equity or as a liability, and attributing
compensation cost to reporting periods. SFAS123R 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 Opinion 25's intrinsic value method of accounting,
permitted by Statement 123 as originally issued (note 24(r)), under which, upon
compliance of certain rules, issuing stock options to employees resulted in
recognition of no compensation cost.
The cost under SFAS123R 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.
SFAS 123R will be effective for the Company as of January 1, 2006 and will
apply to all awards granted after the required effective date and to awards
modified, repurchased, or cancelled after that date. 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
Statement 123 (note 24(r)) will apply SFAS123R 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 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 Statement 123.
In connection with the adoption of SFAS 123R in 2006, if the Company elects to
grant new equity awards to employees, SFAS 123R may have a material impact in
the Company's net income under U.S. GAAP (see pro forma historical information
in footnote 24(r)). In respect to expected non-vested awards as of the adoption
date, the Company considers that their cost will not have a material effect
given that they are very few after the restructuring of employee' stock option
programs undertaken during 2004.
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, the 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 will be
effective for the Company for inventory costs incurred on or after January 1,
2006. The Company does not expect any material impact 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 will be effective for the Company for nonmonetary
asset exchanges occurring on or after January 1, 2006. The Company does not
expect any material impact from the adoption of this Statement.
(w) Recent Developments (unaudited)
On March 1, 2005, CEMEX completed the acquisition of RMC. The boards of
directors of CEMEX and RMC, as well as RMC shareholders, European Union and
U.S. regulators, and the High Court of Justice in England and Wales have
approved the acquisition. Considering the assumption of debt for approximately
U.S.$1.7 billion, the total purchase price of the transaction was approximately
U.S.$5.8 billion. This amount includes the acquisition of the approximately
18.8% equity interest in RMC made during 2004.
With the integration of RMC, CEMEX will enhance its position as one of the
world's largest building materials companies, with global presence in cement
and aggregates and a leading position in ready mix concrete. With the
integration of RMC, CEMEX will have an estimated production capacity of 97
million tons of cement, enhancing its position as the third largest company in
the cement industry. CEMEX, with RMC, will be the largest ready mix
F-63
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
concrete company in the world, with an estimated production capacity of 77
million cubic meters of ready mix concrete. Additionally, the combined company
will become the fourth largest aggregates company in the world.
For the year ended December 31, 2004, RMC's consolidated revenues from
continuing operations, before revenues from unconsolidated joint ventures and
associated entities of approximately (pound)351.7 million, were approximately
(pound)4,121.1 million (U.S.$7,897.9 million or Ps87,982.1). From this amount,
approximately 26% was generated in the United Kingdom, 14% in Germany, 33% in
other European countries, 23% in the United States and 4% in the rest of the
world. The revenues amount was determined under U.K. GAAP, which may differ
from Mexican GAAP and U.S. GAAP. The Company is currently evaluating possible
differences between these accounting standards that may modify the disclosed
amounts but has not yet concluded its assessment.
At the 2004 annual shareholders' meeting held on April 28, 2005, in connection
with their approval of a dividend for the 2004 fiscal year, the Company's
shareholders approved an increase in the variable part of CEMEX's capital stock
through the capitalization of retained earnings in an amount up to
approximately Ps4,815.3 through the issuance of up to 240 million series A
shares and 120 million series B shares, to be represented by CPOs. The final
amount of the capital increase will be determined by the board of directors
once the final number of CPOs required to be issued in connection with the
dividend is established and will be based on the then current market price of
the CPOs on the Mexican Stock Exchange, minus the 20% discount at which those
CPOs will be issued. In addition, at the 2004 annual shareholders' meeting, our
shareholders approved the cancellation of 249,133,670 series A treasury shares
and 124,566,835 series B treasury shares.
In addition, at a general extraordinary meeting of shareholders held on April
28, 2005, CEMEX's shareholders approved a new stock split. For every one of our
series A shares, two new series A shares will be issued, and for every one of
our series B shares, two new series B shares will be issued. Concurrently with
this stock split, shareholders authorized the amendment of the CPO trust
agreement to provide for the substitution of two new CPOs for each of our
existing CPOs, each new CPO will represent two new series A shares and one new
series B share. After giving effect to the new stock split and the amendment to
the CPO trust agreement, each of our ADSs will represent ten new CPOs. The
proportional equity interest participation of the stockholders in our common
stock will not change as a result of the stock split mentioned above. Earnings
per share, the average number of shares outstanding, as well as the CPO numbers
included throughout this financial statements and related notes for the years
ended December 31, 2002, 2003 and 2004, 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)
---------------------------------------------------------
2002 2003 2004 2004
------------- ------------ ------------ -----------
Pro forma per share information under Mexican GAAP:
Basic earnings per share........................................ Ps 0.71 0.79 1.46 U.S.$ 0.13
Diluted earnings per share...................................... 0.71 0.78 1.45 0.13
Pro forma per share information under U.S. GAAP:
Basic earnings per share........................................ Ps 0.69 0.92 1.80 U.S.$ 0.16
Diluted earnings per share...................................... 0.69 0.90 1.79 0.16
Pro forma number of shares (millions):
Basic average number of shares outstanding...................... 8,975 9,456 9,987 -
Diluted average number of shares outstanding.................... 8,992 9,674 10,039 -
F-64
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
(x) Guaranteed debt
In June 2000, CEMEX concluded the issuance of U.S.$200 million 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 million
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 (see 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, 2003 and 2004, indebtedness of
CEMEX in an aggregate amount of U.S.$3,145 million (Ps37,555.6) and
U.S.$3,087.8 million (Ps34,398.1), respectively, is fully and unconditionally
guaranteed, on a joint and several basis, by CEMEX Mexico and ETM.
As of December 31, 2002, 2003 and 2004, CEMEX owned a 100% equity interest in
CEMEX Mexico, including, in 2002, a 0.6% equity interest held by a Mexican
trust in connection with an equity financing transaction due in 2007, which was
terminated during 2003 (see note 15F), and CEMEX Mexico owned a 100% equity
interest in ETM at the end 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, 2004,
for the years ended December 31, 2002 and 2003 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, 2004, 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.
The condensed consolidated financial information is as follows:
F-65
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Condensed consolidated balance sheets:
Adjustments
Combined Combined and CEMEX
As of December 31, 2003 CEMEX guarantors non-guarantors eliminations consolidated
- --------------------------------------------- --------------------------------------------------------------------------
Current assets.............................. Ps 1,808.7 6,436.0 78,173.0 (64,608.0) 21,809.7
Investment in affiliates.................... 90,012.2 107,642.5 67,624.9 (257,930.3) 7,349.3
Other non-current assets.................... 37,372.0 488.8 1,043.8 (36,705.5) 2,199.1
Property, machinery and equipment........... 1,820.0 31,425.1 76,543.7 853.1 110,641.9
Deferred charges............................ 5,585.9 5,970.3 94,427.4 (56,733.0) 49,250.6
------------- ------------- -------------- ------------- -------------
Total assets............................. 136,598.8 151,962.7 317,812.8 (415,123.7) 191,250.6
------------- ------------- -------------- ------------- -------------
Current liabilities......................... 11,403.4 15,043.0 28,193.8 (20,854.0) 33,786.2
Long-term debt.............................. 48,844.3 8.9 35,449.4 (30,126.5) 54,176.1
Other non-current liabilities............... 1,906.3 50,374.4 14,792.6 (44,582.2) 22,491.1
------------- ------------- -------------- ------------- -------------
Total liabilities........................ 62,154.0 65,426.3 78,435.8 (95,562.7) 110,453.4
------------- ------------- -------------- ------------- -------------
Majority interest stockholders' equity...... 74,444.8 86,536.4 172,318.2 (258,854.6) 74,444.8
------------- ------------- -------------- ------------- -------------
Minority interest........................ - - 67,058.8 (60,706.4) 6,352.4
------------- ------------- -------------- ------------- -------------
Stockholders' equity under Mexican GAAP..... 74,444.8 86,536.4 239,377.0 (319,561.0) 80,797.2
------------- ------------- -------------- ------------- -------------
Total liabilities and stockholders' equity.. Ps 136,598.8 151,962.7 317,812.8 (415,123.7) 191,250.6
============= ============= ============== ============= =============
Adjustments
Combined Combined and CEMEX
As of December 31, 2004 CEMEX guarantors non-guarantors eliminations consolidated
- --------------------------------------------- ---------------------------------------------------------------------------
Current assets.............................. Ps 1,780.8 8,222.4 77,599.1 (65,861.0) 21,741.3
Investment in affiliates.................... 103,554.6 119,214.5 70,828.8 (276,694.6) 16,903.3
Other non-current assets.................... 33,916.0 459.5 17,467.6 (48,198.2) 3,644.9
Property, machinery and equipment........... 1,813.5 30,833.4 74,670.9 (224.0) 107,093.8
Deferred charges............................ 4,135.3 6,129.0 87,619.3 (53,644.0) 44,239.6
------------- ------------- -------------- ------------- --------------
Total assets.............................. 145,200.2 164,858.8 328,185.7 (444,621.8) 193,622.9
------------- ------------- -------------- ------------- --------------
Current liabilities......................... 10,319.2 28,004.2 42,870.0 (54,319.7) 26,873.7
Long-term debt.............................. 46,280.6 37.2 27,808.5 (19,686.8) 54,439.5
Other non-current liabilities............... 1,366.3 35,374.8 17,350.9 (33,349.1) 20,742.9
------------- ------------- -------------- ------------- --------------
Total liabilities......................... 57,966.1 63,416.2 88,029.4 (107,355.6) 102,056.1
------------- ------------- -------------- ------------- --------------
Majority interest stockholders' equity...... 87,234.1 101,442.6 181,010.5 (282,453.1) 87,234.1
------------- ------------- -------------- ------------- --------------
Minority interest......................... - - 59,145.8 (54,813.1) 4,332.7
------------- ------------- -------------- ------------- --------------
Stockholders' equity under Mexican GAAP..... 87,234.1 101,442.6 240,156.3 (337,266.2) 91,566.8
------------- ------------- -------------- ------------- --------------
Total liabilities and stockholders' equity.. Ps 145,200.2 164,858.8 328,185.7 (444,621.8) 193,622.9
============= ============= ============== ============= =============
F-66
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Condensed consolidated income statements:
For the year ended December 31, 2002 Adjustments
Combined Combined and CEMEX
CEMEX guarantors non-guarantors eliminations consolidated
- ----------------------------------------------- --------------------------------------------------------------------------
Sales........................................ Ps - 23,813.1 53,450.9 2,460.6 79,724.6
Operating income............................. (116.4) 3,513.7 5,942.0 6,627.4 15,966.7
Comprehensive financing result............... (1,503.9) (6,987.4) (4,006.6) 8,484.7 (4,013.2)
Other income (expense), net.................. (369.3) (359.6) 6,667.6 (10,681.9) (4,743.2)
Income tax................................... 2,418.1 (1,367.4) (1,373.1) (471.2) (793.6)
Equity in income of affiliates............... 5,910.7 1,747.2 (2.5) (7,281.3) 374.1
------------- ------------- ------------ -------------- -------------
Consolidated net income...................... 6,339.2 (3,453.5) 7,227.4 (3,322.3) 6,790.8
------------- ------------- ------------ -------------- -------------
Minority interest......................... - - 92.8 358.8 451.6
------------- ------------- ------------ -------------- -------------
Majority interest net income................. Ps 6,339.2 (3,453.5) 7,134.6 (3,681.1) 6,339.2
============= ============= ============ ============== =============
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2003 CEMEX guarantors non-guarantors eliminations consolidated
- ----------------------------------------------- --------------------------------------------------------------------------
Sales........................................ Ps - 25,724.1 60,753.2 (924.7) 85,552.6
Operating income............................. (57.8) 3,566.3 4,315.6 9,553.0 17,377.1
Comprehensive financing result............... (1,864.5) (3,161.1) 1,055.5 776.2 (3,193.9)
Other income (expense), net.................. 4,603.1 (515.5) 3,446.8 (12,988.4) (5,454.0)
Income tax................................... 832.8 397.1 (1,236.9) (1,265.9) (1,272.9)
Equity in income of affiliates............... 3,994.8 5,522.1 203.5 (9,305.2) 415.2
------------- ------------- ------------ -------------- -------------
Consolidated net income...................... 7,508.4 5,808.9 7,784.5 (13,230.3) 7,871.5
------------- ------------- ------------ -------------- -------------
Minority interest.......................... - - 21.8 341.3 363.1
------------- ------------- ------------ -------------- -------------
Majority interest net income................. Ps 7,508.4 5,808.9 7,762.7 (13,571.6) 7,508.4
============= ============= ============ ============== =============
Adjustments
CEMEX Combined Combined and CEMEX
For the year ended December 31, 2004 guarantors non-guarantors eliminations consolidated
- ----------------------------------------------- --------------------------------------------------------------------------
Sales........................................ Ps - 26,776.2 70,205.4 (6,197.7) 90,783.9
Operating income............................. (37.5) 3,669.1 4,403.3 12,592.8 20,627.7
Comprehensive financing result............... 1,225.5 493.8 6,623.7 (6,857.5) 1,485.5
Other income (expense), net.................. (1,172.6) (463.8) 5,870.9 (9,624.7) (5,390.2)
Income tax................................... 304.0 354.2 (1,178.9) (1,853.1) (2,373.8)
Equity in income of affiliates............... 14,242.9 14,756.9 3,027.4 (31,580.9) 446.3
------------- ------------- ------------ -------------- -------------
Consolidated net income...................... 14,562.3 18,810.2 18,746.4 (37,323.4) 14,795.5
------------- ------------- ------------ -------------- -------------
Minority interest......................... - - 3,235.3 (3,002.1) 233.2
------------- ------------- ------------ -------------- -------------
Majority interest net income................. Ps 14,562.3 18,810.2 15,511.1 (34,321.3) 14,562.3
============= ============= ============ ============== =============
F-67
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Condensed consolidated statements of changes in financial position:
Adjustments
Combined Combined and CEMEX
For the year ended December 31, 2002 CEMEX guarantors non-guarantors eliminations consolidated
- ------------------------------------------------ --------------------------------------------------------------------------
Operating activities:
Majority interest net income.................. Ps 6,339.2 (3,453.5) 7,134.6 (3,681.1) 6,339.2
Non-cash items................................ (6,591.9) 1,499.6 21,583.2 (7,221.3) 9,269.6
--------------------------------------------------------------------------
Resources provided by operations........... (252.7) (1,953.9) 28,717.8 (10,902.4) 15,608.8
Net change in working capital................. 1,193.1 5,508.9 (29,697.0) 27,657.0 4,662.0
--------------------------------------------------------------------------
Resources provided by operations, net...... 940.4 3,555.0 (979.2) 16,754.6 20,270.8
Financing activities:
Bank loans and notes payable, net............. 7,990.7 69.9 (5,548.0) 181.5 2,694.1
Dividends paid................................ (3,984.1) (2,377.1) 2.6 2,374.5 (3,984.1)
Issuance of common stock...................... 3,456.3 - 15,875.2 (15,875.2) 3,456.3
Repurchase of preferred stock by subsidiaries. - - (4,880.8) (39.4) (4,920.2)
Others........................................ 377.1 (188.0) 59,358.3 (56,383.6) 3,163.8
--------------------------------------------------------------------------
Resources used in financing activities..... 7,840.0 (2,495.2) 64,807.3 (69,742.2) 409.9
Investing activities:
Property, machinery and equipment, net........ - (1,164.3) (3,043.8) (304.3) (4,512.4)
Acquisitions, net of cash acquired............ (69,166.9) 12,636.3 615.7 52,704.0 (3,210.9)
Dividends received............................ 2,546.1 - - (2,546.1) -
Minority interest............................. - - (3,446.7) (27.8) (3,474.5)
Deferred charges and others................... 58,064.3 (11,673.0) (57,008.9) 501.7 (10,115.9)
--------------------------------------------------------------------------
Resources used in investing activities..... (8,556.5) (201.0) (62,883.7) 50,327.5 (21,313.7)
Change in cash and investments............. 223.9 858.8 944.4 (2,660.1) (633.0)
Cash and investments initial balance....... 179.0 1,152.3 2,497.4 1,204.8 5,033.5
-------------- ------------ -------------- -------------- -------------
Cash and investments ending balance........ Ps 402.9 2,011.1 3,441.8 (1,455.3) 4,400.5
============== ============ ============== ============== =============
F-68
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 7,508.4 5,808.9 7,762.7 (13,571.6) 7,508.4
Non-cash items................................ (2,240.1) (3,307.7) 22,763.1 (6,135.1) 11,080.2
--------------------------------------------------------------------------
Resources provided by operations........... 5,268.3 2,501.2 30,525.8 (19,706.7) 18,588.6
Net change in working capital................. 19,089.0 14,619.3 (43,705.9) 10,113.0 115.4
--------------------------------------------------------------------------
Resources provided by operations, net...... 24,357.3 17,120.5 (13,180.1) (9,593.7) 18,704.0
Financing activities:
Bank loans and notes payable, net............. (12,227.3) (232.9) 10,517.1 (15.7) (1,958.8)
Dividends paid................................ (4,210.3) (5,945.0) 147.2 5,797.8 (4,210.3)
Issuance of common stock...................... 3,944.7 - - - 3,944.7
Repurchase of preferred stock by subsidiaries. - - (7,801.5) - (7,801.5)
Others........................................ 787.2 (8,843.2) 2,866.1 9,317.1 4,127.2
--------------------------------------------------------------------------
Resources used in financing activities..... (11,705.7) (15,021.1) 5,728.9 15,099.2 (5,898.7)
Investing activities:
Property, machinery and equipment, net........ - (1,003.5) (3,496.3) (36.3) (4,536.1)
Acquisitions, net of cash acquired............ (7,397.9) (2,097.2) 13,475.7 (4,954.1) (973.5)
Dividends received............................ 5,844.6 - - (5,844.6) -
Minority interest............................. - - (906.0) (7.3) (913.3)
Deferred charges and others................... (11,386.7) 665.3 7,006.0 (3,588.0) (7,303.4)
--------------------------------------------------------------------------
Resources used in investing activities..... (12,940.0) (2,435.4) 16,079.4 (14,430.3) (13,726.3)
Change in cash and investments............. (288.4) (336.0) 8,628.2 (8,924.8) (921.0)
Cash and investments initial balance....... 402.9 2,011.1 3,441.8 (1,455.3) 4,400.5
-------------- ------------ -------------- -------------- -------------
Cash and investments ending balance........ Ps 114.5 1,675.1 12,070.0 (10,380.1) 3,479.5
============== ============ ============== ============== =============
F-69
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 14,562.3 18,810.2 15,511.1 (34,321.3) 14,562.3
Non-cash items................................ (11,891.3) (13,530.8) 13,700.2 24,359.5 12,637.6
--------------------------------------------------------------------------
Resources provided by operations........... 2,671.0 5,279.4 29,211.3 (9,961.8) 27,199.9
Net change in working capital................. (862.7) 11,379.0 (9,374.3) (3,513.5) (2,371.5)
--------------------------------------------------------------------------
Resources provided by operations, net...... 1,808.3 16,658.4 19,837.0 (13,475.3) 24,828.4
Financing activities:
Bank loans and notes payable, net............. (1,526.2) 59.0 (11,357.5) - (12,824.7)
Bank loans acquisition of RMC Group........... - - 8,756.0 - 8,756.0
Appreciation warrants......................... (1,053.0) - - - (1,053.0)
Dividends paid................................ (4,319.4) - (283.4) 283.4 (4,319.4)
Issuance of common stock...................... 4,224.0 - - - 4,224.0
Issuance (repurchase) of preferred stock by
subsidiaries.................................. - - (2,810.0) 2,019.0 (791.0)
Others........................................ (540.0) (14,311.8) 4,771.1 8,255.8 (1,824.9)
--------------------------------------------------------------------------
Resources used in financing activities..... (3,214.6) (14,252.8) (923.8) 10,558.2 (7,833.0)
Investing activities:
Property, machinery and equipment, net........ - (651.8) (4,183.1) 709.3 (4,125.6)
Acquisitions, net of cash acquired............ (1,358.9) (1,364.5) (186.4) 2,723.4 (186.4)
Investment in RMC Group....................... - - (8,756.0) - (8,756.0)
Dividends received............................ 283.4 - - (283.4) -
Minority interest............................. - - (1,461.9) - (1,461.9)
Deferred charges and others................... 2,471.8 (73.3) (1,814.7) (2,715.3) (2,131.5)
--------------------------------------------------------------------------
Resources used in investing activities..... 1,396.3 (2,089.6) (16,402.1) 434.0 (16,661.4)
Change in cash and investments............. (10.0) 316.0 2,511.1 (2,483.1) 334.0
Cash and investments initial balance....... 114.5 1,675.1 12,070.0 (10,380.1) 3,479.5
-------------- ------------ -------------- -------------- -------------
Cash and investments ending balance........ Ps 104.5 1,991.1 14,581.1 (12,863.2) 3,813.5
============== ============ ============== ============== =============
F-70
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The tables below present consolidated balance sheets as of December 31, 2003
and 2004, and income statements and statements of changes in financial position
for each of the three-year periods ended December 31, 2004 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, 2003 Guarantors (Parent Company-only)
-----------------------------------------------------------------
Assets Adjustments
CEMEX and Combined
Mexico ETM eliminations guarantors
---------------- -------------- --------------- ---------------
Current Assets
Cash and investments............................ Ps 809.4 865.7 - 1,675.1
Trade accounts receivable, net.................. 278.2 - - 278.2
Other receivables and other current assets...... 887.1 106.6 (117.9) 875.8
Related parties receivables..................... 2,137.6 4,740.7 (4,599.0) 2,279.3
Inventories..................................... 1,327.6 - - 1,327.6
---------------- -------------- --------------- ---------------
Total current assets......................... 5,439.9 5,713.0 (4,716.9) 6,436.0
---------------- -------------- --------------- ---------------
Other Investments
Investments in subsidiaries and affiliates...... 127,448.1 30,075.9 (49,881.5) 107,642.5
Long-term related parties receivables........... 254.6 9,833.9 (9,833.9) 254.6
Other investments............................... 234.2 - - 234.2
---------------- -------------- --------------- ---------------
Total other investments...................... 127,936.9 59,715.4 (39,909.8) 127,936.4
---------------- -------------- --------------- ---------------
Property, machinery and equipment............... 31,425.1 - - 31,425.1
---------------- -------------- --------------- ---------------
Deferred charges................................ 1,633.9 4,353.7 (17.3) 5,970.3
---------------- -------------- --------------- ---------------
Total Assets................................. Ps 166,435.8 49,976.5 (64,449.6) 151,962.7
================ ============== =============== ===============
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt............ Ps 7.2 - - 7.2
Trade accounts payable.......................... 640.3 - - 640.3
Other accounts payable and accrued expenses..... 1,319.6 5.5 (118.1) 1,207.0
Related parties payables........................ 17,787.5 - (4,599.0) 13,188.5
---------------- -------------- --------------- ---------------
Total current liabilities.................... 19,754.6 5.5 (4,717.1) 15,043.0
---------------- -------------- --------------- ---------------
Total long-term debt............................ 8.9 - - 8.9
---------------- -------------- --------------- ---------------
Other Noncurrent Liabilities
Deferred income taxes........................... 8,327.2 - (17.3) 8,309.9
Others.......................................... 102.0 89.9 - 191.9
Long-term related parties payables.............. 51,706.7 - (9,834.1) 41,872.6
---------------- -------------- --------------- ---------------
Total other noncurrent liabilities........... 60,135.9 89.9 (9,851.4) 50,374.4
---------------- -------------- --------------- ---------------
Total Liabilities............................ 79,899.4 95.4 (14,568.5) 65,426.3
---------------- -------------- --------------- ---------------
Stockholders' equity............................ 80,727.5 48,050.0 (48,050.0) 80,727.5
Net income...................................... 5,808.9 1,831.1 (1,831.1) 5,808.9
---------------- -------------- --------------- ---------------
Total stockholders' equity................... 86,536.4 49,881.1 (49,881.1) 86,536.4
---------------- -------------- --------------- ---------------
Total Liabilities and Stockholders' Equity... Ps 166,435.8 49,976.5 (64,449.6) 151,962.7
================ ============== =============== ===============
F-71
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Guarantors' Combined Balance Sheets:
December 31, 2004 Guarantors (Parent Company-only)
--------------------------------------------------------------
Adjustments
CEMEX and Combined
Assets Mexico ETM eliminations guarantors
---------------- ----------- --------------- --------------
Current Assets
Cash and investments.............................. Ps 831.9 1,159.2 - 1,991.1
Trade accounts receivable, net.................... 93.0 - - 93.0
Other receivables and other current assets........ 770.4 400.9 (301.4) 869.9
Related parties receivables....................... 3,730.6 1,725.6 (1,792.1) 3,664.1
Inventories....................................... 1,604.3 - - 1,604.3
--------------------------------------------------------------
Total current assets.......................... 7,030.2 3,285.7 (2,093.5) 8,222.4
--------------------------------------------------------------
Other Investments
Investments in subsidiaries and affiliates........ 138,243.5 29,515.0 (48,544.0) 119,214.5
Long-term related parties receivables............. 145.0 34,100.0 (34,100.0) 145.0
Other investments................................. 314.5 - - 314.5
--------------------------------------------------------------
Total other investments....................... 138,703.0 63,615.0 (82,644.0) 119,674.0
--------------------------------------------------------------
Property, machinery and equipment................. 30,833.4 - - 30,833.4
--------------------------------------------------------------
Deferred charges.................................. 1,828.5 4,300.5 - 6,129.0
--------------------------------------------------------------
Total Assets.................................. Ps 178,395.1 71,201.2 (84,737.5) 164,858.8
==============================================================
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Current maturities of long-term debt.............. 37.9 - - 37.9
Trade accounts payable............................ 745.0 - - 745.0
Other accounts payable and accrued expenses....... 1,361.1 300.4 (301.4) 1,360.1
Related parties payables.......................... 27,582.4 70.9 (1,792.1) 25,861.2
--------------------------------------------------------------
Total current liabilities..................... 29,726.4 371.3 (2,093.5) 28,004.2
--------------------------------------------------------------
Total long-term debt.............................. 37.2 - - 37.2
--------------------------------------------------------------
Other Noncurrent Liabilities
Deferred income taxes............................. 7,580.6 72.8 - 7,653.4
Others............................................ 205.5 - - 205.5
Long-term related parties payables................ 39,402.8 22,213.1 (34,100.0) 27,515.9
--------------------------------------------------------------
Total other noncurrent liabilities............ 47,188.9 22,285.9 (34,100.0) 35,374.8
--------------------------------------------------------------
Total Liabilities............................. 76,952.5 22,657.2 (36,193.5) 63,416.2
--------------------------------------------------------------
Stockholders' equity.............................. 82,632.4 48,152.9 (48,152.9) 82,632.4
Net income........................................ 18,810.2 (391.1) (391.1) 18,810.2
--------------------------------------------------------------
Total stockholders' equity.................... 101,442.6 48,544.0 (48,544.0) 101,442.6
--------------------------------------------------------------
Total Liabilities and Stockholders' Equity.... Ps 178,395.1 71,201.2 (84,737.5) 164,858.8
==============================================================
F-72
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Guarantors' Combined Income Statements:
Guarantors (Parent Company-only)
----------------------------------------------------------
Adjustments
CEMEX and Combined
For the year ended December 31, 2002 Mexico ETM eliminations guarantors
---------- -------- ---------------- ---------------
Net sales................................................ Ps 23,813.1 - - 23,813.1
Cost of sales............................................ (8,175.4) - - (8,175.4)
----------------------------------------------------------
Gross profit........................................ 15,637.7 - - 15,637.7
Total operating expenses............................ (12,123.7) (0.2) (0.1) (12,124.0)
----------------------------------------------------------
Operating income................................. 3,514.0 (0.2) (0.1) 3,513.7
----------------------------------------------------------
Net comprehensive financing result............... (6,422.7) (564.8) 0.1 (6,987.4)
----------------------------------------------------------
Other income (expense), net.............................. (352.2) (7.3) (0.1) (359.6)
----------------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... (3,260.9) (572.3) (0.1) (3,833.3)
----------------------------------------------------------
Total IT, BAT and ESPS.............................. (580.6) (786.8) - (1,367.4)
----------------------------------------------------------
Income before equity in income of affiliates........ (3,841.5) (1,359.1) (0.1) (5,200.7)
Equity in income of affiliates................... 388.0 (28.7) 1,387.9 1,747.2
----------------------------------------------------------
Net income.......................................... Ps (3,453.5) (1,387.8) 1,387.8 (3,453.5)
==========================================================
Guarantors (Parent Company-only)
---------------------------------------------------------
Adjustments
CEMEX and Combined
For the year ended December 31, 2003 Mexico ETM eliminations guarantors
---------- -------- ---------------- ---------------
Net sales................................................ Ps 25,724.1 - - 25,724.1
Cost of sales............................................ (9,240.8) - - (9,240.8)
---------------------------------------------------------
Gross profit........................................ 16,483.3 - - 16,483.3
Total operating expenses............................ (12,916.6) - (0.4) (12,917.0)
---------------------------------------------------------
Operating income................................. 3,566.7 - (0.4) 3,566.3
---------------------------------------------------------
Net comprehensive financing result............... (4,299.0) 1,137.9 - (3,161.1)
---------------------------------------------------------
Other income (expense), net.............................. (492.8) (22.7) - (515.5)
---------------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... (1,225.1) 1,115.2 (0.4) (110.3)
---------------------------------------------------------
Total IT, BAT and ESPS.............................. 472.7 (75.6) - 397.1
---------------------------------------------------------
Income before equity in income of affiliates........ (752.4) 1,039.6 (0.4) 286.8
Equity in income of affiliates................... 6,561.3 791.5 (1,830.7) 5,522.1
---------------------------------------------------------
Net income.......................................... Ps 5,808.9 1,831.1 (1,831.1) 5,808.9
=========================================================
Guarantors (Parent Company-only)
---------------------------------------------------------
Adjustments
CEMEX and Combined
For the year ended December 31, 2004 Mexico ETM eliminations guarantors
---------- -------- ---------------- ---------------
Net sales................................................ Ps 26,776.2 - - 26,776.2
Cost of sales............................................ (9,953.8) - - (9,953.8)
----------------------------------------------------------
Gross profit........................................ 16,822.4 - - 16,822.4
Total operating expenses............................ (13,153.0) (0.3) - (13,153.3)
----------------------------------------------------------
Operating income................................. 3,669.4 (0.3) - 3,669.1
----------------------------------------------------------
Net comprehensive financing result............... 17.7 476.1 - 493.8
----------------------------------------------------------
Other income (expense), net.............................. (406.4) (57.4) - (463.8)
----------------------------------------------------------
Income before IT, BAT, ESPS and equity in affiliates..... 3,280.7 418.4 - 3,699.1
----------------------------------------------------------
Total IT, BAT and ESPS.............................. 733.9 (379.7) - 354.2
----------------------------------------------------------
Income before equity in income of affiliates........ 4,014.6 38.7 - 4,053.3
Equity in income of affiliates................... 14,795.6 (52.4) 391.1 14,756.9
----------------------------------------------------------
Net income.......................................... Ps 18,810.2 (91.1) 391.1 18,810.2
=========================================================
F-73
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Guarantors' Combined Statements of Changes in Financial Position:
Guarantors (Parent Company-only)
Adjustments
CEMEX and Combined
For the year ended December 31, 2002 Mexico ETM eliminations guarantors
-------------- --------- ------------- ------------
Operating activities
Net income Ps (3,453.5) (1,387.8) 1,387.8 (3,453.5)
Charges to operations which did not require resources..... 1,698.7 1,188.7 (1,387.8) 1,499.6
-------------- --------- ------------- ------------
Resources provided by operating activities................ (1,754.8) (199.1) - (1,953.9)
Net change in working capital......................... 5,060.4 (27.6) 476.1 5,508.9
-------------- --------- ------------- ------------
Net resources provided by operating activities........ 3,305.6 (226.7) 476.1 3,555.0
-------------- --------- ------------- ------------
Financing activities
Bank loans and notes payable, net......................... 13.5 56.4 - 69.9
Dividends................................................. (2,377.1) - - (2,377.1)
Long-term related parties receivables and payables, net... (56,521.2) - - (56,521.2)
Other noncurrent assets and liabilities, net.............. 56,333.2 - - 56,333.2
-------------- --------- ------------- ------------
Resources used in financing activities.................... (2,551.6) 56.4 - (2,495.2)
-------------- --------- ------------- ------------
Investing activities
Property, plant and equipment, net........................ (1,164.3) - - (1,164.3)
Investments in subsidiaries and affiliates................ (11,355.0) (24.5) 68.1 (11,311.4)
Deferred charges.......................................... (232.6) (18.5) (110.5) (361.6)
Other investments......................................... 12,921.2 148.8 (433.7) 12,636.3
-------------- --------- ------------- ------------
Resources used in investing activities................ 169.3 105.8 (476.1) (201.0)
-------------- --------- ------------- ------------
Change in cash and investments........................ 923.3 (64.5) - 858.8
Cash and investments initial balance.................. 439.8 712.5 - 1,152.3
-------------- --------- ------------- ------------
Cash and investments ending balance................... Ps 1,363.1 648.0 - 2,011.1
============== ========= ============= ============
Guarantors (Parent Company-only)
-------------------------------------------------------
Adjustments
CEMEX and Combined
For the year ended December 31, 2003 Mexico ETM eliminations guarantors
-------------- --------- ------------- ------------
Operating activities
Net income................................................ Ps 5,808.9 1,831.1 (1,831.1) 5,808.9
Charges to operations which did not require resources..... (5,238.6) 100.1 1,830.8 3,307.7
-------------- --------- ------------- ------------
Resources provided by operating activities................ 570.3 1,931.2 (0.3) 2,501.2
Net change in working capital......................... 40,445.3 1,112.7 (26,938.7) 14,619.3
Net resources provided by operating activities........ 41,015.6 3,043.9 (26,939.0) 17,120.5
-------------- --------- ------------- ------------
Financing activities
Bank loans and notes payable, net......................... (266.4) 33.5 - (232.9)
Dividends................................................. (5,945.0) - - (5,945.0)
Long-term related parties receivables and payables, net... (40,831.6) - 31,951.1 (8,880.5)
Other noncurrent assets and liabilities, net.............. 37.3 (6,808.2) 6,808.2 37.3
-------------- --------- ------------- ------------
Resources used in financing activities.................... (47,005.7) (6,774.7) 38,759.3 (15,021.1)
-------------- --------- ------------- ------------
Investing activities
Property, plant and equipment, net........................ (1,003.5) - - (1,003.5)
Investments in subsidiaries and affiliates................ 5,774.6 (1,063.8) (6,808.0) (2,097.2)
Deferred charges.......................................... 634.7 - - 634.7
Other investments......................................... 30.6 5,012.3 (5,012.3) 30.6
-------------- --------- ------------- ------------
Resources used in investing activities................ 5,436.4 3,948.5 (11,820.3) (2,435.4)
-------------- --------- ------------- ------------
Change in cash and investments........................ (553.7) 217.7 - (336.0)
Cash and investments initial balance.................. 1,363.1 648.0 - 2,011.1
-------------- --------- ------------- ------------
Cash and investments ending balance................... Ps 809.4 865.7 - 1,675.1
============== ========= ============= ============
F-74
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Guarantors' Combined Statements of Changes in Financial Position:
- -------------------------------------------------------------------------------------------------------------------
Guarantors (Parent Company-only)
------------------------------------------------------
Adjustments
CEMEX and Combined
For the year ended December 31, 2004 Mexico ETM eliminations guarantors
------------ ----------- -------------- -----------
Operating activities
Net income................................................ Ps 18,810.2 (391.1) 391.1 18,810.2
Charges to operations which did not require resources..... (13,642.4) 279.5 (391.1) (13,530.8)
------------ ----------- -------------- -----------
Resources provided by operating activities................ 5,167.8 111.6 - 5,279.4
Net change in working capital......................... 8,182.6 3,087.0 109.4 11,379.0
------------ ----------- -------------- -----------
Net resources provided by operating activities........ 13,350.4 3,198.6 109.4 16,658.4
------------ ----------- -------------- -----------
Financing activities
Bank loans and notes payable, net......................... 59.0 - - 59.0
Long-term related parties receivables and payables, net... (12,303.9) 22,213.1 (24,265.9) (14,356.7)
Other noncurrent assets and liabilities, net.............. 44.9 - - 44.9
------------ ----------- -------------- -----------
Resources used in financing activities.................... (12,200.0) 22,213.1 (24,265.9) (14,252.8)
------------ ----------- -------------- -----------
Investing activities
Property, plant and equipment, net........................ (651.8) - - (651.8)
Investments in subsidiaries and affiliates................ (439.6) (25,081.4) 24,156.5 (1,364.5)
Deferred charges.......................................... (177.4) (36.8) - (214.2)
Other investments......................................... 140.9 - - 140.9
------------ ----------- -------------- -----------
Resources used in investing activities................ (1,127.9) (25,118.2) 24,156.5 (2,089.6)
------------ ----------- -------------- -----------
Change in cash and investments........................ 22.5 293.5 - 316.0
Cash and investments initial balance.................. 809.4 865.7 - 1,675.1
Cash and investments ending balance................... Ps 831.9 1,159.2 - 1,991.1
============ =========== ============== ===========
Guarantors--Restatement of certain amounts of year 2003
Until June 2003, CEMEX, the owner of 100% of the common stock of CEMEX Mexico,
held an approximate 49% equity interest in CEMEX Trademarks Holdings, Ltd.
("CTH"), which in turn was the holding company of CEMEX Trademarks Worldwide
Ltd. ("CTW"), the subsidiary that conducts the research and development efforts
within the group, and that is the owner of the rights for most of CEMEX's
intangible assets, including trademarks and commercial names. The remaining 51%
equity interest in CTH was indirectly held by CEMEX Mexico. In June 2003, by
means of an exchange of assets between related parties, CEMEX Mexico became the
indirect majority owner of CTW, in exchange for the transfer to CEMEX, through
CTH, of an equity interest of approximately 24% in the subsidiary of CEMEX
Mexico that holds the international operations of the group. As a result of the
exchange of assets, which was accounted for at historical cost, CEMEX Mexico
reduced its investment in subsidiaries with a corresponding reduction in equity
which was intended to represent the carrying value of the 24% interest
transferred to CEMEX.
In connection with the preparation of the 2004 financial information for the
separate CEMEX Mexico and Combined guarantors presentation, CEMEX recognized
that the effect of the exchange of assets was not reflective of the
transaction. As a result, during 2004, CEMEX Mexico and CTH entered into
agreements pursuant to which CEMEX Mexico, through a subsidiary, has an option
to acquire the equity interest of CTH in the holding company of the
international operations, while CTH has an option to acquire, from a subsidiary
of CEMEX Mexico, such subsidiary's equity interest in CTW.
F-75
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The balance sheets of CEMEX Mexico-only and the Combined guarantors as of
December 31, 2004, as well as the income statements of CEMEX Mexico-only and
the Combined guarantors for the year ended December 31, 2004, reflect 100% of
the interest of the subsidiaries of CEMEX Mexico. The line items "Investment in
subsidiaries and affiliates" and "Stockholders' equity" in the balance sheet
andn the line item "Equity in income of affiliates" in the income statement of
both, CEMEX Mexico-only and the Combined guarantors, include the equity
interest of CEMEX in CTH. CEMEX considers that is a more meaningful
representation of the stockholders' equity of CEMEX Mexico-only and the pro
forma stockholders' equity of the Combined guarantors, given that: i) CEMEX
Mexico and CTH are directly and indirectly, respectively, wholly-owned
subsidiaries of CEMEX, as a result of which, the majority equity interest of
CTH, and majority and minority equity interests of, CEMEX Mexico and the
Combined guarantors were under the common control of CEMEX for all periods
presented; and ii) upon execution of the call option for the 24% minority
interest entered into by CEMEX Mexico and CTH during 2004, a reduction in the
carrying value of CEMEX Mexico's investment in subsidiaries would not be
reflected. This presentation does not affect the consolidated financial
information of CEMEX and subsidiaries.
For purposes of presenting the comparative Combined guarantors financial
statements for the year 2003, on a basis consistent with that presented in 2004
as discussed above, CEMEX restated the previously filed balance sheet
information of CEMEX Mexico-only and the Combined guarantors as of December 31,
2003, as well as the income statement information of CEMEX Mexico-only and the
Combined guarantors for the year ended December 31, 2003, as if the option had
been in effect at the date of the original exchange, thus reflecting 100%
ownership of the Subsidiaries of CEMEX Mexico, and also corrected
misclassifications in the 2003 presentation of amounts between guarantors and
non-guarantors. The restated items in the Combined guarantors' financial
information are as follows:
As of and for the year ended December 31, 2003 As reported Restated
------------- ----------------
Combined Guarantors
Investment in subsidiaries and affiliated companies............... Ps 97,698.3 107,642.5
Total assets...................................................... 142,018.1 151,962.7
Stockholders' equity.............................................. 76,591.8 86,536.4
Total liabilities and stockholders' equity........................ 142,018.1 151,962.7
------------ --------------
Equity in income of subsidiaries and affiliates................... 3,575.9 5,522.1
Net income........................................................ 3,862.8 5,808.9
------------ --------------
Guarantors--Cash and investments
At December 31, 2003 and 2004, ETM's temporary investments are primarily
comprised of CEMEX CPOs. In June 2003 and 2004, CEMEX issued 817,515 CPOs and
325,212 CPOs, respectively, through dividends to ETM amounting to Ps30.6 and Ps
17.3, 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, 2003 and 2004, these balances amounted to Ps1,705.2 and Ps1,726.1
from CEMEX Mexico, respectively, and Ps909.4 and Ps1,417.1 from its subsidiary,
respectively.
Guarantors--Investment in affiliates
At December 31, 2003 and 2004, of the Guarantors' total investment in
affiliates, which are accounted for under the equity method, Ps108,098.2 and
Ps118,969.9, respectively, correspond to investments in non-guarantors, and
Ps241.8 in 2003 and Ps244.6 in 2004, are related to minority investments in
third parties.
At December 31, 2004, 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.
F-76
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Guarantors--Indebtedness
At December 31, 2003 and 2004, the Guarantors had total indebtedness of
U.S.$1.3 million (Ps16.1) and U.S.$6.7 million (Ps75.1), respectively. At
December 31, 2003 and 2004, the average annual interest rate of this
indebtedness was approximately 7.8% and 9.9%, respectively. Of the total
indebtedness of the Guarantors at December 31, 2004, approximately U.S.$3.4
million (Ps37.9) matures in 2005 and U.S.$3.3 million (Ps.37.2) matures in 2006
and thereafter.
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, 2003 Short-Term Long-Term Short-Term Long-Term
------------ ----------- ---------- ------------
CEMEX, S.A. de C.V........................................... Ps 141.3 - - 32,270.5
CEMEX Central, S.A. de C.V................................... 703.5 - - -
CEMEX Concretos, S.A. de C.V................................. 257.9 - - -
Impra Cafe, S.A. de C.V. .................................... 502.1 - - -
CEMEX Trademarks Worldwide................................... - - 5,122.3 -
Servicios CEMEX Mexico, S.A. de C.V. ........................ 272.7 - - -
Proveedora de Fibras Textiles, S.A. de C.V. ................. - - 61.1 -
Inmobiliaria Rio la Silla, S.A. de C.V....................... - 254.6 - -
Centro Distribuidor de Cemento, S.A. de C.V. ................ - - - 6,704.0
CEMEX International Finance Company.......................... - - 4,116.6 -
Petrocemex, S.A. de C.V...................................... - - 1,185.5 2,898.1
CEMEX Internacional, S.A. de C.V............................. - - 641.2 -
Turismo CEMEX, S.A. de C.V.. ................................ - - 269.0 -
Others....................................................... 401.8 - 1,792.8 -
------------ ----------- ---------- ------------
Ps 2,279.3 254.6 13,188.5 41,872.6
============ =========== ========== ============
- ----------------------------------------------------------------------------------------------------------------------
Guarantors Assets Liabilities
At December 31, 2004 Short-Term Long-Term Short-Term Long-Term
------------ ----------- ---------- ------------
CEMEX, S.A. de C.V........................................... Ps 912.0 - - 27,515.9
CEMEX Central, S.A. de C.V................................... 1,344.8 - - -
CEMEX Concretos, S.A. de C.V................................. 240.0 - - -
Corporacion Gouda, S.A. de C.V............................... 127.1 - - -
Incalpa, S.A. de C.V. ..................................... . 625.3 - - -
Construmexcla, S.A. de C.V. ................................. - - 6,183.5 -
CEMEX Irish Investments Company Limited. .................... - - 4,710.3 -
CEMEX Trademarks Worldwide................................... - - 5,425.8 -
Servicios CEMEX Mexico, S.A. de C.V. ........................ - - 334.3 -
Inmobiliaria Rio la Silla, S.A. de C.V......................
- 145.0 71.2 -
Centro Distribuidor de Cemento, S.A. de C.V. ................ - - 2,618.3 -
Petrocemex, S.A. de C.V..................................... - - 4,085.6 -
CEMEX Internacional, S.A. de C.V............................. - - 302.7 -
Turismo CEMEX, S.A. de C.V.. ................................ - - 1,072.9 -
Others....................................................... 414.9 - 1,056.6 -
------------ ----------- ---------- ------------
Ps 3,664.1 145.0 25,861.2 27,515.9
============ =========== ========== ============
F-77
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
The principal transactions carried out with affiliated companies are as
follows:
Years ended December 31,
-------------------------------------------------
Guarantors 2002 2003 2004
-------------- ------------- -------------
Net sales......................................................... Ps 3,681.7 3,848.1 4,556.6
Purchases......................................................... (1,079.2) (1,380.5) (1,381.7)
Selling and administrative expenses .............................. (7,878.6) (8,613.2) (7,683.7)
Financial expense................................................. (4,680.2) (4,963.1) (2,831.1)
Financial income ................................................. 631.5 360.1 863.6
Other expense, net ............................................... Ps (62.0) 295.3 580.8
-------------- ------------- -------------
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 24, 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,
---------------------------------------------
2002 2003 2004
----------- ----------- ----------
Net income reported under Mexican GAAP........................... Ps (3,453.5) 5,808.9 18,810.2
Approximate U.S. GAAP adjustments:
1. Deferred income taxes and ESPS (see note B)................... 2,117.1 (8.4) (541.2)
2. Other employees' benefits (see note C)........................ (14.8) 36.5 10.9
3. Inflation adjustment of machinery and equipment (see note D).. (200.4) (123.1) (108.7)
4. Other U.S. GAAP adjustments (see note E)...................... 331.7 (176.1) 1,159.9
5. Monetary position result (see note F)......................... 541.1 118.4 181.0
----------- ----------- ----------
Total approximate U.S. GAAP adjustments...................... 2,774.7 (152.7) 701.9
----------- ----------- ----------
Total approximate net income under U.S. GAAP................. Ps (678.8) 5,656.2 19,512.1
=========== =========== ==========
At December 31,
-------------------------------------
2003 2004
---------------- ----------------
Total stockholders' equity under Mexican GAAP............................. Ps 86,536.4 101,442.6
Approximate U.S. GAAP adjustments:
1. Effect of pushdown of goodwill, net (see note A)...................... 2,139.2 1,693.8
2. Deferred income taxes and ESPS (see note B)........................... (3,447.2) (3,248.2)
3. Other employees' benefits (see note C)................................ (105.5) (89.2)
4. Inflation adjustment for machinery and equipment (see note D).......... 2,279.5 1,805.3
5. Other U.S. GAAP adjustments (see note E).............................. 581.0 6,656.4
================ ================
Total approximate U.S. GAAP adjustments.............................. 1,447.0 6,818.1
---------------- ----------------
Total approximate stockholders' equity under U.S. GAAP............... Ps 87,983.4 108,260.7
================ ================
F-78
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 Ps7,647.0, of which Ps3,955.4 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 Ps1,274.8 in 2003 and Ps829.4 in 2004.
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 Ps972.6. The net adjustment in the Guarantors' stockholders' equity
reconciliation to U.S. GAAP arising from this pushed-down goodwill was Ps864.4
in 2003 and Ps864.4 in 2004.
As mentioned in note 24(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, 2003 and 2004, represented expense of Ps717.4 and
expense of Ps405.9, respectively. In addition, deferred ESPS adjustment to U.S.
GAAP was an expense of Ps2,729.8 in 2003 and an expense of Ps2,842.3 in 2004.
C. Other employees' benefits
The Guarantors do not accrue for severance payments and until December 31,
2002, did not accrue for vacation expense. These items are recognized when
retirements occur or when vacation was taken. Beginning January 1, 2003, in
accordance with new Mexican GAAP pronouncements, the Guarantors began to accrue
for vacation expense on the basis of services rendered. The Guarantors
recognized, for purposes of the U.S. GAAP reconciliation, a liability for
severance benefits for Ps105.5 in 2003 and Ps89.2 in 2004.
D. Inflation Adjustment of Machinery and Equipment
As previously mentioned in note 24(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
Deferred charges--For U.S. GAAP purposes, other deferred charges net of
accumulated amortization that did not qualify for deferral under U.S. GAAP have
been charged to expense, with a net effect in the net income reconciliation to
U.S. GAAP of expense of Ps294.3 for the year ended December 31, 2002. Mexican
GAAP allowed the deferral of these expenses. This effect has been cancelled in
stockholders' equity because the intangible assets were sold to Cemex
Trademark Worldwide (CTW), an affiliated company, for a total amount of Ps521.2
in February 2003.
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, 2003 and 2004
was income of Ps581.0 and income of Ps6,656.4, respectively. The effect on the
net income reconciliation to U.S. GAAP was income of Ps626.0 in 2002 and
expense of Ps176.1 in 2003 and Ps1,159.9 in 2004, respectively. From the U.S.
GAAP adjustments to subsidiary companies in the Guarantors' reconciliation of
stockholders' equity, expense of Ps3,447.2 in 2003 and expense of Ps3,248.2 in
2004, are related to deferred IT and deferred ESPS.
F-79
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Affiliates companies--In 2003, the investment in affiliates includes an effect
of Ps682.4 corresponding to the cumulative effect of accounting change; see
notes 24(k), with respect to asset retirement obligations, and 24(m) with
respect to equity forward contracts.
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.
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, 2002, 2003 and 2004, 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,
-------------------------------------------------
2002 2003 2004
-------------- ------------- --------------
Net cash provided by operating activities.......................... Ps 2,001.4 6,969.9 17,387.8
Net cash provided by (used in) financing activities................ 2,418.5 (5,886.0) 31.1
Net cash used in investing activities.............................. (3,555.4) (1,561.2) (17,355.0)
============== ============= ==============
Net cash flow from operating activities reflects cash payments for interests
and income taxes as follows:
Years ended December 31,
-------------------------------------------------
2002 2003 2004
-------------- ------------- --------------
Interest paid...................................................... Ps 263.5 149.7 0.1
Income taxes paid.................................................. - - 0.7
-------------- ------------- --------------
Guarantors' non-cash activities are comprised of the following:
Dividends declared to CEMEX amounting to Ps2,171.5 in 2002 and 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, 2003 and 2004, CEMEX Mexico and ETM guaranteed debt of CEMEX
in the amount of U.S.$3,145 million (Ps37,555.6) and U.S.$3,087.8 million
(Ps34,398.1) (note 12C).
Subsequent event
On March 7, 2005, at the extraordinary shareholders meeting of CEMEX Mexico,
shareholders approved: 1) an increase in capital stock amounting to
approximately U.S.$799.6 millions (Ps8,863.3) and, 2) a capital contribution to
its subsidiary CEDICE amounting to U.S.$799.6 millions (Ps8,863.3).
F-80
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 15, 2005, we reported on the consolidated balance
sheets of CEMEX, S.A. de C.V. and subsidiaries as of December 31, 2003 and
2004, and the related consolidated statements of income, changes in
stockholders' equity and changes in financial position for each of the years
ended December 31, 2002, 2003 and 2004, 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 15, 2005
S-1
SCHEDULE I
CEMEX, S.A. DE C.V. (PARENT COMPANY ONLY)
Balance Sheets
(Millions of constant Mexican Pesos as of December 31, 2004)
December 31,
------------------------------------
Assets 2003 2004
----------------- ---------------
Current Assets
Cash and investments.................................................... Ps 114.5 104.5
Other receivables (note 3).............................................. 750.5 984.6
Related parties receivables (note 7).................................... 943.7 691.7
----------------- ---------------
Total current assets................................................ 1,808.7 1,780.8
----------------- ---------------
Investments and Noncurrent Receivables
Investments in subsidiaries and affiliated companies (note 4) .......... 90,012.2 103,554.6
Other investments....................................................... 75.6 77.2
Other noncurrent accounts receivable.................................... 1,003.8 793.1
Long-term related parties receivables (note 7).......................... 36,292.6 33,045.7
----------------- ---------------
Total investments and noncurrent receivables........................ 127,384.2 137,470.6
----------------- ---------------
----------------- ---------------
Land and Buildings......................................................... 1,820.0 1,813.5
----------------- ---------------
Intangible Assets and Deferred Charges (note 5)............................ 5,585.9 4,135.3
----------------- ---------------
Total Assets........................................................ Ps 136,598.8 145,200.2
================= ===============
Liabilities and Stockholders' Equity
Current Liabilities
Bank loans (note 6).........................................................Ps 770.0 1,541.5
Notes payable (note 6)...................................................... 1,991.8 -
Current maturities of long-term debt (note 6)............................... 743.0 1,759.7
Other accounts payable and accrued expenses (note 3)....................... 2,968.6 654.8
Related parties payable (note 7)............................................ 4,930.0 6,363.2
----------------- ----------------
Total current liabilities............................................... 11,403.4 10,319.2
----------------- ----------------
Long-Term Debt
Long-Term debt (note 6)..................................................... 23,396.7 22,074.1
Long-term related parties payables (note 7)................................. 25,447.6 24,206.5
----------------- ----------------
Total long-term debt.................................................... 48,844.3 46,280.6
Other long-term liabilities............................................. 1,906.3 1,366.3
----------------- ----------------
Total Liabilities.............................................................. 62,154.0 57,966.1
----------------- ----------------
----------------- ----------------
Stockholders' Equity........................................................... 74,444.8 87,234.1
----------------- ----------------
Total Liabilities and Stockholders' Equity..............................Ps 136,598.8 145,200.2
================= ================
See accompanying notes to 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, 2004, except for earnings per share)
Years ended December 31,
--------------- -------------- ---------------
2002 2003 2004
--------------- -------------- ---------------
Total revenues ..............................................Ps 5,910.7 3,994.8 14,242.9
Administrative expenses......................................... (116.4) (57.8) (37.5)
--------------- -------------- ---------------
Operating income............................................. 5,794.3 3,937.0 14,205.4
--------------- -------------- ---------------
Net comprehensive financing result....................... (1,503.9) (1,864.5) 1,225.5
Other income (expense), net.................................... (369.3) 4,603.1 (1,172.6)
--------------- -------------- ---------------
Income before income taxes................................... 3,921.1 6,675.6 14,258.3
Income tax benefit and business assets tax, net (note 8)........ 2,418.1 832.8 304.0
--------------- -------------- ---------------
Net income...................................................Ps 6,339.2 7,508.4 14,562.3
=============== ============== ===============
Basic earnings per share.....................................Ps 1.41 1.58 2.92
Diluted earnings per share...................................Ps 1.41 1.55 2.90
=============== ============== ===============
See accompanying notes to 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, 2004)
Years ended December 31,
--------------- --------------- ---------------
2002 2003 2004
--------------- --------------- ---------------
Operating activities
Net income.......................................................... Ps 6,339.2 7,508.4 14,562.3
Charges to operations which did not require resources (note 9)...... (6,591.9) (2,240.1) (11,891.3)
--------------- --------------- ---------------
Resources provided by (used in) operating activities............ (252.7) 5,268.3 2,671.0
Net change in working capital....................................... 1,193.1 19,089.0 (862.7)
--------------- --------------- ---------------
Net resources provided by operating activities.................. 940.4 24,357.3 1,808.3
--------------- --------------- ---------------
Financing activities
Proceeds from bank loans (repayments), net......................... 3,523.4 (9,901.0) 5,712.0
Notes payable, net................................................. 4,467.3 (2,326.3) (7,238.2)
Liquidation of appreciation warrants............................... - - (1,053.0)
Dividends paid..................................................... (3,984.1) (4,210.3) (4,319.4)
Issuance of common stock from reinvestment of dividends............ 3,376.4 3,899.4 4,156.8
Issuance of common stock under stock option plan................... 79.9 45.3 67.2
Disposal (acquisition) of shares under repurchase program.......... (425.5) 407.9 -
Other financing activities, net.................................... 802.6 379.3 (540.0)
--------------- --------------- ---------------
Resources (used in) provided by financing activities........... 7,840.0 (11,705.7) (3,214.6)
--------------- --------------- ---------------
Investing activities
Long-term related parties receivables, net......................... 58,037.6 (10,883.9) 2,005.8
Net change in investment in subsidiaries........................... (69,166.9) (7,397.9) (1,358.9)
Dividends received................................................. 2,546.1 5,844.6 283.4
Deferred charges................................................... (103.1) (50.1) 267.5
Other noncurrent accounts receivable............................... 129.8 (452.7) 198.5
--------------- --------------- ---------------
Resources (used in) provided by investing activities.......... (8,556.5) (12,940.0) 1,396.3
--------------- --------------- ---------------
Increase (decrease) in cash and investments.................... 223.9 (288.4) (10.0)
Cash and investments at beginning of year...................... 179.0 402.9 114.5
--------------- --------------- ---------------
Cash and investments at end of year............................ Ps 402.9 114.5 104.5
=============== =============== ===============
See accompanying notes to financial statements.
S-4
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
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 and ready-mix
concrete.
2. SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION AND DISCLOSURE
These financial statements have been prepared in accordance with Generally
Accepted Accounting Principles in Mexico ("Mexican GAAP"), which include the
recognition of the effects of inflation on the financial information.
B) PRESENTATION OF COMPARATIVE FINANCIAL STATEMENTS
The restatement factors for the Parent Company's financial statements of prior
periods were calculated using Mexican inflation.
2001 to 2002 2002 to 2003 2003 to 2004
-------------- ------------- ---------------
Restatement factor using Mexican inflation.................. 1.0559 1.0387 1.0539
-------------- ------------- ---------------
C) CASH AND INVESTMENTS
Investments include fixed-income securities with original maturities of three
months or less, as well as marketable securities easily convertible into cash.
Investments in fixed-income securities are recorded at cost plus accrued
interest. Investments in marketable securities are recorded at market value.
Results from changes in market values, accrued interest and the effects of
inflation are included in earnings as part of the Comprehensive Financing
Result.
D) INVESTMENTS IN SUBSIDIARIES AND AFFILIATED COMPANIES
Investments in common stock representing between 10% and 100% of the issuer's
common stock are accounted for by the equity method. Under the equity method,
after acquisition, the investments original cost are adjusted for the
proportional interest of the holding company in the affiliates equity and
earnings, considering the inflation effects.
E) LAND AND BUILDINGS
Land and buildings are presented at their restated values using the Mexican
inflation index. Depreciation of buildings is provided on the straight-line
method over the estimated useful lives of the assets. The useful lives of
administrative buildings are approximately 50 years.
F) INTANGIBLE ASSETS, DEFERRED CHARGES AND AMORTIZATION (note 5)
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 demonstrated. 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, except for goodwill, is
calculated under the straight-line method.
Intangible assets acquired in a business combination are separately accounted
for at fair value at the acquisition date, unless the value cannot be
reasonably estimated, in which case, such amounts are included as part of
goodwill, which was amortized until December 31, 2004, in accordance with
current accounting standards. Until that date, CEMEX amortized goodwill 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 December 31, 2004 was
amortized over a maximum period of 20 years. Starting January 1, 2005, goodwill
balances will cease to be amortized but will remain subject to periodic
impairment tests.
S-5
SCHEDULE I (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS--(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Direct costs incurred in debt issuances are capitalized and amortized as part
of the effective interest rate of each transaction over its maturity. These
costs include discounts on debt issuance, bank fees, fees paid to attorneys,
agents, printers and consultants.
G) 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 Mexican inflation rate on the Company's net monetary position.
H) DEFICIT IN EQUITY RESTATEMENT
The deficit in equity restatement includes the accumulated effect from holding
non-monetary assets as well as the foreign currency translation effects from
foreign subsidiaries' financial statements.
I) CONTINGENCIES AND COMMITMENTS
Obligations or material losses, related to contingencies and commitments, are
recognized when present obligations exist, as a result of past events, it is
probable that the effects will materialize and there are reasonable elements
for quantification. If there are no reasonable elements for quantification, a
qualitative disclosure is included in the notes to the financial statements.
The Company does not recognize contingent revenues, income or assets.
J) USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities at the
financial statements date and the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from these estimates.
3. OTHER ACCOUNTS RECEIVABLE AND OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other accounts receivable as of December 31, 2003 and 2004 consist of:
2003 2004
--------------- --------------
Non-trade receivables........................................................... Ps 298.1 229.6
Prepayments and receivables from valuation of derivative instruments............ 115.9 391.2
Refundable income tax........................................................... 8.4 -
Other refundable taxes.......................................................... 328.1 363.8
--------------- --------------
Ps 750.5 984.6
=============== ==============
Other accounts payable and accrued expenses as of December 31, 2003 and 2004
consist of:
2003 2004
--------------- ---------------
Other accounts payable and accrued expenses..................................... Ps 1,563.1 1.2
Interest payable................................................................ 336.8 206.3
Tax payable..................................................................... 511.8 173.1
Dividends payable............................................................... 5.2 4.4
Provisions...................................................................... 7.3 -
Accounts payable from valuation of derivative instruments....................... 544.4 269.8
--------------- ---------------
Ps 2,968.6 654.8
=============== ===============
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.
S-6
SCHEDULE 1 (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS--(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
4. INVESTMENTS IN SUBSIDIARIES AND AFFILIATED COMPANIES
As of December 31, 2003 and 2004, investments in subsidiaries and affiliated
companies accounted for by the equity method, are summarized as follows:
2003 2004
--------------- --------------
Book value at acquisition date................................................ Ps 67,530.2 65,187.8
Equity in income and other changes in stockholders' equity of subsidiaries and
affiliated companies....................................................... 22,482.0 38,366.8
--------------- --------------
Ps 90,012.2 103,554.6
=============== ==============
5. INTANGIBLE ASSETS AND DEFERRED CHARGES
At December 31, 2003 and 2004, intangible assets of indefinite life and
deferred charges are summarized as follows:
2003 2004
--------------- --------------
Intangible of indefinite useful life:
Goodwill..................................................................... Ps 2,088.7 2,080.6
Accumulated amortization...................................................... (157.9) (187.2)
--------------- --------------
1,930.8 1,893.4
--------------- --------------
Deferred Charges:
Deferred financing costs...................................................... 405.4 196.9
Deferred income taxes (note 8)................................................ 3,186.9 1,970.2
Others........................................................................ 438.0 379.0
Accumulated amortization ..................................................... (375.2) (304.2)
--------------- --------------
3,655.1 2,241.9
--------------- --------------
Ps 5,585.9 4,135.3
=============== ==============
6. SHORT AND LONG-TERM BANK LOANS AND NOTES PAYABLE
A total of 69.9% and 90.1% of the Parent Company-only short-term debt is
denominated in dollars in 2003 and 2004, respectively.
Of the Parent Company-only long-term debt, approximately 89.0% and 84.0% is
denominated in dollars in 2003 and 2004, respectively; the remaining debt in
2003 and 2004 is primarily denominated in Mexican pesos.
The maturities of long-term debt as of December 31, 2004 are as follows:
Parent
-----------------
2006.............................................. Ps 6,177.8
2007.............................................. 10,104.2
2008.............................................. 3,489.6
2009.............................................. 2,302.5
2010 and thereafter............................... -
-----------------
Ps 22,074.1
=================
In the Parent Company-only balance sheet at December 31, 2003 and 2004, there
were short-term debt transactions amounting to U.S.$395 million ($4,716.8) and
U.S.$847.2 million ($9,438.1), respectively, classified as long-term debt, due
to the Company's ability and the intention to refinance such indebtedness with
the available amounts of the committed long-term lines of credit.
S-7
SCHEDULE 1 (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS--(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
7. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
The main balances receivable and payable with related parties as of December
31, 2003 and 2004 are:
Parent Company 2003
-----------------------------------------------------------------------
Assets Liabilities
--------------------------------- ---------------------------------
Short-Term Long-Term Short-Term Long-Term
-------------- --------------- -------------- ---------------
CEMEX Mexico, S.A. de C.V............................. $ 785.7 36,082.3 - -
CEMEX International Finance Co........................ - - 41.7 21,203.6
Empresas Tolteca de Mexico, S.A. de C.V............... - - 4,738.8 -
CEMEX Irish Investments Company Limited............... - - 17.8 4,108.7
International Investors LLC........................... 10.2 210.3 - -
Centro Distribuidor de Cemento, S.A. de C.V........... 2.8 - - 135.3
CEMEX Asia Pte. Ltd................................... - - 125.0 -
CEMEX Manila Investments B.V.......................... 58.6 - - -
Sunbelt Trading, S.A.................................. 50.2 - - -
CEMEX Venezuela, S.A.C.A.............................. 8.9 - - -
CEMEX Colombia, S.A................................... 7.1 - - -
Latin Asia Investments, Pte. Ltd...................... 5.9 - - -
Others................................................ 14.3 - 6.7 -
-------------- --------------- -------------- ---------------
$ 943.7 36,292.6 4,930.0 25,447.6
============== =============== ============== ==============-
Parent Company 2004
-----------------------------------------------------------------------
Assets Liabilities
--------------------------------- ---------------------------------
Short-Term Long-Term Short-Term Long-Term
-------------- --------------- -------------- ---------------
CEMEX Mexico, S.A. de C.V............................. $ - 10,832.6 6,245.5 267.2
CEMEX International Finance Co........................ - - 60.5 19,940.1
Empresas Tolteca de Mexico, S.A. de C.V............... 70.9 22,213.1 - -
CEMEX Irish Investments Company Limited............... - - 22.7 3,863.9
Centro Distribuidor de Cemento, S.A. de C.V........... - - 31.9 135.3
CEMEX Manila Investments B.V.......................... 589.2 - - -
CEMEX Venezuela, S.A.C.A............................. 18.8 - - -
Latin Asia Investments, Pte. Ltd...................... 5.6 - - -
Others............................................... 7.2 - 2.6 -
-------------- --------------- -------------- ---------------
$ 691.7 33,045.7 6,363.2 24,206.5
============== =============== ============== ===============
The main transactions carried out during the last three years with related
parties are:
2002 2003 2004
--------------- -------------- ---------------
Rental income....................................... Ps 303.6 290.6 278.4
License fees........................................ 202.1 544.7 668.8
Financial expense................................... (879.0) (835.5) (939.7)
Management services expense......................... (2,299.3) (1,503.5) (930.2)
Financial income.................................... 3,406.9 3,233.2 1,488.7
Dividends received.................................. 2,546.1 5,844.6 283.4
=============== ============== ===============
S-8
SCHEDULE 1 (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS--(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
8. INCOME TAX (IT), BUSINESS ASSETS TAX (BAT)
In accordance with the effective tax legislation in Mexico, corporations must
pay either income tax ("IT") or business assets tax ("BAT") depending on which
amount is greater for their operations in Mexico. Both taxes recognize the
effects of inflation, though in a manner different from Mexican GAAP.
The IT benefit, presented in the accompanying income statements, is summarized
as follows:
2002 2003 2004
------------- ------------- -------------
Received from subsidiaries............... Ps 1,020.0 1,409.8 1,357.6
Deferred IT.............................. 1,398.1 (577.0) (1,053.6)
------------- ------------- -------------
Ps 2,418.1 832.8 304.0
============= ============= =============
Arising from its Mexican subsidiaries, the Company has accumulated IT loss
carry forwards 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
-------------- --------------
2000..................................... Ps 360.0 2010
2001..................................... 3,527.9 2011
2002..................................... 4,053.6 2012
2003..................................... 811.7 2013
--------------
Ps 8,753.2
==============
The Company and its subsidiaries in Mexico must generate taxable income to
preserve the benefit of the tax loss carryforwards generated beginning in 1999.
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. 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, 2004 is as follows:
Year in which BAT exceeded IT Amount of Year of
carryforwards expiration
-------------- --------------
1997..................................... Ps 150.4 2007
S-9
SCHEDULE 1 (Continued)
CEMEX, S.A. DE C.V.
NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS--(Continued)
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
9. ITEMS NOT AFFECTING CASH FLOWS
For the years ended December 31, 2002, 2003 and 2004, items charged or credited
to the results of operations, which did not generated the use of resources, are
summarized as follows:
2002 2003 2004
------------- ------------- -------------
Depreciation of properties..........................................Ps 5.5 5.5 6.5
Amortization of deferred charges and credits, net................... 205.7 336.9 344.3
Deferred income tax credited to results............................. (1,398.1) 577.0
1,053.6
Equity in income of subsidiaries and affiliates..................... (5,405.0) (3,159.5) (13,295.7)
------------- ------------- -------------
Ps (6,591.9) (2,240.1) (11,891.3)
============= ============= =============
10. CONTINGENCIES AND COMMITMENTS
As of December 31, 2003 and 2004, CEMEX has signed as guarantor of loans made
to certain subsidiaries for approximately U.S.$1,322 million and U.S.$1,355
million, respectively. As of the same date, the Company and certain
subsidiaries have 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.$55 million and U.S.$25.8
million, respectively.
S-10
SCHEDULE II
CEMEX, S.A. DE C.V. AND SUBSIDIARIES
December 31, 2002, 2003 and 2004
(Millions of constant Mexican Pesos as of December 31, 2004)
Valuation and Qualifying Accounts as of December 31, 2002, 2003
and 2004, 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, 2002:
Allowance for doubtful accounts........... Ps 590.5 284.1 334.5 21.7 561.8
============ ============ ============ ============ =============
Year ended December 31, 2003:
Allowance for doubtful accounts........... 561.8 373.1 298.7 35.3 671.5
============ ============ ============ ============ =============
Year ended December 31, 2004:
Allowance for doubtful accounts........... 671.5 418.9 354.5 20.5 756.4
============ ============ ============ ============ =============
(1) Amounts included in "Others" primarily result from 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-11
EXHIBIT 4.14
[EXECUTION COPY]
================================================================================
CEMEX ESPANA FINANCE LLC
(Y)4,980,600,000 1.79% Senior Notes, Series 2004, Tranche 1, due 2010
(Y)6,087,400,000 1.99% Senior Notes, Series 2004, Tranche 2, due 2011
-------------------------
NOTE PURCHASE AGREEMENT
-------------------------
Dated as of April 15, 2004
================================================================================
TABLE OF CONTENTS
Page
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........................................................................2
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
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......................................................................12
6.1 Purchase for Investment.......................................................................12
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......................................................................17
8.1 Stated Maturity...............................................................................17
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.............................................................20
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
10.4 Sales of Assets...............................................................................28
10.5 Financial Covenants...........................................................................29
10.6 Limitation on Non-Guarantor Financial Indebtedness............................................29
10.7 Notarization..................................................................................31
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
22.1 Successors and Assigns........................................................................45
22.2 Payments Due on Non-Business Days.............................................................45
22.3 Severability..................................................................................46
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
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
Schedule 10.7 Existing Notarizations
Exhibits
Exhibit 1 Forms of Notes
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
CEMEX ESPANA FINANCE LLC
c/o Cemex Espana, S.A.
Caleruega 67- 5(0)
28033 Madrid, Spain
1.79% Senior Notes, Series 2004, Tranche 1, due April 15, 2010
1.99% Senior Notes, Series 2004, Tranche 2, due April 15, 2011
as of April 15, 2004
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) (Y)4,980,600,000
aggregate principal amount of its 1.79% Senior Notes, Series 2004, Tranche 1,
due April 15, 2010 (the "Tranche 1 Notes") and (ii) (Y)6,087,400,000 aggregate
principal amount of its 1.99% Senior Notes, Series 2004, Tranche 2, due April
15, 2011 (the "Tranche 2 Notes") (the Tranche 1 Notes and the Tranche 2 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 3, Notes in the principal
amount and of the tranche(s) 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 April 15, 2004 or on such other Business Day thereafter on or
prior to April 15, 2004 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 (Y)50,000,000 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., New York, ABA:021000089 for further transfer to the credit of Cemex
Espana Finance LLC, account JPY: ES29 1474 0000 1900 1102 2022 held at
Citibank International, PLC, Madrid Branch, Swift: CITIESMX. 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, 10.3 or 10.7
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,
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 tranche
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 April 15, 2012.
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, Banc of America Securities, has
delivered to each Purchaser a copy of a Private Placement Memorandum, dated
February 2004 (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, 2002, 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, showing, as to each 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 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) No Subsidiary is a party to, or otherwise subject to any legal restriction
or any agreement (other than this Agreement, the agreements and other
restrictions listed on Schedule 5.4 and 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 5.5 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
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 (i) 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 and (ii) the assumption, made solely for the
purpose of making such representation, that Department of Labor Interpretive
Bulletin 75-2 with respect to prohibited transactions remains valid in the
circumstances of the transactions contemplated herein.
(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 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 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 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 December 31, 2003, 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
10.3.
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.
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), Article 914 of the Spanish Commercial Code (Codigo de Comercio)
until September 1, 2004, and from and following September 1, 2004 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) and those
whose claims that according to Spanish law rank in priority as a result of
having been raised to the status of a Spanish Public Document as a result of
Permitted Notarizations in accordance with Section 10.7.
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 6.2
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), 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(b) 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 10.7 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 Tranche 1 Notes shall become
due and payable on April 15, 2010.
(b) The entire principal amount of the Tranche 2 Notes shall become
due and payable on April 15, 2011.
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 a minimum
amount of (Y)100,000,000 and otherwise in multiples of (Y)10,000,000) 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 shall be a Business Day), 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 purchased 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 Japanese government bonds will be
0.25%). 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 purchased 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 8.2 or 8.3, 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 8,
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 the Notes is payable)
equal to the Reinvestment Yield with respect to such Called
Principal.
"Recognized Yen Market Maker" means any financial
institution that makes regular markets in Japanese Government Bonds
and Japanese Government Bond-based securities and financial products,
as shall be agreed between the Required Holders and Cemex Espana or,
following the occurrence and continuance of an Event of Default, as
reasonably determined by the Required Holders.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 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 Bloomberg Financial
Markets News screen BTMM JN (or such other Bloomberg Financial
Markets News display as may replace such BTMM JN screen) for actively
traded Japanese Government Bonds having a maturity equal to the
remaining life of such Called Principal as of such Settlement Date,
provided that if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, such yield to
maturity shall be implied by the average of the rates as determined
by two Recognized Yen Market Makers. Such implied yields will be
determined, if necessary, by (i) converting quotations to
bond-equivalent yields in accordance with accepted financial practice
and (ii) interpolating linearly between (x) the actively traded
Japanese Government Bonds with a maturity closest to and greater than
the remaining life and (y) the actively traded Japanese Government
Bonds with a maturity closest to and less than the remaining life.
"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 the Notes, 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 and
assessments 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 or
assessment or claims 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 and assessments 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), Article 914 of the Spanish
Commercial Code (Codigo de Comercio), 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) and those whose
claims that according to Spanish law rank in priority as a result of having
been raised to the status of a Spanish Public Document as a result of
Permitted Notarizations in accordance with Section 10.7.
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 corporation or convey, transfer or
lease 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 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 is a member of the EU on the date hereof (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 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
corporation or convey, transfer or lease 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 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 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, provided that, 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, provided that 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.
10.7 Notarization
(a) Subject to clause (b) below, Cemex Espana will not (and will not
permit its Subsidiaries to) permit any unsecured Financial Indebtedness of
Cemex Espana or its Subsidiaries to be notarized as a Spanish Public Document
(any such notarization, a "Notarization"), other than the following permitted
Notarizations ("Permitted Notarizations"):
(i) any existing Notarization listed in Schedule 10.7
(Existing Notarizations) and any amendments or modifications
thereof, provided that any such amendment or modification shall not
increase the principal amount of such Financial Indebtedness, extend
the maturity thereof or refinance such Financial Indebtedness;
(ii) Notarizations with the prior written consent of the
Required Holders;
(iii) any Notarization securing indebtedness, provided that
immediately after giving effect to such Notarization 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; and
(iv) any Notarizations relating to indebtedness in respect
of any sale and purchase agreement customarily registered in a
public register in Spain and payment of which indebtedness is made
within seven days of the date of such agreement.
(b) This Section 10.7 shall not apply if Cemex Espana, concurrently
with any such Notarization (other than a Permitted Notarization) referred
to in clause (a) above and at its own cost and expense, causes this
Agreement and the Note Guarantee of Cemex Espana to be the subject of a
Notarization. Cemex Espana shall give each holder at least 30 days'
written notice prior to the Notarization of any Financial Indebtedness
other than a Permitted Notarization. Such notice shall instruct the
holders as to the procedures to be followed in order for this Agreement
and the Note Guarantee of Cemex Espana of the Notes to be notarized. Each
holder shall, at the expense of Cemex Espana, take such actions as may be
reasonably requested by Cemex Espana and are necessary or required in
obtaining such Notarization. Cemex Espana shall have no obligation to
notarize Financial Indebtedness held by any Person (including a holder)
if such Person does not take such actions as may be reasonably requested
by Cemex Espana in order for Cemex Espana to satisfy its obligations
under this Section 10.7(b). If requested in writing by the Required
Holders, Cemex Espana shall, prior to the time of any such Notarization,
deliver to the holders an opinion of nationally recognized Spanish
counsel to the effect that, upon the Notarization of this Agreement and
Cemex Espana's Note Guarantee of the Notes required to be Notarized, such
Note Guarantee shall, in the event of a bankruptcy of Cemex Espana, rank
in right of payment equal and pro rata with or senior to all other
unsecured Financial Indebtedness of Cemex Espana Notarized concurrently
therewith, 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),
Article 914 of the Spanish Commercial Code (Codigo de Comercio), 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).
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), 10.2, 10.4, 10.5,
10.6 or 10.7 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 (euro)27,500,000 (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 (euro)27,500,000 (or the equivalent thereof if
denominated in a currency other than euro) (excluding in the calculation
of such (euro)27,500,000 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
tranche 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 tranche 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 (Y)100,000,000, provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than
(Y)100,000,000. 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 tranche, 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 14.3 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 Japanese Yen. All payments under the Notes shall be
made in Japanese yen.
(b) Certain Expenses. Unless otherwise stated herein, 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 Japanese Yen. 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 (other than amounts due under Section
15.1) 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 Japanese yen 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 Japanese yen 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 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 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 or the Notes or in responding to any subpoena
or other legal process or informal investigative demand issued in connection
with this Agreement 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 or any Subsidiary
or in connection with any work-out or restructuring of the transactions
contemplated hereby 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 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). Amounts payable pursuant
to this Section 15.1 shall be payable in Dollars.
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement 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 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 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
and the holder of any Note nor any delay in exercising any rights hereunder 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 or the Notes, or have directed the taking of any
action provided herein 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 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
(iii) if to the Company or Cemex Espana, to the Company or
Cemex Espana at Caleruega 67- 5, 28033 Madrid, Spain, Facsimile
number:+ 3491 3535065/66, Phone number: + 3491 3535055, 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 NL, 66220 Mexico, Facsimile number: +52 81
8888 4428, to the attention of Francisco Contreras, and with a copy
(which shall not 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 with 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 20, (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 (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 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 20 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. Notwithstanding anything to the contrary set forth herein
or in any other written or oral understanding or agreement to which the
parties hereto are parties or by which they are bound, the parties to this
Agreement acknowledge and agree that (i) any obligations of confidentiality
contained herein and therein do not apply and have not applied from the
commencement of discussions between the parties to the tax treatment and tax
structure of the Notes (and any related transactions or arrangements) and (ii)
each Purchaser (and each of its 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 Notes and all materials of any kind
(including opinions or other tax analyses) that are provided to such Purchaser
relating to such tax treatment and tax structure, all within the meaning of
the U.S. Department of the Treasury Regulations Section 1.6011-4.
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/ Hector Campa Martinez
--------------------------------
Name: Hector Campa Martinez
-------------------------
Title: Attorney-in-Fact
-------------------
CEMEX ESPANA FINANCE LLC
By: /s/ Hector Campa Martinez
--------------------------------
Name: Hector Campa Martinez
-------------------------
Title: Attorney-in-Fact
-------------------
The foregoing is hereby agreed to as of the date thereof.
JOHN HANCOCK LIFE INSURANCE COMPANY
By: /s/ David E. Johnson
------------------------------------------------
David E. Johnson
Managing Director
NATIONWIDE MUTUAL INSURANCE COMPANY
By: /s/ Mark. W. Poeppelman
------------------------------------------------
Name: Mark W. Poeppelman
Title: Authorized Signatory
MANULIFE LIFE INSURANCE COMPANY
By: /s/ John Shed
------------------------------------------------
Name: John Shed
Title: Vice President & Managing Corporate Officer
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Illegible
------------------------------------------------
Name: Illegible
Title: Director
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Robert B. Bodett
------------------------------------------------
Name: Robert B. Bodett
By: /s/ Jerry D. Zinkula
------------------------------------------------
Name: Jerry D. Zinkula
Authorized Signatories
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
TRANCHE 1 NOTES
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); 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
exceed EBITDA by (euro)10,000,000 or more.
"Affiliate" means, at any time, and with respect to any Person, (a)
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) 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 corporation 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 8.8 only, any
day other than a Saturday, a Sunday or a day on which commercial banks in New
York City or Tokyo, Japan 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, New
York City or Tokyo, Japan 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 of any Subsidiary.
"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 Federal, state, local, and
foreign 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, and (vi) Sandworth Plaza Holding
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 polycholorinated 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 (Y)500,000,000 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.
"Japanese yen" and the sign "(Y)" mean lawful currency of Japan.
"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.
"Notarization" is defined in Section 10.7(a).
"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 April 15, 2011; 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 Notarization" is defined in Section 10.7(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, covenants and
indemnities, 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 Cemex Espana or its Subsidiary as to which a
valid Notarization is in effect, excluding Permitted Notarizations of the type
described in clauses (i), (ii) and (iv) of Section 10.7(a), (ii) Financial
Indebtedness of Subsidiaries (other than Excluded Subsidiary Guarantors and
the Company), excluding Financial Indebtedness of the type described in
clauses (a) through (h) of Section 10.6 and (iii) 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
the 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 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.
"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.
"Spanish Public Document" means any document granted before either a
Spanish public notary or a competent Spanish public employee observing the
formalities of applicable Spanish law.
"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 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 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.
"Tranche 1 Notes" is defined in Section 1.
"Tranche 2 Notes" is defined in Section 1.
"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
None.
SCHEDULE 5.3
DISCLOSURE EXCEPTIONS
None.
SCHEDULE 5.4
SUBSIDIARIES (INCLUDING IDENTIFICATION OF MATERIAL SUBSIDIARIES)
As of February 29, 2004
- -------------------------------------------------------------------------------------------------------
COMPANY'S PLACE OF SHAREHOLDING
NAME INCORPORATION PARTICIPATION
- -------------------------------------------------------------------------------------------------------
AGROPECUARIA ROSARITO, C.A. Venezuela 100%
- -------------------------------------------------------------------------------------------------------
ALTAIR (INDIA) PRIVATE LIMITED India 100%
- -------------------------------------------------------------------------------------------------------
APO CEMENT CORPORATION Philippines 100%
- -------------------------------------------------------------------------------------------------------
APO LAND & QUARRY CORPORATION Philippines 100%
- -------------------------------------------------------------------------------------------------------
ARICEMEX, S.A. Spain 100%
- -------------------------------------------------------------------------------------------------------
ARIDOS Y ASFALTOS CANARIOS, S.A. Spain 100%
- -------------------------------------------------------------------------------------------------------
ARRENDAMIX DE VENEZUELA, S.A. Venezuela 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 92%
- -------------------------------------------------------------------------------------------------------
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 CAPE VERDIAN INVESTMENTS B.V. Netherlands 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 98%
- -------------------------------------------------------------------------------------------------------
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 DANISH INVESTMENTS B.V. Netherlands 100%*
- -------------------------------------------------------------------------------------------------------
CEMEX EGYPT FOR DISTRIBUTION COMPANY Egypt 100%
- -------------------------------------------------------------------------------------------------------
CEMEX EGYPT FOR SERVICES Egypt 100%
- -------------------------------------------------------------------------------------------------------
CEMEX EGYPTIAN INVESTMENTS B.V. Netherlands 100%(G)
- -------------------------------------------------------------------------------------------------------
CEMEX ELEVEN INVESTMENTS B.V. Netherlands 100%
- -------------------------------------------------------------------------------------------------------
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 FOURTEEN INVESTMENTS B.V. Netherlands 100%
- -------------------------------------------------------------------------------------------------------
CEMEX GENERACION Y COMERCIALIZACION DE ENERGIA, S.A. Colombia 100%
E.S.P.
- -------------------------------------------------------------------------------------------------------
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 AFRICA AND MIDDLE EAST, A.p.S. Denmark 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 THIRTEEN 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 TWELVE INVESTMENTS B.V. Netherlands 100%
- -------------------------------------------------------------------------------------------------------
CEMEX VENEZUELA, S.A.C.A. Venezuela 76%*
- -------------------------------------------------------------------------------------------------------
CEMEX VENTURES, INC. Delaware 100%
- -------------------------------------------------------------------------------------------------------
CEMEX, INC. Louisiana 100%*
- -------------------------------------------------------------------------------------------------------
CEMSAL Ltd. Ghana 75%
- -------------------------------------------------------------------------------------------------------
CENTRAL DE MEZCLAS, S.A. Colombia 100%
- -------------------------------------------------------------------------------------------------------
CETACEA INVESTMENTS LIMITED Trinidad & Tobago 100%
- -------------------------------------------------------------------------------------------------------
CETRA INC. Cayman Islands 100%
- -------------------------------------------------------------------------------------------------------
COMERCIALIZADORA FERREX, C.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 EN LIQUIDACION Colombia 100%
- -------------------------------------------------------------------------------------------------------
DISTRIBUIDORA DE CEMENTO, S.A. Panama 100%
- -------------------------------------------------------------------------------------------------------
EDGEWATER VENTURES CORPORATION Philippines 100%
- -------------------------------------------------------------------------------------------------------
ESPARTANA SHIPPING CO. Cayman Islands 100%
- -------------------------------------------------------------------------------------------------------
FLORIDA LIME CORPORATION Puerto Rico 100%
- -------------------------------------------------------------------------------------------------------
FUNDACION DIAMANTE SAMPER Colombia 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%
- -------------------------------------------------------------------------------------------------------
HISPAGOLD INVESTMENTS B.V. Netherlands 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. EN LIQUIDACION Colombia 98%
- -------------------------------------------------------------------------------------------------------
INMOBILIARIA VALLE DOS C.A. Venezuela 100%
- -------------------------------------------------------------------------------------------------------
INMOBILIARIA Y ARRENDAMIENTO BAYANO, S.A. Panama 100%
- -------------------------------------------------------------------------------------------------------
INTERNATIONAL COMPANY FOR SILOS LTD. Egypt 70%
- -------------------------------------------------------------------------------------------------------
ISLAND QUARRY AND AGGREGATES CORP. Philippines 100%
- -------------------------------------------------------------------------------------------------------
JAMES H. DREW CORPORATION Indiana 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%
- -------------------------------------------------------------------------------------------------------
MADISA B.V. Netherlands 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%
- -------------------------------------------------------------------------------------------------------
SANDWORTH PLAZA HOLDING B.V. Netherlands 100%(G)
- -------------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------
TENNESSEE GUARDRAIL, INC. Tennessee 100%
- -------------------------------------------------------------------------------------------------------
TOULOUSE MIDI PYRENNEES ENROBES, S.A. France 57%
- -------------------------------------------------------------------------------------------------------
TRANSENERGY, INC. Texas 100%
- -------------------------------------------------------------------------------------------------------
TRANSPORTES DE CEMENTO, S.A. Spain 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%
- -------------------------------------------------------------------------------------------------------
* In Bold, material subsidiaries
(G) In Bold, Guarantor
As of February 29, 2004
BOARD OF DIRECTORS OF CEMEX ESPANA
LORENZO H. ZAMBRANO TREVINO
JOSE LUIS SAENZ DE MIERA ALONSO
IGNACIO MADRIDEJOS FERNANDEZ
HECTOR MEDINA AGUIAR
VICTOR MANUEL ROMO MUNOZ
RAMIRO VILLARREAL MORALES
MARCELO ZAMBRANO LOZANO
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
JUAN M. PORTA
SCHEDULE 5.5
FINANCIAL STATEMENTS
1. Consolidated Annual Accounts December 31, 2002 and 2001 and 2002
Directors' Report (With Auditors' Report Thereon)
2. Balance Sheet and Statement of Profit and Loss for the year ended
December 31, 2003
SCHEDULE 5.8
LITIGATION
None.
SCHEDULE 5.11
LICENSE, ETC. EXCEPTIONS
None.
SCHEDULE 5.15
EXISTING FINANCIAL INDEBTEDNESS
As of 03.31.04
Amounts in M (euro)*
- ------------------------------------------------------------------------------------------------------
BORROWER INSTRUMENT OUTSTANDING FINAL
AMOUNT MATURITY
- ------------------------------------------------------------------------------------------------------
Bilateral Lines 478 April 2004-April 2006
CEMEX ESPANA RCF (euro) 300 M(1) 220 October 2004
Others 24 July 2005
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 722
- ------------------------------------------------------------------------------------------------------
Priv. Plac. ((euro) 50 M) 50 March 2006
Priv. Plac. ((euro) 315 M) 256 March 2006
CEMEX INC. Priv. Plac. ((euro) 396 M) 322 March 2006
SBLC(2) 45 Dec 2004-April 2025
Others 13 Between 2004-2009
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 685
- ------------------------------------------------------------------------------------------------------
Priv. Plac. ($103 M) 84 June 2010
CEMEX ESPANA FINANCE LLC Priv. Plac. ($96 M) 78 June 2013
Priv. Plac. ($201 M) 322 June 2015
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 327
- ------------------------------------------------------------------------------------------------------
CEMEX FINANCE EUROPE B.V. EMTN 158 July 2004-July 2006
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 158
- ------------------------------------------------------------------------------------------------------
CEMEX COLOMBIA S.A. 5-year Term Loan 30 April 2004
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 30
- ------------------------------------------------------------------------------------------------------
PUERTO RICAN CEMENT $40 M Credit Line 24 May 2005
$50 M Credit Line 28 January 2006
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 53
- ------------------------------------------------------------------------------------------------------
ASSIUT CEMENT COMPANY Bank loans 8 June 2005-July 2009
Overdraft lines 2 May-June 2004
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 10
- ------------------------------------------------------------------------------------------------------
APO CEMENT CORPORATION ECA Loan 20 December 2004-March 2006
ST Bank debt 0 March 2005
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 20
- ------------------------------------------------------------------------------------------------------
CEMEX CEMENT BANGLADESH Bilateral Line 2 August 2004
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 2
- ------------------------------------------------------------------------------------------------------
CEMENTOS NACIONALES Intercompany debt 12 September 2004
Others 2 September 2007
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 14
- ------------------------------------------------------------------------------------------------------
OTHER COMPANIES Credit Lines 11 --
- ------------------------------------------------------------------------------------------------------
SUBTOTAL 11
- ------------------------------------------------------------------------------------------------------
TOTAL 2,033
----- -----
* Exchange rates:
(euro)/USD=0.8121
JPY/(euro)=128.51
(1) To be prepaid on April 16 with the proceeds of a new EUR 400 million
multicurrency loan signed on March 30, 2004 with final maturity in March 2009.
(2) 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 (M (euro)) AS OF 03.31.04
- ------------------------------------------------------------------------------
COMPANY LENDER LIEN CONCEPT BALANCE
CEMEX Construction Materials, L.P. GE Capital 7964, 8069 Equipment related with the Credit 0.89
CEMEX Construction Materials, L.P. City of Long Beach Cement Terminal (Capital Lease Obligation) 7.90
CEMEX Construction Materials, L.P. Hampton Land related with Credit 0.23
CEMEX Construction Materials, L.P. RIO Land related with the credit 3.91
CEMEX Construction Materials, L.P. Met-South, Inc. Ash storage facility 0.17
------------
13.11
SCHEDULE 10.7
EXISTING NOTARIZATIONS
Type of Total Principal Amount of
Agreement Borrower/Guarantor Maturity date Indebtedness notarised as
of March 31, 2004
- ---------------------------------------------------------------------------------------------------------
Bilateral lines Cemex Espana S.A./n.a. Between Jan. 2005 EUR 51,086,029 (1)
and Dec. 2005
Deferred purchase price Aricemex S.A./n.a. July, 2005 EUR 961,619
5-year term loan Cemex Colombia S.A. April 22nd, 2004 US$ 37,172,250 (2)
(formerly known as
Cementos Diamante)/
Cemex Espana S.A.
(1) Corresponds to the total committed amount under the facilities.
Amount drawn as of 03.31.04: EUR 8,110,266
(2) Approximately $20 million of principal is due and payable on April
22, 2004; Cemex intends to repay the remaining principal amount in
full at that time
EXHIBIT 1(a)
[FORM OF TRANCHE 1 NOTE]
CEMEX ESPANA FINANCE LLC
1.79% SENIOR NOTE, SERIES 2004, TRANCHE 1, DUE APRIL 15, 2010
No.[_____] [Date]
(Y)[_____________] ________________
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
[_______________________________] JAPANESE YEN ((Y)____________) on April 15,
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 1.79% per annum from
the date hereof, payable semiannually, on the 15th day of April and October in
each year, commencing with the April 15th or October 15th 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) 3.79% 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 Japanese yen 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 April 15,
2004 (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 representation 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.
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 TRANCHE 2 NOTE]
CEMEX ESPANA FINANCE LLC
1.99% SENIOR NOTE, SERIES 2004, TRANCHE 2, DUE APRIL 15, 2011
No.[_____] [Date]
(Y)[_____________] ________________
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
[_______________________________] JAPANESE YEN ((Y)____________) on April 15,
2011, 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 1.99% per annum from
the date hereof, payable semiannually, on the 15th day of April and October in
each year, commencing with the April 15th or October 15th 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) 3.99% 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 Japanese yen 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 April 15,
2004 (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.
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
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 4.15
EXECUTION COPY
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 BARCLAYS BANK
PLC, as Issuing Bank and Documentation Agent and ING BANK N.V., as Issuing Bank
and The Several Lenders Party Hereto, as Lenders and BARCLAYS CAPITAL,THE
INVESTMENT BANKING DIVISION OF BARCLAYS BANK PLC, as Joint Bookrunner and ING
CAPITAL LLC, as Joint Bookrunner and Administrative Agent
US$800,000,000
Dated as of June 23, 2004
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. ........................18
ARTICLE II THE LOAN FACILITIES.............................................18
2.01 Revolving Loans..............................................18
2.02 Swing Line Loans.............................................22
2.03 Interest.....................................................25
ARTICLE III THE STANDBY L/C FACILITY.......................................26
3.01 Issuance of the Standby L/C. ..................................26
3.02 Reimbursement Obligations......................................28
3.03 Obligations to Reimburse Standby L/C Drawing Absolute..........28
3.04 Participating Interests........................................29
3.05 Limited Liability of the Issuing Banks.. ......................32
ARTICLE IV TERMINATION AND REDUCTION OF COMMITMENTS; FEES, TAXES,
PAYMENT PROVISIONS..............................................33
4.01 Termination or Reduction of Commitments......................33
4.02 Extension of Termination Date................................33
4.03 Fees.........................................................35
4.04 Computation of Fees..........................................36
4.05 Taxes........................................................36
4.06 General Provisions as to Payments............................38
4.07 Funding Losses...............................................39
4.08 Basis for Determining Interest Rate Inadequate or Unfair. ...39
4.09 Capital Adequacy.............................................40
4.10 Illegality...................................................40
4.11 Requirements of Law..........................................41
4.12 Substitute Lenders...........................................42
Sharing of Payments, Etc..........................................42
Conditions to Effectiveness. .....................................43
ARTICLE V CONDITIONS PRECEDENT ............................................43
5.02 Conditions Precedent to Borrowings, Continuation or
Conversion of the Loans and Issuances of Standby L/Cs........45
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER..................46
6.01 Corporate Existence and Power...............................46
6.02 Power and Authority; Enforceable Obligations................46
6.03 Compliance with Law and Other Instruments...................47
6.04 Consents/Approvals..........................................47
6.06 Litigation..................................................47
6.07 No Immunity.................................................48
6.08 Governmental Regulations....................................48
6.09 Direct Obligations; Pari Passu; Liens.......................48
6.10 Subsidiaries................................................48
6.11 Ownership of Property.......................................48
6.12 No Recordation Necessary....................................48
6.13 Taxes.......................................................49
6.14 Compliance with Laws........................................49
6.15 Absence of Default..........................................49
6.16 Full Disclosure.............................................50
6.17 Choice of Law; Submission to Jurisdiction and Waiver
of Sovereign Immunity.......................................50
6.18 Total Outstandings..........................................50
6.19 Existing Standby L/C's......................................50
6.20 Pension and Welfare Plans...................................50
6.21 Environmental Matters.......................................50
6.22 Margin Regulations..........................................51
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS...............52
7.01 Corporate Existence and Power................................52
7.02 Power and Authority; Enforceable Obligations.................52
7.03 Compliance with Law and Other Instruments. ..................52
7.04 Consents/Approvals. .........................................53
7.05 Litigation; Material Adverse Effect..........................53
7.06 No Immunity..................................................53
7.07 Governmental Regulations.....................................53
7.09 No Recordation Necessary.....................................53
7.10 Choice of Law; Submission to Jurisdiction and Waiver
of Sovereign Immunity........................................54
ARTICLE VIII AFFIRMATIVE COVENANTS.........................................54
8.01 Financial Reports and Other Information. ....................54
8.02 Notice of Default and Litigation.............................55
8.03 Compliance with Laws and Contractual Obligations, Etc........55
8.04 Payment of Obligations.......................................56
8.05 Maintenance of Insurance.....................................56
8.06 Conduct of Business and Preservation of Corporate
Existence....................................................56
8.07 Books and Records............................................56
8.08 Maintenance of Properties, Etc...............................56
8.09 Use of Proceeds..............................................57
8.10 Pari Passu Ranking...........................................57
8.11 Transactions with Affiliates.................................57
8.12 Maintenance of Governmental Approvals........................57
8.13 Measurement Date.............................................57
8.14 Inspection of Property.......................................58
ARTICLE IX NEGATIVE COVENANTS..............................................58
9.01 Financial Conditions. ...........................................58
9.02 Liens............................................................58
9.03 Consolidations and Mergers. .....................................60
9.04 Sales of Assets, Etc.............................................61
9.05 Change in Nature of Business.....................................61
9.06 Margin Regulations...............................................61
ARTICLE X OBLIGATIONS OF GUARANTORS .......................................61
10.01 The Guaranty.. .................................................61
10.02 Nature of Liability. ...........................................62
10.03 Unconditional Obligations.......................................62
10.04 Independent Obligation..........................................62
10.05 Waiver of Notices. .............................................63
10.06 Waiver of Defenses..............................................63
10.07 Bankruptcy and Related Matters..................................64
10.08 No Subrogation..................................................65
10.09 Right of Contribution...........................................65
10.10 General Limitation on Guaranty..................................66
10.11 Covenants of the Guarantors.....................................66
ARTICLE XI EVENTS OF DEFAULT...............................................66
11.01 Events of Default. .............................................66
11.02 Remedies........................................................69
11.03 Notice of Default. .............................................69
11.04 Default Interest. ..............................................69
ARTICLE XII THE ADMINISTRATIVE AGENT.......................................69
12.01 Appointment and Authorization. .................................69
12.02 Delegation of Duties............................................70
12.03 Liability of Administrative Agent..............................70
12.04 Reliance by Administrative Agent...............................70
12.05 Notice of Default..............................................71
12.06 Credit Decision................................................71
12.07 Indemnification................................................72
12.08 Administrative Agent in Individual Capacity....................72
12.09 Successor Administrative Agent.................................73
ARTICLE XIII THE ISSUING BANKS.............................................73
13.01 Appointment. ...................................................73
13.02 Liability of Issuing Bank. .....................................74
13.03 Reliance by Issuing Banks.......................................74
13.04 Credit Decision. ...............................................74
13.05 Indemnification.................................................75
13.06 Issuing Banks in their Individual Capacities. ..................75
13.07 Notice of Default. .............................................76
ARTICLE XIV THE JOINT BOOKRUNNERS..........................................76
14.01 The Joint Bookrunners...........................................76
14.02 Liability of Joint Bookrunners..................................76
14.03 Joint Bookrunners in their respective Individual Capacities. ...76
14.04 Credit Decision. ...............................................76
ARTICLE XV MISCELLANEOUS...................................................77
15.01 Notices. .......................................................77
15.02 Amendments and Waivers..........................................77
15.03 No Waiver; Cumulative Remedies. ................................79
15.04 Payment of Expenses, Etc........................................79
15.05 Indemnification.................................................79
15.06 Successor and Assigns...........................................80
15.07 Right of Set-off. ..............................................82
15.08 Confidentiality. ...............................................82
15.09 Use of English Language.........................................83
15.10 GOVERNING LAW...................................................83
15.11 Submission to Jurisdiction......................................83
15.12 Appointment of Agent for Service of Process.....................84
15.13 Waiver of Sovereign Immunity. ..................................84
15.14 Judgment Currency...............................................84
15.15 Counterparts....................................................85
15.16 USA PATRIOT Act. ...............................................85
15.17 Severability. ..................................................85
15.18 Survival of Agreements and Representations......................85
SCHEDULES
Schedule 1.01(a) Commitments
Schedule 1.01(b) Lending Offices
Schedule 3.01 Existing Standby L/Cs
Schedule 6.06 Litigation
Schedule 6.10 Subsidiaries
Schedule 7.05 Litigation
Schedule 9.02 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 Form of Standby Letter of Credit
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of June 23, 2004 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"), BARCLAYS BANK PLC, NEW YORK BRANCH ("Barclays"), as an Issuing
Bank and Documentation Agent, ING BANK N.V., as an Issuing Bank (together with
Barclays in its capacity as an Issuing Bank, the "Issuing Banks"), the several
Lenders party hereto, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF
BARCLAYS BANK PLC, as a Joint Bookrunner and ING CAPITAL LLC, as a Joint
Bookrunner and Administrative Agent.
RECITALS
WHEREAS, Barclays issued its letter of credit (the "CP Letter of
Credit") in the maximum face amount of US$300,000,000 to provide for the
repayment of outstanding promissory notes of the Borrower issued in the United
States commercial paper market and issued certain standby letters of credit,
each in accordance with the provisions of (i) a First Amended and Restated
Reimbursement and Credit Agreement, dated as of August 8, 2003 (the "Prior
Agreement"), among the Borrower, the Guarantors, Barclays, as issuing bank,
documentation agent and administrative agent thereunder, the several lenders
party thereto, Barclays Capital, the Investment Banking Division of Barclays,
as a joint arranger thereunder and Banc of America Securities LLC, as a joint
arranger and syndication agent thereunder, and (ii) an existing Depositary
Agreement, dated as of August 8, 2003, by and among the parties thereto, upon
the terms and subject to the conditions set forth therein.
WHEREAS, the Borrower proposes to terminate its existing commercial
paper program (the "CP Program"), the CP Letter of Credit issued in connection
therewith and the Prior Agreement and enter into a new three-year revolving
credit facility.
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.
"Additional Commitment Lender" has the meaning specified in Section
4.02(f).
"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 ING Capital LLC, in its capacity as
administrative agent for each of the Participating 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 4.10(a).
"Affiliate" of any specified Person means any other Person who
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Available Standby L/C Sublimit" means, as of any date, the
lesser of (a)(i) the aggregate amount of the Available Standby L/C Sublimit of
each Issuing Bank minus (ii) the aggregate amount of the Standby L/C Exposure
of each Issuing Bank at such time, and (b) the Available Commitments.
"Aggregate Committed Amount" means the aggregate amount of all of the
Commitments.
"Aggregate Exposure" means the sum of (i) the Outstanding Borrowings
under this Agreement and (ii) the Aggregate Standby L/C Exposure.
"Aggregate Standby L/C Sublimit" means, initially $200,000,000, as
such amount may be reduced in accordance with Section 4.01.
"Aggregate Standby L/C Exposure" means the sum the Standby L/C
Exposure of each Issuing Bank.
"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 Borrowers latest twelve-month total Consolidated Net
Debt/EBITDA Ratio as of such date (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
Consolidated Net Debt/EBITDA Ratio Base Rate Loans LIBOR Loans
3.00 to 1 or greater 0.70% 0.70%
2.99 to 1 or less, but greater than 2.50 to 1 0.60% 0.60%
2.49 to 1 or less, but greater than 2.00 to 1 0.55% 0.55%
2.00 to 1 or less 0.50% 0.50%
; provided, however, the initial Applicable margin shall be 0.55.
"Appropriate Issuing Bank" means, at any time, the Issuing Bank with
the greatest Available Standby L/C Sublimit, or if the Available Standby L/C
Sublimit for each Issuing Bank is equal, then the Issuing Bank designated as
such in the Notice of Borrowing.
"Assignee" has the meaning specified in Section 15.06(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 total amount of the
Aggregate Committed Amount minus the Aggregate Exposure.
"Available Standby L/C Sublimit" means, with respect to each Issuing
Bank, as of any date, the lesser of (a)(i) Standby L/C Sublimit for such
Issuing Bank minus (ii) the Standby L/C Exposure for such Issuing Bank at such
time, and (b) the Available Commitments.
"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 ING Capital LLC, 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, a Swing Line Notice
of Borrowing or a Standby L/C Request.
"Business Day" means any day other than a Saturday or Sunday or other
day on which commercial banks in New York City or The Netherlands Antilles are
authorized or required by law to close.
"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 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 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, (b)
mandatory dividend payments during such period in respect of preferred Capital
Stock of the Borrower or any of its Subsidiaries and (c) 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, 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 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 four consecutive fiscal quarters immediately preceding such fiscal
quarter.
"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 plus (c) to the extent not included in Debt, all
payment obligations of such Person under the 9.66% Puttable Capital Securities
issued by CEMEX International Capital LLC on May 14, 1998, or under any
transaction similar thereto, minus (d) all Temporary Investments of the
Borrower and its Subsidiaries at 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.
"CP Letter of Credit" has the meaning set forth in the recitals.
"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 Leverage 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, with respect to a Drawing, the date on
which such Drawing is paid by the relevant Issuing Bank and, with respect to a
Loan, the date on which such Loan is made by the Participating Lender.
"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.
"Dollars", "$" and "U.S.$" each means the lawful currency of the
United States.
"Dow Jones Page 3750" means the display designated as page "3750" on
the Dow Jones Market Screen (formerly known as the Telerate Service) or such
other page as may replace the "3750" page on that service or such other service
or services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for Dollar deposits.
"Drawing" means a drawing made under a Standby L/C.
"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 Leverage 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 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 period.
"Effective Date" has the meaning specified in Section 5.01.
"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.
"Event of Default" has the meaning specified in Section 11.01.
"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 any written agreement as to the payment of fees
referred to in Section 4.03.
"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).
"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.
"Indemnified Party" has the meaning specified in Section 15.05.
"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,
the last day of each Interest Period for such Loan, the date of repayment of
principal of such Loan and on the Termination Date, (iii) with respect to any
Swing Line Loan, the Maturity Date thereof. 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 where the next succeeding Business Day falls in the next succeeding
calendar month, then on the next preceding Business Day.
"Interest Period" means, with respect to each Borrowing of LIBOR
Loans, the period (i) commencing (A) on the date of such Borrowing or
conversion of Base Rate Loans into LIBOR Loans or (B) in the case of the
continuation of LIBOR 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 the Borrower
may elect 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 shall, subject to paragraph (3) below, be extended to
the next succeeding LIBOR Business Day unless such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end on the
immediately preceding LIBOR Business Day;
(2) any Interest Period which begins on the last LIBOR 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 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.
"Issuing Bank" means each of Barclays Bank PLC and ING Bank N.V., each
in its capacity as issuer of Standby L/Cs, and its successors in such capacity.
"Lender" means each financial institution designated as such on the
signature pages hereof, each Assignee which becomes a Lender pursuant to
Section 4.02(c) or 15.06(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 and with the consent of the Issuing Banks (which shall not
be unreasonably withheld).
"LIBOR", applicable to any Interest Period, means the rate for
deposits in Dollars for a period equal to such Interest Period quoted on the
second LIBOR Business Day prior to the first day of such Interest Period, as
such rate appears on Dow Jones Page 3750 as of 11:00 a.m. (London time) on
such date as determined by the Administrative Agent and notified to the
Lenders and the Borrower on such second prior LIBOR Business Day. If LIBOR
cannot be determined based on the Dow Jones Page 3750, LIBOR means the
arithmetic mean (rounded upwards to the nearest 1/16%) of the rates per annum,
as supplied to the Administrative Agent, quoted by the Reference Banks to
prime banks in the London interbank market for deposits in Dollars at
approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Loans to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"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).
"Loan" means any Revolving Loan or any Swing Line Loan.
"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 or any other
Transaction Document.
"Material Debt" means Debt (other than the Loans and the Standby L/C
Exposure) 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 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 and (b) each Guarantor.
"Measurement Date" means any of the dates specified in Section 8.13.
"Mexican GAAP" means, generally accepted accounting principles in
Mexico as in effect from time to time, except that for purposes of Section
9.01, 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 8.01. 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.
"Non-Extending Lender" means, in connection with extending the
Termination Date and the Commitments in accordance with Section 4.02, (a) any
Participating Lender that gives written notice to the Joint Bookrunners and
Administrative Agent that it does not agree to extend its Commitment and (b)
any Participating Lender that fails to give any notice within five Business
Days prior to the effective date of such extension, whether or not such
Participating Lender agrees to such extension, and shall, for purposes of the
effectiveness of this Agreement, also include any lender under the Prior
Agreement that elected not to extend its commitment under the Prior Agreement
to be a Participating Lender hereunder.
"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).
"Obligations" means, (a) with respect to the Borrower, all of its
indebtedness, obligations and liabilities to the Participating 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
Participating 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.
"OECD Bank" shall mean any bank organized under the laws of a member
of the Organization for Economic Cooperation and Development.
"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.
"Outstanding Borrowings" means the aggregate principal amount of all
Loans outstanding.
"Participant" has the meaning specified in Section 15.06(d).
"Participating Lender" means any Lender, Swing Line Lender or Issuing
Bank, or if used in the plural, all thereof.
"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 9.02.
"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.
"Prior Agreement" has the meaning specified in the Recitals hereto.
"Process Agent" has the meaning specified in Section 15.12(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.
"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" shall mean three banks in the London interbank
market, initially Barclays Bank PLC, ING Bank N.V. 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, exceed 50% of the Aggregate
Exposure minus the Total Exposure of any Defaulting Lenders 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.
"Revolving Loans" has the meaning specified in Section 2.01(a) hereof.
"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.
"Standby L/C" means (i) a standby letter of credit issued by an
Issuing Bank and substantially in the form of Exhibit G, as such may hereafter
be amended or replaced from time to time pursuant to the terms of this
Agreement, and (ii) any standby letter of credit of an Issuing Bank, issued and
outstanding on the Effective Date pursuant to the terms of the Prior Agreement.
"Standby L/C Exposure" means, with respect to each Issuing Bank, at
any time, the sum of (a) the aggregate undrawn amount at such time of all
outstanding Standby L/Cs of such Issuing Bank plus (b) the aggregate unpaid
amount at such time of all unreimbursed Drawings under all outstanding Standby
L/Cs of such Issuing Bank.
"Standby L/C Facility" means the Standby L/Cs, any Drawing (including
any unreimbursed Drawing), any obligations of the Borrower in respect of the
foregoing and the payments received by the Issuing Banks in respect of any of
the foregoing.
"Standby L/C Request" has the meaning specified in Section 3.01(c).
"Standby L/C Sublimit" means, with respect to each Issuing Bank,
initially US$100,000,000, as such amount as may be reduced or increased in
connection with an extension of the Termination Date and the Commitments in
accordance with Section 3.01(c).
"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 Participating 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.
"Swing Line Lenders" means Barclays Bank PLC and ING Bank N.V., each
acting in the capacity of Lender of Swing Line Loans hereunder.
"Swing Line Loans" means, collectively, the loans outstanding pursuant
to Section 2.02 from time to time.
"Swing Line Maturity Date" means, with respect to any Swing Line Loan,
the later of (i) the Business Day set forth in the relevant Swing Line Request
as the date upon which such Swing Line Loan matures; provided that such date
shall be no later than the third Business Day following the relevant Borrowing
or (ii) the date to which the Swing Line Loan has been extended pursuant to
Section 2.02(c)(iv).
"Swing Line Request" means a request by the Borrower for a Swing Line
Loan, which shall specify (i) the requested Borrowing Date, (ii) the requested
date of maturity and (iii) the amount of such Swing Line Loan.
"Swing Line Sublimit" means, with respect to each Swing Line Lender
individually, US$50,000,000 and in the aggregate, US$100,000,000.
"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, each Issuing Bank and the Administrative Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by its net
income by the jurisdiction (or any political subdivision thereof) under the
laws of which such Lender, such Issuing Bank or the Administrative Agent, as
the case may be, 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, such Issuing Bank or the Administrative Agent (as the case may
be) as a result of a present or former connection between the Lender, the
Issuing Bank and the Administrative Agent 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, the Issuing Bank 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 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).
"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.
"Termination Date" means the date which is the earliest of (a) the
date three years following the Effective Date, or if extended with the written
consent of such Lender, such later date or (b) if no Loans or Standby L/Cs 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, it's
Total Outstandings at such time.
"Total Outstandings" means at any time, as to any Lender, the sum of
the aggregate outstanding principal amount of such Lender's Revolving Loans and
its pro rata share of the aggregate outstanding Standby L/C Exposure and its
pro rata share of the Swing Line Exposure.
"Transaction Documents" means a collective reference to this Credit
Agreement, the Notes, any Assignment and Assumption Agreement, the Fee Letter,
any Standby L/C, 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 4.03(e).
"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 or LIBOR Business 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 the other
Lenders, agrees to make revolving credit loans in Dollars (the "Revolving
Loans") to the Borrower from time to time in an aggregate principal amount at
any one time outstanding not to exceed such Lender's Commitment for the
purposes hereinafter set forth; provided that (i) with regard to the Lenders
collectively, the aggregate principal amount of Loans outstanding, together
with the Aggregate Standby L/C Exposure, at any one time shall not exceed the
Aggregate Committed Amount, and (ii) with regard to each Lender individually,
the aggregate principal amount of such Lender's Commitment Percentage of all
the Loans outstanding at any time, together with such Lender's Commitment
Percentage of its Standby L/C Exposure, shall not exceed the Commitment of such
Lender. Revolving Loans may consist of Base Rate Loans or LIBOR 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 if any
Revolving Loan shall be made on the Effective Date or within three (3) Business
Days thereafter such Revolving Loan may be a LIBOR 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 Revolving Loan shall be made as part of
a Borrowing consisting of Revolving Loans made by the Lenders ratably in
accordance with their Commitment Percentage. The failure of any Lender to make
any Revolving 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 Revolving 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, on the business day prior to the day the Borrower
designates therein as the Disbursement Date or (2) in the case of a
request for a LIBOR Loan, on the date that is no less than three LIBOR
Business Days 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 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 Revolving Loan is requested;
(2) the requested Disbursement Date, which shall be a
Business Day;
(3) the aggregate principal amount to be borrowed; and
(4) whether the Borrowing shall be composed of Base Rate
Loans, LIBOR Loans, or a combination thereof, and if LIBOR
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, then such notice shall be deemed to be a
request for an Interest Period of one (1) month, or (ii)
the type of Revolving Loan requested, then such notice
shall be deemed to be a request for a LIBOR Loan
hereunder.
(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 Revolving Loan to be made as part
of the requested Borrowing.
(ii) Minimum Amounts. Each Revolving Loan shall be in a minimum
aggregate principal amount of $5,000,000, in the case of LIBOR Loans, or
$1,000,000 (or the remaining Committed Amount, if less), in the case of
Base Rate Loans, and integral multiples of $1,000,000 in excess thereof.
(d) Funding of Borrowings. Each Lender shall make each Revolving 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 number 36964215 that the Borrower
maintains with Citibank, NA. NY (ABA No. 021000089 Ref: CEMEX) in New York City
(the "Funding Account") or any other account with such bank or any other
financial institution designated by the Borrower in the applicable Notice of
Borrowing. 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 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 be disregarded for purposes of
calculating the Commitment Fee pursuant to Section 4.03(a) 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 Revolving Loans into a subsequent
permissible Interest Period or to convert Revolving Loans into Revolving Loans
of another interest rate type; provided, however, that (i) except as provided
in Section 4.10, LIBOR 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, (ii) LIBOR Loans may be extended, and Base Rate
Loans may be converted into LIBOR Loans, only if the conditions in Section 5.02
have been satisfied, (iii) Loans extended as, or converted into, LIBOR 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 (iv) any request for extension or conversion of a LIBOR 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, in the case of the conversion of a LIBOR Loan into a Base Rate
Loan, and on the third LIBOR Business Day prior to, in the case of the
extension of a LIBOR Loan as, or conversion of a Base Rate Loan into, a LIBOR
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
Revolving Loans into which such Loans are to be converted, and, if appropriate,
(D) the applicable Interest Periods with respect thereto. Each Notice of
Extension/Conversion shall be irrevocable and shall constitute a representation
and warranty by the Borrower of the matters specified in Sections 5.02(a)
through (e). 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 in
accordance with this Section, or any such conversion or extension is not
required by this Section, then such LIBOR 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. It being 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 into a Base Rate Loan shall also constitute a representation
and warranty by the Borrower of the matters specified in Sections 5.02(a)
through (e). In the event any LIBOR Loans are not permitted to be converted
into another LIBOR Loan hereunder, such LIBOR 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 Revolving Loans shall be
due and payable in full on the Termination Date. (g) Revolving Notes. Upon the
request of any Lender, such Lender's Commitment Percentage of the Revolving
Loans shall be evidenced by a duly executed revolving note in favor of such
Lender in the form of Exhibit A attached hereto.
(h) Maximum Number of LIBOR Loans. The Borrower will be limited to a
maximum number of ten (10) LIBOR Loans outstanding at any time. For purposes
hereof, LIBOR Loans with separate or different Interest Periods will be
considered as separate LIBOR Loans even if their Interest Periods expire on the
same date.
(i) Notice. The Administrative Agent shall promptly advise each Lender
of any change in Commitment Percentages made pursuant to Section 4.02. 2.02
Swing Line Loans.
(a) Swing Line Loans Commitments. During the Commitment Period,
subject to the terms and conditions hereof, each Swing Line Lender hereby
agrees to make Swing Line Loans to the Borrower in the aggregate amount up to
but not exceeding the Swing Line Sublimit; provided, after giving effect to
the making of any Swing Line Loan, in no event shall the aggregate amount of
the Loans outstanding plus the aggregate amount of the Standby L/C Exposure
exceed the Aggregate Committed Amount for the facility then in effect. Amounts
borrowed pursuant to this Section 2.02 may be repaid, prepaid and reborrowed
during the Commitment Period. Each Swing Line Lender's commitment to make
Swing Line Loans shall expire on the Termination Date and all Swing Line Loans
and all other amounts owed hereunder with respect to the Swing Line Loans and
the Revolving Commitments shall be paid in full no later than such date.
Subject to Section 2.02(c)(iv), each Swing Line Loan shall mature on the Swing
Line Maturity Date.
(b) Loans and Borrowings. Each Swing Line Loan shall be made as
part of a Borrowing consisting of Swing Line Loans made by the Swing Line
Lenders on a pro rata basis. The failure of any Swing Line Lender to make any
Swing Line Loan required to be made by it shall not relieve any other Swing Line
Lender of its obligations hereunder; provided that the Commitments of the Swing
Line Lenders are several and no Swing Line Lender shall be responsible for any
other Swing Line Lender's failure to make Swing Line Loans as required.
(c) Borrowing Mechanics for Swing Line Loans.
(i) Swing Line Loans shall be made in an aggregate minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess of
that amount.
(ii) Whenever the Borrower desires that the Swing Line
Lenders make a Swing Line Loan, the Borrower shall deliver to
Administrative Agent, with a copy to each Swing Line Lender, a Swing
Line Request no later than 11:00 a.m. (New York City time) on the
proposed Disbursement Date. With respect to any Borrowing Date, the
Borrower may deliver only a single Swing Line Request to the
Administrative Agent. Any Swing Line Request, once delivered to the
Administrative Agent in accordance with this Agreement, shall be
irrevocable.
(iii) Each Swing Line Lender shall make its pro rata share
of the amount of the requested Swing Line Loan available to the
Administrative Agent by no later than 2:00 p.m. (New York City time)
on the applicable Disbursement Date by wire transfer of same day
funds in Dollars, at the account held by the Administrative Agent
for such purpose most recently designated by it by notice to the
Swing Line Lenders. Except as provided herein, upon satisfaction or
waiver by the Swing Line Lenders of the conditions precedent
specified herein, the Administrative Agent shall make the proceeds
of such Swing Line Loans available to the Borrower on the applicable
Disbursement Date by causing an amount of same day funds in Dollars
equal to the proceeds of all such Swing Line Loans received by
Administrative Agent from each Swing Line Lender to be credited to
the account of the Borrower at the Administrative Agent's Payment
Office, or to such other account as may be designated in writing to
Administrative Agent by the Borrower.
(iv) The Borrower shall have the option, on any Business Day,
to extend an existing Swing Line Loan for a subsequent three Business
Day period; provided, however, that in no event may a Swing Line Loan
be extended for more that two consecutive three Business Day periods.
Each such extension shall be effected by the Borrower by giving a
written notice of such extension (or telephone notice promptly
confirmed in writing) to the Administrative Agent prior to 10:00 a.m.,
New York City time, on the Business Day of such extension.
(d) Repayment and Participations.
(i) Swing Line Loans shall be repaid, together with all
accrued and unpaid interest thereon on the earlier to occur of (i) the
Swing Line Maturity date and (ii) the Commitment Termination Date.
(ii) With respect to any Swing Line Loans which have not been
paid by the Borrower when due, each Swing Line Lender may at any time
in its sole and absolute discretion, deliver to the Administrative
Agent (with a copy to the Borrower), no later than 10:00 a.m. (New
York City time) at least one (1) Business Day in advance of the
proposed Disbursement Date, a notice (which shall be deemed to be a
Notice of Borrowing given by the Borrower) requesting that the Lenders
make Revolving Loans that are Base Rate Loans to the Borrower, or its
designee, on such Disbursement Date in an amount equal to the
aggregate amount of such Swing Line Loans (the "Refunded Swing Line
Loans") outstanding on the date a Swing Line Lender gives such Notice
requesting that Lenders make Revolving Loans. For purposes of this
Section 2.02, the Borrower agrees that such Base Rate Loan to be made
by the Lenders pursuant to the Notice of Borrowing shall be made to
the accounts of each of the Swing Line Lenders, as Borrower's
designee, on a pro rata basis. Anything contained in this Agreement to
the contrary notwithstanding, (1) the proceeds of such Revolving Loans
made by the Lenders other than the Lenders that are also Swing Line
Lenders shall be immediately delivered by the Administrative Agent to
each Swing Line Lender, as Borrower's designee, on a pro rata basis
and applied to repay a corresponding portion of the Refunded Swing
Line Loans and (2) on the day such Revolving Loans are made, each
Swing Line Lender's pro rata share of the Refunded Swing Line Loans
shall be deemed to be paid by such Swing Line Lender with the proceeds
of a Revolving Loan deemed to be made by such Swing Line Lender to the
Borrower, or its designee, and such portion of the Swing Line Loans
deemed to be so paid shall no longer be outstanding as Swing Line
Loans and shall no longer be due under any Swing Line Note of such
Swing Line Lender but shall instead constitute part of such Swing Line
Lender's outstanding Revolving Loans to the Borrower and shall be due
under the revolving loan note, if any, issued by the Borrower to such
Swing Line Lender in its capacity as Lender. The Borrower hereby
authorizes the Administrative Agent and each Swing Line Lender to
charge the Borrower's accounts with the Administrative Agent and each
Swing Line Lender (up to the amount available in each such account) in
order to immediately pay each Swing Line Lender the amount of the
Refunded Swing Line Loans to the extent the proceeds of such Revolving
Loans made by the Lenders, including the Revolving Loan deemed to be
made by such Swing Line Lender, are not sufficient to repay in full
the Refunded Swing Line Loans. If any portion of any such amount paid
(or deemed to be paid) to any Swing Line Lender should be recovered by
or on behalf of the Borrower from such Swing Line Lender in
bankruptcy, by assignment for the benefit of creditors or otherwise,
the loss of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by Section 4.13.
(iii) If for any reason Revolving Loans are not made pursuant
to Section 2.01(d) in an amount sufficient to repay any amounts owed
to such Swing Line Lenders in respect of any outstanding Swing Line
Loans on or before the third (3rd) Business Day after demand is made
for payment thereof by such Swing Line Lender, each Lender holding a
Commitment shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans, and in an amount
equal to its pro rata share of the applicable unpaid amount together
with accrued interest thereon. Upon one (1) Business Day's notice from
any Swing Line Lender, each Lender holding a Commitment shall deliver
to each Swing Line Lender an amount equal to its respective
participation in the applicable unpaid amount in same day funds at the
domestic office of such Swing Line Lender. In order to evidence such
participation, each Lender holding a Revolving Commitment agrees to
enter into a participation agreement at the request of such Swing Line
Lender in form and substance reasonably satisfactory to such Swing
Line Lender. In the event any Lender holding a Revolving Commitment
fails to make available to any Swing Line Lender the amount of such
Lender's participation as provided in this paragraph, each Swing Line
Lender shall be entitled to recover such amount on demand from such
Lender together with interest thereon for three Business Days at the
rate customarily used by such Swing Line Lender for the correction of
errors among banks and thereafter at the Base Rate, as applicable.
(iv) Notwithstanding anything contained herein to the
contrary, (1) each Lender's obligation to make Revolving Loans for the
purpose of repaying any Refunded Swing Line Loans pursuant to the
second preceding paragraph and each Lender's obligation to purchase a
participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional
and shall not be affected by any circumstance, including without
limitation (A) any set-off, counterclaim, recoupment, defense or other
right which such Lender may have against any Swing Line Lender, any
Credit Party or any other Person for any reason whatsoever; (B) the
occurrence or continuation of a Default or Event of Default; (C) any
adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of any Credit Party;
(D) any breach of this Agreement or any other Credit Document by any
party thereto; or (E) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided,
that such obligations of each Lender are subject to the condition that
each Swing Line Lender believed in good faith that all conditions
under Section 5.02 to the making of the applicable Refunded Swing Line
Loans or other unpaid Swing Line Loans, were satisfied at the time
such Refunded Swing Line Loans or unpaid Swing Line Loans were made,
or the satisfaction of any such condition not satisfied had been
waived by Requisite Lenders prior to or at the time such Refunded
Swing Line Loans or other unpaid Swing Line Loans were made; and (2)
no Swing Line Lender shall be obligated to make any Swing Line Loans
(A) if it has elected not to do so after the occurrence and during the
continuation of a Default or Event of Default or (B) at a time when a
Funding Default exists unless such Swing Line Lender has entered into
arrangements satisfactory to it and the Borrower to eliminate each
such Swing Line Lender's risk with respect to the Defaulting Lender's
participation in such Swing Ling Loan, including by cash
collateralizing such Defaulting Lender's pro rata share of the
outstanding Swing Line Loans.
2.03 Interest.
(a) Base Rate Loans. Revolving Loans constituting each Base Rate
Borrowing shall bear interest at a rate per annum equal to the Base Rate plus
the Applicable Margin.
(b) LIBOR Rate Loans. Revolving Loans constituting each LIBOR Rate
Borrowing shall bear interest at a rate per annum equal to the LIBOR Rate for
the Interest Period for such Borrowing plus the Applicable Margin.
(c) Swing Line Loans. Swing Line Loans shall bear interest at a rate
per annum equal to the Base Rate plus the Applicable Margin.
(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 2.03(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) interest accrued on a Swing
Line Loan shall be payable on the Swing Line Maturity Date, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of a
Revolving Loan that is a Base Rate Loan prior to the Termination Date), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion of any
LIBOR Rate Borrowing prior to the end of the Interest Period therefore, accrued
interest on such Borrowing shall be payable on the effective date of such
conversion.
(f) Computation. All interest hereunder shall be computed on the basis
of a year of 360 days, except that 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 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 or LIBOR Rate
shall be determined by the Administrative Agent, and such determination shall
be conclusive absent manifest error.
ARTICLE III
THE STANDBY L/C FACILITY
3.01 Issuance of the Standby L/C.
(a) Subject to the terms and conditions set forth herein, including
but not limited to the conditions precedent specified in Section 5.02, and so
long as no Default or Event of Default shall have occurred and be continuing,
the Borrower may request the Issuing Banks to issue, in support of certain
obligations of the Borrower and any of its Subsidiaries including but not
limited to, contingent liabilities arising in connection with forward sales
contracts, leases, insurance contracts and arrangements, service contracts,
equipment contracts, financing transactions and other payment obligations, and
each Issuing Bank agrees to issue on the terms set out in this Section 3.01
below, from time to time during the period from and including the Effective
Date to but excluding the date that is five Business Days prior to the
Termination Date, a Standby L/C denominated in Dollars for the Borrower's own
account, and having a stated amount not exceeding the Available Standby L/C
Sublimit at the time of issuance; provided, however, that the issuance of such
requested Standby L/C shall not cause the Issuing Bank to violate any law or
regulation to which it is or may be subject. The Standby L/C shall be
substantially in the form indicated in Exhibit G-1 or G-2, as determined by the
Borrower or in any other form that may be reasonably agreed upon by the
Appropriate Issuing Bank and the Borrower.
(b) The Borrower, the Guarantors and the Participating Lenders hereby
acknowledge and agree that, as of the date hereof, Standby L/Cs issued pursuant
to the Prior Agreement are outstanding, and the outstanding amount of each
issued Standby L/C is set forth on Schedule 3.01 hereto. From and after the
date hereof and upon fulfillment of the conditions specified in Section 5.02
hereof, each such existing letter of credit, as such may have been amended,
shall be deemed and treated for all purposes hereof as a "Standby L/C"
hereunder, and each Lender, without further action on its part, shall be deemed
to have purchased a participation in each such Standby L/C as provided in
Section 3.04 hereof in accordance with its Commitment.
(c) To request the issuance of a Standby L/C, the Borrower shall
deliver notice (a "Standby L/C Request") to the Appropriate Issuing Bank
requesting the issuance of a Standby L/C, specifying the date of issuance
(which shall be a Business Day that is no earlier than either (i) the Business
Day following the Business Day on which the Appropriate Issuing Bank shall have
received the request for the issuance of the Standby L/C, if such request is
received by the Appropriate Issuing Bank prior to 11:00 a.m. (New York City
time), or (ii) the Business Day that is two (2) Business Days following the
Business Day on which the Appropriate Issuing Bank shall have received the
request for the issuance of the Standby L/C, if such request is received is by
the Appropriate Issuing Bank after 11:00 a.m. (New York City time) but before
5:00 p.m. (New York City time); provided however, that the Appropriate Issuing
Bank, in its sole discretion and on a request by request basis, may elect to
accept a request for issuance of a Standby L/C specifying an issuance date not
complying with the terms of this parenthetical), the date on which such Standby
L/C is to expire, the amount of such Standby L/C, the name and address of the
beneficiary thereof and any such other information as shall be necessary to
prepare such Standby L/C. On the requested date of issuance, the Appropriate
Issuing Bank shall, subject to the terms and conditions set forth herein and so
long as no Default or Event of Default shall have occurred or be continuing,
issue a Standby L/C in accordance with the Borrower's request pursuant to this
paragraph (c).
(d) Each Standby L/C shall have a minimum stated amount equal to
U.S.$5,000,000 and shall expire at or prior to the close of business on the
earlier of (i) the date that is 360 days after the date of issuance of such
Standby L/C and (ii) the date that is five Business Days prior to the
Termination Date.
(e) Notwithstanding Clause (d) of this Section 3.01, if the Borrower
is requesting a Standby L/C that is less than the Aggregate Available Standby
L/C Sublimit, but greater than the Available Standby L/C Sublimit for each
Issuing Bank, the Borrower may request a Standby L/C from each Issuing Bank in
an amount up to the Available Standby L/C Sublimit for such Issuing Bank, on a
pro rata basis determined on the basis of each Issuing Bank's Standby L/C
Exposure, after giving effect to the requested Standby L/C, and each Issuing
Bank shall be deemed to be the Appropriate Issuing Bank for the purposes of
Section 3.01(c) hereof.
(f) Each Lender hereby irrevocably authorizes the Issuing Banks to
issue Standby L/Cs under and in accordance with this Agreement, to pay the
amount of any draft presented under any Standby L/C in accordance with the
terms and conditions thereof, to receive from the Borrower reimbursement for
Standby L/C Drawings and to take such action on its behalf under the provisions
of this Agreement and the other Transaction Documents and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Issuing Bank by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto.
3.02 Reimbursement Obligations.
(a) The Borrower agrees to reimburse the Issuing Banks for the full
amount of any Drawing paid by an Issuing Bank on a Disbursement Date; provided,
however, that in no event shall such reimbursement be made prior to the time
such Drawing is paid by such Issuing Bank.
(b) If the amount of any Drawing is not reimbursed in full on the
Disbursement Date by the Borrower, then the amount thereof which is not so
reimbursed shall bear interest from (and including), the Disbursement Date
until (but excluding) the date of actual payment thereof at a rate per annum
equal to the Base Rate plus 2.00%, payable on demand.
3.03 Obligations to Reimburse Standby L/C Drawing Absolute.
(a) The obligations of the Borrower to reimburse an Issuing Bank for
any Drawing shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including the following circumstances:
(i) any lack of validity or enforceability of any Transaction
Document;
(ii) any amendment to or waiver of or any consent to departure
from the terms of any Transaction Document;
(iii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against the beneficiary of any
Standby L/C or any transferee of any Standby L/C (or any Person for
whom any such transferee may be acting), the Administrative Agent, any
Participating Lender or any other Person, whether in connection with
this Agreement, any other Transaction Document or any unrelated
transaction;
(iv) any draft, statement or any other document presented under a
Standby L/C proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in
any respect whatsoever; or
(v) payment by an Issuing Bank under a Standby L/C against
presentation of a draft or document which does not comply with the
terms of such Standby L/C.
(b) The Issuing Banks shall not be responsible to any Person:
(i) for the validity, genuineness or legal effect of any document
submitted to an Issuing Bank by any Person in connection with the
issuance of, or any Drawing under, any Standby L/C; provided, however,
that nothing in this clause (i) shall relieve an Issuing Bank from its
obligations to honor a Drawing under a Standby L/C that strictly
complies with the terms of such Standby L/C;
(ii) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(iii) for any loss or delay in the transmission or otherwise of
any document required in order to make a Drawing under a Standby L/C
or of the proceeds thereof;
(iv) for the misapplication by the beneficiary of a Standby L/C of
the proceeds of a Drawing under such Standby L/C; or (v) for any
consequences arising from causes beyond the control of an Issuing Bank
(including, any acts of any Governmental Authority);
provided, however, that the provisions of this Section 3.03 shall not limit
any right or claim the Borrower may have against an Issuing Bank to the extent
of any direct, as opposed to consequential or special, damages suffered by the
Borrower which the Borrower proves were caused by such Issuing Bank's gross
negligence or willful misconduct, it being understood that the existence of
any such right or claim shall not in any way affect the obligation of the
Borrower to reimburse such Issuing Bank for all Drawings under Standby L/Cs.
3.04 Participating Interests.
(a) Without further action on the part of the Issuing Banks and the
Lenders, each Lender severally purchases from the Issuing Banks, without
recourse to the Issuing Banks, and the Issuing Banks hereby sell to each such
Lender, an undivided interest, to the extent of such Lender's Commitment
Percentage, in each Standby L/C issued or to be issued hereunder or issued
pursuant to the Prior Agreement, all Drawings, all interest thereon and all
other rights, costs and expenses of the Issuing Banks hereunder and under such
Standby L/C with respect thereto.
(b) As promptly as practicable upon becoming aware that the Borrower
has not reimbursed or will not reimburse the relevant Issuing Bank in full for
a Drawing under any Standby L/C in accordance with Section 3.02(a) or (b) on
any applicable Disbursement Date, such Issuing Bank shall notify the
Administrative Agent which shall promptly notify each Lender to such effect and
each Lender shall (i) not later than 4:30 p.m. (New York City time) on the
Business Day such notice is received from the Administrative Agent (if such
notice is received at or prior to 12:00 noon (New York City time)) or (ii) not
later than 11:00 a.m. (New York City time) on the Business Day following
receipt of such notice (if such notice is received after 12:00 noon (New York
City time)) pay to the Administrative Agent, at the Administrative Agent's
Payment Office, for the account of such Issuing Bank, an amount equal to such
Lender's Commitment Percentage of such unreimbursed Drawing. Notwithstanding
clause (ii) of this paragraph (b), if a Lender does not make available to the
Administrative Agent on the applicable Disbursement Date such Lender's
Commitment Percentage of any unreimbursed Drawing, such Lender shall be
required to pay interest to the Administrative Agent for the account of such
the Issuing Bank on its Commitment Percentage of the amount of such
unreimbursed Drawing at the Federal Funds Rate from such Disbursement Date
until the date payment is received by the Administrative Agent; provided,
however, that if the Federal Funds Rate does not cover such Issuing Bank's cost
of funds, the applicable rate of interest shall be such rate as determined by
such Issuing Bank, in good faith, to be equal to its cost of funds; and
provided, further, that if any amount remains unpaid by any Lender for more
than five Business Days after receipt of notice, such Lender shall, commencing
on the day next following such fifth Business Day, pay interest to the
Administrative Agent for the account of such Issuing Bank at a rate per annum
equal to the Federal Funds Rate (or such other rate as may be determined by
such Issuing Bank as set forth herein) plus 2.00%. Upon receipt of any such
funds, the Administrative Agent shall promptly pay such funds to such Issuing
Bank.
(c) If the Administrative Agent receives a Lender's Commitment
Percentage of an unreimbursed Drawing on the corresponding Disbursement Date
therefor, or if the Administrative Agent receives such payment together with
interest thereon in accordance with the provisions of the preceding paragraph
(b), such Lender shall be entitled to receive interest on its Commitment
Percentage of such Standby L/C Drawing, as provided in Section 3.04(d)(ii)
below, from the applicable Disbursement Date. (d) The payment obligations of
each Lender to the relevant Issuing Bank as described in this Section 3.04
shall be absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be affected by any circumstance,
including:
(i) any set-off, counterclaim, defense or other right which such
Lender or any other Person may have against the Administrative Agent,
an Issuing Bank or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or Event of
Default or the termination of the Commitments or the expiration the
applicable Standby L/C;
(iii) any adverse change in the condition (financial or
otherwise) of the Borrower;
(iv) any breach of any Transaction Document by any party thereto;
(v) any violation or asserted violation of law by any Lender or
any affiliate thereof;
(vi) the failure of any Lender to perform its obligations
hereunder;
(vii) any amendment to or extension of an issued and outstanding
Standby L/C; or
(viii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing;
provided, however, that no Lender shall be liable for any portion of such
liability resulting from such Issuing Bank's gross negligence or willful
misconduct.
(e) The relevant Issuing Bank agrees to pay promptly upon receipt to
the Administrative Agent for the account of each Lender (i) first, such
Lender's Commitment Percentage of all amounts received from the Borrower in
payment, in whole or in part, of an unreimbursed Standby L/C Drawing, but only
to the extent that such Lender has paid in full its Commitment Percentage of
such Standby L/C Drawing to the Administrative Agent for the account of such
Issuing Bank pursuant to Section 3.04(c) above and (ii) second, such Lender's
Commitment Percentage of any interest received from the Borrower with respect
to any such unreimbursed Standby L/C Drawing, but only to the extent such
Lender has paid in full its Commitment Percentage of such Standby L/C Drawing
to the Administrative Agent for the account of such Issuing Bank pursuant to
Section 3.04(c) above.
(f) If, on account of the bankruptcy, insolvency, concurso mercantil
or governmental intervention (or similar event) of the Borrower, an Issuing
Bank or the Administrative Agent is required at any time (whether before or
after the Termination Date) to return to the Borrower or to a trustee,
receiver, liquidator, custodian or other similar official or any other Person,
any portion of the payments made by (or on behalf of) the Borrower to the
Administrative Agent for the account of an Issuing Bank (or directly to an
Issuing Bank) in reimbursement of any unreimbursed Drawing and interest
thereon, each Lender shall, on demand of such Issuing Bank or the
Administrative Agent, forthwith return to such Issuing Bank or the
Administrative Agent for the account of such Issuing Bank any amounts
transferred to such Lender by such Issuing Bank or the Administrative Agent in
respect thereof pursuant to the terms hereof plus such Lender's pro rata share
of any interest on such payments required to be paid to the Person recovering
such payments plus interest on all amounts so demanded from the day such
amounts are returned by such Issuing Bank or the Administrative Agent, as the
case may be, to the day such amounts are returned by such Lender to such
Issuing Bank or the Administrative Agent at a rate per annum for each day equal
to the Federal Funds Rate; provided, however, that if the Federal Funds Rate
does not cover such Issuing Bank's or the Administrative Agent's cost of funds,
the applicable rate of interest shall be such rate as determined by such
Issuing Bank or the Administrative Agent, in good faith, to be equal to its
cost of funds; and provided, further, that if any amount remains unpaid by any
Lender for more than five Business Days after demand, such Lender shall,
commencing on the day next following such fifth Business Day, pay interest to
such Issuing Bank or the Administrative Agent, as the case may be, at a rate
per annum equal to the Federal Funds Rate plus 2.00%. In any case when an
amount is returned to any Person pursuant to this paragraph (f), the
reimbursement obligation of the Borrower contained in Section 3.02(a) will be
reinstated as of the original date such reimbursement obligation arose.
(g) The Borrower hereby confirms and acknowledges that each Lender
shall have a direct claim against the Borrower for the principal of and
interest on each portion of any unreimbursed Standby L/C Drawing advanced by
such Lender to an Issuing Bank and that each Lender shall to the extent
applicable be entitled to all the rights of the Issuing Bank against the
Borrower (to the extent not exercised by such Issuing Bank) as if such Lender
had funded its Commitment Percentage of the Standby L/C Drawing directly to the
beneficiary of the applicable Standby L/C.
(h) Each Issuing Bank and each Lender, with respect to the amounts
payable to it in respect of any unreimbursed Standby L/C Drawing, and the
Administrative Agent, with respect to all amounts payable in respect of
unreimbursed Standby L/C Drawings, shall maintain on its books in accordance
with its usual practice, loan accounts, setting forth its Commitment Percentage
of each Standby L/C Drawing, the applicable interest rate and the amounts of
principal and interest paid and payable by the Borrower from time to time
hereunder with respect thereto; provided, however, that the failure by an
Issuing Bank, any Lender or the Administrative Agent to record any such amount
on its books or any error in such recordation shall not affect the obligations
of the Borrower with respect thereto. In the case of any dispute, action or
proceeding relating to any amount payable in respect of any unreimbursed
Standby L/C Drawings, the entries in each such account shall be prima facie
evidence of such amount. In the case of any discrepancy between the entries in
an Issuing Bank's books and any Lender's books or the Administrative Agent's
books, an Issuing Bank's books shall be considered correct in the absence of
manifest error.
3.05 Limited Liability of the Issuing Banks. As between an Issuing
Bank on the one hand, and the Borrower on the other, the Borrower assumes all
risks of any acts or omissions of the beneficiaries of Standby L/Cs with
respect to their use of the Standby L/Cs or the proceeds thereof. Neither of
the Issuing Banks nor any of its employees, officers, directors or agents shall
be liable or responsible for any acts or omissions of the beneficiaries in
connection therewith.
ARTICLE IV
TERMINATION AND REDUCTION OF COMMITMENTS; FEES, TAXES,
PAYMENT PROVISIONS
4.01 Termination or Reduction of Commitments.
(a) Mandatory Termination. Subject to Section 4.02, the Commitments
shall terminate on the Termination Date.
(b) Voluntary Termination. Upon at least five Business Days' notice to
the Administrative Agent, the Joint Bookrunners and the Issuing Banks, but no
sooner than six months after the Effective Date, in which case such termination
may occur at any time upon five Business Days, the Borrower may terminate the
existing Commitments by instructing each beneficiary of a Standby L/C to
surrender such Standby L/C to the relevant Issuing Bank for cancellation; and
provided, further, however, that the existing Commitments may not be terminated
so long as (i) any Standby L/C is outstanding or (ii) any Loan is outstanding
or (iii) any Drawing, interest, fee or expenses remain unpaid. Upon at least
five Business Days prior notice to the Administrative Agent and the Issuing
Banks, the Borrower may terminate any Standby L/C, in accordance with its
terms, by surrendering, or causing the beneficiary thereof to surrender, such
Standby L/C to the relevant Issuing Bank for cancellation.
(c) Reduction of Standby L/C. Upon at least five Business Days prior
notice to the Administrative Agent and each Issuing Bank, the Borrower may
reduce the stated amount of any Standby L/C to be reduced, in accordance with
its terms, by surrendering, or causing the beneficiary thereof to surrender,
such Standby L/C to the relevant Issuing Bank for cancellation in exchange for
a new Standby L/C having the reduced stated amount and otherwise having the
same terms as the Standby L/C being cancelled; provided, however, that the
stated amount of any Standby L/C shall not as a result of such reduction be
reduced below U.S.$3,000,000.
(d) Any reduction of the Commitments shall reduce the Commitment of
each Lender pro rata except as otherwise specified in Section 4.02(e).
(e) No reduction or termination of the Commitments shall in any event
release any Lender from any of its direct or indirect obligations to the
Issuing Banks in respect of (i) any Standby L/Cs issued prior to such
termination or reduction or (ii) any Drawing.
4.02 Extension of Termination Date.
(a) Extension of Termination Date/Reduction of Standby L/C. Upon at
least five Business Days' prior notice to the Administrative Agent and each
Issuing Bank, but no sooner than six months after the Effective Date, the
Borrower may permanently reduce the amount of the Aggregate Standby L/C
Sublimit and the Standby L/C Sublimit for each Issuing Bank by a minimum amount
of U.S.$5,000,000 or any integral multiple of U.S.$1,000,000 in excess thereof;
provided, however, the Standby L/C Sublimit for any Issuing Bank may not be
reduced below the Standby L/C Exposure of such Issuing Bank and any reductions
in the Standby L/C Sublimit for the Issuing Banks must be made on a pro rata
basis. The Borrower may, within 90 days, but not less than 45 days, prior to
each anniversary date of the original Effective Date (each anniversary date
being referred to as an "Anniversary Date"), by notice to the Administrative
Agent, the Issuing Banks and the Lenders, make a written request of the
Participating Lenders to extend the Termination Date for an additional period
of one (1) year. The Administrative Agent will give prompt notice to each of
the Participating Lenders of its receipt of any such request for extension of
the Termination Date. Each Participating Lender shall make a determination not
later than 30 days prior to the then applicable Anniversary Date (the
"Extension Consent Date") as to whether or not it will agree to extend the
Termination Date as requested (such approval of an extension shall be an
"Extension Consent"); provided, however, that failure by any Participating
Lender to make a timely response to the Borrower's request for extension of the
Termination Date shall be deemed to constitute a refusal by such Participating
Lender to an extension of the Termination Date.
(b) Lender Not Consenting. If by any Extension Consent Date the
Borrower and the Administrative Agent have not received an Extension Consent
from any Participating Lender, the Termination Date, as it relates to such
Participating Lender, shall not be extended, the Commitment of such
Participating Lender shall terminate on the Termination Date applicable to it
and any Loans or Standby L/C, as applicable, made by such Participating Lender
and all accrued and unpaid interest thereon shall be due and payable on such
Termination Date. Upon the termination of the Commitment of any such Lender,
unless this Agreement is amended as provided in Sections 4.02(e) or 4.02(f),
the aggregate amount of the Commitments shall be reduced by the amount of such
terminated Commitment, and the Commitment Percentage of each other Lender shall
be adjusted to that percentage obtained by dividing the Commitment of such
Lender by the aggregate amount of the Commitments after giving effect to such
reduction as provided in the definition of "Commitment Percentage".
(c) Other Lenders. No refusal by any one Participating Lender to
consent to any extension of the Termination Date shall affect the extension of
the Termination Date as it may relate to the Commitment and Loans of any
Participating Lender that consents to such extension as provided in Section
4.02(b), and one or more Participating Lenders may consent to the extension of
the Termination Date as it relates to them notwithstanding any refusal by any
other Lenders so to consent; provided that even as to the consenting Lenders,
the Termination Date will be extended only upon consent to such an extension by
the Required Lenders.
(d) Termination of Commitment. If any Participating Lender does not
deliver an Extension Consent as provided in Section 4.02(b) and no Loans or
Standby L/Cs, as applicable are then outstanding, the Borrower may upon at
least three (3) Business Days' prior notice to such Participating Lender and to
the Administrative Agent terminate the Commitment of such Lender. Upon any such
termination, the Commitment Percentage of each other Lender shall be adjusted,
if necessary, to that percentage obtained by dividing the Commitment of such
Lender by the aggregate amount of the Commitments after giving effect to such
termination and any increases in the aggregate amount of the Commitments under
the provisions of Section 4.02(e) or Section 4.02(f).
(e) Increase in Commitment of Other Lender or Lenders. If any Lender
does not deliver an Extension Consent as provided in Section 4.02(b), upon the
expiration of the Commitment of such Lender, or upon its termination as
provided in Section 4.02(d), the Borrower may offer each Lender that has
delivered an Extension Consent as provided in Section 4.02(b) a reasonable
opportunity to increase its Commitment by an amount equal to its pro rata share
(based on its Commitment before giving effect to such increase) of the
Commitment of the Lender that does not deliver an Extension Consent as provided
in Section 4.02(b). After giving such Lenders such an opportunity, the Borrower
may with the approval of the Administrative Agent amend this Agreement to
increase the Commitment of any other Lender or Lenders with the consent of such
Lender or Lenders; provided that such increase does not increase the aggregate
amount of the Commitments to an amount greater than the Aggregate Committed
Amount in effect immediately before such expiration or termination.
(f) Additional Lender or Lenders. If any Lender does not deliver an
Extension Consent as provided in Section 4.02(b), upon the expiration of the
Commitment of such Lender, or upon its termination as provided in Section
4.02(d), the Borrower may with the approval of the Administrative Agent amend
this Agreement as provided herein to add one or more other Lenders (each an
"Additional Commitment Lender") as parties, with such Commitments as may be
agreed to by the Administrative Agent and such other Lender or Lenders;
provided that such additions do not increase the Aggregate Committed Amount to
an amount greater than the aggregate amount of Commitments in effect
immediately before such expiration or termination.
4.03 Fees.
(a) Commitment Fee. The Borrower agrees to pay to the Administrative
Agent, quarterly in arrears commencing on September 30, 2004, for the account
of the Lenders ratably in accordance with their Commitment Percentage a
commitment fee (the "Commitment Fee") at the rate of 40% of the Applicable
Margin per annum for the relevant quarterly period on the Available Commitments
as from time to time in effect]. 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 or the Termination Date is not a Business Day,
then the Commitment Fee shall be payable on the next preceding Business Day.
(b) Standby L/C Fees. The Borrower will pay to each Issuing Bank
Standby L/C documentation fees (the "Standby L/C Fees") in the amounts and at
the times agreed to by the Issuing Banks and the Borrower in the Fee Letter.
(c) Letter of Credit Utilization Fees. A letter of credit utilization
fee, at a rate per annum equal to the Applicable Margin for the relevant
quarterly period from time to time in effect, calculated on a per annum basis
on the daily amount of Aggregate Standby L/C Exposure from time to time,
payable to the Administrative Agent for the account of the Lenders in arrears
on (i) the last day of each calendar quarter, commencing on the first such date
after the Borrowing Date, and (ii) the Termination Date.
(d) 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.
(e) 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") in
accordance with the Summary of Terms and Conditions agreed to by the Borrower
and the Joint Bookrunners on May 10, 2004.
4.04 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.
4.05 Taxes.
(a) Any and all payments by the Borrower or the Guarantor, as the case
may be, to any Lender, any Issuing Bank, 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 4.05(c), the Borrower and
the Guarantors agree to indemnify and hold harmless each Lender, each Issuing
Bank and the Administrative Agent for the full amount of Taxes or Other Taxes
excluding in each case United States backup withholding Taxes imposed because
of payee underreporting (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 4.05) paid by or assessed
against any Lender, any Issuing Bank 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,
unless such penalties, interest, additions to tax or expenses are incurred
solely as a result of any gross negligence or willful misconduct of such
Lender, Issuing Bank or Administrative Agent, as the case may be. Payment under
this indemnification shall be made within 30 days after the date any Lender,
any Issuing Bank or the Administrative Agent makes written demand therefore,
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, any Issuing Bank 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 4.05, but excluding in each case United States backup
withholding Taxes imposed because of payee underreporting) such
Lender, such Issuing Bank 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, Issuing Bank
or the Administrative Agent to the extent such increased amounts would
be in excess of the increased amounts that would have been payable to
such Lender or Issuing Bank had such Lender, Issuing Bank or
Administrative Agent complied with the requirements of Section
4.05(f);
(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 any Lender or any Issuing Bank pursuant to Section
4.05(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 such Lender or such Issuing Bank, as the case may be,
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office or issuing
office, as the case may be, so as to eliminate or reduce the obligation of the
Borrower or the Guarantor, as the case may be, to pay any such additional
amounts which may thereafter accrue or to indemnify such Lender or the Issuing
Bank in the future, if such change in the reasonable judgment of such Lender or
such Issuing Bank is not otherwise disadvantageous to such Lender or such
Issuing Bank.
(f) Each Issuing Bank, 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 Issuing Bank, 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).
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) If any Issuing Bank, 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 4.05(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) such Issuing Bank, 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 such Issuing Bank, 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 such Issuing Bank, the Administrative Agent or such Lender, as the
case may be, if such Issuing Bank, 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 such
Issuing Bank, the Administrative Agent or such Lender, as the case may be.
4.06 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, the
Swing Line Lenders or the Issuing Banks, as the case may be, 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) (but
not earlier than 11:30 a.m. (New York City time) in respect of any Drawing
under a Standby L/C), on the dates specified herein but in no event prior to
the payment by the relevant Issuing Bank of such Drawing, as the case may be,
to be reimbursed. The Administrative Agent will promptly distribute to the
relevant Issuing Bank or 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 an Issuing Bank
or 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 the relevant Issuing Bank or each Lender, as the case may be, on
such due date an amount equal to the amount then due to such Issuing Bank or
such Lender. If and to the extent that the Borrower shall not have made such
payment, the relevant Issuing Bank or each Lender, as the case may be, shall
repay to the Administrative Agent forthwith on demand such amount distributed
to such Issuing Bank or such Lender together with accrued interest thereon, for
each day from the date such amount is distributed to such Issuing Bank or such
Lender until the date such Issuing Bank or such Lender repays such amount to
the Administrative Agent, at the Federal Funds Rate; provided, however, that if
any amount remains unpaid by the relevant Issuing Bank or any Lender for more
than five Business Days after the Administrative Agent has made a demand for
such amount, such Issuing Bank or 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 the relevant Issuing Bank or
any Lender for more than ten Business Days, such Issuing Bank or 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%.
4.07 Funding Losses. If the Borrower makes any payment of
principal with respect to any LIBOR 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 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 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 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 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.
4.08 Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any LIBOR
Loan:
(a) the Administrative Agent determines that by reason of
circumstances affecting the London interbank market, reasonably adequate means
do not exist for ascertaining LIBOR applicable to such Interest Period or that
deposits in Dollars (in the applicable amounts) are not being offered in the
London interbank market for such Interest Period, or
(b) the Required Lenders advise the Administrative Agent that LIBOR
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
advise, 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.
4.09 Capital Adequacy.
If any Participating 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 Participating 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 Participating Lender's cost of maintaining its
Commitment or Standby L/C, as the case may be, or making or maintaining any
Loans or any Standby L/C, as the case may be, or reducing the rate of return on
such Participating Lender's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such
Participating 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 Participating Lender
to the Borrower, the Borrower shall be obligated to pay to such Participating
Lender such additional amount or amounts as will compensate such Participating
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 Participating Lender's making a claim for compensation under
this Section 4.09, (i) such Participating 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 4.12.
4.10 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
Credit Agreement, then such Lender, together with Lenders giving notice under
Section 4.08(c), 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, 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,
made by it be converted to Base Rate Loans, in which event all such
LIBOR 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 that would have been made
by such Lender or the converted LIBOR 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.
(b) For purposes of this Section 4.10, 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.
4.11 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 the LIBOR
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 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 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.
4.12 Substitute Lenders. If any Lender has demanded compensation
pursuant to Sections 4.09, 4.10 or to 4.11, and such Lender does not waive its
right to future additional compensation pursuant to Section, 4.09, 4.10 or
4.11, 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 and a fee of U.S.$1,500 payable directly
to each Issuing Bank; 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 4.09, 4.10 or 4.11; 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 4.09) unless any such amount is being
contested by the Borrower in good faith.
4.13 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 Participating 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 4.13 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 4.13 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 V
CONDITIONS PRECEDENT
5.01 Conditions to Effectiveness. The obligations of the Participating
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 if
requested by a Lender, there shall have been delivered to the Administrative
Agent for the account of such 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 Participating
Lenders, and (ii) the opinion of Sullivan & Cromwell LLP, New York counsel to
the Participating 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 15.12.
(g) Fees and Expenses. The Borrower shall have paid all fees and
expenses owing to the Participating Lenders, the Joint Bookrunner 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, 2003 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.
(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 Participating Lender through the Administrative
Agent.
(l) Fees, Costs and Expenses under the Prior Agreement. The Borrower
shall have paid all accrued and unpaid fees payable under the Prior Agreement
to the extent due and payable on or before the Effective Date of this
Agreement.
(m) Prior Agreement. The Prior 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, all
outstanding loans issued under the Prior Agreement, other than the existing
Standby L/C set forth on Schedule 3.01, shall have been repaid or reimbursed.
The parties hereto agree that a Notice of Borrowing may be given under this
Agreement simultaneously to repay or reimburse all outstanding obligations
under the Prior Agreement.
(n) Termination of the U.S. Commercial Paper Program. The
Administrative Agent shall have received evidence that all outstanding amounts
under the CEMEX U.S. Commercial Paper program, dated as of August 8, 2003,
shall have been, or will be with the proceeds of a Borrowing hereunder, paid
in full and all commitments shall have been or will on the same day be
terminated or cancelled.
5.02 Conditions Precedent to Borrowings, Continuation or
Conversion of the Loans and Issuances of Standby L/Cs. The obligation of any
Lender to make a Loan on the occasion of any Borrowing or to continue or
convert any Loan or for an Issuing Bank to issue a Standby L/C 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,
Swing Line Request or a Notice of Extension/Conversion as required by Section
2.01(c), 2.02(c) or 2.01(e), respectively, and, in the case of issuances of
Standby L/Cs, the Appropriate Issuing Bank shall have received a Standby L/C
Request as required by Section 3.01(c);
(b) Availability. (i) Immediately after such Borrowing (after giving
effect to the payment of any unreimbursed Drawing with the proceeds of such
Borrowing), the continuation or conversion of any Loan or the issuance of the
Standby L/C, as the case may be, the Total Outstandings shall not exceed the
Aggregate Committed Amount; and
(ii) in the case of issuances of Standby L/Cs, the stated amount of
the Standby L/C subject of such issuance shall not exceed the Available
Standby L/C Sublimit.
(c) No Default. Immediately before and after giving effect to such
Borrowing or the continuation or conversion of any Borrowing or the issuance
of such Standby L/C, no Default or Event of Default shall have occurred and be
continuing and such Borrowing or continuation or conversion of any Loan or
issuance of a Standby L/C thereof 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, continuation or conversion of any Loan or issuance of a Standby L/C
thereof.
(e) Fees. In the case of issuances of Standby L/Cs, the Borrower
shall have paid to the Issuing Banks all of the Standby L/C Fees due and
payable on or before the issuance of such Standby L/C.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants that:
6.01 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.
6.02 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.
6.03 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.
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 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.
6.05 Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 2003, 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, 2004, 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, 2004, 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.
(b) Since December 31, 2003 there has been no development or event
which has had or is reasonably likely to have a Material Adverse Effect.
6.06 Litigation. Except as set forth in Schedule 6.06, 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 6.06.
6.07 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).
6.08 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.
6.09 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.
6.10 Subsidiaries. All Material Subsidiaries of the Borrower are
listed on Schedule 6.10.
6.11 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 8.05.
6.12 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 Participating 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 Participating
Lender, that the Administrative Agent or such Participating Lender be licensed
or qualified with any Mexican Governmental Authority or be entitled to carry on
business in Mexico.
6.13 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 is permitted
to pay any additional amounts payable pursuant to Section 4.05.
6.14 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.
6.15 Absence of Default. No Default or Event of Default has occurred
and is continuing.
6.16 Full Disclosure. All information heretofore furnished
by the Borrower to the Administrative Agent, the Joint Bookrunners or any
Participating 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 Participating 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 Participating Lenders in writing any and all
facts which may have a Material Adverse Effect.
6.17 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 Participating 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 15.10, 15.11 and 15.13.
6.18 Total Outstandings. The Total Outstandings do not exceed the
aggregate amount of the Commitments.
6.19 Existing Standby L/C's. Attached hereto as Schedule 3.01 is a
complete and accurate list of the outstanding Standby L/C's under the Prior
Agreement, listed by number, stated amount, date of issue and expiry.
6.20 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.
6.21 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, without limitation,
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 6.21 constitutes the only representations and
warranties of the Credit Parties with respect to any Environmental Law or
Hazardous Substance.
6.22 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 Participating Lender or the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Participating
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, without limitation, 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 VII
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
Each of the Guarantors separately represents and warrants that:
7.01 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.
7.02 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.
7.03 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.
7.04 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.
7.05 Litigation; Material Adverse Effect. (a) Except as set forth in
Schedule 7.05, 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 7.05.
(b) Since December 31, 2003 there has been no development or event
which has had or is reasonably likely to have a Material Adverse Effect.
7.06 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).
7.07 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.
7.08 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.
7.09 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.
7.10 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
Participating 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 15.10, 15.11 and 15.13.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that for so long as any Obligation
under this Agreement or any other Transaction Document remains unpaid, any
Standby L/Cs remain outstanding or any Lender has any Commitment hereunder:
8.01 Financial Reports and Other Information. The Borrower will
deliver to the Administrative Agent (with a copy for each Participating
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
6.05 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 6.05 and provided further that
all such documents will be prepared in English.
8.02 Notice of Default and Litigation. The Borrower will furnish to
the Administrative Agent (and the Administrative Agent will notify each
Participating 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 6.06 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 but not limited to Environmental Laws) the violation of
which could reasonably be expected to have a Material Adverse Effect.
8.03 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.
8.04 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.
8.05 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.
8.06 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 9.03; 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.
8.07 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.
8.08 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.
8.09 Use of Proceeds.
(a) The Borrower will use the proceeds of all Loans made hereunder for
general corporate purposes, including but not limited to the repayment of short
term debt.
(b) The Borrower will ensure that at no time shall the Aggregate
Exposure of the Participating Lenders exceed the Aggregate Committed Amount
then in effect.
8.10 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.
8.11 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.
8.12 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.
8.13 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 (i) on the date a
Notice of Borrowing is submitted by the Borrower, (ii) one Business Day
following the date any Responsible Officer obtains actual knowledge of a change
in the Consolidated Net Debt/EBITDA Ratio, (iii) one Business Day following the
date the Administrative Agent or any Participating Lender requests such ratio
and (iv) as soon as practicable, but in no event later than the 20th Business
Day following the last day of every quarter, in each case calculated as of the
date of such event or occurrence based on the most recently available
consolidated financial statements of the Borrower and its Subsidiaries for the
corresponding fiscal quarter prior to such date and calculated (for purposes of
event (i) above) after giving effect to the Borrowing, obligation or conversion
requested under the Notice of Borrowing.
8.14 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 Participating
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 Participating
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 IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that for so long as any Obligation
under this Agreement or any other Transaction Document remains unpaid, any
Standby L/C remains outstanding or any Lender has any Commitment hereunder:
9.01 Financial Conditions.
(a) The Borrower shall not permit the Consolidated Leverage 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 8.01 the Borrower shall deliver to the
Administrative Agent (with a copy to each Participating Lender) a certificate
from a Responsible Officer containing all information and calculations
necessary for determining compliance by the Borrower with Sections 9.01 (a) and
(b) above.
9.02 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 such 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 as described in
Schedule 9.02 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 9.04; and provided, further that such Liens may not secure Debt of the
Borrower or any Subsidiary (unless permitted under another clause of this
Section 9.02);
(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.
9.03 Consolidations and Mergers. The Borrower shall not,
and shall not permit any Material Subsidiary to, 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 Material Subsidiary, 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 Material Subsidiary
(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 Participating Lender
and the Administrative Agent against any tax, levy, assessment or governmental
charge payable by withholding or deduction thereafter imposed on such
Participating 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 Subsidiary for such
Subsidiary and treating any Debt or Lien incurred by the Borrower or any
Successor to the Borrower, or by a Subsidiary of the Borrower or any Successor
to such Subsidiary, 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 IX and that all
conditions precedent provided for in this Agreement relating to such
transaction have been complied with.
9.04 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.
9.05 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.
9.06 Margin Regulations. The Borrower shall not use any part of the
proceeds of the Loans or any Standby L/C for any purpose which would result in
any violation (whether by the Borrower, the Administrative Agent, any Issuing
Bank 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 X
OBLIGATIONS OF GUARANTORS
10.01 The Guaranty. Each of the Guarantors jointly and severally
hereby unconditionally and irrevocably guarantee (as a primary obligor and not
merely as surety) payment in full as provided herein of all Obligations payable
by the Borrower to each Participating 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).
10.02 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 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.
10.03 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, the Issuing Banks, 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 (including for the reason that the obtaining of the
Standby L/Cs may be in excess of the powers of the Borrower or of its officers,
directors or other agents, acting or purporting to act on its behalf, or be in
any way irregular or defective);
(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; or
(e) any other act or omission to act or delay of any kind by the
Borrower, the Administrative Agent, the Participating 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.
10.04 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 Participating 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
Participating 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 Participating 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 Participating
Lenders in favor of the Borrower or each of the Guarantors. Without limiting
the generality of the foregoing, the Administrative Agent or the Participating
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.
10.05 Waiver of Notices. Each of the Guarantors hereby waives notice
of acceptance of this ARTICLE X 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 Participating Lenders against, and any other
notice, to the Guarantors.
10.06 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 X, 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 Participating 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 X 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
Participating 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 Participating 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 XI, 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 as known of form and substance
to each such Guarantor
10.07 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 Participating Lenders.
(c) The obligations of each of the Guarantors under this ARTICLE X
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 10.07(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 Participating
Lenders that the Obligations which are to be purchased by the Guarantors
pursuant to this ARTICLE X 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
Participating 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 Participating 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 X, to the extent permitted by applicable law.
10.08 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
Participating Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of the Administrative Agent or any Participating 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 Participating 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 Participating 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 Issuing Bank, 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.
10.09 Right of Contribution. Subject to Section 10.08, 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 10.09 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent, the Joint Bookrunners
and the Participating Lenders, and each Guarantor shall remain liable to the
Administrative Agent, the Joint Bookrunners and the Participating Lenders for
the full amount guaranteed by such Guarantor hereunder.
10.10 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 10.10 would otherwise, taking into account the provisions of Section
10.09, 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 10.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Guarantor, any Participating 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.
10.11 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, any Standby L/C remains outstanding or any
Participating 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 XI
EVENTS OF DEFAULT
11.01 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 reimburse any
Drawing or 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 Drawing, or 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 on 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 8.01, 8.02(a), 8.06 (with respect to the Borrower's and each
Guarantor's existence only), 8.09(b) or 8.10 or ARTICLE IX; 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 or any other Transaction Document (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 X 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
Participating 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 the Transaction Documents; 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 any Transaction Document to which it is a party; or
(n) Material Adverse Effect. There shall occur any circumstance, event
or condition of a financial or other nature which the Required Lenders
determine in good faith is reasonably likely to have a material adverse effect
on the ability of the Borrower or either Guarantor to perform its obligations
under this Agreement or any of the other Transaction Documents; or
(o) 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.
11.02 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 or the relevant Issuing Bank, as applicable:
declare by notice to the Borrower the principal amount of all
outstanding Loans and Standby L/Cs 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 11.01(f) or (g), without notice or any
other act by the Lenders, the Loans and Standby L/Cs (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;
provided, however, that nothing in this Section 11.02 shall (x) impair the
obligation of any Issuing Bank to make payments in accordance with the Standby
L/Cs or (y) impair the obligation of the Borrower to reimburse each Issuing
Bank for, or the obligation of any Lender to fund its participation in, any
Drawing, made subsequent to the time any remedy provided in this paragraph
shall have been exercised.
11.03 Notice of Default. The Administrative Agent shall give notice to
the Borrower of any event occurring under Section 11.01(a), (b), (c) or (d)
promptly upon being requested to do so by any Participating Lender and shall
thereupon notify all the Participating Lenders thereof.
11.04 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 2.03(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 XII
THE ADMINISTRATIVE AGENT
12.01 Appointment and Authorization. Each Participating Lender hereby
irrevocably designates and appoints ING Capital LLC as the Administrative Agent
of such Participating Lender under this Agreement, and each Participating
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 Participating 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.
12.02 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.
12.03 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 Participating 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 Participating 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.
12.04 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 or
the relevant Issuing Bank, as the case may be, as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction by the
Lenders or the relevant Issuing Bank, as the case may be, 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), or the relevant Issuing Bank, as the case may be, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders or such Issuing Bank, as the case may be.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Participating 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 Participating Lender for consent, approval, acceptance or satisfaction
on or before the Effective Date.
12.05 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
each Issuing Bank and the Lenders) unless the Administrative Agent shall have
received written notice from a Lender, an Issuing Bank 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 each Issuing Bank and 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 and the Issuing Banks.
12.06 Credit Decision. Each Participating 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 Participating
Lender. Each Participating Lender acknowledges to the Administrative Agent that
it has, independently and without reliance upon the Administrative Agent or any
other Participating 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 Participating Lender regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement.
Each Participating Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Participating
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 Participating Lenders by the Administrative Agent, the
Administrative Agent shall not have any duty or responsibility to provide any
Participating 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.
12.07 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.
12.08 Administrative Agent in Individual Capacity. ING Capital LLC 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 ING Capital LLC were not the Administrative Agent
hereunder and without notice to or consent of the Participating Lenders. The
Participating Lenders acknowledge that, pursuant to such activities, ING
Capital LLC, New York Branch 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, ING Capital LLC 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 ING
Capital LLC in its individual capacity.
12.09 Successor Administrative Agent. The Administrative Agent may, and at
the request of the Required Lenders and/or the Issuing Banks shall, resign as
Administrative Agent upon 30 days' notice to the Participating Lenders and the
Borrower. If the Administrative Agent resigns under this Agreement, the
Required Lenders and/or the Issuing Banks shall appoint from among the
Participating Lenders a successor agent for the Participating 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 Participating Lenders and the Borrower, a successor
agent from among the Participating 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 XII and Sections 15.04 and 15.05 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 Participating 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 XIII
THE ISSUING BANKS
13.01 Appointment. Each Lender hereby irrevocably designates and
appoints each of Barclays Bank PLC, New York Branch and ING Bank N.V., as an
Issuing Bank under this Agreement, and each Lender hereby irrevocably
authorizes each of Barclays Bank PLC, New York Branch and ING Bank N.V., as an
Issuing Bank, to take such action 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 Issuing Banks 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 elsewhere in this Agreement or in any other Transaction Document, the
Issuing Banks shall not have any duties or responsibilities, except those
expressly set forth herein or in any other Transaction Document, nor shall the
Issuing Banks 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 Issuing Banks; provided,
however, that nothing contained in this ARTICLE XIII shall be deemed to limit
or impair the rights and obligations of the Issuing Banks under the Standby
L/Cs issued hereunder.
13.02 Liability of Issuing Bank. Neither of the Issuing Banks nor any
of their respective 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 (except for its or such Person'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 Issuing Banks 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 Transaction Document to perform its obligations
hereunder or thereunder. Except as otherwise expressly stated herein, and
except for the obligation to examine all documents stipulated in any Standby
L/C issued hereunder, in accordance with the Uniform Customs and Practice for
Documentary Credits and applicable law, the Issuing Banks 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.
13.03 Reliance by Issuing Banks. Each of the Issuing Banks 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 an Issuing Bank. Except for the issuance of any Standby
L/Cs issued hereunder, in accordance with the terms of this Agreement and the
payment of Drawings, as the case may be, thereunder, each of the Issuing Banks
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 such Issuing Bank 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. Each Issuing Bank shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other
Transactions Documents in accordance with a request of the Required Lenders,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders.
13.04 Credit Decision. Each Lender expressly acknowledges that neither
of the Issuing Banks nor any of either of their respective Affiliates,
officers, directors, employees, agents or attorneys-in-fact has made any
representation or warranty to it, and that no act by any Issuing Bank 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 any Issuing Bank to any Lender. Each Lender acknowledges to the
Issuing Banks that it has, independently and without reliance upon the Issuing
Banks, 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 bank 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
Issuing Banks, 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 and the Guarantors.
13.05 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders agree to indemnify upon demand from an
Issuing Bank or 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 in accordance with Section 15.05), 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 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 such Issuing
Bank (or any of its Affiliates, directors, officers, agents or 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 such Issuing
Bank under or in connection with any of the foregoing; provided, however, that
no Lender shall be liable for (a) the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent it results from such
Issuing Bank's gross negligence or willful misconduct or (b) any untrue
statement of a material fact in the material furnished in writing by such
Issuing Bank to the Borrower for inclusion in any offering statement or any
omission in such offering statement to state a material fact required to be
stated therein in light of the circumstances under which they were made.
Notwithstanding the foregoing, no Lender shall be required to fund any other
Lender's portion of an unreimbursed Drawing or Standby L/C Drawing, as the case
may be, which such other Lender fails to fund hereunder.
13.06 Issuing Banks in their Individual Capacities. Each of Barclays
Bank PLC and ING Bank N.V. and its Affiliates 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 or any of its Affiliates as though it was not an Issuing Bank
hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, each Issuing Bank 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
each Issuing Bank shall be under no obligation to provide such information to
them. With respect to the Obligations, each of Barclays Bank PLC, New York
Branch and ING Bank N.V. shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
an Issuing Bank, and the terms "Lender" and "Lenders" shall include each of ING
Bank N.V. and Barclays Bank PLC, New York Branch in its individual capacity.
13.07 Notice of Default. Neither of Issuing Banks shall be deemed to
have knowledge or notice of any Default or Event of Default unless such Issuing
Bank shall have received written notice from the Administrative Agent, any
Participating Lender, the Borrower or a Guarantor referring to this Agreement
and describing such Default or Event of Default.
ARTICLE XIV
THE JOINT BOOKRUNNERS
14.01 The Joint Bookrunners. The Borrower hereby confirms the
designation of Barclays Capital, the Investment Banking Division of Barclays
Bank PLC, and ING Capital LLC, as arrangers and Joint Bookrunners for the
Revolving Facility and the Standby L/C 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 Participating
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 Participating 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.
14.02 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.
14.03 Joint Bookrunners in their respective Individual Capacities.
Each of Barclays Capital, the Investment Banking Division of Barclays Bank PLC
and its Affiliates, and Banc of America Securities LLC 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.
14.04 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 Arrangers or any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
ARTICLE XV
MISCELLANEOUS
15.01 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 Issuing Banks,
the Joint Bookrunners or the Administrative Agent, at its address or facsimile
number set forth on the signature pages hereof 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 Issuing Banks, 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, V or XII shall not be
effective until received.
15.02 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 Participating Lender;
(ii) extend the maturity of any of the Obligations,
extend the time of payment of interest thereon, or, other
than as provided in Section 4.02, 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 (other than the Standby L/C
Fees, Agency Fees or Arrangement Fees), or change the
provisions of 4.06(a);
in each case without the consent of the Borrower and each Participating Lender
directly affected thereby;
(b) (i) amend, modify or waive any provision of this Section 15.02;
(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
(except as provided in Article V for Non-Extending Lenders); or
(iii) amend, modify or waive any provision of Section 5.01;
(iv) amend or modify the definition of "Available Standby L/C
Sublimit" in Section 1.01 hereof;
(v) amend, modify or waive any provision of Section 5.02; or
(vi) amend, modify or waive any provision of Section 15.06;
in each case without the consent of the Borrower and all the Participating
Lenders;
(c) amend, modify or waive any provision of ARTICLE XII without the
written consent of the Administrative Agent;
(d) amend, modify or waive any provision of ARTICLE XIV without the
consent of the Joint Bookrunners;
(e) amend, modify or waive any provision of ARTICLE III and XIII
without the consent of the Required Lenders and the Issuing Bank; and
(f) amend, modify or waive any provision of Section 2.02, without the
consent of the Required Lenders and the Swing Line Lenders.
15.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any
Participating 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.
15.04 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 counsel
to the Administrative Agent, English and New York counsel to the Issuing Banks
and the allocated cost of in-house 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 and the Issuing Banks 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 counsel for the Administrative Agent
and the Issuing Banks and the allocated cost of in-house counsel thereof; and
(c) all reasonable and documented, out-of-pocket costs and expenses
incurred by the Administrative Agent or any Participating 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 counsel for the Administrative Agent, such
Participating Lender and the allocated costs of in-house counsel thereof.
15.05 Indemnification. The Borrower agrees to indemnify and hold
harmless the Joint Bookrunners, the Administrative Agent, each Issuing Bank 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 15.05 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 also agrees not to assert any claim against the Joint
Bookrunners, the Administrative Agent, an Issuing Bank, 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, an Issuing Bank nor any Lender
shall be deemed to have any fiduciary relationship with the Borrower or the
Guarantor.
15.06 Successor 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 Issuing Bank, 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 (other than an Issuing Bank in its capacity as such)
may at any time, and any Lender, if demanded by the Borrower or an Issuing Bank
pursuant to Section 2.01(d) or Section 4.11 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) and the Issuing Bank (which
consent may be withheld for any reason; except that where such Assignee is an
OECD Bank, consent may not be unreasonably withheld); 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 other than from the relevant Issuing Bank; 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 2.06(b) or
4.11, 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.$2,000
and to the Issuing Bank a fee of U.S.$1,000.
(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 15.06; 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, the Issuing Banks 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 or its share of the Standby L/C Exposure. 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, the Issuing Banks 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 4.07 and 4.10 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 15.06,
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.
15.07 Right of Set-off. In addition to any rights and remedies of the
Participating Lenders provided by law, each such Participating 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 Participating Lender,
or any branch or agency thereof to or for the credit or the account of the
Borrower or the Guarantors. Each Participating 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 Participating Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
15.08 Confidentiality. Neither the Administrative Agent nor any
Participating 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 Participating Lender's Affiliates and their
officers, directors, employees, agents and advisors and, as contemplated by
Section 15.06(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 Participating 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.
Notwithstanding the foregoing or anything contained in any Transaction Document
to the contrary, the parties (and each employee, representative, or other agent
of the parties) may disclose to any and all persons, without limitation of any
kind, the tax treatment and any facts that may be relevant to the tax structure
of the transactions contemplated by this Agreement, provided, however, that no
party (and no employee, representative, or other agent thereof) shall disclose
any other information that is not relevant to understanding the tax treatment
and tax structure of such transactions (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.
15.09 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 5.01(e)(iii), Section 8.01 and Section 8.02
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.
15.10 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.
15.11 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
and, with respect to the Borrower and the Guarantors, to the competent courts
of their own corporate domicile 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 or, with respect to the Borrower and
the Guarantors, any such competent court in the place of their corporate
domicile 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 THE ARRANGER, THE ADMINISTRATIVE AGENT, THE ISSUING
BANK OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
15.12 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 the Guarantor, as the case may be, in care of the Process Agent at
its address specified above, and the Borrower or the 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 15.11 or in this Section 15.12 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.
15.13 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 15.13 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.
15.14 Judgment Currency.
(a) All payments made under this Agreement and the other Transaction
Documents shall be made in Dollars. If for the purposes of obtaining judgment
in any court it is necessary to convert a sum due from the Borrower in Dollars
into another currency, 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, each
Issuing Bank or each Lender, as the case may be, could purchase Dollars with
such currency 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, an
Issuing Bank 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 Dollars, be
discharged only to the extent that on the Business Day following receipt by
such Lender, such Issuing Bank or the Administrative Agent of any sum adjudged
to be so due in such other currency such Lender, such Issuing Bank or the
Administrative Agent may in accordance with normal banking procedures purchase
Dollars with such other currency. If the amount of Dollars so purchased is less
than the sum originally due to such Issuing Bank, 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 Issuing Bank, such Lender
or the Administrative Agent against such resulting loss.
15.15 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.
15.16 USA PATRIOT Act. The Participating 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 Issuing Banks to identify the Borrower in accordance with
the Act.
15.17 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.
15.18 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 4.05, 4.07,
4.09, 4.10, 15.04, 15.05, 15.08, 15.09, 15.11 and 15.12, and the obligations of
the Lenders under Sections 12.07 and 13.05, shall survive the termination of
the Commitments, the expiration of Standby L/Cs 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 JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
CEMEX, S.A. DE C.V.,
as Borrower
By /s/ Humberto Lozano
____________________________
Name: Humberto Lozano
Title: Attorney-in-Fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
CEMEX MEXICO, S.A. DE C.V.,
as Guarantor
By /s/ Hector Vega
____________________________
Name: Hector Vega
Title: Attorney-in-Fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
EMPRESAS TOLTECA DE MEXICO,
S.A. DE C.V.,
as Guarantor
By /s/ Hector Vega
____________________________
Name: Hector Vega
Title: Attorney-in-Fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
ING CAPITAL LLC, as Administrative
Agent
By /s/ Michele M. Mangav
________________________________
Name: Michele M. Mangav
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BARCLAYS BANK PLC
as Issuing Bank, Documentation
Agent and Lender
By /s/ Nicholas A. Bell
________________________________
Name: Nicholas A. Bell
Title: Director
Loan Transaction Management
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
ING Bank, N.V. (acting through its
Curacao Branch), as Issuing bank
and Lender
By /s/ A. C. Zulia
________________________________
Name: A. C. Zulia
Title: Senior Manager Transaction
Processing
By /s/ A. B. Rosaria
_______________________________
Name: A. B. Rosaria
Title: Vice President Risk Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BANCO SANTANDER CENTRAL
HISPANO, S.A., New York Branch,
as Lender
By /s/ Ruben Perez-Romo
________________________________
Name: Ruben Perez-Romo
Title: Vice President
____ Corporate Banking
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BBVA BANCOMER, S.A.,
INSTITUCION DE BANCA
MULTIPLE, GRUPO FINANCIERO
BBVA-BANCOMER,
as Lender
By /s/ Carlo David Velazquez Thierry
____________________________________
Name: Carlo David Velazquez Thierry
Title: Apoderado
By /s/ Sergio Antonio del Rio Herrera
____________________________________
Name: Sergio Antonio del Rio Herrera
Title: Apoderado
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
MIZUHO CORPORATE BANK, LTD.,
as Lender
By /s/ Takeo Kada
________________________________
Name: Mr. Takeo Kada
Title: Deputy General Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
THE BANK OF NOVA SCOTIA,
as Lender
By /s/ Kevin C. Clark
________________________________
Name: Kevin C. Clark
Title: Managing Director,
International Banking
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
THE BANK OF TOKYO-MITSUBISHI LTD.,
as Lender
By /s/ Hiroshi Azuma
________________________________
Name: Hiroshi Azuma
Title: VP & Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
ABN AMRO BANK N.V.,
as Lender
By /s/ Michel van Schaurdenbur
________________________________
Name: Michel van Schaurdenbur
Title: Senior Managing Director
By /s/ Oscar Herrera
________________________________
Name: Oscar Herrera
Title: Business Manager CPM NA
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BANK OF AMERICA, N.A.
as Lender
By /s/ Ernesto Alatorre
________________________________
Name: Ernesto Alatorre
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
CALYON NEW YORK BRANCH,
as Lender
By /s/ Attila Coach
________________________________
Name: Attila Coach
Title: Managing Director
By /s/ Phillippe Soustra
________________________________
Name: Phillippe Soustra
Title: Executive Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
CITIBANK, N.A. NASSAU, Bahamas
Branch, as Lender
By /s/ Margaret A. Butler
________________________________
Name: Margaret A. Butler
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
STANDARD CHARTERED BANK,
as Lender
By /s/ Monica Molina
________________________________
Name: Monica Molina A2385
Title: Assistant Vice President
By /s/ Ana M. Marchan
________________________________
Name: Ana M. Marchan
Title: Assistant Vice President
A2380
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BAYERISCHE LANDESBANK,
Cayman Islands Branch, as Lender
By /s/ Dietmar Rieg
________________________________
Name: Dietmar Rieg
Title: Senior Vice President
By /s/ James H. Boyle
________________________________
Name: James H. Boyle
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
HSBC MEXICO, S.A., INSTITUCION
DE BANCA MULTIPLE, GRUPO
FINANCIERO HSBC, as Lender
By /s/ Jorge Casas De La Torre
________________________________
Name: Jorge Casas De La Torre
Title: Corporate Banking
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Lender
By /s/ Laura McInnes
________________________________
Name: Laura McInnes
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
WESTLB AG, New York Branch,
as Lender
By /s/ Richard J. Pearse
________________________________
Name: Richard J. Pearse
Title: Executive Director
By /s/ Daniel Hitchcock
________________________________
Name: Daniel Hitchcock
Title: Director
Credit Americas
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BANCO DE CREDITO B
INVERSIONES,
as Lender
By /s/ Roberto Gatica
________________________________
Name: Roberto Gatica
Title: V.P. Commercial Lending
By /s/ Maria Grisel Vega
________________________________
Name: Maria Grisel Vega
Title: First Vice President,
Comptroller
Bci Miami Branch
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
COMERICA BANK, as Lender
By /s/ Robert J. Hurley
________________________________
Name: Robert J. Hurley
Title: Assistant Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
DEUTSCHE BANK AG New York Branch,
as Lender
By /s/ Bettina Maier
________________________________
Name: Bettina Maier
Title: Vice President
By /s/ Frank Farsi
________________________________
Name: Frank Farsi
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
DRESDNER BANK AG, acting through
its Lending Offices at Dresdner Bank AG,
New York and Grand Cayman Branches,
as Lender
By /s/ Brian K. Schneider
________________________________
Name: Brian K. Schneider
Title: Vice President
By /s/ Enrique Bustamante
________________________________
Name: Enrique Bustamante
Title: Managing Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BAYERISCHE HYPO-UND
VEREINSBANK AG., as Lender
By /s/ Maria Lago
________________________________
Name: Maria Lago
Title: Associate Director
By /s/ Lara Cunha
________________________________
Name: Lara Cunha
Title: Associate Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
SANPAOLO IMI S.p.A., as Lender
By /s/ Benato Carducci
________________________________
Name: Benato Carducci
Title: General Manager
By /s/ Barbara Bassi
________________________________
Name: Barbara Bassi
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BANCO DI ROMA, S.p.A., New York
Branch, as Lender
By /s/ Alessandro Paoli
________________________________
Name: Alessandro Paoli
Title: Vice President
By /s/ Claudio Perna
________________________________
Name: Claudio Perna
Title: Exec. Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
BNP PARIBAS PANAMA BRANCH,
as Lender
By /s/ Christian Giraudon
________________________________
Name: Christian Giraudon
Title: General Manager
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
JPMORGAN CHASE BANK,
as 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 JUNE 23,
2004, AMONG CEMEX, AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND EMPRESAS TOLTECA
DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS ISSUING BANK AND
DOCUMENTATION AGENT, ING BANK N.V., AS ISSUING BANK, THE SEVERAL LENDERS PARTY
THERETO, BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK
PLC, AS JOINT BOOKRUNNER AND ING CAPITAL LLC, AS A JOINT BOOK RUNNER AND
ADMINISTRATIVE AGENT.
SOCIETE GENERALE
as Lender
By /s/ Alejandro Grenier
________________________________
Name: Alejandro Grenier
Title: Vice President
SCHEDULE 1.01(a)
Commitments
- ------------------------------------------ --------------------------------- --------------------------------
Commitment Commitment
Lender Amount Percentage
- ------------------------------------------ --------------------------------- --------------------------------
Barclays Bank PLC $50,000,000 6.25%
- ------------------------------------------ --------------------------------- --------------------------------
ING Bank N.V. $50,000,000 6.25%
- ------------------------------------------ --------------------------------- --------------------------------
Banco Santander Central $50,000,000 6.25%
Hispano, S.A., New York
Branch
- ------------------------------------------ --------------------------------- --------------------------------
BBVA Bancomer, S.A., $50,000,000 6.25%
Institucion de Banca
Multiple, Grupo
Financiero BBVA- Bancomer
- ------------------------------------------ --------------------------------- --------------------------------
Mizuho Corporate Bank, $50,000,000 6.25%
LTD.
- ------------------------------------------ --------------------------------- --------------------------------
The Bank of Nova Scotia $50,000,000 6.25%
- ------------------------------------------ --------------------------------- --------------------------------
The Bank of Tokyo- $50,000,000 6.25%
Mitsubishi, Ltd.
- ------------------------------------------ --------------------------------- --------------------------------
ABN Amro Bank N.V. $35,000,000 4.375%
- ------------------------------------------ --------------------------------- --------------------------------
Bank of America, N.A. $35,000,000 4.375%
- ------------------------------------------ --------------------------------- --------------------------------
Calyon New York Branch $35,000,000 4.375%
- ------------------------------------------ --------------------------------- --------------------------------
Citibank, N.A. Nassau, $35,000,000 4.375%
Bahamas Branch
- ------------------------------------------ --------------------------------- --------------------------------
Standard Chartered Bank $35,000,000 4.375%
- ------------------------------------------ --------------------------------- --------------------------------
Bayerische Landesbank $30,000,000 3.75%
- ------------------------------------------ --------------------------------- --------------------------------
HSBC Mexico, S.A., $30,000,000 3.75%
Institucion de Banca
Multiple, Grupo
Financiero HSBC
- ------------------------------------------ --------------------------------- --------------------------------
Wachovia Bank, National $30,000,000 3.75%
Association
- ------------------------------------------ --------------------------------- --------------------------------
WestLB AG, New York $25,000,000 3.125%
Branch
- ------------------------------------------ --------------------------------- --------------------------------
Banco de Credito e $20,000,000 2.5%
Inversiones
- ------------------------------------------ --------------------------------- --------------------------------
Comerica Bank $20,000,000 2.5%
- ------------------------------------------ --------------------------------- --------------------------------
Deutsche Bank AG New $20,000,000 2.5%
York Branch
- ------------------------------------------ --------------------------------- --------------------------------
Dresdner Bank AG, $20,000,000 2.5%
acting through its
Lending Offices at
Dresdner Bank AG, New
York and Grand Cayman
Branches
- ------------------------------------------ --------------------------------- --------------------------------
Bayerische Hypo-und $20,000,000 2.5%
Vereinsbank AG
- ------------------------------------------ --------------------------------- --------------------------------
SANPAOLO IMI S.p.A. $20,000,000 2.5%
- ------------------------------------------ --------------------------------- --------------------------------
Banca di Roma, S.p.A., $10,000,000 1.25%
New York Branch
- ------------------------------------------ --------------------------------- --------------------------------
BNP Paribas Panama $10,000,000 1.25%
Branch
- ------------------------------------------ --------------------------------- --------------------------------
JPMorgan Chase Bank $10,000,000 1.25%
- ------------------------------------------ --------------------------------- --------------------------------
Societe Generale $10,000,000 1.25%
- ------------------------------------------ --------------------------------- --------------------------------
SCHEDULE 1.01(b)
Lending Offices
- ------------------------------------------------------- -----------------------------------------------------
Lender Lending Offices
- ------------------------------------------------------- -----------------------------------------------------
Barclays Bank PLC 200 Park Avenue
New York, New York 10166
Attention: Thomas Janson
Telephone: (212) 412-6888
Fax: (212) 412-7600
Email: Thomas.janson@barcap.com
- ------------------------------------------------------- -----------------------------------------------------
ING Bank N.V. 1325 Avenue of the Americas, 8th Floor New York,
New York 10019
Attention: Vicente Leon
Telephone: (646) 424-6054
Email: vicente.leon@americas.ing.com
- ------------------------------------------------------- -----------------------------------------------------
Banco Santander Central Hispano, S.A., New York Branch 45 East 53rd Street
New York, New York 10022
Attention: Ruben Perez-Romo
Telephone: (212) 350-0645
Fax: (212) 407-1141
- ------------------------------------------------------- -----------------------------------------------------
BBVA Bancomer, S.A., Institucion de Banca Multiple, Ave. Vasconcelos #101 Ote. Piso 1
Grupo Financiero BBVA-Bancomer Col. Residencial San Agustin
66260 Garza Garcia, N.L.
Attention: Jesus Villarruel Ruvalcaba
Telephone: (52-81) 8368-6937
Fax: (52-81) 8368-6980
- ------------------------------------------------------- -----------------------------------------------------
Mizuho Coroporate Bank, LTD. 1251 Avenue of the Americas, 32nd Floor
New York, New York 10020
Attention: David Costa
Telephone: (212) 282-4964
Fax: (212) 282-4385
- ------------------------------------------------------- -----------------------------------------------------
The Bank of Nova Scotia Calzada del Valle 202, Ote, Piso 1
Col. Del Valle Garza Garcia
Nuevo Leon, Mexico 66220
Attention: Armando Contel
Telephone: (52-81) 8318-3099
Fax: (52-81) 8318-3072
- ------------------------------------------------------- -----------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd. 1251 Avenue of the Americas
New York, New York 10020-1104
Attention: Hiroshi Azuma
Telephone: (212) 782-4184
Fax: (212) 782-6400
E-mail: hazuma@btmna.com
- ------------------------------------------------------- -----------------------------------------------------
ABN Amro Bank N.V. Prolongacion Reforma 600-320
Col. Santa Fe Pena Blanca
Mexico D.F., 01210 Mexico
Attention: Rosalia Noble
Telephone: (52-55) 5257-7842
Fax: (52-55) 5257-7829
- ------------------------------------------------------- -----------------------------------------------------
Bank of America, N.A. 100 SE 2nd St., 31st Floor
Miami, FL 33131
Attention: Ana Kube
Telephone: (305) 533-2486
Fax: (52-55) 5230-6317
- ------------------------------------------------------- -----------------------------------------------------
Calyon New York Branch 1301 Avenue of the Americas
New York, New York 10019
Attention: Ronald Finn
Telephone: (212) 261-7050
- ------------------------------------------------------- -----------------------------------------------------
Citibank, N.A. Nassau, Bahamas Branch Ave. Roble 701, 5o. Piso
Col. Valle del Campestre
66260 Garza Garcia NL
Attention: Ines Vargas
Telephone: (52-81) 1226-8525
Fax: (52-81) 1226-8538
- ------------------------------------------------------- -----------------------------------------------------
Standard Chartered Bank One Madison Avenue
New York, New York 10010
Attn: Larry Fitzgerald
Phone : (212) 667-0107
Fax: (212) 667-0568
- ------------------------------------------------------- -----------------------------------------------------
Bayerische Landesbank 550 Lexington Ave.
New York, New York 10022
Attention: Dietmar Rieg
Telephone: (212) 310-9842
Fax: (212) 230-9166
- ------------------------------------------------------- -----------------------------------------------------
HSBC Mexico, S.A., Institucion de Banca Multiple, Arq. Pedro Ramirez Vazquez 200-10,
Grupo Financiero HSBC Piso 1
San Pedro Garza Garcia, NL CP 66269
Attention: Cordelia Gonzalez Flores
Telephone: (52-81) 8133-4528
Fax: (52-81) 8133-4558
E-mail: cordelia.gonzalez@hsbc.com.mx
- ------------------------------------------------------- -----------------------------------------------------
Wachovia Bank, National Association 191 Peachtree St., NE
Internal Mail Code: GA8o88
Atlanta, GA 30303
Attention: Kay Reedy
Telephone (404) 332-5262
Fax: (404) 332-5905
E-mail: kathleen.reedy@wachovia.com
- ------------------------------------------------------- -----------------------------------------------------
WestLB AG, New York Branch 1211 Avenue of the Americas
New York, New York 10036
Attention: Ricardo Fernandez
Telephone: (212) 852-6122
Fax: (212) 597-1428
- ------------------------------------------------------- -----------------------------------------------------
Banco de Credito e Inversiones 701 Brickell Ave. Suite 1450
Miami, FL 33131-2813
Attention: Roberto Gatica
Telephone: (305) 347-3330
Fax: (305) 347-3332
- ------------------------------------------------------- -----------------------------------------------------
Comerica Bank 500 Woodward Ave.
International Dept., MC 3330
Detroit, Michigan 48226
Attention: Andres Cueva
Telephone: (52-81) 8368 0316
Fax: (52-81) 8368 0048
- ------------------------------------------------------- -----------------------------------------------------
Deutsche Bank AG New York Branch 60 Wall Street
New York, New York 10005
Attention: Bettina Maier
Tel: (212) 250-5035
Fax: (212) 797-0510
- ------------------------------------------------------- -----------------------------------------------------
Dresdner Bank AG, acting through its Lending Offices 75 Wall Street
at Dresdner Bank AG, New York and Grand Cayman New York, New York 10005
Branches Attention: Brian Schneider
Phone: (212) 895-1674
Fax: (212) 895-1560
- ------------------------------------------------------- -----------------------------------------------------
Bayerische Hypo-und Vereinsbank AG New York Branch / IBF Branch
150 East 42nd St, 31st Floor
New York, New York 10017
Attention: Lara Cunha / Maria Lago Telephone: (212)
672-5442 / 5899
Fax: (212) 672-5597
E-mail: Lara_Cunha@hvbamericas.com
Maria_Lago@hvbamericas.com
- ------------------------------------------------------- -----------------------------------------------------
SANPAOLO IMI S.p.A. 245 Park Avenue, 35th Floor
New York, New York 10167
Attention: Barbara Bassi
Telephone: (213) 692-3141
Fax: (213) 599-5307
E-mail: barbara.bassi@sanpaoloimi.com
- ------------------------------------------------------- -----------------------------------------------------
Banca di Roma, S.p.A., New York Branch 34 East 5151 Street
New York, New York 10022
Attention: Alessandro Paoli
Telephone: (212) 407-1746
Fax: (212) 407-1740
- ------------------------------------------------------- -----------------------------------------------------
BNP Paribas Panama Branch Via Espana No. 200, Edificio Omanco
P.O. Box 0816-07547, Panama 1
Panama, Republic of Panama
Attention: Efrain Rosas / Yoel Alveo Telephone:
(507) 263-1867 / 269-6802 Fax: (507) 263-6559 /
223-5529
E-mail: efrain.rosas@americas.bnpparibas.com
yoel.alveo@americas.bnpparibas.com
- ------------------------------------------------------- -----------------------------------------------------
JPMorgan Chase Bank 277 Park Avenue, 2nd Floor
New York, New York 10172
Attention: Linda M. Meyer
Telephone: (212) 622-7447
Fax: (646) 534-0839
- ------------------------------------------------------- -----------------------------------------------------
Societe Generale 1221 Ave. of the Americas
New York, New York 10020
Attention: Alejandro Garcia
Telephone: (212) 278-5988
Fax: (212) 278-6872
- ------------------------------------------------------- -----------------------------------------------------
Schedule 3.01
Existing Standby L/Cs
- ----------------------------- -------------------------------------------------------------------------------------
CEMEX Outstanding Standby L/Cs
- ----------------------------- -------------------------------------------------------------------------------------
BENEIFICARY AMOUNT REFERENCE ISSUANCE MATURITY
- ----------------------------- ----------------- --------------------- ---------------------- ----------------------
Bank of American, NA $50,000,000.00 SB00282 13-Jan-04 13-Jul-04
- ----------------------------- ----------------- --------------------- ---------------------- ----------------------
Total Outstanding $50,000,000.00
- ----------------------------- ----------------- --------------------- ---------------------- ----------------------
Schedule 6.06
-------------
Litigation
----------
A description of material regulatory and legal matters affecting
CEMEX and its Subsidiaries is provided below.
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the
Commerce Department and the International Trade Commission 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 filed a petition for a "changed circumstances" review. The International
Trade Commission decided in December 2001 not to initiate such a review. CEMEX
has appealed the ITC's decision in the "sunset review" and the "changed
circumstances" review to NAFTA. As of March 1, 2004, no NAFTA Panel has been
formed to review the ITC's decision to initiate a "changed circumstances"
review.
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 the 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 upheld the Commerce Department's
decision to terminate the Suspension Agreement. The U.S. cement industry has
appealed the decision of the Court of International Trade to the Court of
Appeals for the Federal Circuit. The appeal is currently pending before the
appellate court.
On January 31, 2003, the Government of Mexico requested consultations
with the United States regarding the final determinations of the United States
Department of Commerce and the United States International Trade Commission
concerning various administrative reviews and sunset reviews of the
anti-dumping order on gray portland cement from Mexico; the Commission's
dismissal of a request to initiate a changed circumstances review; and certain
US laws, regulations, procedures and administrative provisions. Mexico and the
US held consultations on April 2, 2003, but did not resolve the dispute. On
July 29, 2003, Mexico requested the establishment of a WTO Panel. The Panel
was established by the WTO's Dispute Settlement Body on August 29, 2003, and
the case is in progress.
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 us 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, 2003, CEMEX Corp., as the parent company to our
U.S. subsidiaries that import Mexican cement into the United States, had
accrued liabilities of U.S.$132.9 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 and twelfth 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 begun 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 latest final determination by the Commerce Department covering
twelfth review period, commencing on August 1, 2001 and ending on July 31,
2002, was issued on September 16, 2003. The Commerce Department determined
that the antidumping margin was 80.8% ad valorem. The final results for the
twelfth review period establish the 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 metric ton, which
will remain in effect until the final results of the thirteenth review period
are published.
On June 15, 2004 the Commerce Department issued the Preliminary
Results of the thirteenth review, which preliminarily reduce the antidumping
margin to 55.01% ad valorem, and the cash deposit rate to $32.86 per metric
ton. The rates established by the twelfth review will remain in place until
the final results of the thirteenth review are issued later this year.
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 Department
(effective 5/5/1997) 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 Department
(effective 5/4/1998) upon review. Liquidation suspended pending
NAFTA panel review.
8/1/98-7/31/99 37.49%, 49.58% (effective 38.65% determined by the Commerce Department
3/17/1999) upon review. Liquidation suspended pending
NAFTA panel review.
8/1/99-7/31/00 49.58%, 45.98% (effective 50.98% determined by the Commerce Department
3/16/2000) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/00-7/31/01 49.58%, 38.65% (effective 73.74% determined by the Commerce Department
5/14/2001) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/01-7/31/02 38.65%, 50.98% (effective 80.75% determined by the Commerce Department
3/19/2002) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/02 - 7/31/03 50.98%, 73.74% (effective Currently under review by the Commerce
1/14/2003) Department.
8/1/03 -- to date 73.74%, U.S.$52.41 per metric Subject to review by the Commerce Department.
ton (effective 10/15/2003)
U.S. Anti-Dumping Rulings--Venezuela
On May 21, 1991, U.S. producers of gray cement and clinker filed
petitions with the Commerce Department and the International Trade Commission,
or 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. These claims arose prior to our
acquisition of our Venezuelan operations in 1994, but for purposes of the
following discussion, we refer to the actions taken by the predecessor company
as actions taken by CEMEX Venezuela. CEMEX Venezuela contested the dumping
claim and the countervailing duty claim, and both cases were suspended.
The Commerce Department's preliminary determination regarding the
dumping claim was published on November 4, 1991. 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." The foreign
market value was determined by the Commerce Department based on information
provided by CEMEX Venezuela each quarter. CEMEX Venezuela was required to
report to the Commerce Department sales in the U.S. market, costs of
production and related data. During its sunset review of the Anti-Dumping
Suspension Agreement, the ITC determined that terminating the agreement would
not likely lead to a continuation or recurrence of injury to the U.S. market,
and voted to terminate the Anti-Dumping Suspension Agreement on October 5,
2000. Consequently, on November 8, 2000, the Commerce Department issued a
notice terminating the Anti-Dumping Suspension Agreement.
On July 28, 2003, the Court of International Trade upheld the
Commerce Department's termination of the Suspension Agreement. The domestic
petitioners have appealed the court's decision to the U.S. Court of Appeals
for the Federal Circuit. No decision is expected until the second quarter of
2004 at the earliest.
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 a letter dated July 19, 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 Cement
Corporation or APO, Rizal and Solid, indirect subsidiaries of CEMEX, which
received their anti-dumping questionnaires from the International Trade
Commission under the Ministry of Economic Affairs (ITC-MOEA) on August 2,
2001, and from the MOF on August 16, 2001.
Rizal and Solid replied to the ITC-MOEA by confirming that they were
not exporting cement/clinker during the covered period. On the other hand, in
its position paper filed on August 18, 2001 and in the public hearing held on
August 20, 2001, APO contested the allegation of "injury" in the anti-dumping
proceedings before the ITC-MOEA.
In a letter dated October 2, 2001, the ITC-MOEA notified the
respondent producers about the result of the preliminary injury investigation
and its determination that there is a reasonable indication that the domestic
industry in Taiwan was materially injured by reason of imports of Portland
cement and clinker from South Korea and the Philippines that are alleged to be
sold in Taiwan at less than normal value. In keeping with the implementing
regulations on the imposition of antidumping duties in Taiwan, the ITCMOEA has
transferred the case to the MOF for further investigation.
On October 12, 2001 and November 2, 2001, APO filed its replies to
the MOF questionnaire to contest the allegation of "dumping" in the
anti-dumping proceedings before the MOF. In a letter dated January 22, 2002,
the MOF notified the petitioner and respondents that it adopted on January 15,
2002 a resolution preliminarily finding that there was "dumping" and resolving
that investigation on the issue of "dumping" would continue, but that no
provisional anti-dumping duty would be imposed.
In a letter dated June 26, 2002, the 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 a letter dated July 12, 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%.
On September 17, 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. As of April 30, 2004, there have been no material
developments. We anticipate further hearings to be conducted with respect to
this appeal.
Tax Matters
As of December 31, 2003, 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
Ps4,885 million. With respect to the tax years from 1993 through 1996, 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.
As of December 31, 2003, the Philippine Bureau of Internal Revenue,
or BIR, assessed APO Cement Corp. for a deficiency in the amount of income tax
paid in the tax years 1998 through 2001 amounting to PhP832.1 million
(U.S.$15.0 million as of December 31, 2003, based on an exchange rate of
PhP55.569 to U.S.$1.00, which was the Philippine Peso/Dollar exchange rate on
December 31, 2003 as published by the Bangko Sentral ng Pilipinas, the central
bank of the Republic of the Philippines). The assessment disallows APO Cement
Corp's income tax holiday related income. We have contested BIR's findings
with the Court of Tax Appeal, or CTA. We believe that these claims will not
have a material adverse effect on us. However, an adverse resolution of these
claims could have a material adverse effect on our results of operations in
the Philippines.
The BIR also finalized its tax assessments for Solid Cement Corp.'s
1999 tax year amounting to PhP387.6 million (U.S.$7.0 million as of December
31, 2003, based on an exchange rate of PhP55.569 to U.S.$1.00) and APO Cement
Corp.'s 1999 tax year amounting to PhP833.3 million (U.S.$15.0 million as of
December 31, 2003, based on an exchange rate of PhP55.569 to U.S.$1.00). We
continue to submit relevant evidence to the BIR to contest these assessments.
Our next recourse is to contest these assessments with the CTA if the BIR
issues a final collection letter.
In addition, Solid Cement Corp.'s 1998 tax year and APO Cement
Corp.'s 1997-1998 tax years are under preliminary review for deficiency taxes.
Finalization of the assessment was held in abeyance by the BIR as we continue
to present evidence to dispute their findings. We intend to contest any and
all assessments if they arise.
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 in the rice production capacity of land of the plaintiffs,
caused by pollution emanating from our cement plants located in Ibague,
Colombia. On December 15, 2003, a judgment was entered against us under which
we were ordered to pay to the plaintiffs an amount equal to CoP21,114 million
(U.S.$7.6 million as of December 31, 2003, based on an exchange rate of
CoP2,778.21 to U.S.$1.00, which was the Colombian Peso/Dollar exchange rate on
December 31, 2003 as published by the Banco de la Republica de Colombia, the
central bank of Colombia). We filed an appeal on January 13, 2004, and the
case will be sent to the Superior Court of Ibague for review.
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 contend that these subsidiaries are responsible for the alleged
damages caused by breach of raw material transportation contracts. The
plaintiffs asked for relief in the amount of CoP127,242 million (U.S.$45.8
million as of December 31, 2003, based on an exchange rate of CoP2,778.21 to
U.S.$1.00). As of April 30, 2004, this proceeding had not reached the
evidentiary stage. Typically, proceedings of this nature continue for several
years before final resolution.
As of December 31, 2003, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
U.S.$ 32.4 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 December 2002, an ex-maritime broker for Puerto Rican Cement
Company. Inc. filed a civil liability lawsuit in Puerto Rico against CEMEX,
S.A. de C.V., PRCC and other unaffiliated entities, including Puerto Rican
authorities. The plaintiff contends that the defendants conspired to violate
state and federal antitrust laws so that one of the defendants, who is not
affiliated with us, could gain control of the maritime broker market in Port
of Ponce, Puerto Rico. The plaintiff has asked for relief in the amount of
approximately U.S.$18 million. In September 2003, the United States District
Court for the District of Puerto Rico dismissed all claims against us, and
entered judgment accordingly. The plaintiff has subsequently filed two
post-judgment motions requesting reconsideration of the court's opinion, and
we have requested the denial of such motions. Resolution of these motions is
still pending before the court.
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 Cemex Asia Holdings Ltd. or
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.
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. As
a result of the registration, an Arbitral Tribunal will be established to hear
the dispute. We cannot predict, however, what effect, if any, this action will
have on our investment in Gresik or what the ruling of the Arbitral Tribunal
will be.
On April 27, 2004, a subsidiary of CEMEX Colombia received notice as
a co-defendant, along with a government agency in charge of urban development
in Bogota, another supplier, and a ready-mix industry association, in an
action brought by a Colombian law firm on "public interest" grounds. The
lawsuit alleges that the use of a certain type of cement-based material in the
construction of roads for the "Transmilenio" public transport system and for
regular traffic resulted in defects that impede the proper functioning of the
"Transmilenio" system and hamper traffic flow. The lawsuit argues that CEMEX
Colombia's subsidiary, the other supplier, and the ready mix-industry
association promoted the use of the material, and seeks damages to pay for the
repair of the defects or, if repair is not possible, the rebuilding of the
defective road sections. We are currently evaluating the potential impact of
this matter on our Colombian operations. Because it is very early in the
process, we cannot estimate the financial implications of an adverse
resolution, but we believe that it is unlikely to have a material adverse
effect on our results of operations. We believe that this will be a protracted
matter that may result in additional lawsuits or actions. We intend to defend
our interests vigorously.
In the ordinary course of our business, we are party to various legal
proceedings. Other than as disclosed herein, we are not currently involved in
any litigation or arbitration proceedings. including any such proceedings
which are pending, which we believe will have, or have had, a material adverse
effect on us, nor, so far as we are aware, are any proceedings of that kind
threatened.
Schedule 6.10
-------------
Subsidiaries
------------
Name Jurisdiction of Incorporation
---- -----------------------------
Cemex Mexico, S.A. de C.V. Mexico
Empresas Tolteca de Mexico, S.A. de C.V. Mexico
Cemex Concretos, S.A. de C.V. Mexico
Sunward Acquisitions N.V. Netherlands
Cemex Espana, S.A. Spain
Cemex, Inc. Louisiana
Cemex Colombia, S.A. Colombia
Cementos Nacionales, S.A. Dominican Republic
Schedule 7.05
-------------
Litigation
----------
A description of material regulatory and legal matters affecting
CEMEX and its Subsidiaries is provided below.
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the
Commerce Department and the International Trade Commission 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 filed a petition for a "changed circumstances" review. The International
Trade Commission decided in December 2001 not to initiate such a review. CEMEX
has appealed the ITC's decision in the "sunset review" and the "changed
circumstances" review to NAFTA. As of March 1, 2004, no NAFTA Panel has been
formed to review the ITC's decision to initiate a "changed circumstances"
review.
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 the 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 upheld the Commerce Department's
decision to terminate the Suspension Agreement. The U.S. cement industry has
appealed the decision of the Court of International Trade to the Court of
Appeals for the Federal Circuit. The appeal is currently pending before the
appellate court.
On January 31, 2003, the Government of Mexico requested consultations
with the United States regarding the final determinations of the United States
Department of Commerce and the United States International Trade Commission
concerning various administrative reviews and sunset reviews of the
anti-dumping order on gray portland cement from Mexico; the Commission's
dismissal of a request to initiate a changed circumstances review; and certain
US laws, regulations, procedures and administrative provisions. Mexico and the
US held consultations on April 2, 2003, but did not resolve the dispute. On
July 29, 2003, Mexico requested the establishment of a WTO Panel. The Panel
was established by the WTO's Dispute Settlement Body on August 29, 2003, and
the case is in progress.
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 us 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, 2003, CEMEX Corp., as the parent company to our
U.S. subsidiaries that import Mexican cement into the United States, had
accrued liabilities of U.S.$132.9 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 and twelfth 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 begun 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 latest final determination by the Commerce Department covering
twelfth review period, commencing on August 1, 2001 and ending on July 31,
2002, was issued on September 16, 2003. The Commerce Department determined
that the antidumping margin was 80.8% ad valorem. The final results for the
twelfth review period establish the 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 metric ton, which
will remain in effect until the final results of the thirteenth review period
are published.
On June 15, 2004 the Commerce Department issued the Preliminary
Results of the thirteenth review, which preliminarily reduce the antidumping
margin to 55.01% ad valorem, and the cash deposit rate to $32.86 per metric
ton. The rates established by the twelfth review will remain in place until
the final results of the thirteenth review are issued later this year.
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 Department
upon review. Liquidation suspended pending
(effective 5/5/1997) NAFTA panel review.
8/1/97-7/31/98 73.69%, 35.88% and 37.49% 45.98% determined by the Commerce Department
(effective 5/4/1998) upon review. Liquidation suspended pending
NAFTA panel review.
8/1/98-7/31/99 37.49%, 49.58% (effective 38.65% determined by the Commerce Department
3/17/1999) upon review. Liquidation suspended pending
NAFTA panel review.
8/1/99-7/31/00 49.58%, 45.98% (effective 50.98% determined by the Commerce Department
3/16/2000) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/00-7/31/01 49.58%, 38.65% (effective 73.74% determined by the Commerce Department
5/14/2001) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/01-7/31/02 38.65%, 50.98% (effective 80.75% determined by the Commerce Department
3/19/2002) upon review. Liquidation suspended pending
appeal to NAFTA panel review.
8/1/02 - 7/31/03 50.98%, 73.74% (effective Currently under review by the Commerce
1/14/2003) Department.
8/1/03 -- to date 73.74%, U.S.$52.41 per metric Subject to review by the Commerce Department.
ton (effective 10/15/2003)
U.S. Anti-Dumping Rulings--Venezuela
On May 21, 1991, U.S. producers of gray cement and clinker filed
petitions with the Commerce Department and the International Trade Commission,
or 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. These claims arose prior to our
acquisition of our Venezuelan operations in 1994, but for purposes of the
following discussion, we refer to the actions taken by the predecessor company
as actions taken by CEMEX Venezuela. CEMEX Venezuela contested the dumping
claim and the countervailing duty claim, and both cases were suspended.
The Commerce Department's preliminary determination regarding the
dumping claim was published on November 4, 1991. 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." The foreign
market value was determined by the Commerce Department based on information
provided by CEMEX Venezuela each quarter. CEMEX Venezuela was required to
report to the Commerce Department sales in the U.S. market, costs of
production and related data. During its sunset review of the Anti-Dumping
Suspension Agreement, the ITC determined that terminating the agreement would
not likely lead to a continuation or recurrence of injury to the U.S. market,
and voted to terminate the Anti-Dumping Suspension Agreement on October 5,
2000. Consequently, on November 5, 2000, the Commerce Department issued a
notice terminating the Anti-Dumping Suspension Agreement.
On July 28, 2003, the Court of International Trade upheld the
Commerce Department's termination of the Suspension Agreement. The domestic
petitioners have appealed the court's decision to the U.S. Court of Appeals
for the Federal Circuit. No decision is expected until the second quarter of
2004 at the earliest.
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 a letter dated July 19, 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 Cement
Corporation or APO, Rizal and Solid, indirect subsidiaries of CEMEX, which
received their anti-dumping questionnaires from the International Trade
Commission under the Ministry of Economic Affairs (ITC-MOEA) on August 2,
2001, and from the MOF on August 16, 2001.
Rizal and Solid replied to the ITC-MOEA by confirming that they were
not exporting cement/clinker during the covered period. On the other hand, in
its position paper filed on August 18, 2001 and in the public hearing held on
August 20, 2001, APO contested the allegation of "injury" in the anti-dumping
proceedings before the ITC-MOEA.
In a letter dated October 2, 2001, the ITC-MOEA notified the
respondent producers about the result of the preliminary injury investigation
and its determination that there is a reasonable indication that the domestic
industry in Taiwan was materially injured by reason of imports of Portland
cement and clinker from South Korea and the Philippines that are alleged to be
sold in Taiwan at less than normal value. In keeping with the implementing
regulations on the imposition of antidumping duties in Taiwan, the ITC-MOEA
has transferred the case to the MOF for further investigation.
On October 12, 2001 and November 2, 2001, APO filed its replies to
the MOF questionnaire to contest the allegation of "dumping" in the
anti-dumping proceedings before the MOF. In a letter dated January 22, 2002,
the MOF notified the petitioner and respondents that it adopted on January 15,
2002 a resolution preliminarily finding that there was "dumping" and resolving
that investigation on the issue of "dumping" would continue, but that no
provisional anti-dumping duty would be imposed.
In a letter dated June 26, 2002, the 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 a letter dated July 12, 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%.
On September 17, 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. As of April 30, 2004, there have been no material
developments. We anticipate further hearings to be conducted with respect to
this appeal.
Tax Matters
As of December 31, 2003, 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
Ps4,885 million. With respect to the tax years from 1993 through 1996, 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.
As of December 31, 2003, the Philippine Bureau of Internal Revenue,
or BIR, assessed APO Cement Corp. for a deficiency in the amount of income tax
paid in the tax years 1998 through 2001 amounting to PhP832.1 million
(U.S.$15.0 million as of December 31, 2003, based on an exchange rate of
PhP55.569 to U.S.$1.00, which was the Philippine Peso/Dollar exchange rate on
December 31, 2003 as published by the Bangko Sentral ng Pilipinas, the central
bank of the Republic of the Philippines). The assessment disallows APO Cement
Corp's income tax holiday related income. We have contested BIR's findings
with the Court of Tax Appeal, or CTA. We believe that these claims will not
have a material adverse effect on us. However, an adverse resolution of these
claims could have a material adverse effect on our results of operations in
the Philippines.
The BIR also finalized its tax assessments for Solid Cement Corp.'s
1999 tax year amounting to PhP387.6 million (U.S.$7.0 million as of December
31, 2003, based on an exchange rate of PhP55.569 to U.S.$1.00) and APO Cement
Corp.'s 1999 tax year amounting to PhP833.3 million (U.S.$15.0 million as of
December 31, 2003, based on an exchange rate of PhP55.569 to U.S.$1.00). We
continue to submit relevant evidence to the BIR to contest these assessments.
Our next recourse is to contest these assessments with the CTA if the BIR
issues a final collection letter.
In addition, Solid Cement Corp.'s 1998 tax year and APO Cement
Corp.'s 1997-1998 tax years are under preliminary review for deficiency taxes.
Finalization of the assessment was held in abeyance by the BIR as we continue
to present evidence to dispute their findings. We intend to contest any and
all assessments if they arise.
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 in the rice production capacity of land of the plaintiffs,
caused by pollution emanating from our cement plants located in Ibague,
Colombia. On December 15, 2003, a judgment was entered against us under which
we were ordered to pay to the plaintiffs an amount equal to CoP21,114 million
(U.S.$7.6 million as of December 31, 2003, based on an exchange rate of
CoP2,778.21 to U.S.$1.00, which was the Colombian Peso/Dollar exchange rate on
December 31, 2003 as published by the Banco de la Republica de Colombia, the
central bank of Colombia). We filed an appeal on January 13, 2004, and the
case will be sent to the Superior Court of Ibague for review.
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 contend that these subsidiaries are responsible for the alleged
damages caused by breach of raw material transportation contracts. The
plaintiffs asked for relief in the amount of CoP127,242 million (U.S.$45.8
million as of December 31, 2003, based on an exchange rate of CoP2,778.21 to
U.S.$1.00). As of April 30, 2004, this proceeding had not reached the
evidentiary stage. Typically, proceedings of this nature continue for several
years before final resolution.
As of December 31, 2003, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
U.S.$ 32.4 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 December 2002, an ex-maritime broker for Puerto Rican Cement
Company, Inc. filed a civil liability lawsuit in Puerto Rico against CEMEX,
S.A. de C.V., PRCC and other unaffiliated entities, including Puerto Rican
authorities. The plaintiff contends that the defendants conspired to violate
state and federal antitrust laws so that one of the defendants, who is not
affiliated with us, could gain control of the maritime broker market in Port
of Ponce, Puerto Rico. The plaintiff has asked for relief in the amount of
approximately U.S.$18 million. In September 2003, the United States District
Court for the District of Puerto Rico dismissed all claims against us, and
entered judgment accordingly. The plaintiff has subsequently filed two
post-judgment motions requesting reconsideration of the court's opinion, and
we have requested the denial of such motions. Resolution of these motions is
still pending before the court.
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 Cemex Asia Holdings Ltd. or
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.
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. As
a result of the registration, an Arbitral Tribunal will be established to hear
the dispute. We cannot predict, however, what effect, if any, this action will
have on our investment in Gresik or what the ruling of the Arbitral Tribunal
will be.
On April 27, 2004, a subsidiary of CEMEX Colombia received notice as
a co-defendant, along with a government agency in charge of urban development
in Bogota, another supplier, and a ready-mix industry association, in an
action brought by a Colombian law firm on "public interest" grounds. The
lawsuit alleges that the use of a certain type of cement-based material in the
construction of roads for the "Transmilenio" public transport system and for
regular traffic resulted in defects that impede the proper functioning of the
"Transmilenio" system and hamper traffic flow. The lawsuit argues that CEMEX
Colombia's subsidiary, the other supplier, and the ready mix-industry
association promoted the use of the material, and seeks damages to pay for the
repair of the defects or, if repair is not possible, the rebuilding of the
defective road sections. We are currently evaluating the potential impact of
this matter on our Colombian operations. Because it is very early in the
process, we cannot estimate the financial implications of an adverse
resolution, but we believe that it is unlikely to have a material adverse
effect on our results of operations. We believe that this will be a protracted
matter that may result in additional lawsuits or actions. We intend to defend
our interests vigorously.
In the ordinary course of our business, we are party to various legal
proceedings. Other than as disclosed herein, we are not currently involved in
any litigation or arbitration proceedings, including any such proceedings
which are pending, which we believe will have, or have had, a material adverse
effect on us, nor, so far as we are aware, are any proceedings of that kind
threatened.
CEMEX, S.A. de C.V.
LIEN SCHEDULE
(Figures in millions of US Dollars)
- ------------------------------------------ ----------------------- ------------------------------------- -------------
COMPANY LENDER LIENS CONCEPT BALANCE
- ------------------------------------------ ----------------------- ------------------------------------- -------------
- ------------------------------------------ ----------------------- ------------------------------------- -------------
CEMEX, Inc. GE Capital 279,280 Equipment related with the credit 1.03
- ------------------------------------------ ----------------------- ------------------------------------- -------------
CEMEX, Inc. City of Long Beach Cement Terminal (Capital Lease 0.00
Obligation)
- ------------------------------------------ ----------------------- ------------------------------------- -------------
CEMEX, Inc. Hampton Land related with the credit 0.28
- ------------------------------------------ ----------------------- ------------------------------------- -------------
CEMEX, Inc. RIO Land related with the credit 0.00
- ------------------------------------------ ----------------------- ------------------------------------- -------------
Mineral Resource Technologies, Inc. Met-South, Inc. Ash storage facility 0.20
- ------------------------------------------ ----------------------- ------------------------------------- -------------
Centro Distribuidor de Cemento, S.A. de Bank of America Cash Collateral 2.10
C.V.
- ------------------------------------------ ----------------------- ------------------------------------- -------------
3.61
- ------------------------------------------ ----------------------- ------------------------------------- -------------
EXHIBIT A
---------
FORM OF NOTE
U.S.$______________ Date_______________
New York, New York,
FOR VALUE RECEIVED, the undersigned, CEMEX, S.A. de C.V., a
sociedad anonima de capital variable organized and existing under the laws of
the United Mexican States and located at Ave. Ricardo Margain Zozoya #325,
Col. Valle Del Campestre, Garza Garcia, N.L. 66265, Mexico (the "Borrower"),
unconditionally promises to pay, without setoff or counterclaim, to the order
of ____________ (the "Lender") on the Maturity Date, as defined in the Credit
Agreement (as defined below), at the office of [ING Capital LLC, 1325 Avenue
of the Americas, New York, New York 10019,] in lawful money of the United
States of America and in immediately available funds, the principal amount of
_____________ Dollars (U.S.$_________) or, if less, the aggregate unpaid
principal amount of all Loans made by the Lender to the undersigned pursuant
to the Credit Agreement which are then due and payable to the Lender pursuant
thereto. The undersigned further unconditionally agrees to pay, without setoff
or counterclaim, interest in like money at such office from the date hereof
until paid in full on the unpaid principal amount hereof from time to time
outstanding at the applicable interest rate per annum determined as provided
in, and payable as specified in, the Credit Agreement. The Lender is
authorized to record the date, type and amount of each Loan made by the Lender
pursuant to the Credit Agreement, the date and amount of each repayment of
principal hereof, the date of each interest rate conversion and each
continuation pursuant to Section 3.05 of the Credit Agreement and the
principal amount subject thereto, and, in the case of Eurodollar Loans, the
interest rate with respect thereto on the schedules 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 is such
recordation) shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This Note is one of the Notes referred to in the Credit
Agreement dated as of __________, among the Borrower, the Guarantors, the
several Lenders party thereto, Barclays Bank PLC, as Issuing Bank and
Documentation Agent, ING Bank N.V., as Issuing Bank, Barclays Capital, the
Investment Banking Division of Barclays Bank PLC, as Joint Bookrunner and ING
Capital LLC, as Joint Bookrunner and Administrative Agent (as the same may
from time to time be amended, supplemented or otherwise modified, the "Credit
Agreement"; terms defined therein being used herein as so defined), and is
entitled to the benefits thereof and is subject to optional and mandatory
prepayment in whole or in part as provided therein.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts remaining unpaid on
this Note shall become, or may be declared to be, immediately due and payable,
all as provided therein.
The Borrower agrees to pay all reasonable costs and
expenses, including all reasonable fees and disbursements of counsel
(including the allocated cost of internal counsel), incurred by the Lender in
connection with the enforcement of the Lender's rights and remedies under the
Credit Agreement and this Note.
The Borrower hereby irrevocably and unconditionally submits
for itself and its property in any legal suit, action or proceeding relating
to this Note or for recognition and enforcement of any judgment in respect
thereof, to the 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, to the jurisdiction of any competent
court in the place of its corporate domicile and any appellate courts thereof,
and consents that any such suit, action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
laying of venue of any such suit, action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same. The Borrower hereby irrevocably agrees that
service of all writs, process and summonses in any such suit, action or
proceeding brought in the State of New York may be made upon CT Corporation
System having offices on the date hereof at 111 Eighth Avenue, 13th Floor, New
York, New York 10011, U.S.A. (the "Process Agent"), and the Borrower hereby
irrevocably appoints the Process Agent as its authorized agent to accept such
service of any and all such writs, process and summonses and agrees that the
failure of the Process Agent to give any notice of any such service of process
to the Borrower shall not impair or affect the validity of such service or of
any judgment based thereon.
The obligations of the Borrower hereunder to make payments
in Dollars shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any other currency
except to the extent that such tender or recovery results in the effective
receipt by the Lender of the full amount of Dollars payable hereunder and the
Borrower shall be obligated to indemnify the Lender (and the Lender shall have
an additional legal claim) for any difference between such full amount and the
amount effectively received by the Lender pursuant to any such tender or
recovery. The Lender's determination of amounts effectively received by it
shall be presumptively correct in the absence of manifest error.
To the extent that the Borrower 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, execution or otherwise) with respect to itself or its property, the
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Note and the other Transaction Documents. The foregoing waiver and
consent are intended to be effective to the fullest extent now or hereafter
permitted by applicable law of any jurisdiction in which any suit, action or
proceeding with respect to this Note may be commenced.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
CEMEX, S.A. de C.V.
By:______________________________
Title:___________________________
Guaranteed:
CEMEX MEXICO, S.A. de C.V.,
in its capacity as Guarantor
Under Article X of the Credit Agreement
By:_____________________________________
Title:__________________________________
Guaranteed:
EMPRESAS TOLTECA DE MEXICO,
S.A. de C.V., in its capacity as
Guarantor under Article X of the Credit
Agreement
By:_____________________________________
Title:__________________________________
Schedule 1 to Note
------------------
BASE RATE LOANS
---------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
Amount of Base
Rate Loans Amount Updated
Made or Amount of Converted to Principal
Converted from Principal LIBOR Balance of Base Notation
Date LIBOR Loans Repaid Loans Rate Loans Made by
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
Schedule 2 to Note
------------------
LIBOR LOANS
-----------
- ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
Amount of
LIBOR Loans Interest Unpaid
Made or Period and Amount Principal
Converted Interest Rate Amount of Converted Balance of
from Base with Respect Principal to Base Rate LIBOR Notation
Date Rate Loans Thereto Repaid Loans Loans Made By
- ------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
EXHIBIT B
---------
FORM OF NOTICE OF BORROWING
---------------------------
ING CAPITAL LLC,
as Administrative Agent
1325 Avenue of the Americas
New York, New York 10019
Attention: [Client Services Unit]
Reference is made to the Credit Agreement, dated as of
________________, 2004, among Cemex, S.A. de C.V., as Borrower (the
"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 Issuing Bank and
Documentation Agent, ING Bank N.V., as Issuing Bank, Barclays Capital, The
Investment Banking Division of Barclays Bank PLC, as Joint Bookrunner, ING
Capital LLC, as Joint Bookrunner and Administrative Agent, and certain other
lenders party thereto (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"). Terms used but not
otherwise defined herein shall have the meanings provided in the Credit
Agreement. The undersigned hereby gives notice pursuant to Section 2.01 of the
Credit Agreement of its request for [a] Revolving Loan[s] with the following
terms:
(A) Requested Disbursement Date ____________________________
(which is a Business Day)
(B) Principal amount of Borrowing ____________________________
(C) Interest rate basis
(D) (If a LIBOR loan is requested) ____________________________
Interest Period and the last
date thereof
The disbursement shall be deposited in the account specified
in and in accordance with the requirements of Section 2.01(d) of the Credit
Agreement.
The Borrower hereby represents and warrants that each
condition specified in Section 5.02 of the Credit Agreement has been satisfied
or waived.
IN WITNESS WHEREOF, the undersigned has hereto set his name
on this _________ day of _________, ____.
CEMEX, S.A. DE C.V.
as Borrower
By:______________________________
Name:_________________________
Title:________________________
EXHIBIT C
---------
FORM OF NOTICE OF EXTENSION/CONVERSION
--------------------------------------
ING CAPITAL LLC,
as Administrative Agent
1325 Avenue of the Americas
New York, New York 10019
Attention: [Client Services Unit]
Reference is made to the Credit Agreement, dated as of
__________, 2004, among Cemex, S.A. de C.V., as Borrower (the "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 Issuing Bank and Documentation
Agent, ING Bank N.V., as Issuing Bank, Barclays Capital, The Investment
Banking Division of Barclays Bank PLC, as Joint Bookrunner, ING Capital LLC,
as Joint Bookrunner and Administrative Agent, and certain other lenders party
thereto (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"). Terms used but not otherwise defined herein shall have
the meanings provided in the Credit Agreement. The undersigned hereby gives
notice pursuant to Section 2.01(e) of the Credit Agreement that it requests an
extension or conversion of [a] Revolving Loan[s] outstanding under the Credit
Agreement, and in connection therewith sets forth below the terms on which
such extension or conversion is requested to be made:
(A) Date of Extension or Conversion ________________________
(B) The Loan[s] to be Extended/ ________________________
Converted and the
Principal Amount thereof
(C) Interest rate basis ________________________
(D) (If a LIBOR loan) Interest ________________________
Period and the last date thereof
The Borrower hereby represents and warrants that each
condition specified in Section 5.02 of the Credit Agreement has been satisfied
or waived.
IN WITNESS WHEREOF, the undersigned has hereto set his name
on this __________day of __________, ___.
CEMEX, S.A. DE C.V.. as Borrower
By: ___________________________
Name:______________________
Title:_____________________
EXHIBIT D
---------
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of ___________,
_____ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), CEMEX,
S.A. de C.V. (the "Borrower"), CEMEX MEXICO, S.A. de C.V. (a "Guarantor"),
EMPRESAS TOLTECA DE MEXICO, S.A. de C.V. (a "Guarantor"), BARCLAYS BANK PLC,
NEW YORK BRANCH, as Issuing Bank, ING CAPITAL N.V. as Issuing Bank (together
with Barclays Bank PLC, each in such capacity, the "Issuing Banks") and ING
CAPITAL LLC as Administrative Agent (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Assignment and Assumption Agreement (this
"Agreement") relates to the Credit Agreement dated as of __________ among the
Borrower, the Guarantors, the Assignor and the other Lenders party thereto,
the Issuing Banks, the Administrative Agent, Barclays Bank PLC, as
Documentation Agent, Barclays Capital, the Investment Banking Division of
Barclays Bank PLC, as a Joint Bookrunner and ING Capital LLC, as a Joint
Bookrunner (as from time to time further amended, supplemented or otherwise
modified, the "Credit Agreement");
WHEREAS, as provided in the Credit Agreement, the Assignor
has purchased a participation in the Letter of Credit has purchased and/or
agreed to purchase a participation in Standby L/Cs and has a Commitment to
make Loans to the Borrower in an aggregate principal amount at any time
outstanding not to exceed U.S.$____________ (the "Assignor's Commitment");
[WHEREAS, [the Assignor has purchased participations in
Standby L/C Drawings in an aggregate principal amount of U.S.$________
outstanding on the date hereof] [Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of
U.S.$__________ are outstanding on the date hereof];
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of [a
portion of] its Commitment thereunder in an amount equal to U.S.$__________
(the "Assigned Amount"), together with a corresponding portion of its
participation in the Standby L/Cs [and] [of its participations in unreimbursed
Standby L/C Drawings] [and] [of its outstanding Loans] and the Assignee
proposes to accept assignment of such rights and assume the corresponding
obligations from the Assignor on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby irrevocably
assigns and sells to the Assignee all of the rights of the Assignor under the
Credit Agreement [to the extent of the Assigned Amount], and the Assignee
hereby irrevocably accepts such assignment from the Assignor and assumes all
of the obligations of the Assignor under the Credit Agreement [to the extent
of the Assigned Amount][, including the purchase from the Assignor of the
corresponding portion of the principal amount of the [participations by the
Assignor in unreimbursed Standby L/C Drawings outstanding on the date hereof
[and] [principal amount of the Loans made by the Assignor]. Upon the execution
and delivery hereof by the Assignor, the Assignee, [the Borrower,] the Issuing
Bank [and the Administrative Agent] and the payment of the amounts specified
in Section 3 hereof required to be paid on the date hereof (a) the Assignee
shall, as of the date hereof, succeed to the rights and be obligated to
perform the obligations of a Lender under the Credit Agreement with a
Commitment in an amount equal to the Assigned Amount [in addition to its
existing Commitment], and (b) the Commitment of the Assignor shall, as of the
date hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have
been assumed by the Assignee. The assignment provided for herein shall be
without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between
them.* It is understood that any Participation Fees accrued to the date hereof
are for the account of the Assignor and such fees accruing from and including
the date hereof with respect to the Assigned Amount are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if either
party receives any amount under the Credit Agreement that is for the account
of the other party, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
- -------------------
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the
Assignee. It may be preferable in an appropriate case to specify
these amounts generically or by formula rather than as a fixed sum.
SECTION 4. Consent Of [The Borrower,] The Issuing Banks [And
The Administrative Agent]. This Agreement is conditioned upon the consent of
[the Borrower,] the Issuing Banks [and the Administrative Agent] pursuant to
Section 4.12 of the Credit Agreement and the payment of a processing fee of
U.S.$3,500 to the Administrative Agent and a fee of U.S.$1,500 to the
Appropriate Issuing Bank. The execution of this Agreement by [the Borrower,]
the Issuing Banks [and the Administrative Agent] is evidence of this consent.
Pursuant to Section 16.06(b) of the Credit Agreement, the Borrower agrees to
execute and deliver a new Note to the Assignee.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor (i) represents and warrants that it is
legally authorized to enter into this Agreement; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or with respect to the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Transaction Document or any other instrument or document furnished
pursuant thereto, other than that the Assignor has not created any adverse
claim upon the interest being assigned by it hereunder and that such interest
is free and clear of any such adverse claim and (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower, the Guarantors, any of their Affiliates or any
other obligor or the performance or observance by the Borrower, the
Guarantors, any of their Affiliates or any other obligor of any of their
respective obligations under the Credit Agreement or any other Transaction
Document or any other instrument or document furnished pursuant hereto or
thereto.
(b) The Assignee (i) represents and warrants that it is
legally authorized to enter into this Agreement; (ii) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements delivered pursuant to Section 8.01 thereof and such other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Agreement; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Administrative
Agent, the Issuing Banks or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement,
the other Transaction Documents or any other instrument or document furnished
pursuant hereto or thereto; (iv) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
and discretion under the Credit Agreement, the other Transaction Documents or
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (v) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its
terms all the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender.
SECTION 6. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition or
statements of the Borrower and the Guarantors, or the validity and
enforceability of the obligations of the Borrower in respect of the Credit
Agreement, the Standby L/Cs or any Note. The Assignee acknowledges that it
has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 7. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and inure to the benefit of the parties hereto and their
respective successor and assigns.
SECTION 8. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of New York.
SECTION 9. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Delivery of an executed counterpart of a signature page of this Assignment by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By:__________________________________
Title:_______________________________
[ASSIGNEE]
By:__________________________________
Title:_______________________________
CEMEX, S.A. de C.V.,
as Borrower
By:__________________________________
Title:_______________________________
CEMEX MEXICO, S.A. de C.V.,
as Guarantor
By:__________________________________
Title:_______________________________
EMPRESAS TOLTECA DE MEXICO, S.A. de C.V.,
as Guarantor
By:__________________________________
Title:_______________________________
BARCLAYS BANK PLC,
as Issuing Bank
By:__________________________________
Title:_______________________________
By:__________________________________
Title:_______________________________
ING BANK N.V.,
as Issuing Bank
By:__________________________________
Title:_______________________________
By:__________________________________
Title:_______________________________
ING CAPITAL LLC,
as Administrative Agent
By:__________________________________
Title:_______________________________
EXHIBIT E
---------
FORM OF OPINION OF SPECIAL NEW YORK COUNSEL
TO THE ISSUER AND GUARANTORS
EXHIBIT F
---------
FORM OF OPINION OF MEXICAN COUNSEL
TO THE BORROWER AND THE GUARANTORS
EXHIBIT G
---------
FORM OF STAND-BY LETTER OF CREDIT
[THIS IRREVOCABLE STANDBY LETTER OF CREDIT NO. _____ IS ONE OF THE STANDBY
LETTERS OF CREDIT REFERRED TO IN THE CREDIT AGREEMENT, DATED _____ AMONG
CEMEX, S.A. DE C.V., CEMEX MEXICO, S.A. DE C.V., EMPRESAS TOLTECA DE MEXICO,
S.A. DE C.V., BARCLAYS BANK PLC, ING BANK N.V., BARCLAYS CAPITAL, THE
INVESTMENT BANKING DIVISION OF BARCLAYS BANK PLC, ING CAPITAL LLC, AND THE
SEVERAL LENDERS PARTY THERETO.]*
Date: [_________________]
To:
[name and address of Beneficiary]
Attn.___________________
[Telex No./ Swift No./ Facsimile No.]
Ladies and Gentlemen:
We hereby establish our irrevocable standby letter of credit
No. ______________ [in support of obligations of _______________]** by order
of our client CEMEX, S.A. de C.V. (the "Company") in favor of you, [name of
beneficiary] (the "Beneficiary") for an aggregate amount not in excess of
U.S.$[_____________]*** (as reduced from time to time in accordance with the
terms of this letter of credit, the "Stated Amount") expiring on
[_____________]**** (the "The Letter of Credit").
Drawings under this Letter of Credit are unconditionally
available to the Beneficiary against presentation of the certificate in the
form attached hereto as Annex I (each, a "Drawing Certificate") appropriately
completed and purportedly signed by the Beneficiary. Each Drawing Certificate
presented hereunder shall be dated the date of presentation and may be
presented to us either in writing delivered to us at [address (in New York)]
or in writing transmitted to us by facsimile telecopy at [fax number (in New
York)].
- -------------------
* Optional.
** Optional.
*** must have a minimum stated amount equal to U.S.$5,000,000.
**** must expire on the ealier of 360 days after the date of issuance or
[insert date that is five business days prior to stated termination
date].
We hereby agree with you that if any Drawing Certificate is
presented under this Letter of Credit at or prior to 11:00 am (New York time),
on a Business Day, and provided that such Drawing Certificate presented
conforms with the terms and conditions of this Letter of Credit, payment shall
be effected by us in same day funds by the close of business on such Business
Day. If any Drawing Certificate is presented under this Letter of Credit after
11:00 am (New York time), on a Business Day, and provided that such documents
conform with the terms and conditions of this Letter of Credit, payment shall
be effected by us in immediately available funds on the following Business
Day. As used in this Letter of Credit, "Business Day" shall mean any day other
than a Saturday or Sunday or a day on which banking institutions in the State
of New York are authorized or required by law to close.
Partial and multiple drawings are permitted, provided
however that the Stated Amount available under this Letter of Credit shall be
reduced immediately following our payment of any drawing hereunder in the
amount equal to the amount to such drawing. No payment hereunder shall exceed
the Stated Amount.
Upon the payment to you or to your account of the amount in
respect of a drawing hereunder, we shall be fully discharged of our obligation
under this Letter of Credit with respect to the amount of such drawing, and we
shall not thereafter be obligated to make any further payments under this
Letter of Credit in respect of such drawing to you or any other person. By
paying to you the amount demanded in accordance herewith, we make no
representation as to the correctness of the amount demanded, and we shall not
be liable to you or to any other person for, or in respect of any amount so
paid or disbursed for any reason whatsoever, including any non-application or
misapplication by you of the proceeds of such payment or disbursement.
This Letter of Credit may not be assigned, except that you
may by written assignment of proceeds to us in the form of Annex II, assign
your rights and obligations under this Letter of Credit to any assignee
identified in such certification. [This Letter of Credit may be transferred]/
[This Letter of Credit may not be transferred]*
This Letter of Credit sets forth in full our undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any other document, instrument or agreement, except
only the Drawing Certificate; and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement.
All bank charges and commissions incurred by the issuer of
this Letter of Credit in connection with the issuance or administration of
this Letter of Credit (including any drawing hereunder) shall be the
responsibility of the Company.
All payments under this Letter of Credit shall be in United
States dollars, regardless of the currency in which the obligations to the
Beneficiary referred to in the Drawing Certificate are denominated, in the
account indicated by the Beneficiary in the Drawing Certificate.
- -------------------
* Insert Appropriate Language
This Letter of Credit is subject to the international
standby practice, International Chamber of Commerce (ICC) publication No. 590
("ISP98") and as to matters not addressed by the ISP98 shall be governed by
and construed in accordance with the laws of the state of New York (including
without limitation, Article 5 of the Uniform Commercial Code of the State of
New York).
All communication regarding this Letter of Credit should be
addressed to: [Issuing bank address], attention _____________, department
_________. The number and the date of this Letter of Credit and the name of
our bank must be quoted in all communications.
Very truly yours,
[Full name of L/C Issuing Bank]
By: [authorized signatory]
--------------------
Name:
Title:
Annex I
ATTACHMENT TO FORM OF STAND-BY LETTER OF CREDIT
ISSUED BY (NAME OF ISSUING BANK)
FORM OF DRAWING CERTIFICATE
Date: __________
Ref. ___________
To:
[Name of L/C Issuing Bank]
[address]
Attn.__________________
[Swift No./ Facsimile No.]
Ladies and Gentlemen:
Reference is made to irrevocable standby letter of credit No. _______ dated
__________ (the "Letter of Credit") issued by order and for account of
_________ (the "Company").
The undersigned, a duly authorized representative of _________ (the
"Beneficiary"), hereby certifies that:
1. The Beneficiary is the Beneficiary of the Letter of
Credit.
2. We are hereby drawing in the amount of ________
because ___________ has failed to fulfill its
[payment obligations] / [obligations]* to ________
in accordance with the terms of the ___________
agreement between __________ and ___________ dated
as of _________. The amount being drawn does not
exceed that amount which the Beneficiary is
entitled to draw under the Letter of Credit.
3. The amount noted in paragraph 2 above should be
remitted to the following location in accordance
with the Letter of Credit:
Name of Beneficiary: [______________________]
Department: [______________________]
Address: [_________________________]
Attention: [_______________________]
Telephone: [_______________________]
Facsimile: [_______________________]
Wiring Instructions: [_____________]
4. If this Drawing Certificate shall be sent by
facsimile, the original copy of this Drawing
Certificate shall be sent immediately to the
Issuing Bank via overnight mail to the following
address: [address in New York].
5. For verification purposes, the Issuing Bank may
contact: [contact person of Beneficiary, such
person being someone other than the sender of this
Drawing Certificate via facsimile or via overnight
mail].
In witness whereof, the undersigned has executed this certificate on __________.
Very truly yours,
[Full name of the Beneficiary]
By: [authorized signatory]
--------------------
Name:
Title:
Annex II
ATTACHMENT TO FORM OF STAND-BY LETTER OF CREDIT
ISSUED BY (NAME OF ISSUING BANK)
FORM OF ASSIGNMENT OF PROCEEDS
Date:_______________
Ref.________________
To:
[Name of L/C Issuing Bank]
[address]
Attn._______________
[Telex No./ Swift No./ Facsimile No.]
Letter of Credit No.__________ (the "Letter of Credit")
Issued by:
With reference to the Letter of Credit which you have issued to us,
out of the proceeds due under the Letter of Credit (or from any
payment of proceeds you at any time may make under or in relation to
the Letter of Credit), we hereby irrevocably authorize and direct you
to pay the sum of:
Words ___________________________ Figures _______________________________
To: Name:___________________________________________________________
Address:________________________________________________________
Pursuant to an assignment agreement which we have entered into with them.
In the event of part payments becoming due, please give effect to these
instructions by paying the Assignees named above:
? The full amount of all drawings until the sum
mentioned above has been fully discharged.
? Per cent of any drawing (but all payments when
added together must not exceed the amount of this
assignment).
* * Please delete and initial the instruction which does not apply.
You are hereby authorized also to communicate such information to the Assignee
relating to the Letter of Credit or our performance of the conditions thereof
as you may in your absolute discretion determine.
Please send to the Assignee a copy of this Notice of Assignment which is give
pursuant to International Chamber of Commerce (ICC) Publication No. 590
("ISP98"), to which the above Letter of Credit is subject.
For and on behalf of
____________________
Authorized Signature
_______________________________________________________________________________
To be completed by Beneficiary's bankers:
We hereby confirm the authenticity of ______________ who is/are authorized to
commit the Company to this Assignment.
__________________________ (Bankers)
EXHIBIT 4.16
C L I F F O R D CONFORMED COPY
C H A N C E
US$1,250,000,000
FACILITIES AGREEMENT
dated 24 September 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
---------------------------------------------------------------------------
TERM AND REVOLVING FACILITIES AGREEMENT
---------------------------------------------------------------------------
CONTENTS
Clause Page
1. Definitions And Interpretation........................................4
2. The Facilities.......................................................30
3. Purpose..............................................................30
4. Conditions Of Utilisation............................................31
5. Utilisation..........................................................34
6. Optional Currencies..................................................35
7. Repayment............................................................36
8. Conversion Of Facility B1............................................36
9. Prepayment And Cancellation..........................................37
10. Interest.............................................................41
11. Interest Periods.....................................................42
12. Changes To The Calculation Of Interest...............................43
13. Fees.................................................................44
14. Tax Gross Up And Indemnities........................................46
15. Increased Costs......................................................48
16. Other Indemnities....................................................49
17. Mitigation By The Lenders............................................50
18. Costs And Expenses...................................................51
19. Guarantee And Indemnity..............................................52
20. Representations......................................................55
21. Information Undertakings.............................................60
22. General Undertakings.................................................64
23. Events Of Default....................................................73
24. Changes To The Lenders...............................................78
25. Changes To The Obligors..............................................82
26. Role Of The Agent And The Arranger...................................84
27. Conduct Of Business By The Finance Parties...........................89
28. Sharing Among The Finance Parties....................................89
29. Payment Mechanics....................................................92
30. Set-Off..............................................................94
31. Notices..............................................................94
32. Calculations And Certificates........................................98
33. Partial Invalidity...................................................99
34. Remedies And Waivers.................................................99
35. Amendments And Waivers...............................................99
36. Counterparts........................................................100
37. Governing Law.......................................................101
38. Enforcement.........................................................101
SCHEDULE 1 THE ORIGINAL PARTIES............................................102
Part I The Original Obligors........................................102
Part II The Original Lenders........................................104
SCHEDULE 2 CONDITIONS PRECEDENT............................................105
Part I Conditions Precedent To Initial Utilisation..................105
Part II Conditions Precedent Required To Be Delivered By An
Additional Guarantor........................................107
SCHEDULE 3 REQUESTS 109
Part I Utilisation Request..........................................109
Part II Selection Notice............................................111
SCHEDULE 4 MANDATORY COST FORMULAE.........................................112
SCHEDULE 5 FORM OF TRANSFER CERTIFICATE....................................115
SCHEDULE 6 FORM OF COMPLIANCE CERTIFICATE..................................117
SCHEDULE 7 FORM OF LMA CONFIDENTIALITY UNDERTAKING.........................118
SCHEDULE 8 TIMETABLE 124
SCHEDULE 9 FORM OF ACCESSION LETTER........................................125
SCHEDULE 10 PERMITTED LIENS................................................126
SCHEDULE 11 FORM OF PROMISSORY NOTE........................................127
Part I Form of Tranche B1 Note......................................127
Part II Form of Tranche B2 Note.....................................134
THIS TERM AND REVOLVING FACILITIES AGREEMENT is dated 24 September 2004 and
made between:
(1) NEW SUNWARD HOLDING B.V. (the "Borrower");
(2) THE COMPANIES listed in Part IB of Schedule 1 (The Obligors) as
original guarantors (the " Original Guarantors");
(3) CITIGROUP GLOBAL MARKETS LIMITED and GOLDMAN SACHS INTERNATIONAL 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 Parties) as lenders (the "Original Lenders"); and
(5) CITIBANK INTERNATIONAL PLC 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 25 (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.
"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. 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) the Termination Date in respect of Facility B1; and
(b) the day which is 180 days after the date of the posting of the
first Offer Document, in the case of Facility B2.
"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 B1
only, any participation in Facility B1 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.
"Bidco" means Cemex UK Limited, a special purpose subsidiary of the
Borrower incorporated in England and Wales with company number
05196131 and having its registered office at 2 Lambs Passage, London
EC1Y 8BB.
"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 London and Amsterdam 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) 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 Obligations" 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 Facilities Agreements" means the Cemex Facility A Agreements
and the Cemex Facility C Agreement.
"Cemex Facility A Agreements" means both, the US$500,000,000 A1 term
loan facility agreement and the Mexican Pesos equivalent of
US$250,000,000 A2 term loan facility agreement, each made between
(amongst others) Cemex Parent and Citigroup Global Markets Limited and
Banco Nacional de Mexico, S.A., Integrante del Grupo Financiero
Banamex on or about the date hereof.
"Cemex Facility C Agreement" means the US$3,800,000,000 multicurrency
term and revolving credit facility made between (amongst others) Cemex
Spain and Citigroup Global Markets Limited and Goldman Sachs
International on or about the date hereof.
"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.
"Certain Funds Period" bears the meaning given to it in the Cemex
Facility C Agreement.
"Clean-Up Date" means the date falling 180 days after the
Unconditional Date.
"Clean-Up Period" means the period commencing on the Unconditional
Date and ending on the Clean-Up Date.
"Code" means the City Code on Takeovers and Mergers.
"Commitment" means a Facility B1 Commitment and/or Facility B2
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 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 (to the extent deducted from
operating income), in each case determined in accordance with Mexican
GAAP consistently applied for such period. For the purposes of
calculating Consolidated EBITDA for any period of four consecutive
fiscal quarters (each, a "Reference Period") in connection with any
determination of Consolidated Leverage Ratio (but not Consolidated
Fixed Charge Coverage Ratio), (i) if at any time during such Reference
Period Cemex Parent or any of its Subsidiaries shall have made any
Material Disposition, Consolidated EBITDA for such Reference Period
shall be reduced by an amount equal to the Consolidated 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 any member of the
Group under such lease shall be included in Consolidated EBITDA) and
(ii) if at any time during such Reference Period Cemex Parent or any
of its Subsidiaries shall have made any Material Acquisition,
Consolidated 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 became
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 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 Cemex
Parent or any of its Subsidiaries during such Reference Period,
Consolidated 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.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the
ratio of (a) Consolidated 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 such period, (b)
mandatory dividend payments during such period in respect of preferred
Capital Stock of Cemex Parent or any of its Subsidiaries, and (c) 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 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)
Consolidated EBITDA for the four consecutive fiscal quarters
immediately preceding such fiscal quarter.
"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), plus (c) to the extent not included in Debt, all
payment obligations of Cemex Parent or any of its Subsidiaries under
the 9.66% Puttable Capital Securities issued by CEMEX International
Capital LLC on 14 May 1998 or under any similar instrument, minus (d)
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.
"Conversion Request" has the meaning given to it in Clause 8.1.
(Request for Conversion)
"Costs and Expenses Letter" means the costs and expenses letter dated
on or about the date of this Agreement between the Arranger, the
Borrower, Cemex Spain and Cemex Parent.
"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 for the deferred purchase price
of property or services, except trade accounts payable arising
in the ordinary course of business;
(d) all Capital Lease Obligations of such Person;
(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;
(g) all obligations of such Person under repurchase agreements for
stock issued by such Person or another Person; and
(h) all obligations, contingent or otherwise, of such Person
directly or indirectly guaranteeing obligations of any other
Person of the kind referred to in paragraphs (a) to (g) above.
"Default" means an Event of Default or any event or circumstance
specified in Clause 23 (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 Obligations" means, as to any Person, all obligations of
such Person in respect of any financial derivatives, including without
limitation any rate swap transaction, basis swap, forward rate
transaction, equity or equity index swap, equity or equity index
option, equity or equity index forward purchase transaction, equity
option, bond option, interest rate option, foreign exchange
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction
(including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions, and
all obligations, contingent or otherwise, of such Person directly or
indirectly guaranteeing obligations of any other Person of the kind
referred to above.
"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 10 July 2002 issued in relation to the Dutch Exemption
Regulation (beleidsregel kernbegrippen markttoetreding en handhaving
Wtk 1992), as amended or restated from time to time.
"Environmental Laws" means any and all foreign, federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
technical standards (norma tecnica), codes, decrees, requirements of
any Governmental Authority or other Requirements of Law (including
common law) regulating, relating to or imposing liability or standards
of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"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 the Specified 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 23 (Events of Default).
"Exchange Act" means the U.S. Securities Exchange Act of 1943, as
amended.
"Facility" means Facility B1 or Facility B2.
"Facility B1" means the 364-day multicurrency revolving loan facility
with a term-out option made available under this Agreement as
described in paragraph (a) of Clause 2.1 (The Facilities).
"Facility B1 Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility B1
Commitment" in Part II of Schedule 1 (The Original Parties)
and the amount of any other Facility B1 Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility B1 Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility B1 Loan" means a loan made or to be made under Facility B1
or the principal amount outstanding for the time being of that loan.
"Facility B1 Note" means a promissory note of the Borrower
substantially in the form of Schedule 12 (Form of Promissory Note)
relating to amounts to be drawn under Facility B1 and reflecting the
terms of this Agreement.
"Facility B1 Repayment Date" means the day falling 364 days after the
date of this Agreement.
"Facility B2" means the multicurrency term loan facility made
available under this Agreement as described in paragraph (b) of Clause
2.1 (The Facilities).
"Facility B2 Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility B2
Commitment" in Part II of Schedule 1 (The Original Parties)
and the amount of any other Facility B2 Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility B2 Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility B2 Loan" means a loan made or to be made under Facility B2
or the principal amount outstanding for the time being of that loan.
"Facility B2 Note" means a promissory note of the Borrower
substantially in the form of Schedule 12 (Form of Promissory Note)
relating to amounts to be drawn under Facility B2 and reflecting the
terms of this Agreement.
"Facility B2 Repayment Date" means the day falling 36 Months after the
date 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.
"Final B1 Termination Date" means, in relation to Facility B1, the
date which is 6 Months after the Termination Date relating thereto.
"Finance Document" means this Agreement, any Note, any Accession
Letter, the Syndication and Fees Letter, the Sub Underwriter Fee
Letter, the Costs and Expenses 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.
"Funds Flow Statement" means the funds flow statement in agreed form
delivered to the Agent (as amended from time to time prior to the
Unconditional Date provided that such amendments:
(a) have been approved by the Lenders; or
(b) do not affect the interests of the Lenders in relation to the
Facilities).
"Governmental Authority" means any foreign or domestic branch of power
or government or any state, department or other political subdivision
thereof, or any foreign or domestic governmental body, agency,
authority (including any central bank or taxing authority), any entity
or instrumentality (including any court or tribunal) exercising, or
asserting jurisdiction to exercise, executive, legislative, judicial,
regulatory or administrative 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 25.3
(Resignation of Guarantor) and has not subsequently become an
Additional Guarantor pursuant to Clause 25.2 (Additional Guarantors)
and "Guarantor" means any of them.
"Holding Company" means, in relation to a company or corporation, any
other company or corporation in respect of which it is a Subsidiary.
"Information Memorandum" means the document in the form approved by
the Borrower (and as updated from time to time with the approval of
the Borrower) concerning Cemex Parent, the Group and the Target Group
which, at the request of the Borrower and on its behalf is to be
prepared in relation to the transaction contemplated by this
Agreement, approved by the Borrower and distributed by the Arranger in
connection with the syndication of the Facilities.
"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 11 (Interest Periods) and, in relation to an
Unpaid Sum, each period determined in accordance with Clause 10.3
(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 24 (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 the Specified 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, or any other type of preferential arrangement
of any kind whatsoever that has the practical effect of creating a
Lien, 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.
"LMA" means the Loan Market Association.
"Loan" means a Facility B1 Loan or a Facility B2 Loan.
"Loan Notes" means the loan notes (if any) issued to the shareholders
of the Target Shares pursuant to the Offer.
"Major Breach" means in respect of the Borrower and its Subsidiaries
(including Bidco) only and not, for the avoidance of doubt, relating
to any member of the Target Group (including any failure to procure
its compliance), an outstanding breach of any paragraph of Clause 3.1
(Purpose) arising from the failure of the Borrower or Bidco to apply
the proceeds of a Utilisation for the purposes for which it was
advanced, Clauses 22.10 (Pari passu ranking), 22.13 (Liens) (other
than any breach in respect of an attachment or judgment lien), 22.14
(Consolidation and mergers), 22.15 (Sales of assets, etc.), 22.16
(Restricted Payments), 22.22 (Ownership of Cemex Spain), 22.23
(Ownership of the Borrower) and 22.24 (Ownership of Trademark
Companies).
"Major Default" means (a) any outstanding Event of Default in respect
of the Borrower and its Subsidiaries (including Bidco) only and not,
for the avoidance of doubt, relating to any member of the Target Group
(including any failure to procure its compliance) under any of
paragraphs (a), (b), (c) (but only in relation to a Major
Representation), (d) (but only in relation to a Major Breach), (g),
(h), (k) and (l); or (b) any failure by the Borrower to comply with
the requirements of Clause 4.1 (Initial Conditions Precedent) other
than paragraphs 2(a), 2(b) and 2(c) of Part I of Schedule 2
(Conditions Precedent).
"Major Representation" means in respect of the Borrower and its
Subsidiaries (including Bidco) only and not, for the avoidance of
doubt, relating to any member of the Target Group (including any
failure to procure its compliance), any of the representations
contained in paragraph (a) of Clause 20.1 (Status), Clause 20.2
(Binding Obligations) and Clause 20.3 (Non-conflict with other
obligations) (inclusive) where, in each case, breach would lead to a
Material Adverse Effect.
"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:
(a) subject to paragraph (c) below, in relation to any Loan the
percentage rate per annum determined pursuant to the table set
out below:
------------------------- ---------------
Facility Margin % p.a.
------------------------- ---------------
Facility B1 0.825
------------------------- ---------------
Facility B2 0.925
------------------------- ---------------
(b) in relation to any Unpaid Sum the percentage rate per annum
specified above applicable to the Facility in relation to
which the 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 at any time after the First Utilisation Date following the
Unconditional Date:
(i) no Default has occurred and is continuing; and
(ii) 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 B1 Facility B2
--------------------------------------------- ------------------ ---------------------
Greater than or equal to 3.3:1 1.025 1.150
--------------------------------------------- ------------------ ---------------------
Less than 3.3:1 but greater than or equal 0.825 0.925
to 3.0:1
--------------------------------------------- ------------------ ---------------------
Less than 3.0:1 but greater than or equal 0.725 0.825
to 2.7:1
--------------------------------------------- ------------------ ---------------------
Less than 2.7:1 but greater than or equal to 0.625 0.725
2.4:1
--------------------------------------------- ------------------ ---------------------
Less than 2.4:1 0.525 0.625
--------------------------------------------- ------------------ ---------------------
However any increase or decrease in the Margin shall take effect on
the date (the "reset date") which is five Business Days after receipt
by the Agent of the Compliance Certificate for that Relevant Period
pursuant to Clause 21.2 (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), or
operations of the Group taken as a whole;
(b) 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 Disposition" means any Disposition of property or series of
related Dispositions of property that yields aggregate gross proceeds
to any one or more members of the Group in excess of US$25,000,000 (or
the equivalent thereof in other currencies).
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"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.
"Mexican Bank" means any bank incorporated under the laws of Mexico
and duly authorised by the Ministry of Finance and Public Credit
(Secretaria de Hacienda y Credito Publico) to carry out the business
of banking in Mexico under the Credit Institutions Law (Ley de
Instituciones de Credito).
"Mexican GAAP" means generally accepted accounting principles in
Mexico as in effect from time to time, except that for purposes of
Clause 22.12 (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 2003. 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.
"Moody's" means Moody's Investors Service Inc..
"New Lender" has the meaning set out in Clause 24.1 (Assignments and
transfers by Lenders).
"Note" means a Facility B1 Note or a Facility B2 Note as the case may
be.
"Obligations" means:
(a) as to the Borrower, all of the Debt, 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 the Debt, obligations and
liabilities of such Guarantor to the Lenders and the Agent now
or in the future existing under or in connection with this
Agreement, 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.
"Offer" means the offer proposed to be made by Bidco, substantially on
the terms set out in the Press Release, to acquire all of the Target
Shares not already owned by Bidco (whether by way of offer to purchase
or scheme of arrangement), as such Offer may from time to time be
amended, added to, revised, renewed or waived as permitted in
accordance with the terms of this Agreement.
"Offer Document" means the offer (or scheme) document delivered or to
be delivered to the shareholders of the Target in relation to the
Offer.
"Optional Currency" means a currency (other than the Base Currency)
which complies with the conditions set out in Clause 4.4 (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
2003; and
(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 2003; 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 22.13
(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.
"Press Release" means a press announcement to be released by Bidco
announcing the terms of the Offer.
"Process Agent" means Bidco.
"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 Debt 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 member of the Group 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) 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).
"Rating" means at any time the solicited long term credit rating or
the senior implied rating of Cemex Parent or an issue of securities of
or guaranteed by Cemex Parent, where the rating is based primarily on
the senior unsecured credit risk of Cemex Parent and/or, in the case
of the senior implied rating, on the characteristics of any particular
issue, assigned by a Rating Agency.
"Rating Agency" means S&P or Moody's.
"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, agreement to acquired 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 securitization transactions involving
accounts receivable.
"Reference Banks" means, the principal London offices of Citibank
N.A., Deutsche Bank AG and Banco Bilbao Vizcaya Argentaria, S.A.or
such other banks as may be appointed by the Agent in consultation with
the Borrower.
"Regulation U" means Regulation U of the Board as in effect from time
to time.
"Relevant Interbank Market" means, in relation to euro, the European
interbank market, and, in relation to any other currency, the London
interbank market.
"Repeating Representations" means each of the representations set out
in Clauses 20.1 (Status) to Clause 20.5 (Governing law and
enforcement), Clause 20.7 (No Default), Clause 20.9 (Financial
statements/condition) and Clause 20.10 (Pari passu ranking).
"Requirement of Law" means, as to any Person, the charter, statuten
and estatutos sociales or other organisational or governing documents
of such Person and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other 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
22.16 (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).
"Rollover Loan" means one or more Facility B1 Loans:
(a) made or to be made on the same day that a maturing Facility B1
Loan is due to be repaid;
(b) the aggregate amount of which is equal to or less than the
maturing Facility B1 Loan;
(c) in the same currency as the maturing Facility B1 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 B1 Loan.
"S&P" means Standard & Poors Corporation.
"Scheme" means a scheme of arrangement under section 425 of the
Companies Act 1985 between the Target, Bidco and the holders of the
Target Shares (as outlined in the Press Release).
"Scheme Effective Date" means, where Bidco elects to use a Scheme to
acquire the Target Shares, the date on which an office copy of the
order of the High Court of Justice sanctioning the Scheme is filed
with the registrar of companies for registration under section 425(3)
of the Companies Act 1985.
"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 11 (Interest Periods) in relation to Facility B2.
"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).
"Sub Underwriter Fee Letter" means the sub underwriter fee letter
dated on or about the date of this Agreement between the Arranger, the
Borrower, Cemex Spain and Cemex Parent.
"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 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
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 this definition, "control" by a Person
means the power directly or indirectly to direct (x) the exercise of
voting power of, or (y) the disposition of, any interest of the kind
set forth in clauses (a) to (b) above. For purposes of determining
whether a trust formed in connection with a Qualified Receivables
Transaction is a Subsidiary, any and all 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.
"Syndication and Fees Letter" means the syndication and fees letter
dated on or about the date of this Agreement between the Arranger and
the Borrower detailing certain agreed arrangements and principles
regarding syndication of the Facilities and setting out certain of the
fees referred to in Clause 12 (Fees).
"Target" means RMC Group PLC, a company incorporated under the laws of
England and Wales.
"Target Group" means Target and its Subsidiaries.
"Target Shares" means the ordinary shares of 25 pence each in the
Target.
"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 Amount" means at any date and with respect to any
Derivatives Obligation, the aggregate of all settlement and other
amounts (without giving effect to any set-off, counterclaim or other
reduction) which in the good faith determination of the Majority
Lenders would be payable if any default, event of default, termination
event, illegality, or other event giving rise to an early termination
or liquidation of the relevant derivative transaction were to occur in
respect of such Derivatives Obligation on such date.
"Termination Date" means:
(a) in relation to Facility B1, the day which is 364 days after
the date of this Agreement;
(b) in relation to Facility B2, the day which is 36 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 B1
Commitments, the Total Facility B2 Commitments.
"Total Facility B1 Commitments" means the aggregate of the Facility B1
Commitments, being US$500,000,000 at the date of this Agreement.
"Total Facility B2 Commitments" means the aggregate of the Facility B2
Commitments, being US$750,000,000 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 22.14
(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.
"Unconditional Date" means the date on which the Offer is declared or
becomes unconditional in all respects.
"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).
"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 recognized 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 London 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 22.12 (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 22.12 (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
Consolidated 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" denotes lawful currency of the United
Kingdom, "(euro)", "EUR" and "euro" means the single currency unit of
the Participating Member States and "US$", "$" and "dollars" denote
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 of this Agreement, the Lenders make available to
the Borrower:
(a) a 364 day multicurrency revolving loan facility in an
aggregate amount equal to the Total Facility B1 Commitments;
and
(b) a three year multicurrency term loan facility in an aggregate
amount equal to the Total Facility B2 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
(a) The Borrower shall apply all amounts borrowed by it under each
Facility immediately in accordance with the Funds Flow
Statement and shall ensure that Bidco applies such funds
immediately upon receipt in payment for Target Shares by way
of market purchases made prior to the Unconditional Date, by
way of settlement under the Offer or by way of payment of
amounts due under the Loan Notes; and
(b) Utilisations after the Unconditional Date may only be made if
the facilities provided under the Cemex Facility A Agreements
have been fully utilised or will be fully utilised
simultaneously with such Utilisation and the conditions
precedent set out in paragraph 5 of Part 1 of Schedule 2
(Conditions Precedent) of the Cemex Facility C Agreement have
been satisfied.
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 a 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
Subject to the provisions of Clause 4.3 (Certain Funds), 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;
(b) the Repeating Representations which are or which are deemed to
be made or repeated by each Obligor on such date pursuant to
Clause 20.17 (Repetition) are true in all material respects;
and
(c) save for Utilisations to fund market purchases of Target
Shares prior to the Unconditional Date, confirmation from the
facility agent under the Cemex Facility A Agreement that the
facilities provided thereunder are fully drawn or that it ahs
received irrevocable Utilisation Request thereunder such that
they will be fully drawn simultaneously with the first
Utilisation under this Agreement being made.
The Lenders will only be obliged to comply with Clause 29.9 (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 Certain Funds
Notwithstanding any term of the Finance Documents (other than Clause
3.1 (Purpose)), each Finance Party agrees that during the Certain
Funds Period, the Finance Parties shall not:
(a) be entitled to refuse to participate in or make available any
Utilisation, whether by cancellation, rescission or
termination or similar right or remedy (whether under the
Finance Documents or under any applicable law) which it may
have in relation to a Utilisation of the Facilities or
otherwise (including by invoking any conditions set out in
Clause 4.1 (Initial Conditions Precedent) and Clause 4.2
(Further Conditions Precedent)); or
(b) make or enforce any claims they may have under the Finance
Documents if the effect of such claim or enforcement would
prevent or limit the making of any Utilisation during the
Certain Funds Period; or
(c) otherwise exercise any right of set-off or counterclaim or
similar right or remedy if to do so would prevent or limit the
making of any Utilisation; or
(d) cancel, accelerate or cause repayment or prepayment of any
Facility,
in each case unless (a) a Major Default has occurred and is continuing
or would result from the making of a Utilisation, (b) a Major
Representation is incorrect or misleading when made or deemed to be
made or (c) a Lender is entitled to do so by virtue of the provisions
of Clause 9.1 (Illegality) provided that immediately upon the expiry
of the Certain Funds Period all such rights, remedies and entitlements
shall be available to the Lenders (subject to Clause 22.2 (Clean Up
Period)) notwithstanding that they may not have been used or been
available for use during the Certain Funds Period.
4.4 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 or euro 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 29.9
(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.
4.5 Maximum number of Loans
The Borrower may not deliver a Utilisation Request if as a result of
the proposed Utilisation:
(a) 10 or more Facility B1 Loans would be outstanding; or
(b) 5 or more Facility B2 Loans would be outstanding.
4.6 Promissory Notes
Each Loan made by each Lender shall be evidenced by a Facility B1 Note
or Facility B2 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 10 (Interest). Each
Note shall qualify as a pagare under Mexican law. 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 11 (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 24 (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 11
(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$20,000,000 or, if less, the relevant
Available Facility; or
(ii) if the currency selected is sterling or euros, a
minimum of (pound)15,000,000 or, as the case may be,
EUR25,000,000 or, if less, the relevant Available
Facility; or
(iii) if the currency selected is an Optional Currency other
than sterling or euros, the minimum amount specified
by the Agent pursuant to paragraph (c)(ii) of Clause
4.4 (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 B1 Loan
The Borrower shall repay each Facility B1 Loan on the last day of its
Interest Period. If such Loan is to be refinanced with a Rollover
Loan, the amount of each Loan required to be repaid shall be set off
against the amount of the applicable Rollover Loan, provided that all
Facility B1 Loans shall be repaid on, or prior to, the Termination
Date relating thereto.
7.2 Rollover of Facility B1 Loans before Unconditional Date
All Facility B1 Loans utilised prior to the Unconditional Date shall
be refinanced in full with Rollover Loans on the last day of each
relevant Interest Period ending prior to the Unconditional Date.
7.3 Repayment of Facility B2 Loan
The Borrower shall repay the Facility B2 Loan in two equal instalments
on the day falling 24 months after the date of this Agreement and on
the Termination Date for Facility B2.
8. CONVERSION OF FACILITY B1
8.1 Request for Conversion
(a) The Company shall be entitled to request that:
(i) all or part (being an amount or an integral multiple
of US$50,000,000 of the Base Currency Amount) of each
Facility B1 Loan (pro rata amongst the Lenders)
forming part of a Utilisation and outstanding on the
Termination Date relating to Facility B1 be converted
on such Termination Date into term loans maturing on
the Final B1 Termination Date; and
(ii) all or part of the Facility B1 Commitments which have
not been drawn down prior to the Termination Date be
drawn down by way of term loan by the Company on or
before the Termination Date,
by delivering to the Agent a request (a "Conversion Request"),
not less than 10 days nor more than 30 days prior to the
Termination Date.
(b) The Conversion Request shall be unconditional and irrevocable
and, in the case of a Conversion Request for the making of
term loans under paragraph (a)(ii) of this Clause 8.1, shall
be accompanied by a Utilisation Request.
(c) Any outstandings not requested to be converted shall be repaid
in full on the Termination Date.
(d) All undrawn Facility B1 Commitments not the subject of a
Conversion Request shall be cancelled on the Termination Date.
(e) The Agent shall forward a copy of the Conversion Request to
each Lender as soon as practicable after receipt.
8.2 Conversion of Existing Facility B1 Loans
If:
(a) the Company has delivered a conversion Request under Clause
8.1 (Request for Conversion); and
(b) the conditions in Clause 4.2 (Further Conditions Precedent)
would have been met if the Facility B1 Loan to be converted
had been a new Term Loan,
then all or a part of each Facility B1 Loan which is outstanding on
the relevant Termination Date (equal to the amount specified in the
Conversion Request as being converted) shall automatically be
converted into a Term Loan in the currency in which the relevant
outstanding Facility B1 Loan is denominated at the time of the
Conversion Request and shall not be repayable on the original
Termination Date pursuant to Clause 7.1 (Repayment of Facility B1
Loan) but shall instead be repayable on the Final B1 Termination Date.
8.3 Conversion of Undrawn Commitment
If:
(a) the Company has delivered a Conversion Request and Utilisation
Request for the making of Term Loans under paragraph (a)(ii)
and (b) of Clause 8.1 (Request for conversion); and
(b) the conditions in Clause 4.2 (Further Conditions Precedent)
would have been met if such Loan had been a new Term Loan,
then a Term Loan shall be made to the Company and shall not be
repayable on the original Termination Date under Clause 7.1 (Repayment
of Facility B1 Loan) but shall instead be repayable on the Final B1
Termination Date.
8.4 Interest
The first Interest Period for each Term Loan made pursuant to Clauses
8.2 (Conversion of Existing Facility B1 Loans) and Clause 8.3
(Conversion of Undrawn Commitment) shall commence on the original
Termination Date, and shall be of a duration determined in accordance
with Clause 10 (Interest Periods).
9. PREPAYMENT AND CANCELLATION
9.1 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.
9.2 Voluntary cancellation
Provided that the Borrower shall not cancel the Facility to the extent
it would, as a result of such cancellation, not have certain funds (as
required under Rule 24.7 of the Code) for the purpose of the Offer,
the Borrower may if it gives the Agent not less than five Business
Days' (or such shorter period as the Majority Lenders in respect of
the Facility to which such cancellation relates may agree) prior
notice, cancel the whole or any part (being a minimum amount of
US$15,000,000 and, if more, an integral multiple of US$5,000,000) of
any Facility. Any cancellation under this Clause 9.2 shall reduce
rateably the Commitments of the Lenders under that Facility.
9.3 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.
9.4 Voluntary prepayment of Loans
The Borrower may, if it gives the Agent not less than five 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$15,000,000
and, if more, an integral multiple of US$5,000,000).
9.5 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
14.2 (Tax gross-up); or
(ii) any Lender claims indemnification from an Obligor
under Clause 14.3 (Tax indemnity) or Clause 15.1
(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.
9.6 Capital Markets Proceeds
(a) For the purposes of this Clause 9.6:
"Capital Markets Proceeds" means:
(i) the net cash proceeds received by any member of the
Group from any capital markets financing (including
convertible debt instruments but excluding bank loans)
with a maturity of more than one year (after deducting
any fees and expenses incurred by any member of the
Group in relation to such financings) other than any
financing to the extent used to redeem the Loan Notes;
and
(ii) 50% of net cash proceeds of any equity issuance in the
capital markets by any member of the Group (after
deducting any fees and expenses incurred by any member
of the Group in relation to such financings) other
than any equity issuance contemplated in the Funds
Flow Statement and capital contributions made by Cemex
Parent or any of its subsidiaries in a company which
is a subsidiary of the contributor.
(b) If:
(i) in respect of Cemex Spain, the Net Borrowings to
Adjusted EBITDA ratio (each as defined in the Cemex
Facility C Agreement) is at any time greater than
2.25:1; or
(ii) in respect of the Borrower, the Consolidated Leverage
Ratio was greater than 2.5:1 when last tested pursuant
to Clause 22.12 (Financial Condition Covenants),
the Borrower shall procure that on receipt by any member of
the Group of Capital Market Proceeds such Capital Market
Proceeds are applied as soon as practicable (with a view to
avoiding any prepayment, repayment or broken funding costs and
expenses) in the repayment of Debt owed by the Borrower or any
of its Subsidiaries (including under this Agreement and the
Cemex Facility C Agreement).
(c) The Debt to be repaid pursuant to paragraph (b) above shall be
Utilisations (or utilisations under the Cemex Facility C
Agreement) unless the originally scheduled repayment date of
any other Debt is to occur prior to the scheduled repayment
date for the next repayable Utilisation (or utilisation under
the Cemex Facility C Agreement), in which event, the Borrower
may elect to repay such earlier repayable Debt first.
9.7 Application of mandatory prepayments
A prepayment of Utilisations (or utilisations under the Cemex Facility
C Agreement) made under Clause 9.6 (Capital Markets Proceeds) shall be
applied as the Borrower elects.
9.8 Restrictions
(a) Any notice of cancellation or prepayment given by any Party
under this Clause 9 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 B2 nor any
Facility B1 Loan (or part thereof) outstanding after any
conversion under Clause 8 (Conversion of Facility B1) which is
prepaid.
(d) Unless a contrary indication appears in the Agreement, any
part of Facility B1 which is prepaid may be re-borowed 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 9 it shall
promptly forward a copy of that notice to either the Borrower
or the affected Lenders, as appropriate.
SECTION 5
COSTS OF UTILISATION
10. INTEREST
10.1 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.
10.2 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).
10.3 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 10.3 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.
10.4 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.
11. INTEREST PERIODS
11.1 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 B2 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 11, 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 (or, in the case
of any Facility B1 Loan which is converted to a term loan
under Clause 8 (Conversion of Facility B1), the Final B1
Termination Date).
(f) Each Interest Period for a Facility B2 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) Prior to any conversion under Clause 8 (Conversion of Facility
B1) a Facility B1 Loan has one Interest Period only.
11.2 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).
11.3 Consolidation and division of Facility B2 Loans
(a) Subject to paragraph (b) below, if two or more Interest
Periods relate to Facility B2 Loans:
(i) in the same currency;
(ii) of the same period; and
(iii) ending on the same date,
those Facility B2 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 B2 Loan on the last day of the Interest Period.
(b) Subject to Clause 4.5 (Maximum number of Loans), and Clause
5.3 (Currency and amount) if the Borrower requests in a
Selection Notice that a Facility B2 Loan be divided into two
or more Facility B2 Loans, that Facility B2 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 B2 Loan immediately before its
division.
12. CHANGES TO THE CALCULATION OF INTEREST
12.1 Absence of quotations
Subject to Clause 12.2 (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.
12.2 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 London 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.
12.3 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.
12.4 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.
13. FEES
13.1 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.
13.2 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.
13.3 Commitment fee
(a) The Borrower shall pay to the Agent (for the account of each
Lender) a commitment fee computed at the rate of:
(i) 30 per cent. of the applicable Margin from time to
time in relation to Facility B1; and
(ii) for the period of 90 days after the date of this
Agreement, 30 per cent. and thereafter 35 per cent. of
the applicable Margin from time to time in relation to
Facility B2,
on that Lender's Available Commitment for the Availability
Period.
(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.
13.4 Term-out fee
The Company shall pay the Agent (for the account of each Lender
participating in Facility B1) a term-out fee of 0.1 per cent. flat
calculated on the Facility B1 Commitments termed-out pursuant to
Clause 8 (Conversion of Facility B1). The term-out fee is payable on
the exercise by the Company of the term-out option pursuant to Clause
8 (Conversion of Facility B1).
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
14. TAX GROSS UP AND INDEMNITIES
14.1 Definitions
(a) In this Clause 14:
"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 14.2 (Tax gross-up)
or a payment under Clause 14.3 (Tax indemnity).
(b) Unless a contrary indication appears, in this Clause 14 a
reference to "determines" or "determined" means a
determination made in the absolute good faith discretion of
the person making the determination.
14.2 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.
14.3 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 14.3 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 14.2 (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 14.3 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 14.3, notify the Agent.
14.4 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.
14.5 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.
14.6 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.
15. INCREASED COSTS
15.1 Increased costs
(a) Subject to Clause 15.2 (Increased Cost Claims) and Clause 15.3
(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.
15.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to Clause
15.1 (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.
15.3 Exceptions
(a) Clause 15.1 (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 14.3 (Tax indemnity) (or
would have been compensated for under Clause 14.3 (Tax
indemnity) but was not so compensated solely because
any of the exclusions in paragraph (b) of Clause 14.3
(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 15.3, a reference to a "Tax Deduction" has the
same meaning given to the term in Clause 14.1 (Definitions).
16. OTHER INDEMNITIES
16.1 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.
16.2 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 28
(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.
16.3 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.
17. MITIGATION BY THE LENDERS
17.1 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 9.1 (Illegality of a
Lender), Clause 14 (Tax gross-up and indemnities), Clause 15
(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.
17.2 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 17.1 (Mitigation).
(b) A Finance Party is not obliged to take any steps under Clause
17.1 (Mitigation) if, in the opinion of that Finance Party
(acting reasonably), to do so might be prejudicial to it.
18. COSTS AND EXPENSES
18.1 Transaction expenses
The Borrower shall pay the Agent and the Arranger the amount of all
transaction costs and expenses as set out in the Costs and Expenses
Letter.
18.2 Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an
amendment is required pursuant to Clause 29.9 (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.
18.3 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
19. GUARANTEE AND INDEMNITY
19.1 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.
19.2 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.
19.3 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.
19.4 Waiver of defences
The obligations of each Guarantor under this Clause 19 will not be
affected by an act, omission, matter or thing which, but for this
Clause 19, would reduce, release or prejudice any of its obligations
under this Clause 19 (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.
19.5 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 19. 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.
19.6 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 19,
provided that the operation of this Clause 19.6 shall not be deemed to
create any Liens.
19.7 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 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.
19.8 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
20. REPRESENTATIONS
Each Obligor makes the representations and warranties set out in this
Clause 20 to each Finance Party.
20.1 Status
(a) Each member of the Group:
(i) is a corporation, duly organised and validly existing
under the law of its jurisdiction of incorporation;
(ii) has the power to own its assets, operate its property,
lease the property it operates as a lessee and carry
on its business as it is being conducted;
(iii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the
conduct of its business requires such qualification;
and
(iv) is in compliance with all Requirements of Law,
except, in the case of paragraphs (ii), (iii) and (iv) above,
as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) 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.
20.2 Binding obligations
Each Obligor has the power and authority, and the legal right, to
make, deliver and perform each of the Finance Documents to which it is
a party and, in the case of the Borrower, to obtain extensions of
credit hereunder. Each Obligor has taken all necessary corporate or
other organisational action to authorise the execution, delivery and
performance of the Finance Documents to which it is a party and, in
the case of the Borrower, to authorise the extensions of credit on the
terms and conditions of this Agreement. This Agreement has been and as
of the First Utilisation Date each Finance Document to which any
Obligor is a party will have been duly executed and delivered on
behalf of such Obligor. This Agreement constitutes, and each Finance
Document upon execution by such Obligor will constitute, a legal,
valid and binding obligation of such Obligor, enforceable against each
such Obligor in accordance with its terms, except as enforceability
may be limited by applicable concurso mercantil, bankruptcy,
insolvency, reorganisation, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or
at law).
20.3 Non-conflict with other obligations
The entry into and performance by it of, and the transactions
contemplated by, the Finance Documents do not and will not:
(a) 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 any member of the Group pursuant to, any
material Contractual Obligation (including, for the avoidance
of doubt and without limitation, any Contractual Obligation
involving payment obligations in excess of US$5,000,000); or
(b) result in any violation of the statuten, estatutos sociales or
other organisation or governing documents of any member of the
Group or any provision of any Requirement of Law applicable to
any such member of the Group.
20.4 Governmental Approvals
No consent or authorisation of, filing with, notice to or other act by
or in respect of, any Governmental Authority or any other Person is
required in connection with the extensions of credit hereunder or with
the execution, delivery, performance, validity or enforceability of
this Agreement or any of the Finance Documents.
20.5 Governing law, enforcement, no filing and stamp taxes
(a) This Agreement and each of the other Finance Documents are in
proper legal form under the law of Mexico and of The
Netherlands for the enforcement thereof against the Finance
Parties under such law. To ensure the legality, validity,
enforceability or admissibility in evidence of this Agreement
or any other Finance Documents in Mexico or 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 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; provided that
in the event any legal proceedings with respect to any Finance
Document are brought in the courts of Mexico, a Spanish
translation of the documents required in such proceedings,
including such Finance Document, 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 Agent or any Lender
to enforce any rights or remedies under any of the Finance
Documents or (ii) solely by reason of the execution, delivery
or performance of this Agreement by the Agent or any Lender,
that the Agent or such Lender be licensed or qualified with
any Mexican or Dutch Governmental Authority or be entitled to
carry on business in Mexico or The Netherlands.
(c) 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).
20.6 Deduction of Tax
(a) Each member of the Group has filed or caused to be filed all
material tax returns that are required to be filed and has
paid all taxes due and payable pursuant to such returns or
pursuant to any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority except
where the same may be contested in good faith by appropriate
proceedings and with respect to which reserves to the extent
required by law or pursuant to Applicable GAAP have been
provided on the books of such member of the Group. No material
tax Lien has been filed and, to the knowledge of any Obligor,
no material claim is being asserted, with respect to any such
tax, fee or other charge.
(b) 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 the
jurisdiction in which such Obligor is domiciled or any
political subdivision or taxing authority thereof or therein
either (i) on or by virtue of the execution, delivery,
performance, enforcement or admissibility into evidence of
this Agreement or any of the other Finance Documents or (ii)
on any payment to be made by such Obligor pursuant to this
Agreement or any of the other Finance Documents, other than,
with respect to each Guarantor, withholding taxes imposed
pursuant to the Mexican Income Tax Law (Ley del Impuesto sobre
la Renta) on payments of interest, fees and other amounts
deemed to constitute interest to any Lender that is not a
resident of Mexico for tax purposes. Each Obligor is permitted
to pay any additional amounts payable pursuant to Clause 14.2
(Tax gross-up).
20.7 No default
No member of the Group is in default under or with respect to any of
its Contractual Obligations in any respect that could reasonably be
expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
20.8 No misleading information
(a) Any factual information provided by the Borrower for the
purposes of the Information Memorandum was true and accurate
in all material respects as at the date it was provided or as
at the date (if any) at which it is stated.
(b) The financial projections contained in the Information
Memorandum have been prepared in good faith on the basis of
recent historical information (which prior to the
Unconditional Date, in the case of Target will consist of
publicly available information) and on the basis of the
assumptions stated therein, which assumptions were fair in the
light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the
Borrower's best estimate of its future performance.
(c) So far as the Borrower is aware, after reasonable enquiry,
nothing has occurred or been omitted from the Information
Memorandum and no information has been given or withheld that
results in the information contained in the Information
Memorandum being untrue or misleading in any material respect.
(d) All material written information (other than the Information
Memorandum) 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.
20.9 Financial statements/condition
(a) The financial statements delivered pursuant to Clause 21.1
(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 2003, (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.
20.10 Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari
passu with the claims of all its other unsecured and unsubordinated
creditors, except for obligations mandatorily preferred by law
applying to companies generally.
20.11 No proceedings pending or threatened
Except as disclosed by Cemex Parent in its filings with the SEC, no
action, suit, investigation, litigation or proceeding before any
arbitrator or Governmental Authority is pending or, to the knowledge
of any member of the Group, threatened by or against any member of the
Group or against any member of the Group's properties or revenues that
(a) is likely to be adversely determined and if adversely determined
would be reasonably likely to have a Material Adverse Effect or (b)
purports to affect the legality, validity or enforceability of any
Finance Document or the consummation of any transaction contemplated
thereby.
20.12 Ownership of Property; Liens
Each member of the Group 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, with such
exceptions as could not reasonably be expected to have a Material
Adverse Effect, and none of its material property is subject to any
Lien other than a Permitted Lien.
20.13 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.
20.14 Federal Reserve Regulations
No part of the proceeds of any Loan, and no other extensions of credit
hereunder, will be used for "buying" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under
Regulation U as now and from time to time hereafter in effect or for
any purpose that violates the provisions of the regulations of the
Board or any Governmental Authority.
20.15 Labour Matters
There are no strikes pending or threatened against any member of the
Group, and the hours worked and payments made to employees of each
member of the Group have not been in violation of any applicable
Requirement of Law where any of the foregoing would reasonably be
expected to have a Material Adverse Effect. All material payments due
from any member of the Group, or for which any claim may be made
against any member of the Group, on account of wages and employee
health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of each member of the Group. The
execution, delivery and performance of the Finance Documents by any of
the Obligors will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which any member of the Group (or any predecessor) is a
party or by which any member of the Group (or any predecessor) is
bound.
20.16 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 sole 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.
20.17 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.
21. INFORMATION UNDERTAKINGS
The undertakings in this Clause 21 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.
21.1 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) the audited consolidated financial statements
of Cemex Parent for that financial year; and
(B) the audited unconsolidated financial
statements of each Guarantor (other than Cemex
Parent) for that financial year; 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; 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) its consolidated financial statements for that
period; and
(B) the unconsolidated financial statements of
each Guarantor (other than Cemex Parent) for
that period; and
(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 three
quarterly periods of each of the financial years of
Cemex Spain, its consolidated financial statements for
that period.
21.2 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), (a)(iii), (b)(i)(A), (b)(ii) or (b)(iii)
of Clause 21.1 (Financial statements), a Compliance
Certificate setting out (in reasonable detail) computations as
to compliance with Clause 22.12 (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 or Cemex Spain, as
the case may be.
21.3 Requirements as to financial statements
(a) Each set of financial statements delivered by the Borrower
pursuant to Clause 21.1 (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 21.1
(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 21.3 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 22.12 (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 22.12
(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 21.3.
21.4 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 or public
equity securities and, within five days after the same are
filed, copies of all financial statements and reports that any
Obligor may make to, or file with, the SEC or any other
securities exchange or securities regulator; 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.
21.5 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 (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).
21.6 "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 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.
(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 25 (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.
21.7 Notices
Give notice to the Agent and each Lender as soon as practicable after
the occurrence of:
(a) any (i) default or event of default under any Contractual
Obligation of any member of the Group or (ii) litigation,
investigation or proceeding that may exist at any time between
any member of the Group and any Governmental Authority that,
in ether case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material
Adverse Effect;
(b) any litigation or proceeding affecting any member of the Group
(i) which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect, or (ii) which
relates to any Finance Document;
(c) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect;
(d) any increase of the ratio of Total Borrowings of the Borrower
to Total Net Worth of Cemex Spain above 0.35 to 1.00, or any
event or change resulting in any senior unsecured long-term
foreign currency denominated Debt of Cemex Spain being rated
less than BBB- by S&P or not being rated by S&P.
Each notice pursuant to this Clause 21.7 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.
22. 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:
22.1 Compliance with laws and contractual obligations, etc.
(a) Comply 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
Contractual Obligations, except where the failure to so comply
would 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.
22.2 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 would 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.
22.3 Maintenance of insurance
Maintain insurance with reputable insurance companies or associations
in such amounts and covering such risks as is customary for companies
of established reputation engaged in similar businesses and owning
similar properties in the same general areas in which such member of
the Group operates where such insurance is available on reasonable
commercial terms.
22.4 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 22.14 (Consolidations and
Mergers), and provided further that no Subsidiary of Cemex Parent,
other than any Obligor, shall be required to preserve any right or
franchise if the Obligors shall determine in good faith that the
preservation thereof is no longer in the best interests of the
Borrower or the Guarantors and the loss thereof could not reasonably
be expected to have a Material Adverse Effect.
22.5 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, such member of
the Group, and to discuss the affairs, finances and accounts of such
member of the Group 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 Borrower.
22.6 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.
22.7 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; 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 would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
22.8 Environmental laws
(a) Comply in all material respects with, and ensure compliance in
all material respects by all tenants and sub-tenants, if any,
with all applicable Environmental Laws, and obtain and comply
in all material respects with and maintain, and ensure that
all tenants and sub-tenants obtain and comply in all material
respects with and maintain, any and all licences, approvals,
notifications, registrations or permits required by applicable
Environmental Laws, except to the extent the failure to do so
would not reasonably be expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required
under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws, except
to the extent the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
22.9 Maintenance of Government approvals
Maintain in full force and effect at all times all approvals of and
filings with any Governmental Authority required under applicable law
for (a) the conduct of its business (including, without limitation,
antitrust laws or Environmental Laws), except where failure to
maintain any such approvals or filings would not reasonably be
expected to have a Material Adverse Effect and (b) the execution,
delivery and performance by each Obligor of its obligations hereunder
and under the other Finance Documents and for the validity or
enforceability hereof and thereof.
22.10 Pari passu ranking
Take all actions to ensure that at all times the Obligations of each
Obligor under the Finance Documents constitute unconditional general
obligations of such Obligor ranking at least pari passu in all
respects with all other present and future senior unsecured,
unsubordinated Debt of such Obligor.
22.11 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
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:
22.12 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) Incur any Debt or other obligation constituting a portion of
Total Borrowings of the Borrower, if at the time of such
incurrence, and after giving effect thereto, (i) the ratio of
Total Borrowings of the Borrower to Total Net Worth of Cemex
Spain exceeds 0.35 to 1.00 or (ii) any senior unsecured
long-term foreign currency denominated Debt of Cemex Spain is
rated less than BBB- by S&P or is not rated by S&P.
22.13 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 existing on the date of this Agreement described in
Schedule 11(Permitted Liens) provided that no such Lien is
extended to cover any additional property after the date
hereof, and that the amount of Debt secured thereby is not
increased;
(b) Liens for taxes, assessments and other governmental charges
the payment of which is being contested in good faith by
appropriate proceedings diligently conducted and for which
such reserves or other appropriate provision, if any, as shall
be required by law or by Applicable GAAP shall have been made;
(c) 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 diligently conducted and for which
such reserves or other appropriate provision, if any, as shall
be required by Applicable GAAP shall have been made;
(d) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security;
(e) 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;
(f) (i) 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 (ii) 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 Guarantor or any of
their Subsidiaries after the date hereof, provided that (x)
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 that is an improvement to, or is acquired for
specific use with, such acquired property and (y) 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 or special
purpose vehicle could be sold by Cemex Parent in compliance
with the provisions of this Agreement; and (ii) proceeds from
the deposit or transfer of such shares into such trust or
special purpose vehicle and from any transfer of or
distributions in respect of the member of the Group's interest
in such trust or special purpose vehicle are applied as
provided under Clause 22.15 (Sales of Assets, etc.); and
provided further that such Liens may not secure Debt of Cemex
Parent or any of its Subsidiaries (unless permitted under
another paragraph of this Clause 22.13);
(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, arising as a result of such Qualified
Receivables Transaction and in connection therewith;
(k) any Liens created in order to undertake the steps contemplated
in the Funds Flow Statement; and
(l) in addition to the Liens permitted by the foregoing paragraphs
(b) through (k), Liens (including any existing Liens described
under paragraph (a) above) securing Debt of Cemex Parent and
its Subsidiaries (taken as a whole) not exceeding at any time
an amount equal to 5% of the Adjusted Consolidated Net
Tangible Assets of Cemex Parent as of the date of the most
recent consolidated balance sheet of Cemex Parent as of the
date of determination,
unless, in each case, the Borrower and the Guarantors have made or
caused to be made effective provision whereby the Obligations
hereunder are secured equally and rateably with, or prior to, the Debt
secured by such Liens (other than Permitted Liens) for so long as such
Debt is so secured.
22.14 Consolidations and mergers
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)
(save as contemplated in the Funds Flow Statement) 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 such transaction:
(a) immediately after giving effect to such transaction, the
Person formed by or surviving any such consolidation or
merger, if it was not a member of the Group prior to such
consolidation or merger, 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
or such Subsidiary (any such Person, a "Successor") shall be a
company organised and validly existing under the laws of its
place of incorporation or organisation, which in the case of a
Successor to the Borrower or any Guarantor, shall be any of
Mexico, the United States, Canada, Denmark, France, Belgium,
Germany, Ireland, Italy, Luxembourg, The Netherlands,
Portugal, Spain, Switzerland or the United Kingdom or any
political subdivision thereof, and shall expressly assume,
pursuant to a written agreement in form and substance
satisfactory to the Majority Lenders, all of the obligations
of the Borrower, such Guarantor or such Subsidiary, as the
case may be, under each of the Finance Documents to which it
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, deduction or otherwise thereafter imposed on such
Lender or the Agent solely as a consequence of such
transaction with respect to any payments to such Lender or the
Agent 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 or the substitution
of any Successor to a Subsidiary for such Subsidiary (treating
any Debt or Lien incurred by any Obligor or any Successor to
such Obligor, or by a Subsidiary of any Obligor or any
Successor to such Subsidiary, 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;
(d) in the case of any such transaction involving the Borrower or
any Guarantor, no Requirement of Law (whether applicable prior
to, in connection with or upon giving effect to such
transaction) shall be reasonably likely to have a Material
Adverse Effect; and
(e) in the case of any such transaction involving the Borrower or
any Guarantor, the Borrower and, in the case of a Guarantor,
such Guarantor, shall have delivered to the Agent a
certificate signed by an Authorised Signatory of such
Guarantor and an opinion of reputable counsel acceptable to
the Agent and the Majority Lenders, each in form and substance
satisfactory to the Agent and the Majority Lenders and stating
that such consolidation, merger, conveyance, transfer or lease
and such written agreement comply with the relevant provisions
of this Agreement, and that all conditions precedent provided
for in this Agreement relating to such transaction have been
complied with.
22.15 Sales of assets, etc.
(a) Sell, lease or otherwise dispose of any assets (including the
Capital Stock of any Subsidiary) unless the proceeds of the
sale of such assets or property are retained by such Obligor
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 such Obligor or any of its Subsidiaries, whether
secured or unsecured or (iii) investments in companies engaged
in the cement industry or related industries.
(b) The restrictions of paragraph (a) of this Clause 22.15 shall
not apply to sales or other dispositions:
(i) of inventory, trade receivables and assets surplus to
the needs of the business of any member of the Group
sold in the ordinary course of business;
(ii) of assets not used, usable or held for use in
connection with cement operations and related
operations; and
(iii) as contemplated in the Funds Flow Statement.
22.16 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 23 (Events of
Default) or any Default or Event of Default described in paragraph (d)
of Clause 23 (Events of Default) (but only with respect to Clause
22.12 (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.
22.17 Transactions with Affiliates
Save as contemplated in the Funds Flow Statement, enter into any
transaction, including any purchase, sale, lease or exchange of
property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than
the Borrower or any Guarantor) unless such transaction is (a) not
prohibited by this Agreement and (b) upon commercially fair and
reasonable terms no less favourable to the relevant member of the
Group than it would obtain in a comparable arm's length transaction
with a Person that is not an Affiliate.
22.18 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 Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated
or construed as if such change had not occurred).
22.19 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.
22.20 Change in nature of business
With respect to the Borrower, any Guarantor and any Material
Subsidiary of Cemex Parent, make any material change in the nature of
its business as carried on at the date hereof.
22.21 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).
22.22 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 22.14
(Consolidations and mergers).
22.23 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 22.14 (Consolidations and
mergers).
22.24 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.
22.25 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.
23. EVENTS OF DEFAULT
23.1 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, or 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 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 by it at any time under or in connection
with this Agreement or any such other Finance Document shall
prove to have been materially incorrect on or as of the date
made or deemed made and, if remediable, such failure shall
remain unremedied for five days after the earlier of the date
on which (i) a director of any Obligor becomes aware of such
incorrectness and (ii) written notice thereof shall have been
given to the Borrower or any other Obligor by the Agent; or
(d) any Obligor shall default in the observance or performance of
any agreement contained in Clause 21.1 (Financial Statements),
Clause 22.4 (Conduct of business and preservation of corporate
existence) (with respect to the Borrower's or any Guarantor's
existence only), Clause 22.5 (Inspection of Property),
paragraph (a)(i) of Clause 21.7 (Notices), Clause 3 (Purpose),
Clause 22.10 (Pari passu ranking) or Clauses 22.12 (Financial
condition covenants) to Clause 22.25 (Incurrence of debt by
trademark companies) (but only insofar as the default results
from the assumption, incurrence or suffering to exist of Debt)
of this Agreement; or
(e) any Obligor shall default in the observance or performance of
any other agreement contained in this Agreement or any other
Finance Document (other than as provided in paragraphs (a) to
(d) of this Clause), and such default shall continue
unremedied for a period of 30 days after the earlier of (i)
notice to the Borrower or any other Obligor from the Agent or
the Majority Lenders and (ii) a director of any Obligor
becoming aware of such failure; or
(f) (i) one or more members of the Group shall fail to pay any
principal amount of Debt (excluding the Loans) and/or shall
fail to meet any payment or collateralisation obligation in
respect of any Derivatives Obligations that, in one or more
related or unrelated transactions is outstanding in a
principal amount and/or (in the case of Derivatives
Obligations) has a then-current Termination Amount, exceeding
in the aggregate US$50,000,000 (or the equivalent thereof in
other currencies), in each case when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and which failure, in the
case of Derivatives Obligations, continues for a period of
five Business Days; or (ii) any default, event of default or
other event or condition shall occur under any indenture,
agreement or other instrument relating to any Debt and/or
Derivative Obligations that, in one or more related or
unrelated transactions is outstanding in a principal amount
and/or (in the case of Derivatives Obligations) has a
then-current Termination Amount, exceeding in the aggregate
US$50,000,000 (or the equivalent thereof in other currencies),
and the effect of such event or condition is to cause
(automatically or by action of any Person, provided that such
action shall have been taken) any principal amount of such
Debt to become due and payable prior to the date on which it
would otherwise become due and payable and/or any Termination
Amount in respect of any such Derivative Obligations to 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, or shall be unable to pay, or shall admit in
writing its inability to pay its debts as they become due, or
shall take any corporate action indicating its consent to,
approval of, or acquiescence in any of the foregoing or the
equivalent thereof under Mexican law (including the Ley de
Concursos Mercantiles) or 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 any member of the Group
under any bankruptcy, insolvency, concurso mercantil or other
similar law as now or hereafter in effect or shall take any
corporate action indicating its consent to, approval of or
acquiescence in any of the foregoing or the equivalent thereof
under Mexican law (including the Ley de Concursos Mercantiles)
or Dutch law; or
(i) a final judgment or judgments or order or orders not subject
to further appeal shall be rendered against one or more
members of the Group for the payment of money in excess of
US$50,000,000 (or the equivalent thereof in other currencies
or currency units) in the aggregate and either (i) enforcement
proceedings shall have been commenced by any creditor upon any
such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such
judgment or order shall not be in effect; or
(j) any non-monetary judgment or order shall be rendered against
any member of the Group that could be reasonably expected to
have a Material Adverse Effect, and there shall be any period
of 30 consecutive days during which a stay of enforcement of
such judgment order shall not be in effect; or
(k) the obligations of the Borrower or of any Guarantor under this
Agreement or any other Finance Document, shall for any reason
fail to rank at least pari passu in all respects with all
other senior unsecured, unsubordinated Debt of the Borrower or
such Guarantor, as the case may be; or
(l) any Finance Document shall at any time be suspended or revoked
or terminated or for any reason cease to be valid and binding
or in full force and effect (other than upon expiration in
accordance with the terms thereof) or performance of any
obligation thereunder shall become unlawful or the validity or
enforceability thereof shall be contested by any Obligor; or
(m) any governmental or other consent, licence, 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, any
Obligor 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
(n) any Governmental Authority shall (i) condemn, nationalise,
seize or otherwise expropriate all or any substantial portion
of the property of, or Capital Stock of any Obligor, any
Material Subsidiary or, if such could reasonably be expected
to have a Material Adverse Effect, any other Subsidiary of the
Borrower or (ii) take any action that would adversely affect
the ability of any Obligor to perform its obligations under
the Finance Documents; or
(o) a moratorium shall be agreed or declared in respect of any
Debt of any Obligor 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 any Obligor for the purpose of performing any
payment obligation under any Finance Document to which it is
party; or
(p) any material adverse change arises in the financial condition
of the Group taken as a whole which the Majority Lenders
reasonably determine would result in the failure by any
Obligor to perform its payment obligations under any of the
Finance Documents; or
(q) the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more in voting
power of the outstanding voting stock of any Guarantor shall
be acquired by any Person or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act); provided that the
acquisition of beneficial ownership of capital stock (i) of
Cemex Parent by Marcelo Zambrano, Lorenzo H. Zambrano or any
of their parents, spouses, progeny (including adopted
children) or siblings, or any progeny (including adopted
children) of any of their siblings, or (ii) of any Guarantor
other than Cemex Parent by any member of the Group (provided
that beneficial ownership by Cemex Parent of such Guarantor
shall not change as a result of any such acquisition) 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.
23.2 Clean Up Period
If during the Clean-Up Period a matter or circumstance exists in
respect of the Target and/or any member of the Target Group which
would constitute a breach under the Finance Documents including (i) a
breach of any representation or warranty made in Clause 20
(Representations), or (ii) a breach of any covenant set out in Clause
22 (General Undertakings) or (iii) a Default, such matter or
circumstance will not constitute a Default until after the end of the
Clean-Up Period, provided that reasonable steps are being taken to
cure such matter or circumstance (following Bidco or Cemex Parent
becoming aware of the same), unless such matter or circumstance (1)
could reasonably be expected to have a Material Adverse Effect
(assuming for this purpose that the definition thereof is deemed to be
adjusted such that sub paragraph (c) thereof refers solely to payment
obligations and financial covenant obligations) or (2) has been
procured by, or approved by, Cemex Parent or Bidco.
SECTION 9
CHANGES TO PARTIES
24. CHANGES TO THE LENDERS
24.1 Assignments and transfers by the Lenders
Subject to this Clause 24, 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 24.2 (Conditions of
assignment or transfer)) other entity (the "New Lender").
24.2 Conditions of assignment or transfer
(a) The Borrower must be given prior notification of any
assignment or transfer becoming effective under Clause 24.1
(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 24.5 (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 14 (Tax gross-up and indemnities) or Clause 15
(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
24 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.
24.3 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.
24.4 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 24; 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.
24.5 Procedure for transfer
(a) Subject to the conditions set out in Clause 24.2 (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".
24.6 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.
24.7 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.
24.8 Interest
All interest accrued in the Interest Period in which a transfer is
effective shall be paid to the Existing Lender.
24.9 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.
25. CHANGES TO THE OBLIGORS
25.1 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.
25.2 Additional Guarantors
(a) Subject to compliance with the provisions of paragraphs (b)
and (c) of Clause 21.6 ("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 25.2 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)).
25.3 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 25.2 (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 25.3; and
(iii) the Borrower may not resign as a Guarantor without the
consent of all Lenders.
25.4 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
26. ROLE OF THE AGENT AND THE ARRANGER
26.1 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.
26.2 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.
26.3 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.
26.4 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.
26.5 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.
26.6 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 35.1 (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 23 (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.
26.7 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.
26.8 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.
26.9 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 Transaction
Document and any officer, employee or agent of the Agent may
rely on this Clause 26 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.
26.10 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).
26.11 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 26. 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.
26.12 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.
26.13 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).
26.14 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.
26.15 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.
26.16 Agent's Management Time
Any amount payable to the Agent under Clause 16.3 (Indemnity to the
Agent) and Clause 26.10 (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 13 (Fees).
26.17 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.
27. 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.
28. SHARING AMONG THE FINANCE PARTIES
28.1 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 29
(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 29
(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 29.5 (Partial payments).
28.2 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
29.5 (Partial payments).
28.3 Recovering Finance Party's rights
(a) On a distribution by the Agent under Clause 28.2
(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.
28.4 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 28.2 (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.
28.5 Exceptions
(a) This Clause 28 shall not apply to the extent that the
Recovering Finance Party would not, after making any payment
pursuant to this Clause, 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
29. PAYMENT MECHANICS
29.1 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.
29.2 Distributions by the Agent
Each payment received by the Agent under the Finance Documents for
another Party shall, subject to Clause 29.3 (Distributions to an
Obligor), Clause 29.4 (Clawback) and Clause 26.17 (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).
29.3 Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with
Clause 30 (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.
29.4 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.
29.5 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.
29.6 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.
29.7 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.
29.8 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.
29.9 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.
30. 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.
31. NOTICES
31.1 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 31.5
(Electronic Communication)) by email.
31.2 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.
31.3 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 31.2
(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 will be deemed to have
been made or delivered to each of the Obligors.
31.4 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 31.2 (Addresses) or
changing its own address or fax number, the Agent shall notify the
other Parties.
31.5 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.
31.6 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.
31.7 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 31.7, 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.
31.8 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.
32. CALCULATIONS AND CERTIFICATES
32.1 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.
32.2 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.
32.3 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.
32.4 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.
33. 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.
34. 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.
35. AMENDMENTS AND WAIVERS
35.1 Required consents
(a) Subject to Clause 35.2 (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 35.
35.2 Exceptions
(a) An amendment or waiver that has the effect of changing or
which relates to:
(i) the definition of "Majority Lenders", "Optional
Currency" or "Certain Funds Period" 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 25 (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 19 (Guarantee and Indemnity), Clause 24
(Changes to the Lenders), Clause 25 (Changes to the
Obligors) or this Clause 35,
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.
36. 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
37. GOVERNING LAW
37.1 This Agreement is governed by English law.
37.2 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.
38. ENFORCEMENT
38.1 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.
38.2 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) irrevocably appoints 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
Bidco by its execution of this Agreement accepts that
appointment; and
(b) agrees that failure by the Process Agent to notify the
relevant Obligor of the process will not invalidate the
proceedings concerned.
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 , N.L.
Mexico, 66265
Tel: (52 81) 8888-4115
Fax: (52 81) 8888-4415
Attn: Humberto Lozano
Empresas Tolteca de Mexico, S.A. de C.V. Numero 1508, folio 241, volumen 321,
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 B1 Facility B2
Commitment Commitment
US$ US$
- ------------------------------------------------------------------------------
Citibank, N.A. 250,000,000 375,000,000
Goldman Sachs Credit Partners L.P. 250,000,000 375,000,000
- ------------------------------------------------------------------------------
TOTALS 500,000,000 750,000,000
- ------------------------------------------------------------------------------
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) The Funds Flow Statement
(d) A copy of the Syndication and Fees Letter and the Sub
Underwriter Fee Letter executed by all parties thereto.
(e) 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 2003 fiscal year;
(ii) audited unconsolidated financial statements of the
Borrower and each Guarantor other than Cemex Parent
for the 2003 fiscal year; and
(iii) unaudited unconsolidated interim financial statements
of the Borrower and each Guarantor other than Cemex
Parent for the quarter ended 30 June 2004.
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 38.2
(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 - $1,250,000,000 Term and Revolving Facilities Agreement
dated __________ 2004 (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 B1]/[Facility B2]*
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 - $1,250,000,000 Term and Revolving Facilities Agreement
dated __________ 2004 (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 B2 Loan with an Interest Period ending on [ ].
3. [We request that the above Facility B2 Loan be divided into [O] term
loans with the following Interest Periods:]
or
[We request that the next Interest Period for the Facility B2 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 10.3 (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 - $1,250,000,000 Term and Revolving Facilities Agreement
dated __________ 2004 (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 24.5 (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 24.5 (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 31.2 (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 24.4
(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 - $1,250,000,000 Term and Revolving Facilities Agreement
dated __________ 2004 (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 22.12 (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:
[o]
(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.
Signed:
------------------------------
Authorised Signatory of New Sunward Holding B.V.
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)3 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 or dollars Loans in sterling
Agent notifies the Borrower if a currency - -
is approved as an Optional Currency in
accordance with Clause 4.4 (Conditions
relating to Optional Currencies)
Delivery of a duly completed Utilisation U-3 U-1
Request (Clause 5.1 (Delivery of a
Utilisation Request)) or a Selection Notice 11.00am 11.00am
(Clause 11.1 (Selection of Interest
Periods))
Agent determines (in relation to a U-3 U-1
Utilisation) the Base Currency Amount of
the Loan, if required under paragraph (c) 3.00pm 3.00pm
of Clause 5.4 (Lenders' participation) and
notifies the Lenders of the Loan in
accordance with Clause 5.4 (Lenders'
participation)
Agent receives a notification from a Lender U-2 U
under Clause 6.2 (Unavailability of a
currency) 9.30am 9.30am
Agent gives notice in accordance with U- 2 U
Clause 6.2 (Unavailability of a
currency) 10.30am 10.30am
LIBOR or EURIBOR is fixed Quotation Day as of 11:00 Quotation Day as of
a.m. London time in respect 11:00 a.m.
of LIBOR and as of 11.00
a.m. Brussels 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 - $1,250,000,000 Term and Revolving Facilities Agreement
dated __________ 2004 (the "Agreement")
1. [Additional Guarantor] agrees to become an Additional Guarantor and to
be bound by the terms of the Facility Agreement as an Additional
Guarantor pursuant to Clause 25 (Changes to the Obligors) of the
Facility Agreement. [Additional Guarantor] is a company duly
incorporated under the laws and regulations of [name of relevant
jurisdiction].
2. [Additional Guarantor's] administrative details are as follows:
Address:
Fax No:
Attention:
3. This Accession Letter is governed by English law and is entered into by
deed.
Signed: Signed:
---------------------------- -----------------------------
[Authorised Signatory of Additional [Authorised Signatory of New Sunward
Guarantor] Holding BV]
[ o ]
SCHEDULE 10
PERMITTED LIENS
(Figures in millions of US Dollars)
- ------------------------- ---------------------------------------- -----------
COMPANY LENDER LIEN CONCEPT BALANCE
- ------------------------- ---------------------------------------- -----------
CEMEX Construction GE Capital (FKIT Equipment related 1.035
Materials, L.P. 279,280) with the Credit
CEMEX Construction Hampton Land related with the 0.277
Materials, L.P. Credit
Kosmos Cement First Corp (FKIT Equipment related 0.029
Company 101649) with the Credit
Mineral Resource Met-South, Inc. Ash storage 0.203
Technologies, Inc.
Centro Distribuidor de Bank of America Cash Collateral 2.100
Cemento, S.A. De C.V.
-----------
3.644
SCHEDULE 11
FORM OF PROMISSORY NOTE
Part I
FORM OF TRANCHE B1 NOTE
PROMISSORY NOTE PAGARE
US$__________________ US$__________________
For value received, the undersigned, NEW SUNWARD Por valor recibido, la suscrita NEW SUNWARD
HOLDING B.V. (the "Borrower"), by this Promissory HOLDING B.V. (el "Deudor"), por este Pagare
Note unconditionally promises to pay to the order of promete incondicionalmente pagar a la orden de
________________, the principal sum of _________________ , la suma principal de
[US$]/[euro]/[insert currency]* __________________ US$/[euro]/[incluir moneda]*__________
(__________________________, [currency of the United (______________, [moneda de los Estados Unidos de
States of America,]/[currency of a member state of America,]/ [moneda de un estado miembro que la
the European Union adopted in accordance with the Union Europea ha adoptado de conformidad con la
legislation relating to the Economic and Monetary legislacion respecto a la Union Economica y
Union]/[other - please describe]* ___/100) on Monetaria]/[otra - por favor describir]* ___/100)
_____________ _____, 20__, (the "Maturity Date"), el ____ de __________ del 20__ (la "Fecha de
provided that if such day is not a Business Day, the Vencimiento"), en el entendido que si dicho dia no
Maturity Date shall be the next succeeding Business es un Dia Habil, la Fecha de Vencimiento sera en
Day unless such next succeeding Business Day would el siguiente Dia Habil salvo que dicho siguiente
fall in the next calendar month, in which case the Dia Habil sea del siguiente mes del calendario, en
Maturity Date shall be the immediately preceding cuyo caso la Fecha de Vencimiento sera el Dia
Business Day. Habil inmediato anterior.
The Borrower further promises to pay interest on the El Deudor asimismo promete pagar intereses
principal amount outstanding hereunder for each day ordinarios sobre la suma principal insoluta
during each Interest Period (as hereinafter defined) conforme al presente Pagare por cada dia durante
at a rate per annum equal to the Screen Rate (as cada Periodo de Intereses (segun dicho termino se
hereinafter defined) for such Interest Period plus define mas adelante) a una tasa de interes anual
[0.825%] [(zero point eight two five per cent.)]. equivalente a la Tasa de Pantalla (segun dicho
Interest shall be payable on the Maturity Date. termino se define mas adelante) para dicho Periodo
de Intereses mas [0.825%] [(cero punto ochocientos
veinticinco por ciento)]. Los intereses seran
pagaderos en la Fecha de Vencimiento.
The Borrower also promises to pay, to the fullest El Deudor tambien promete pagar, en la medida
extent permitted by applicable law, default interest permitida por la legislacion aplicable, intereses
on any amount payable hereunder that is not paid when moratorios sobre cualesquiera cantidades pagaderas
due, payable on demand, at a rate per annum equal to conforme al presente y que no fueren pagadas a su
the Screen Rate then in effect plus [0.825]% (zero vencimiento, pagaderos a la vista, a una tasa de
point eight two five per cent.) plus 2.00% (two point interes anual equivalente a la Tasa de Pantalla
zero per cent.). aplicable mas [0.825]% [(cero punto ochocientos
veinticinco por ciento)] mas 2.00% (dos punto cero
por ciento).
All computations of interest hereunder shall be made Todos los intereses pagaderos conforme al presente
on the basis of a year of 360 days for the actual Pagare seran calculados sobre la base de un ano de
number of days elapsed in the period for which any 360 dias por el numero de dias efectivamente
such interest is payable (including the first day but transcurridos durante el periodo en el cual dichos
excluding the last day). intereses sean pagaderos (incluyendo el primer dia
pero excluyendo el ultimo dia).
All payments to be made on or in respect of this Todos los pagos que deban hacerse conforme al
Promissory Note shall be made not later than 10:00 presente Pagare deberan hacerse antes de las 10:00
a.m., London time, to the account number __________, a.m., hora de Londres, a la cuenta numero _______,
ABA number _____________, Ref.:_______________ in ABA numero _______________, Ref.: _______ del
__________________, maintained by the Agent (as Agente (segun dicho termino se define mas
hereinafter defined), in [Dollars]/[euro]/[insert adelante), en [Dolares] /[euro]/[incluir moneda]*
currency]* and in immediately available funds. en fondos inmediatamente disponibles.
All payments hereunder shall be made free and clear Todos los pagos conforme al presente Pagare, se
of, and without deduction or withholding for or on haran libres de, y sin deduccion o retencion por o
account of, any present or future taxes, levies, a cuenta de, cualesquier impuestos, derechos,
imposts, duties, charges, fees, deductions or cargos, gravamenes, contribuciones, deducciones o
withholdings, now or hereafter imposed, levied, retenciones, presentes o futuros que sean
collected, withheld or assessed by any Governmental establecidos, cobrados, retenidos o impuestos por
Authority (as hereinafter defined) ("Taxes"). If any cualquier Autoridad Gubernamental (segun dicho
Taxes are required to be deducted or withheld from termino se define mas adelante) ("Impuestos"). En
any amounts payable hereunder, the amounts so payable el caso que se deba de realizar cualquier
to the holder hereof shall be increased to the extent deduccion o retencion por Impuestos respecto de
necessary so that the holder hereof receives all the cualquier pago a realizarse conforme al presente
amount it would have received had no such deduction Pagare, las cantidades pagaderas conforme al
or withholding been made. presente se incrementaran en la medida que sea
necesario para que el tenedor reciba las
cantidades que hubiera recibido de no haberse
realizado dicha deduccion o retencion.
The undersigned agree to reimburse upon demand, in Las suscritas convienen en rembolsar a la vista,
like manner and funds, all losses, costs and en la misma forma y fondos, cualesquier perdidas,
reasonable expenses of the holder hereof, if any, costos y gastos razonables del tenedor de este
incurred in connection with the enforcement of this Pagare, si los hubiere, incurridos en relacion con
Promissory Note (including, without limitation, all la exigibilidad de este Pagare (incluyendo, sin
reasonable legal costs and expenses). limitacion, todos los costos y gastos legales
razonables).
For purposes of this Note, the following terms shall Para efectos de este Pagare, los siguientes
have the following meanings: terminos tendran los siguientes significados:
"Agent" means Citibank International plc "Agente " significa Citibank International plc.
"Business Day" means a [day (other than a Saturday or "Dia Habil" significa cualquier [dia (distinto de
Sunday) on which banks are open for general business un Sabado o Domingo) en el que los bancos esten
in London, England and in Amsterdam, The abiertos para celebrar operaciones en Londres,
Netherlands.]/[TARGET Day]* Inglaterra y Amsterdam, Holanda.]/ [Dia TARGET]*
["TARGET" means Trans-European Automated Real-time ["TARGET" significa es sistema de pagos Automatico
Gross Settlement Express Transfer payment system. en Tiempo Real con Compensacion Total Express
Trans- Europeo (Trans-European Automated Real-time
Gross Settlement Express Transfer).
"TARGET Day" means any day on which TARGET is open ["Dia TARGET" significa un dia en el cual TARGET
for the settlement of payments in euro.]** abra para celebrar operaciones de pago y
compensaciones en euros.]
"Interest Payment Date" means the last day of each "Fecha de Pago de Intereses" significa el ultimo
Interest Period. dia de cada Periodo de Intereses.
"Interest Period" means the period commencing on the "Periodo de Intereses" significa, el periodo que
execution date of this Promissory Note and ending on inicia en la fecha de firma de este Pagare y
the Maturity Date. termina en la Fecha de Vencimiento.
"Screen Rate" means, with respect to each day during "Tasa de Pantalla " significa, respecto de cada
each Interest Period, the rate per annum (rounded dia durante cada Periodo de Intereses, la tasa
upward, if necessary, to the next 1/100th of 1%) anual (redondeada hacia arriba, de ser necesario,
determined on the basis of [the rate determined by al 1/100 mas cercano de 1%) que se determine con
the Banking Federation of the European Union]**/[the base en [la tasa determinada por la Federacion
British Bankers' Association Interest Settlement Bancaria (Banking Federation) de la Union
Rate]*** for a period equal to such Interest Period Europea]** / [la Tasa de Interes de Liquidacion de
appearing on the relevant page of the Reuters screen la Asociacion Britanica de Banqueros (British
as of 11:00 A.M., London time, two Business Days Bankers' Association Interest Settlement Rate)]***
prior to the beginning of such Interest Period. In para un periodo equivalente a dicho Periodo de
the event that such rate does not appear on the Intereses que aparezca en la correspondiente
Reuters screen, the "Screen Rate" shall be the pagina de Reuters a las 11:00 a.m., hora de
arithmetic mean of the rates (rounded upwards to four Londres, dos Dias Habiles antes del inicio de
decimal places) as supplied to the Agent at its dicho Periodo de Intereses. En caso de que dicha
request quoted by the Reference Banks (as hereinafter tasa no aparezca en la pantalla Reuters, la "Tasa
defined) to leading banks in the London interbank de Pantalla" sera el promedio aritmetico
market for the offering of deposits in Dollars for a (redondeado hacia arriba a cuatro decimales) de
period comparable to such Interest Period at or about las tasas notificadas al Agente que ofrezcan los
11:00 A.M., London time, two Business Days prior to Bancos de Referencia (segun dicho termino se
the beginning of such Interest Period. define mas adelante) a los bancos principales en
el mercado interbancario de Londres para depositos
en Dolares con vencimiento comparable a dicho
Periodo de Intereses, a las o alrededor de las
11:00 a.m., hora de Londres, dos Dias Habiles
antes del inicio de dicho Periodo de Intereses.
"Governmental Authority" means any foreign or "Autoridad Gubernamental" significa cualquier
domestic branch of power or government or any state, agencia gubernamental, o que ejerza actos de poder
department or other political subdivision thereof, or o cualquier estado, departamento o cualquier
any foreign or domestic governmental body, agency, subdivision politica de los mismos, ya sea
authority (including any central bank or taxing nacional o extranjero, o cualquier cuerpo
authority), any entity or instrumentality (including gubernamental, agencia, autoridad (incluyendo
any court or tribunal) exercising, or asserting cualquier banco central o autoridad fiscal),
jurisdiction to exercise, executive, legislative, nacional o extranjero, cualquier entidad o
judicial, regulatory or administrative functions of instrumentalidad (incluyendo cualquier corte o
or pertaining to government. tribunal) que ejerza, o tenga jurisdiccion para
ejercer, funciones ejecutivas, legislativas,
judiciales, regulatorias, administrativas o de
gobierno.
"Reference Banks" means the principal London offices "Bancos de Referencia" significa las oficinas
of Citibank, N.A. and __________. principales en Londres de Citibank, N.A. y
_________________.
This Promissory Note shall in all respects be Este Pagare se regira e interpretara de
governed by, and construed in accordance with, the conformidad con las leyes de Inglaterra, en el
laws of England, provided however, that if any action entendido que, si cualquier accion o procedimiento
or proceeding in connection with this Promissory Note en relacion con el presente Pagare es iniciado
shall be brought in any courts in the United Mexican ante cualquier tribunal de los Estados Unidos
States, this Promissory Note shall be governed by the Mexicanos, el presente Pagare se regira por las
laws of United Mexican States. leyes de los Estados Unidos Mexicanos.
Any legal action or proceeding arising out of or Cualquier accion o procedimiento legal relacionado
relating to this Promissory Note may be brought, in con o derivado del presente Pagare podra ser
the competent courts of England, or in the courts iniciado ante los tribunales competentes de
located in the City of Mexico, Federal District, Inglaterra o en los tribunales ubicados en la
United Mexican States. The undersigned waive the Ciudad de Mexico, Distrito Federal, Estados Unidos
jurisdiction of any other courts that may correspond Mexicanos. Las suscritas renuncian a la
for any other reason. jurisdiccion de cualesquiera otros tribunales que
pudiere corresponderles por cualquier otra razon.
The undersigned hereby waive diligence, presentment, Las suscritas por medio del presente renuncian a
protest or notice of total or partial non-payment or todo requisito de presentacion, protesto o
dishonor with respect to this Promissory Note. notificacion de incumplimiento total o parcial, o
cualquier otro requisito similar con respecto al
presente Pagare.
This Promissory Note has been executed in both El presente Pagare se firma en ingles y en
English and Spanish versions, both of which shall espanol, obligando ambas versiones a las
bind the undersigned; provided, however, that the suscritas, en el entendido que la version en
English version shall be controlling, except in any ingles prevalecera, excepto en el caso de que se
action, suit or proceeding brought in the courts of inicie cualquier accion, demanda o procedimiento
the United Mexican States, in which case the Spanish ante los tribunales de los Estados Unidos
version shall be controlling. Mexicanos, en cuyo caso la version en espanol
prevalecera.
This Promissory Note consists of ____ pages. Este Pagare consta de ____ paginas.
, [LUGAR DE FIRMA] a de de 2004.
------------- ----- -------------
[PLACE OF EXECUTION] , 2004.
---------- ------------------- ------
NEW SUNWARD HOLDING B.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
GUARANTORS
POR AVAL
CEMEX, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
CEMEX, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
Part II
FORM OF TRANCHE B2 NOTE
PROMISSORY NOTE PAGARE
US$__________________ US$__________________
For value received, the undersigned, NEW SUNWARD Por valor recibido, la suscrita NEW SUNWARD
HOLDING B.V. (the "Borrower"), by this Promissory HOLDING B.V. (el "Deudor"), por este Pagare
Note unconditionally promises to pay to the order of promete incondicionalmente pagar a la orden de
________________, the principal sum of _________________ , la suma principal de
[US$]/[euro]/[insert currency]* __________________ [US$]/[euro]/[incluir moneda]*__________
(__________________________, [currency of the United (______________, [moneda de los Estados Unidos de
States of America,]/[currency of a member state of America,]/[moneda de un estado miembro que la
the European Union adopted in accordance with the Union Europea ha adoptado de conformidad con la
legislation relating to the Economic and Monetary legislacion respecto a la Union Economica y
Union]/[other - please describe]*___/100) on Monetaria]/[otra - por favor describir]* ___/100)
_____________ _____, 20__, (the "Maturity Date"), el ____ de __________ del 20__ (la "Fecha de
provided that if such day is not a Business Day, the Vencimiento"), en el entendido que si dicho dia no
Maturity Date shall be the next succeeding Business es un Dia Habil, la Fecha de Vencimiento sera en
Day unless such next succeeding Business Day would el siguiente Dia Habil salvo que dicho siguiente
fall in the next calendar month, in which case the Dia Habil sea del siguiente mes del calendario, en
Maturity Date shall be the immediately preceding cuyo caso la Fecha de Vencimiento sera el Dia
Business Day. Habil inmediato anterior.
The Borrower further promises to pay interest on the El Deudor asimismo promete pagar intereses
principal amount outstanding hereunder for each day ordinarios sobre la suma principal insoluta
during each Interest Period (as hereinafter defined) conforme al presente Pagare por cada dia durante
at a rate per annum equal to the Screen Rate (as cada Periodo de Intereses (segun dicho termino se
hereinafter defined) for such Interest Period plus define mas adelante) a una tasa de interes anual
[0.925%] [(zero point nine two five per cent.)]. equivalente a la Tasa de Pantalla (segun dicho
Interest shall be payable on each Interest Payment termino se define mas adelante) para dicho Periodo
Date (as hereinafter defined). de Intereses mas [0.925]% [(cero punto novecientos
veinticinco por ciento)]. Los intereses seran
pagaderos en forma vencida, en la Fecha de Pago de
Intereses (segun dicho termino se define mas
adelante).
The Borrower also promises to pay, to the fullest El Deudor tambien promete pagar, en la medida
extent permitted by applicable law, default interest permitida por la legislacion aplicable, intereses
on any amount payable hereunder that is not paid when moratorios sobre cualesquiera cantidades pagaderas
due, payable on demand, at a rate per annum equal to conforme al presente y que no fueren pagadas a su
the Screen Rate then in effect plus [0.925]% [(zero vencimiento, pagaderos a la vista, a una tasa de
point nine two five per cent.)] plus 2.00% (two point interes anual equivalente a la Tasa de Pantalla
zero per cent.). aplicable mas [0.925]% [(cero punto novecientos
veinticinco por ciento)] mas 2.00% (dos punto cero
por ciento).
All computations of interest hereunder shall be made Todos los intereses pagaderos conforme al presente
on the basis of a year of 360 days for the actual Pagare seran calculados sobre la base de un ano de
number of days elapsed in the period for which any 360 dias por el numero de dias efectivamente
such interest is payable (including the first day but transcurridos durante el periodo en el cual dichos
excluding the last day). intereses sean pagaderos (incluyendo el primer dia
pero excluyendo el ultimo dia).
All payments to be made on or in respect of this Todos los pagos que deban hacerse conforme al
Promissory Note shall be made not later than 10:00 presente Pagare deberan hacerse antes de las 10:00
a.m., London time, to the account number __________, a.m., hora de Londres, a la cuenta numero _______,
ABA number _____________, Ref.:_______________ in ABA numero _______________, Ref.: _______ del
__________________, maintained by the Agent (as Agente (segun dicho termino se define mas
hereinafter defined), in [Dollars]/[euro]/[insert adelante), en Dolares en fondos inmediatamente
currency]* and in immediately available funds. disponibles.
All payments hereunder shall be made free and clear Todos los pagos conforme al presente Pagare, se
of, and without deduction or withholding for or on haran libres de, y sin deduccion o retencion por o
account of, any present or future taxes, levies, a cuenta de, cualesquier impuestos, derechos,
imposts, duties, charges, fees, deductions or cargos, gravamenes, contribuciones, deducciones o
withholdings, now or hereafter imposed, levied, retenciones, presentes o futuros que sean
collected, withheld or assessed by any Governmental establecidos, cobrados, retenidos o impuestos por
Authority (as hereinafter defined) ("Taxes"). If any cualquier Autoridad Gubernamental (segun dicho
Taxes are required to be deducted or withheld from termino se define mas adelante) ("Impuestos"). En
any amounts payable hereunder, the amounts so payable el caso que se deba de realizar cualquier
to the holder hereof shall be increased to the extent deduccion o retencion por Impuestos respecto de
necessary so that the holder hereof receives all the cualquier pago a realizarse conforme al presente
amount it would have received had no such deduction Pagare, las cantidades pagaderas conforme al
or withholding been made. presente se incrementaran en la medida que sea
necesario para que el tenedor reciba las
cantidades que hubiera recibido de no haberse
realizado dicha deduccion o retencion.
The undersigned agree to reimburse upon demand, in Las suscritas convienen en rembolsar a la vista,
like manner and funds, all losses, costs and en la misma forma y fondos, cualesquier perdidas,
reasonable expenses of the holder hereof, if any, costos y gastos razonables del tenedor de este
incurred in connection with the enforcement of this Pagare, si los hubiere, incurridos en relacion con
Promissory Note (including, without limitation, all la exigibilidad de este Pagare (incluyendo, sin
reasonable legal costs and expenses). limitacion, todos los costos y gastos legales
razonables).
For purposes of this Note, the following terms shall Para efectos de este Pagare, los siguientes
have the following meanings: terminos tendran los siguientes significados:
"Agent" means Citibank International plc "Agente " significa Citibank International plc.
"Business Day" means a [day (other than a Saturday or "Dia Habil" significa cualquier [dia (distinto de
Sunday) on which banks are open for general business un Sabado o Domingo) en el que los bancos esten
in London, England and in Amsterdam, The abiertos para celebrar operaciones en Londres,
Netherlands.]/[TARGET Day]* Inglaterra y Amsterdam, Holanda.]/[Dia TARGET]*
["TARGET" means Trans-European Automated Real-time ["TARGET" significa es sistema de pagos Automatico
Gross Settlement Express Transfer payment system. en Tiempo Real con Compensacion Total Express
Trans- Europeo (Trans-European Automated Real-time
Gross Settlement Express Transfer).
"TARGET Day" means any day on which TARGET is open ["Dia TARGET" significa un dia en el cual TARGET
for the settlement of payments in euro.]** abra para celebrar operaciones de pago y
compensaciones en euros.]
"Interest Payment Date" means the last day of each "Fecha de Pago de Intereses" significa el ultimo
Interest Period. dia de cada Periodo de Intereses.
"Interest Period" shall mean, the period commencing "Periodo de Intereses" significa, el periodo que
on the execution date of this Promissory Note and inicia en la fecha de firma de este Pagare y
ending [one] [two] [three] [six] months thereafter termina [uno] [tres] [seis] meses despues y los
and thereafter, each period commencing on the last siguientes periodos comenzaran el ultimo dia del
day of the immediately preceding Interest Period and Periodo de Intereses inmediato anterior y
ending [one] [two] [three] [six] months thereafter; terminaran [uno] [tres] [seis] meses despues; en
provided that (i)-if any Interest Period would el entendido que (i)-si cualquier Periodo de
otherwise end on a day that is not a Business Day, Intereses de otra manera terminaria en un dia que
such Interest Period shall be extended to the next no se un Dia Habil, dicho Periodo de Intereses
succeeding Business Day unless such extension would sera extendido al siguiente Dia Habil, salvo que
carry such Interest Period into another calendar dicha extension mandaria dicho Periodo de
month, in which event such Interest Period shall end Intereses a un nuevo mes calendario, en cuyo caso
on the immediately preceding Business Day; (ii)-no dicho Periodo de Intereses terminara en el Dia
Interest Period shall extend beyond the Maturity Habil inmediato anterior; (ii)-ningun Periodo de
Date; and (iii)-any Interest Period that begins on Intereses se extendera mas alla de la Fecha de
the last Business Day of a calendar month (or on a Vencimiento; y (iii)-cualquier Periodo de
day for which there is no numerically corresponding Intereses que comience en el ultimo Dia Habil de
day in the calendar month at the end of such Interest un mes calendario (o en un dia para el cual no
Period) shall end on the last Business Day of a haya un dia numericamente correspondiente en el
calendar month. mes calendario en que termine dicho Periodo de
Intereses) terminara en el ultimo Dia Habil de un
mes calendario.
"Screen Rate" means, with respect to each day during "Tasa de Pantalla " significa, respecto de cada
each Interest Period, the rate per annum (rounded dia durante cada Periodo de Intereses, la tasa
upward, if necessary, to the next 1/100th of 1%) anual (redondeada hacia arriba, de ser necesario,
determined on the basis of [the rate determined by al 1/100 mas cercano de 1%) que se determine con
the Banking Federation of the European Union]**/[the base en [la tasa determinada por la Federacion
British Bankers' Association Interest Settlement Bancaria (Banking Federation) de la Union
Rate]*** for a period equal to such Interest Period Europea]** / [la Tasa de Interes de Liquidacion de
appearing on the relevant page of the Reuters screen la Asociacion Britanica de Banqueros (British
as of 11:00 A.M., London time, two Business Days Bankers' Association Interest Settlement Rate)]
prior to the beginning of such Interest Period. In *** para un periodo equivalente a dicho Periodo de
the event that such rate does not appear on the Intereses que aparezca en la correspondiente
Reuters screen, the "Screen Rate" shall be the pagina de Reuters a las 11:00 a.m., hora de
arithmetic mean of the rates (rounded upwards to four Londres, dos Dias Habiles antes del inicio de
decimal places) as supplied to the Agent at its dicho Periodo de Intereses. En caso de que dicha
request quoted by the Reference Banks (as hereinafter tasa no aparezca en la pantalla Reuters, la "Tasa
defined) to leading banks in the London interbank de Pantalla" sera el promedio aritmetico
market for the offering of deposits in Dollars for a (redondeado hacia arriba a cuatro decimales) de
period comparable to such Interest Period at or about las tasas notificadas al Agente que ofrezcan los
11:00 A.M., London time, two Business Days prior to Bancos de Referencia (segun dicho termino se
the beginning of such Interest Period. define mas adelante) a los bancos principales en
el mercado interbancario de Londres para depositos
en Dolares con vencimiento comparable a dicho
Periodo de Intereses, a las o alrededor de las
11:00 a.m., hora de Londres, dos Dias Habiles
antes del inicio de dicho Periodo de Intereses.
"Governmental Authority" means any foreign or "Autoridad Gubernamental" significa cualquier
domestic branch of power or government or any state, agencia gubernamental, o que ejerza actos de poder
department or other political subdivision thereof, or o cualquier estado, departamento o cualquier
any foreign or domestic governmental body, agency, subdivision politica de los mismos, ya sea
authority (including any central bank or taxing nacional o extranjero, o cualquier cuerpo
authority), any entity or instrumentality (including gubernamental, agencia, autoridad (incluyendo
any court or tribunal) exercising, or asserting cualquier banco central o autoridad fiscal),
jurisdiction to exercise, executive, legislative, nacional o extranjero, cualquier entidad o
judicial, regulatory or administrative functions of instrumentalidad (incluyendo cualquier corte o
or pertaining to government. tribunal) que ejerza, o tenga jurisdiccion para
ejercer, funciones ejecutivas, legislativas,
judiciales, regulatorias, administrativas o de
gobierno.
"Reference Banks" means the principal London offices "Bancos de Referencia" significa las oficinas
of Citibank, N.A. and __________. principales en Londres de Citibank, N.A. y
_________________.
This Promissory Note shall in all respects be Este Pagare se regira e interpretara de
governed by, and construed in accordance with, the conformidad con las leyes de Inglaterra, en el
laws of England, provided however, that if any action entendido que, si cualquier accion o procedimiento
or proceeding in connection with this Promissory Note en relacion con el presente Pagare es iniciado
shall be brought in any courts in the United Mexican ante cualquier tribunal de los Estados Unidos
States, this Promissory Note shall be governed by the Mexicanos, el presente Pagare se regira por las
laws of United Mexican States. leyes de los Estados Unidos Mexicanos.
Any legal action or proceeding arising out of or Cualquier accion o procedimiento legal relacionado
relating to this Promissory Note may be brought, in con o derivado del presente Pagare podra ser
the competent courts of England, or in the courts iniciado ante los tribunales competentes de
located in the City of Mexico, Federal District, Inglaterra o en los tribunales ubicados en la
United Mexican States. The undersigned waive the Ciudad de Mexico, Distrito Federal, Estados Unidos
jurisdiction of any other courts that may correspond Mexicanos. Las suscritas renuncian a la
for any other reason. jurisdiccion de cualesquiera otros tribunales que
pudiere corresponderles por cualquier otra razon.
The undersigned hereby waive diligence, presentment, Las suscritas por medio del presente renuncian a
protest or notice of total or partial non-payment or todo requisito de presentacion, protesto o
dishonor with respect to this Promissory Note. notificacion de incumplimiento total o parcial, o
cualquier otro requisito similar con respecto al
presente Pagare.
This Promissory Note has been executed in both El presente Pagare se firma en ingles y en
English and Spanish versions, both of which shall espanol, obligando ambas versiones a las
bind the undersigned; provided, however, that the suscritas, en el entendido que la version en
English version shall be controlling, except in any ingles prevalecera, excepto en el caso de que se
action, suit or proceeding brought in the courts of inicie cualquier accion, demanda o procedimiento
the United Mexican States, in which case the Spanish ante los tribunales de los Estados Unidos
version shall be controlling. Mexicanos, en cuyo caso la version en espanol
prevalecera.
This Promissory Note consists of ____ pages. Este Pagare consta de ____ paginas.
, [LUGAR DE FIRMA] a de de 2004.
------------- ----- -------------
[PLACE OF EXECUTION] , 2004.
---------- ------------------- ------
NEW SUNWARD HOLDING B.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
GUARANTORS
POR AVAL
CEMEX, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
CEMEX, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
-----------------------------------
By/Por:
----------------------------
Title/Cargo: Attorney-in-Fact/Apoderado
SIGNATURES
THE BORROWER
NEW SUNWARD HOLDING B.V.
By: /s/ RAMIRO VILLARREAL MORALES
Address: Amsteldijk 166
1079LH Amsterdam
The Netherlands
Fax: (31) 20 644-4095
Attention: Managing Director(s)
THE ORIGINAL GUARANTORS
CEMEX, S.A. DE C.V.
By: /s/ RAMIRO VILLARREAL MORALES
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
CEMEX MEXICO, S.A. DE C.V.
By: /s/ RAMIRO VILLARREAL MORALES
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
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V.
By: /s/ RAMIRO VILLARREAL MORALES
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
THE AGENT
CITIBANK INTERNATIONAL PLC
By: /s/ CARLOS BARONA
Address: Loans Agency Office, 2nd Floor
4 Harbour Exchange Square
London E14 9GE
Fax: 00 44 208636 3824/3925
Attention: Ian Hayton
THE ARRANGER
CITIGROUP GLOBAL MARKETS LIMITED
By: /s/ CARLOS BARONA
Address: Citigroup Centre, 33 Canada Square, Canary Wharf,
London E14 5LB
Fax: +44 20 7986 8278
GOLDMAN SACHS INTERNATIONAL
By: /s/ JAVIER LAZARO
Address: Peterborough Court, 133 Fleet Street, London EC4A 2BB
Fax: 0044 (20) 7774 4477
Attention: Javier Lazaro
THE ORIGINAL LENDERS
CITIBANK, N.A.
By: /s/ CARLOS BARONA
Address: Citigroup Centre, 33 Canada Square, Canary Wharf
London E14 5LB
Fax: +44 20 7986 8278
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ JAVIER LAZARO
Address: 85 Broad Street, New York, NY 10004, United States of America
Fax: +44 (20) 7774 4477
EXHIBIT 4.17
C L I F F O R D CONFORMED COPY
C H A N C E
US$3,800,000,000
FACILITIES AGREEMENT
dated 24 September 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
---------------------------------------------------------------------------
TERM AND REVOLVING FACILITIES AGREEMENT
---------------------------------------------------------------------------
CONTENTS
Clause Page
1. Definitions And Interpretation.......................................1
2. The Facilities......................................................22
3. Purpose.............................................................23
4. Conditions Of Utilisation...........................................24
5. Utilisation.........................................................27
6. Optional Currencies.................................................28
7. Repayment...........................................................29
8. Conversion Of Facility C1...........................................29
9. Prepayment And Cancellation.........................................30
10. Interest............................................................34
11. Interest Periods....................................................35
12. Changes To The Calculation Of Interest..............................36
13. Fees................................................................37
14. Tax Gross Up And Indemnities........................................39
15. Increased Costs.....................................................42
16. Other Indemnities...................................................43
17. Mitigation By The Lenders...........................................45
18. Costs And Expenses..................................................46
19. Guarantee And Indemnity.............................................47
20. Representations.....................................................50
21. Information Undertakings............................................54
22. Financial Covenants.................................................57
23. General Undertakings................................................60
24. Events Of Default...................................................72
25. Changes To The Lenders..............................................76
26. Changes To The Obligors.............................................79
27. Role Of The Agent And The Arranger..................................82
28. Conduct Of Business By The Finance Parties..........................87
29. Sharing Among The Finance Parties...................................87
30. Payment Mechanics...................................................90
31. Set-Off.............................................................92
32. Notices.............................................................92
33. Calculations And Certificates.......................................96
34. Partial Invalidity..................................................97
35. Remedies And Waivers................................................97
36. Amendments And Waivers..............................................97
37. Counterparts........................................................98
38. Governing Law.......................................................99
39. Enforcement.........................................................99
Schedule 1 100
Part I The Obligors.................................................100
Part Ii The Original Lenders........................................101
Schedule 2 CONDITIONS PRECEDENT............................................102
Part I Conditions Precedent To Initial Utilisation..................102
Part Ii Conditions Precedent Required To Be Delivered By An
Additional Obligor..................................................105
Schedule 3 REQUESTS 107
Part I A Utilisation Request........................................107
Part Ii Selection Notice............................................109
Schedule 4 MANDATORY COST FORMULAE.........................................110
Schedule 5 FORM OF TRANSFER CERTIFICATE....................................113
Schedule 6 FORM OF ACCESSION LETTER........................................115
Schedule 7 FORM OF COMPLIANCE CERTIFICATE..................................116
Schedule 8 TIMETABLES......................................................118
Schedule 9 FORM OF LMA CONFIDENTIALITY UNDERTAKING.........................119
Schedule 10 EXISTING SECURITY..............................................124
Schedule 11 EXISTING NOTARISATIONS.........................................125
Schedule 12 MATERIAL SUBSIDIARIES..........................................126
THIS TERM AND REVOLVING FACILITIES AGREEMENT is dated 24 September 2004 and made
BETWEEN:
(1) CEMEX ESPANA, S.A. (the "Original Borrower" or the "Company");
(2) THE COMPANIES listed in Part I of Schedule 1 (The Obligors) as
original guarantors (the "Original Guarantors");
(3) CITIGROUP GLOBAL MARKETS LIMITED and GOLDMAN SACHS INTERNATIONAL 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 INTERNATIONAL PLC 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 6 (Form of Accession Letter).
"Acquisition Utilisation" means a Term Loan made or to be made for one
or more of the purposes set out in Clause 3.1(b) (Purpose) (other than
paragraphs (v) and (vi) thereof).
"Additional Cost Rate" has the meaning given to it in Schedule 4
(Mandatory Cost Formulae).
"Additional Borrower" means a company which becomes an Additional
Borrower in accordance with Clause 26 (Changes to the Obligors).
"Additional Guarantor" means a company which becomes an Additional
Guarantor in accordance with Clause 26 (Changes to the Obligors).
"Additional Obligor" means an Additional Borrower or an Additional
Guarantor.
"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.
"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. on a
particular day.
"Asia Fund" means Cemex Asia Holdings Ltd. ("CAH") or any other
vehicles used by the Company or any other member of the Group 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 members of
the Group or CEMEX, S.A. de C.V. and its Subsidiaries and with the
Company maintaining control of its management.
"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) the Termination Date in respect of Facility C1; and.
(b) the day which is 180 days after the date of the posting of the
first Offer Document, in the case of Facility C2 or Facility
C3
"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 C1
only, any participation in Facility C1 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 Company 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.
"Bidco" means Cemex UK Limited, a special purpose subsidiary of Cemex
Holdco incorporated in England and Wales with company number 05196131
and having its registered office at 2 Lambs Passage, London EC1Y 8BB.
"Borrowers" means the Original Borrower and any Additional Borrower
and "Borrower" means any of them.
"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 London and Madrid, 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) 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 any lease that is capitalised on the balance
sheet prepared in accordance with Spanish GAAP.
"Cemex Facility B Agreement" means the US$1,250,000,000 multicurrency
term and revolving credit agreement made between (among others) Cemex
Holdco as borrower and Citigroup Global Markets Limited and Goldman
Sachs International on or about the date hereof.
"Cemex Holdco" means New Sunward Holding B.V., a company incorporated
in The Netherlands with registered number 34133556.
"Cemex Holdco B Facilities" means the Facilities made available to
Cemex Holdco pursuant to the Cemex Facility B Agreement.
"Cemex Parent" means CEMEX, S.A. de C.V., a company (sociedad anonima
de capital variable) incorporated in Mexico.
"Cemex Parent A Facilities" means both, the US$500,000,000 A1 term
loan facility agreement and the Mexican Peso equivalent of
US$250,000,000 A2 term loan facility agreement, each made between
(amongst others) Cemex Parent and Citigroup Global Markets Limited and
Banco Nacional de Mexico, S.A., Integrante del Grupo Financiero
Banamex on or about the date hereof.
"Certain Funds Period" means the period commencing on the date of this
Agreement and ending on the earlier of:
(a) the date on which the Offer lapses or is withdrawn by the
Bidco;
(b) the date on which the European Commission initiates Phase II
Proceedings or the Offer is referred to the UK Competition
Commission (where such date occurs before 3.00 p.m. on the
first closing date of the Offer or the date on which the Offer
becomes or is declared unconditional as to acceptances,
whichever is the later);
(c) the date which falls 180 days after the date of the posting of
the Offer Document;
(d) the date which falls 90 days after the Unconditional Date;
(e) the date falling four Months after the date on which the Offer
Document is despatched if, by that date, Bidco has not given a
Section 429 Notice;
(f) the date falling 8 weeks after the first date on which the
Bidco is entitled to give a Section 429 Notice; or
(g) the date falling 14 days after the Scheme Effective Date.
"Clean-Up Date" means the date falling 180 days after the
Unconditional Date.
"Clean-Up Period" means the period commencing on the Unconditional
Date and ending on the Clean-Up Date.
"Code" means the City Code on Takeovers and Mergers.
"Commitment" means a Facility C1 Commitment, a Facility C2 Commitment,
and/or Facility C3 Commitment.
"Company/Bidco Intercompany Loan" means a loan to be made directly or
indirectly by the Company to Bidco under the Company/Bidco
Intercompany Loan Agreement.
"Company/Bidco Intercompany Loan Agreement" means the loan agreement
in the agreed form to be entered into between the Company or any of
its direct or indirect subsidiaries and Bidco on or before the first
Utilisation after the Unconditional Date, pursuant to which all
proceeds of the Facilities will be on-lent by the Company to Bidco.
"Compliance Certificate" means a certificate substantially in the form
set out in Schedule 7 (Form of Compliance Certificate).
"Confidentiality Undertaking" means a confidentiality undertaking
substantially in a recommended form of the LMA as set out in Schedule
9 (Form of LMA Confidentiality Undertaking) or in any other form
agreed between the Company and the Agent.
"Conversion Request" has the meaning given to it in Clause 8.1
(Request for Conversion).
"Costs and Expenses Letter" means the costs and expenses letter dated
on or about the date of this Agreement between the Arranger, the
Company, Cemex Holdco and Cemex Parent.
"Default" means an Event of Default or any event or circumstance
specified in Clause 24 (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.
"Domestic Lender" means any person described in paragraph (c) of
article 57 of Royal Decree 537/1997, of 14 April (Real Decreto
537/1997 de 14 de abril) as amended by Royal Decree 2717/1998, of 18
December (Real Decreto 2717/1998, de 18 de diciembre) or in the second
paragraph of article 12.1 of Royal Decree 326/1999, of 26 February
(Real Decreto 326/1999, de 26 de febrero).
"Environmental Claim" means any claim, proceeding or investigation by
any person in respect of any Environmental Law.
"Environmental Law" means any applicable law or regulation in any
jurisdiction in which any member of the Group conducts business which
relates to the pollution or protection of the environment or harm to
or the protection of human health or the health of animals or plants.
"Environmental Permits" means any permit, licence, consent, approval
and other authorisation and the filing of any notification, report or
assessment required under any Environmental Law for the operation of
the business of any member of the Group conducted on or from the
properties owned or used by the relevant member of the Group.
"ERISA" means the United States Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"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 the Specified 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 24 (Events of Default).
"Facility" means Facility C1, Facility C2 or Facility C3.
"Facility C1" means the 364-day multicurrency revolving loan facility
with a term-out option made available under this Agreement as
described in paragraph (a) of Clause 2.1 (The Facilities).
"Facility C1 Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility C1
Commitment" in Part II of Schedule 1 (The Original Parties)
and the amount of any other Facility C1 Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility C1 Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility C1 Loan" means a loan made or to be made under Facility C1
or the principal amount outstanding for the time being of that loan.
"Facility C2" means the multicurrency term loan facility made
available under this Agreement as described in paragraph (b) of Clause
2.1 (The Facilities).
"Facility C2 Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility C2
Commitment" in Part II of Schedule 1 (The Original Lenders)
and the amount of any other Facility C2 Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility C2 Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility C2 Loan" means a loan made or to be made under Facility C2
or the principal amount outstanding for the time being of that loan.
"Facility C3" means the multicurrency term loan facility made
available under this Agreement as described in paragraph (c) of Clause
2.1 (The Facilities).
"Facility C3 Commitment" means:
(a) in relation to an Original Lender, the amount in the Base
Currency set opposite its name under the heading "Facility C3
Commitment" in Part II of Schedule 1 (The Original Lenders)
and the amount of any other Facility C3 Commitment transferred
to it under this Agreement; and
(b) in relation to any other Lender, the amount in the Base
Currency of any Facility C3 Commitment transferred to it under
this Agreement,
to the extent not cancelled, reduced or transferred by it under this
Agreement.
"Facility C3 First Repayment Date" means the date falling 42 months
after the date of this Agreement.
"Facility C3 Loan" means a loan made or to be made under Facility C3
or the principal amount outstanding for the time being of that loan.
"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.
"Final C1 Termination Date" means, in relation to Facility C1, a date
which is 364 days after the Termination Date relating thereto.
"Finance Document" means this Agreement, any Accession Letter, the
Syndication and Fees Letter, the Sub Underwriter Fees Letter, the
Costs and Expenses Letter and any other document designated as a
"Finance Document" by the Agent and the Company.
"Finance Party" means the Agent, the Arranger or a Lender.
"Financial Indebtedness" means any indebtedness for or in respect of,
and without double counting:
(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 Securitisations 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) the 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 Security 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) guarantees of Financial Indebtedness of other persons.
"First Utilisation Date" means the date on which the first Utilisation
is made under this Agreement.
"Funds Flow Statement" means the funds flow statement in agreed form
delivered to the Agent (as amended from time to time prior to the
Unconditional Date provided that such amendments:
(a) have been approved by the Lenders; or
(b) do not affect the interests of the Lenders in relation to the
Facilities).
"GAAP" means, in relation to an Obligor, the generally accepted
accounting principles applying to it (i) in the country of its
incorporation; or (ii) in a jurisdiction agreed to by the Agent.
"Group" means the Company and each of its Subsidiaries for the time
being.
"Guarantors" means the Original Guarantors and any Additional
Guarantor other than any Original Guarantor or Additional Guarantor
which has ceased to be a Guarantor pursuant to Clause 26.4
(Resignation of Guarantor) and has not subsequently become an
Additional Guarantor pursuant to Clause 26.3 (Additional Guarantors)
and "Guarantor" means any of them.
"Holding Company" means, in relation to a company or corporation, any
other company or corporation in respect of which it is a Subsidiary.
"Information Memorandum" means the document in the form approved by
the Company (and as updated from time to time with the approval of the
Company) concerning Cemex Parent, the Group and the Target Group
which, at the request of the Company and on its behalf is to be
prepared in relation to the transaction contemplated by this
Agreement, approved by the Company and distributed by the Arranger in
connection with the syndication of the Facilities.
"Intellectual Property" means:
(a) any patents, trade marks, service marks, designs, business
names, copyrights, design rights, data-base rights,
inventions, knowhow and other intellectual property rights and
interests, whether registered or unregistered; and
(b) the benefit of all applications and rights to use such assets
of each member of the Group.
"Interest Period" means, in relation to a Loan, each period determined
in accordance with Clause 11 (Interest Periods) and, in relation to an
Unpaid Sum, each period determined in accordance with Clause 10.3
(Default interest).
"International Accounting Standards" means the accounting standards
approved by the International Accounting Standards Board from time to
time.
"Legal Opinions" means the legal opinions delivered to the Agent
pursuant to Clause 4.1 (Initial Conditions Precedent) or in relation
to any Additional Obligors.
"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 25 (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 the Specified 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.
"LMA" means the Loan Market Association.
"Loan" means a Facility C1 Loan or a Term Loan.
"Loan Notes" means the loan notes (if any) issued to the shareholders
of the Target Shares pursuant to the Offer.
"Major Breach" means in respect of the Company and its Subsidiaries
(including Bidco) only and not, for the avoidance of doubt, relating
to any member of the Target Group (including any failure to procure
its compliance), an outstanding breach of any paragraph of Clause 3.1
(Purpose) arising from the failure of a Borrower or Bidco to apply the
proceeds of an Acquisition Utilisation for the purposes for which it
was advanced, Clauses 23.6 (Negative Pledge) (other than any breach in
respect of a judgment lien), 23.7 (Disposals) (other than any breach
arising from a downgrade in the Rating of the Company), 23.8 (Merger)
(other than any breach arising from a downgrade in the Rating of the
Company), 23.14 (Pari Passu Ranking) or 23.18 (The Offer).
"Major Default" means (a) any outstanding Event of Default in respect
of the Company and its Subsidiaries (including Bidco) only and not,
for the avoidance of doubt, relating to any member of the Target Group
(including any failure to procure its compliance) under any of Clauses
24.1 (Non-payment), 24.3 (Other obligations) only in relation to a
Major Breach, 24.4 (Misrepresentation) only in relation to a Major
Representation, 24.6 (Insolvency), 24.7 (Insolvency proceedings),
24.11 (Unlawfulness) or 24.12 (Repudiation); or (b) any failure by the
Company to comply with the requirements of Clause 4.1 (Initial
Conditions Precedent) (other than paragraphs 4(a), (b), (c) and 6(e)
of Part I of Schedule 2).
"Major Representation" means in respect of the Company and its
Subsidiaries (including Bidco) only and not, for the avoidance of
doubt, relating to any member of the Target Group (including any
failure to procure its compliance), any of the representations
contained in Clause 20.1 (Status) to Clause 20.4 (Power and authority)
(inclusive) and 20.14 (Offer Documents Information) where, in each
case, breach would lead to a Material Adverse Effect.
"Majority Lenders" means:
(a) for the purposes of paragraph (b)(i) of Clause 23.16 (The
Offer) only, a Lender or Lenders whose Commitments aggregate
more than 66 per cent. of the Total Commitments (or, if the
Total Commitments have been reduced to zero, aggregated more
than 66 per cent. of the Total Commitments immediately prior
to that reduction);
(b) if there are no Loans then outstanding a Lender or Lenders
whose Commitments aggregate more than 51 per cent. of the
Total Commitments (or, if the Total Commitments have been
reduced to zero, aggregated more than 51 per cent. of the
Total Commitments immediately prior to that reduction); and
(c) 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:
(a) subject to paragraph (c) below, in relation to any Loan the
percentage rate per annum determined pursuant to the table set
out below:
----------------------- -----------------------
Facility Margin % p.a.
----------------------- -----------------------
Facility C1 0.65
----------------------- -----------------------
Facility C2 0.75
----------------------- -----------------------
Facility C3 0.85
----------------------- -----------------------
(b) in relation to any Unpaid Sum the percentage rate per annum
specified above applicable to the Facility in relation to
which the 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,
(c) but if at any time after the First Utilisation Date following
the Unconditional Date:
(i) no Default has occurred and is continuing; and
(ii) the Net Borrowings to Adjusted EBITDA 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 will be the
percentage rate per annum set out below opposite that range:
--------------------------- ------------------------------------
Net Borrowings to Margin
Adjusted EBITDA % p.a.
--------------------------- ------------ ----------- -----------
Facility Facility Facility
C1 C2 C3
--------------------------- ------------ ----------- -----------
Greater than or equal to 0.85 0.95 1.05
3.0:1
--------------------------- ------------ ----------- -----------
Less than 3.0:1 but 0.65 0.75 0.85
greater than or equal to
2.5:1
--------------------------- ------------ ----------- -----------
Less than 2.5:1 but 0.50 0.60 0.70
greater than or equal to
2.0:1
--------------------------- ------------ ----------- -----------
Less than 2.0:1 0.40 0.50 0.60
--------------------------- ------------ ----------- -----------
However any increase or decrease in the Margin shall take
effect on the date (the "reset date") which is five Business
Days after receipt by the Agent of the Compliance Certificate
for that Relevant Period pursuant to Clause 21.2 (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. For the purpose of determining the Margin, Net
Borrowings to Adjusted EBITDA ratio and Relevant Period shall
be determined in accordance with Clause 22.1 (Financial
definitions).
"Material Adverse Effect" means a material adverse effect on:
(a) the business, condition (financial or otherwise) or operations
of the Group taken as a whole;
(b) the rights or remedies of any Finance Party under the Finance
Documents; or
(c) the ability of any Obligor to perform its obligations under
the Finance Documents.
"Material Subsidiary" means those companies set out in Schedule 13
(Material Subsidiaries) and any other Subsidiary of the Company:
(a) which becomes a Subsidiary of the Company after the date
hereof or acquires substantial assets or businesses after the
date hereof; and
(b) which:
(i) has total assets representing 5 per cent. or more of
the total consolidated assets of the Group; and/or
(ii) has revenues representing 5 per cent. or more of the
consolidated turnover of the Group,
in each case calculated on a consolidated basis and any Holding
Company of any such Subsidiary (save unless such company is already a
Guarantor hereunder).
Compliance with the conditions set out in paragraphs (a) and (b) shall
be determined by reference to the most recent Compliance Certificate
supplied by the Company and/or the latest audited financial statements
of that Subsidiary (consolidated in the case of a Subsidiary which
itself has Subsidiaries) and the latest audited consolidated financial
statements of the Group, but if a Subsidiary has been acquired since
the date as at which the latest audited consolidated financial
statements of the Group were prepared, the financial statements shall
be adjusted in order to take into account the acquisition of that
Subsidiary (that adjustment being certified by the Group's auditors as
representing an accurate reflection of each of the respective revised
total assets and turnover of the Group).
A report by the auditors of the Company that a Subsidiary is a
Material Subsidiary shall, in the absence of manifest error, be
conclusive and binding on all Parties.
"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.
"Moody's" means Moody's Investors Service Inc.
"New Lender" means a New Lender as specified in a Transfer
Certificate.
"Obligors" means the Borrowers and the Guarantors and "Obligor" means
any of them.
"Offer" means the offer proposed to be made by Bidco, substantially on
the terms set out in the Press Release, to acquire all of the Ordinary
Shares not already owned by Bidco (whether by way of offer to purchase
or scheme of arrangement), as such Offer may from time to time be
amended, added to, revised, renewed or waived as permitted in
accordance with the terms of this Agreement.
"Offer Costs" means all costs, fees and expenses (and taxes thereon)
and all stamp, documentary, registration or similar taxes incurred by
or on behalf of Cemex Parent, the Company, Bidco or the Target in
connection with the Offer, the financing of the Offer and the
refinancing of the Financial Indebtedness of members of the Target
Group.
"Offer Document" means the offer (or scheme) document delivered or to
be delivered to the shareholders of the Target in relation to the
Offer.
"Offer Documents" means the Offer Document, the Press Release and any
other documents despatched to the shareholders of the Target in
relation to the Offer by or on behalf of Bidco.
"Optional Currency" means a currency (other than the Base Currency)
which complies with the conditions set out in Clause 4.4 (Conditions
relating to Optional Currencies).
"Ordinary Shares" means the ordinary shares of 25 pence each in the
Target.
"Original Financial Statements" means:
(a) in relation to the Company, its audited unconsolidated and
consolidated financial statements for its financial year ended
31 December 2003;
(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 2003; and
(c) in relation to any other Obligor, its most recent audited
financial statements.
"Original Obligor" means an Original Borrower or an Original
Guarantor.
"Outlook" means a rating outlook of the Company with regard to the
Company's economic and/or fundamental business condition, as assigned
by a Rating Agency.
"Panel" means the Panel on Takeovers and Mergers.
"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 Securitisations" means a sale, transfer or other
securitisation of receivables and related assets by the Company 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 and regulations of the jurisdiction in which
such originator is organised, (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, covenants and indemnities,
such sale, transfer or other securitisation is carried out on a
non-recourse basis.
"Phase II Proceedings" means proceedings under Article 6 (1) (c) of
the Council Regulation (EC) 139/2004.
"Press Release" means a press announcement to be released by Bidco
announcing the terms of the Offer.
"Process Agent" means Bidco.
"Qualifying Lender" has the meaning given to that term in Clause 14
(Tax gross-up and indemnities).
"Quotation Day" means, in relation to any period for 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,
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).
"Rating" means at any time the solicited long term credit rating or
the senior implied rating of the Company or an issue of securities of
or guaranteed by the Company, where the rating is based primarily on
the senior unsecured credit risk of the Company and/or, in the case of
the senior implied rating, on the characteristics of any particular
issue, assigned by a Rating Agency.
"Rating Agency" means S&P or Moody's.
"Reference Banks" means, the principal London offices of Citibank,
N.A., Deutsche Bank A.G., Banco Bilbao Vizcaya Argentaria, S.A. and
such other banks as may be appointed by the Agent in consultation with
the Company.
"Refinancing Loans" means Facility C1 Loans made for the purposes
specified in paragraph (a) of Clause 3.1 (Purpose).
"Relevant Interbank Market" means, in relation to euro, the European
interbank market, and, in relation to any other currency, the London
interbank market.
"Relevant Jurisdiction" means in relation to an Obligor:
(a) its jurisdiction of incorporation; and
(b) any jurisdiction where it conducts its business.
"Relevant Period" has the meaning given to that term in Clause 22
(Financial Covenants).
"Relevant Target Facilities" means all such Financial Indebtedness of
the Target Group which comprises bilateral or syndicated credit
facilities provided by banks or other financial institutions before or
after the date of this Agreement but not including any fixed rate
privately placed notes or any publicly issued debt instruments.
"Repeating Representations" means each of the representations set out
in Clauses 20.1 (Status) to Clause 20.6 (Governing law and
enforcement), Clause 20.9 (No default), paragraphs (a) and (b) of
Clause 20.11 (Financial statements), Clause 20.12 (Pari passu
ranking), Clause 20.13 (No proceedings pending or threatened), Clause
20.15 (No winding-up), Clause 20.16 (Material Adverse Change) and
Clause 20.14 (Offer Documents Information).
"Rollover Loan" means one or more Facility C1 Loans:
(a) made or to be made on the same day that a maturing Facility C1
Loan is due to be repaid;
(b) the aggregate amount of which is equal to or less than the
maturing Facility C1 Loan;
(c) in the same currency as the maturing Facility C1 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 C1 Loan.
"S&P" means Standard & Poors Corporation.
"Scheme" means a scheme of arrangement under section 425 of the
Companies Act 1985 between the Target, Bidco and the holders of the
Target Shares (as outlined in the Press Release).
"Scheme Effective Date" means, where Bidco elects to use a Scheme to
acquire the Ordinary Shares, the date on which an office copy of the
order of the High Court of Justice sanctioning the Scheme is filed
with the registrar of companies for registration under section 425(3)
of the Companies Act 1985.
"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 Company and the Lenders.
"Section 429 Notice" means a notice in the prescribed form to those
holders of Target Shares which have not accepted the Offer, pursuant
to Section 429(2) of the Companies Act 1985.
"Security" means a mortgage, charge, pledge, lien or other security
interest securing any obligation of any person or any other agreement
or arrangement having a similar effect. "Selection Notice" means a
notice substantially in the form set out in Part II of Schedule 3
(Selection Notice) given in accordance with Clause 11 (Interest
Periods) in relation to a Term Facility.
"Spain" means the Kingdom of Spain.
"Spanish Public Document" means any obligation in an Escritura Publica
or documento intervenido.
"Special Purpose Vehicle" means a securitisation trust or fund,
limited liability company, partnership or other special purpose person
established to implement a securitisation of receivables, provided
that the business of such person is limited to acquiring, servicing
and funding receivables and related assets and activities incidental
thereto.
"Specified Time" means a time determined in accordance with Schedule 8
(Timetables).
"Stake" means a number of shares in any Group member held by another
Group member the disposal of which would cause the first Group member
to cease to be a Subsidiary of the second Group member.
"Sub Underwriter Fee Letter" means the sub underwriter fee letter
dated on or about the date of this Agreement between the Arranger, the
Company, Cemex Holdco and Cemex Parent.
"Subsidiary" means in relation to any company or corporation, a
company or corporation:
(a) which is controlled, directly or indirectly, by the first
mentioned company or corporation;
(b) more than half the issued share capital of which is
beneficially owned, directly or indirectly by the first
mentioned company or corporation; or
(c) which is a Subsidiary of another Subsidiary of the first
mentioned company or corporation,
and for this purpose, a company or corporation shall be treated as
being controlled by another if that other company or corporation is
able to direct its affairs and/or to control the composition of its
board of directors or equivalent body.
"Syndication and Fees Letter" means the syndication and fees letter
dated on or about the date of this Agreement between the Arranger and
the Company detailing certain agreed arrangements and principles
regarding syndication of the Facilities and setting out certain of the
fees referred to in Clause 13 (Fees).
"Target" means RMC Group PLC, a company incorporated under the laws of
England and Wales.
"Target Group" means the Target and its Subsidiaries.
"Target Shares" means all of the Ordinary Shares, which are or will be
the subject of the Offer.
"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.
"Term Facility" means Facility C2 or Facility C3.
"Term Loan" means a Facility C2 Loan or a Facility C3 Loan and any
Facility C1 Loan following the exercise by the Company of the term-out
option pursuant to Clause 8 (Conversion of Facility C1).
"Termination Date" means:
(a) in relation to Facility C1, the day which is 364 days after
the date of this Agreement;
(b) in relation to Facility C2, the day which is 36 Months after
the date of this Agreement;
(c) in relation to Facility C3 the day which is 60 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 C1
Commitments, the Total Facility C2 Commitments and the Total Facility
C3 Commitments.
"Total Facility C1 Commitments" means the aggregate of the Facility C1
Commitments.
"Total Facility C2 Commitments" means the aggregate of the Facility C2
Commitments.
"Total Facility C3 Commitments" means the aggregate of the Facility C3
Commitments.
"Transaction Documents" means the Finance Documents, the Offer
Documents and the Company /Bidco Intercompany Loan Agreement.
"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 Company.
"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.
"Unconditional Date" means the date on which the Offer is declared or
becomes unconditional in all respects.
"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).
"VAT" means value added tax as provided for in the Value Added Tax Act
1994 and any other tax of a similar nature.
1.2 Construction
(a) Unless a contrary indication appears a 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 Company 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 a "Transaction Document" or
any other agreement or instrument is a reference to
that Finance Document or Transaction 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 "person" includes any person, firm, company,
corporation, government, state or agency of a state or
any association, trust or partnership (whether or not
having separate legal personality) of two or more of
the foregoing;
(ix) 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;
(x) 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)
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;
(xi) a provision of law is a reference to that provision as
amended or re-enacted without material modification;
(xii) a time of day is a reference to London time; and
(xiii) 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 22 (Financial 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 22
(Financial Covenants), there is no breach thereof.
1.3 Currency Symbols and Definitions
"(pound)" and "sterling" denote lawful currency of the United Kingdom,
"(euro)", "EUR" and "euro" means the single currency unit of the
Participating Member States and "US$", "$" and "dollars" denote 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 of this Agreement, the Lenders make available:
(a) a 364 day multicurrency revolving loan facility in an
aggregate amount equal to the Total Facility C1 Commitments;
(b) a three year multicurrency term loan facility in an aggregate
amount equal to the Total Facility C2 Commitments;
(c) a five year multicurrency term loan facility in an aggregate
amount equal to the Total Facility C3 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.
2.3 Affiliate Facility Offices
(a) A Lender may designate an Affiliate of that Lender as its
Facility Office for the purpose of participating in or making
Loans to Borrowers in particular countries.
(b) An Affiliate of a Lender may be designated for the purposes of
paragraph (a):
(i) by appearing under the name of the Lender in Parts II
(The Original Lenders) of Schedule 1 and executing
this Agreement; or
(ii) by being referred to in and executing a Transfer
Certificate by which the Lender becomes a Party.
(c) An Affiliate of a Lender referred to in this Clause 2.3 shall
not have any Commitment, but shall be entitled to all rights
and benefits under the Finance Documents relating to its
participation in Loans, and shall have the corresponding
duties of a Lender in relation thereto, and is a Party to this
Agreement and each other relevant Finance Document for those
purposes.
(d) A Lender which has an Affiliate appearing under its name in
Parts II (The Original Lenders) of Schedule 1 or, as the case
may be, in a Transfer Certificate, will procure, subject to
the terms of this Agreement, that the Affiliate participates
in Loans to the relevant Borrower(s) in place of that Lender.
However, if as a result of the Affiliate's participation, an
Obligor would be obliged to make a payment to the Affiliate
under Clause 14 (Tax Gross-up and indemnities) or Clause 15
(Increased costs), then the Affiliate is only entitled to
receive payment under those clauses to the same extent as the
Lender (designating such Affiliate) would have been if the
Lender had not designated such Affiliate for purposes of
paragraph (a) above.
3. PURPOSE
3.1 Purpose
(a) Each Borrower shall apply the proceeds of each Facility C1
Loan in or towards refinancing Financial Indebtedness of
members of the Target Group which is outstanding as of the
first Utilisation after the Unconditional Date and for payment
of any break funding costs, redemption premia and other costs,
fees and expenses (and taxes thereon) payable in connection
with such refinancing.
(b) The proceeds of each Facility C2 Loan and each Facility C3
Loan will be applied on or after the Unconditional Date, in or
towards:
(i) financing the acquisition by Bidco of the Target
Shares to be acquired by Bidco pursuant to the Offer;
(ii) financing the consideration payable by Bidco with
respect to the Target Shares pursuant to the
procedures contained in sections 428-430F of the
Companies Act 1985;
(iii) financing payments to holders of options in respect of
shares in the Target who exercise or surrender their
options in connection with the Offer;
(iv) financing or refinancing the Offer Costs, other than
fees paid to the financial advisers to Bidco in
relation to the Offer;
(v) refinancing Financial Indebtedness of members of the
Target Group and for the payment of any break funding
costs, redemption premia and other costs, fees and
expenses (and taxes thereon) payable in connection
with such refinancing; and
(vi) if the Cemex Holdco B Facilities have been fully
utilised, financing the payment of amounts due under
Loan Notes.
(c) if the Cemex Holdco B Facilities have been fully utilised, the
proceeds of each Facility C2 Loan and each Facility C3 Loan
may be applied to finance payment for Ordinary Shares by way
of market purchases made prior to the Unconditional Date.
(d) Utilisations after the Unconditional Date may only be made if
the Cemex Parent A Facilities and the Cemex Holdco B
Facilities have been fully utilised or will be fully utilised
simultaneously with such Utilisations hereunder.
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 Company may not deliver a 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) save that the
Company may deliver a Utilisation Request for Loans to fund market
purchases of Ordinary Shares prior to the Unconditional Date
notwithstanding that the conditions precedent specified in paragraphs
5(b) and (c) of Part 1 of Schedule 2 (Conditions Precedent) have not
been met. The Agent shall notify the Company and the Lenders promptly
upon being so satisfied.
4.2 Further Conditions Precedent
Subject to the provisions of Clause 4.3 (Certain Funds), 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;
(b) the Repeating Representations which are or which are deemed to
be made or repeated by each Obligor on such date pursuant to
Clause 20.21 (Times on which representations are made) are
true in all material respects;
4.3 Certain Funds
Notwithstanding any term of the Finance Documents (other than Clause
3.1 (Purpose)), each Finance Party agrees that during the Certain
Funds Period, the Finance Parties shall not:
(a) be entitled to refuse to participate in or make available any
Acquisition Utilisation (other than any to be made prior to
the Unconditional Date), whether by cancellation, rescission
or termination or similar right or remedy (whether under the
Finance Documents or under any applicable law) which it may
have in relation to an Acquisition Utilisation or otherwise
(including by invoking any conditions set out in Clause 4.1
(Initial Conditions Precedent) and Clause 4.2 (Further
Conditions Precedent)) provided that this Clause 4.3 shall not
apply to any Refinancing Loans; or
(b) make or enforce any claims they may have under the Finance
Documents if the effect of such claim or enforcement would
prevent or limit the making of any Acquisition Utilisation
during the Certain Funds Period; or
(c) otherwise exercise any right of set-off or counterclaim or
similar right or remedy if to do so would prevent or limit the
making of any Acquisition Utilisation; or
(d) cancel, accelerate or cause repayment or prepayment of any
Facility.
in each case unless (a) a Major Default has occurred and is continuing
or would result from the making of an Acquisition Utilisation, (b) a
Major Representation is incorrect or misleading when made or deemed to
be made or (c) a Lender is entitled to do so by virtue of the
provisions of Clause 9.1 (Illegality of a Lender) provided that
immediately upon the expiry of the Certain Funds Period all such
rights, remedies and entitlements shall be available to the Lenders
(subject to Clause 24.17 (Clean Up Period)) notwithstanding that they
may not have been used or been available for use during the Certain
Funds Period.
4.4 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 or euros 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 30.9
(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 Company
for a currency to be approved under paragraph (a)(ii) above,
the Agent will confirm to the Company 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.
4.5 Maximum number of Loans
(a) The Company may not deliver a Utilisation Request if as a
result of the proposed Utilisation:
(i) 10 or more Facility C1 Loans would be outstanding; or
(ii) 5 or more Facility C2 Loans would be outstanding; or
(iii) 5 or more Facility C3 Loans would be outstanding.
(b) The Company may not request that a Term Loan be divided if, as
a result of the proposed division, 10 or more Term Loans would
be outstanding.
(c) Any Loan made by a single Lender under Clause 6.2
(Unavailability of a currency) shall not be taken into account
in this Clause 4.5.
4.6 Utilisation after the Unconditional Date
The Facilities may only be utilised after the Unconditional Date if
the Agent has received confirmation from the agents under the Cemex
Parent A Facilities and the Cemex Holdco B Facilities that those
facilities are fully utilised or that it has received irrevocable
requests under those facilities such that they will be fully utilised
simultaneously with the first Utilisation under this Agreement after
the Unconditional Date.
SECTION 3
UTILISATION
5. UTILISATION
5.1 Delivery of a Utilisation Request
The Company 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 11
(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$50,000,000 or, if less, the relevant
Available Facility; or
(ii) if the currency selected is sterling or euros, a
minimum of (pound)30,000,000 or, as the case may be,
EUR50,000,000 or, if less, the relevant Available
Facility; or
(iii) if the currency selected is an Optional Currency other
than sterling or euros, the minimum amount specified
by the Agent pursuant to paragraph (c) (ii) of Clause
4.4 (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 Company 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 Company 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 Term Loans
The Borrowers shall:
(a) repay all Facility C2 Loans on the Termination Date relating
thereto; and
(b) repay all Facility C3 Loans in equal semi-annual instalments
starting on the Facility C3 First Repayment Date and ending on
the Termination Date relating to Facility C3.
7.2 Repayment of Facility C1 Loans
The Borrowers shall repay each Facility C1 Loan on the last day of its
Interest Period. If such Loan is to be refinanced with a Rollover
Loan, the amount of each Loan required to be repaid shall be set off
against the amount of the applicable Rollover Loan, provided that all
Facility C1 Loans shall be repaid on, or prior to the Termination Date
relating thereto.
8. CONVERSION OF FACILITY C1
8.1 Request for Conversion
(a) The Company shall be entitled to request that:
(i) all or part (being an amount or an integral multiple
of US$50,000,000 of the Base Currency Amount) of each
Facility C1 Loan (pro rata amongst the Lenders)
forming part of a Utilisation and outstanding on the
Termination Date relating to Facility C1 be converted
on such Termination Date into Term Loans maturing on
the Final C1 Termination Date; and
(ii) all or part of the Facility C1 Commitments which have
not been drawn down prior to the Termination Date be
drawn down by way of Term Loan by the Company on or
before the Termination Date,
by delivering to the Agent a request (a "Conversion Request"),
not less than 10 days nor more than 30 days prior to the
Termination Date.
(b) The Conversion Request shall be unconditional and irrevocable
and, in the case of a Conversion Request for the making of
Term Loans under paragraph (a)(ii) of this Clause 8.1, shall
be accompanied by a Utilisation Request.
(c) Any outstandings not requested to be converted shall be repaid
in full on the Termination Date.
(d) All undrawn Facility C1 Commitments not the subject of a
Conversion Request shall be cancelled on the Termination Date.
(e) The Agent shall forward a copy of the Conversion Request to
each Lender as soon as practicable after receipt.
8.2 Conversion of Existing Facility C1 Loans
If:
(a) the Company has delivered a conversion Request under Clause
8.1 (Request for Conversion); and
(b) the conditions in Clause 4.2 (Further Conditions Precedent)
would have been met if the Facility C1 Loan to be converted
had been a new Term Loan,
then all or a part of each Facility C1 Loan which is outstanding on
the relevant Termination Date (equal to the amount specified in the
Conversion Request as being converted) shall automatically be
converted into a Term Loan in the currency in which the relevant
outstanding Facility C1 Loan is denominated at the time of the
Conversion Request and shall not be repayable on the original
Termination Date pursuant to Clause 7.2 (Repayment of Facility C1
Loans) but shall instead be repayable on the Final C1 Termination
Date.
8.3 Conversion of Undrawn Commitment
If:
(a) the Company has delivered a Conversion Request and Utilisation
Request for the making of Term Loans under paragraph (a)(ii)
and (b) of Clause 8.1 (Request for conversion); and
(b) the conditions in Clause 4.2 (Further Conditions Precedent)
would have been met if such Loan had been a new Term Loan,
then a Term Loan shall be made to the Company and shall not be
repayable on the original Termination Date under Clause 7.2 (Repayment
of Facility C1 Loans) but shall instead be repayable on the Final C1
Termination Date.
8.4 Interest
The first Interest Period for each Term Loan made pursuant to Clauses
8.2 (Conversion of Existing Facility C1 Loans) and Clause 8.3
(Conversion of Undrawn Commitment) shall commence on the original
Termination Date, and shall be of a duration determined in accordance
with Clause 10 (Interest Periods).
9. PREPAYMENT AND CANCELLATION
9.1 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 Company to repay that Lender's participation on the date
such repayment is required to be made;
(b) upon the Agent notifying the Company, the Commitment of that
Lender will be immediately cancelled; and
(c) the Company shall, on the last day of the Interest Period for
each Loan occurring after the Agent has notified the Company
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.
9.2 Voluntary cancellation
Provided that the Company shall not cancel the Facility to the extent
it would, as a result of such cancellation, not have certain funds (as
required under Rule 24.7 of the Code) for the purpose of the Offer,
the Company may if it gives the Agent not less than five Business
Days' (or such shorter period as the Majority Lenders in respect of
the Facility to which such cancellation relates may agree) prior
notice, cancel the whole or any part (being a minimum amount of
US$50,000,000) of any Facility. Any cancellation under this Clause 9.2
shall reduce rateably the Commitments of the Lenders under that
Facility.
9.3 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.
9.4 Voluntary prepayment of Loans
A Borrower may, if the Company gives the Agent not less than five
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$50,000,000).
9.5 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
14.2 (Tax gross-up); or
(ii) any Lender claims indemnification from an Obligor
under Clause 14.3 (Tax indemnity) or Clause 15.1
(Increased costs),
the Company 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
Company has given notice under paragraph (a) above (or, if
earlier, the date specified by the Company in that notice),
each Borrower shall repay that Lender's participation in the
Loans to which such Interest Period relates.
9.6 Capital Markets Proceeds
(a) For the purposes of this Clause 9.6:
"Capital Markets Proceeds" means:
(i) the net cash proceeds received by any member of the
Group from any capital markets financing (including
convertible debt instruments but excluding bank loans)
with a maturity of more than one year (after deducting
any fees and expenses incurred by any member of the
Group in relation to such financings) other than any
financing to the extent used to redeem the Loan Notes;
and
(ii) 50% of net cash proceeds of any equity issuance in the
capital markets by any member of the Group (after
deducting any fees and expenses incurred by any member
of the Group in relation to such financings) other
than any equity issuance contemplated in the Funds
Flow Statement and capital contributions made by Cemex
Parent or any of its subsidiaries in a company which
is a subsidiary of the contributor.
(b) If:
(i) in respect of the Company, the Net Borrowings to
Adjusted EBITDA ratio was greater than 2.25:1 when
last tested under Clause 22.2 (Financial Condition);
or
(ii) in respect of Cemex Holdco, the Consolidated Leverage
Ratio (as defined in the Cemex Facility B Agreement)
is at any time greater than 2.5:1,
the Company shall procure that on receipt by any member of the
Group of Capital Market Proceeds such Capital Market Proceeds
are applied as soon as practicable (with a view to avoiding
any prepayment, repayment or broken funding costs and
expenses) in the repayment of Financial Indebtedness owed by
Cemex Holdco or any of its Subsidiaries (including under this
Agreement and the Cemex Facility B Agreement).
(c) The Financial Indebtedness to be repaid pursuant to paragraph
(b) above shall be Utilisations (or utilisations under the
Cemex Facility B Agreement) unless the originally scheduled
repayment date of any other Financial Indebtedness is to occur
prior to the scheduled repayment date for the next repayable
Utilisation (or utilisation under the Cemex Facility B
Agreement), in which event, the Company may elect to repay
such earlier repayable Financial Indebtedness first.
9.7 Application of mandatory prepayments
A prepayment of Utilisations (or utilisations under the Cemex Facility
B Agreement) made under Clause 9.6 (Capital Markets Proceeds) shall be
applied as the Company elects.
9.8 Restrictions
(a) Any notice of cancellation or prepayment given by any Party
under this Clause 9 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) A Borrower may not reborrow any part of a Term Loan which is
prepaid.
(d) Unless a contrary indication appears in this Agreement, any
part of Facility C1 which is prepaid may be reborrowed in
accordance with the terms of this Agreement.
(e) No Borrower shall 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 9 it shall
promptly forward a copy of that notice to either the relevant
Borrower or the affected Lenders, as appropriate.
SECTION 5
COSTS OF UTILISATION
10. INTEREST
10.1 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.
10.2 Payment of interest
On the last day of each Interest Period relating to a Loan each
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).
10.3 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 10.3 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.
10.4 Notification of rates of interest
The Agent shall promptly notify the Lenders and the relevant Borrower
of the determination of a rate of interest under this Agreement.
11. INTEREST PERIODS
11.1 Selection of Interest Periods
(a) The Company may select an Interest Period for a Loan in the
Utilisation Request for that Loan or (if the Loan is a Term
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 Company not later than the Specified Time.
(c) If the Company fails to deliver a Selection Notice to the
Agent in accordance with paragraph (b) above, the relevant
Interest Period will be three Months.
(d) Subject to this Clause 11, the Company may select an Interest
Period of one, two, three or six Months, or any other period
agreed between the Company 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 (or, in the case
of any Facility C1 Loan which is converted to a Term Loan
under Clause 8 (Conversion of Facility C1), the Final C1
Termination Date).
(f) Each Interest Period for a Term 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) Prior to any conversion under Clause 8 (Conversion of Facility
C1) a Facility C1 Loan has one Interest Period only.
11.2 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).
11.3 Consolidation and division of Term Loans
(a) Subject to paragraph (b) below, if two or more Interest
Periods relate to Term Loans:
(i) in the same currency;
(ii) of the same period; and
(iii) ending on the same date,
those Term Loans will, unless the Company specifies to the
contrary in the Selection Notice for the next Interest Period,
be consolidated into, and be treated as, a single Term Loan on
the last day of the Interest Period.
(b) Subject to Clause 4.5 (Maximum number of Loans), and Clause
5.3 (Currency and amount) if the Company requests in a
Selection Notice that a Term Loan be divided into two or more
Term Loans, that Term 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 Term
Loan immediately before its division.
12. CHANGES TO THE CALCULATION OF INTEREST
12.1 Absence of quotations
Subject to Clause 12.2 (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.
12.2 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 London 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.
12.3 Alternative basis of interest or funding
(a) If a Market Disruption Event occurs and the Agent or the
Company so requires, the Agent and the Company 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 Company, be binding on all
Parties.
12.4 Break Costs
(a) Each 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 that
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.
13. FEES
13.1 Commitment fee
(a) The Company shall pay to the Agent (for the account of each
Lender) a commitment fee in the Base Currency computed at the
rate of:
(i) 30 per cent. of the applicable Margin from time to
time per annum on that Lender's Available Commitment
under Facility C1 for the period commencing on the
date of this Agreement and ending on the last day of
the Availability Period applicable to Facility C1;
(ii) 30 per cent. for the period of 90 days from the date
of this Agreement and 35 per cent. thereafter, in each
case, of the applicable Margin from time to time per
annum on that Lender's Available Commitment under
Facility C2 for the period commencing on the date of
this Agreement and ending on the last day of the
Availability Period applicable to Facility C2; and
(iii) 30 per cent. for the period of 90 days from the date
of this Agreement and 35 per cent. thereafter, in each
case, of the applicable Margin from time to time per
annum on that Lender's Available Commitment under
Facility C3 for the period commencing on the date of
this Agreement and ending on the last day of the
Availability Period applicable to Facility C3.
(b) The accrued commitment fees set out above 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.
13.2 Arrangement fee
The Company shall pay to the Arranger an arrangement fee in the amount
and at the times agreed in the Syndication and Fees Letter.
13.3 Agency fee
The Company 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.
13.4 Term-out fee
The Company shall pay the Agent (for the account of each Lender
participating in Facility C1) a term-out fee of 0.1 per cent. flat
calculated on the Facility C1 Commitments termed-out pursuant to
Clause 8 (Conversion of Facility C1). The term-out fee is payable on
the exercise by the Company of the term-out option pursuant to Clause
8 (Conversion of Facility C1).
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
14. TAX GROSS UP AND INDEMNITIES
14.1 Definitions
(a) In this Clause 14:
"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.
"Qualifying Lender" means:
(i) any legal person or entity (including, for the
avoidance of doubt, any securitisation trust or fund)
habitually resident for taxation purposes in a
Qualifying State which is not acting through a
territory considered as a tax haven pursuant to
Spanish laws and regulations (currently set out in
Royal Decree 1080/1991 of 5 July (Real Decreto
1080/1991 de 5 de julio)) or through a permanent
establishment in Spain; or
(ii) any legal person or entity (including, for the
avoidance of doubt, any securitisation trust or fund)
resident in a country which, as a result of any
applicable double taxation treaty, would not require
any payments made by a Borrower to such financial
institution hereunder to be subject to any deduction
or withholding in Spain; or
(iii) any Domestic Lender.
"Qualifying State" means a member state of the European Union
(other than Spain).
"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 14.2 (Tax gross-up)
or a payment under Clause 14.3 (Tax indemnity).
(b) Unless a contrary indication appears, in this Clause 14 a
reference to "determines" or "determined" means a
determination made in the absolute good faith discretion of
the person making the determination.
14.2 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 Company 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 Company 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.
14.3 Tax indemnity
(a) The Company 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 14.3 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 14.2
(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 14.3 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
Company.
(d) A Protected Party shall, on receiving a payment from an
Obligor under this Clause 14.3, notify the Agent.
14.4 Tax Certificates
(a) Without prejudice to the other provisions of this Clause 14,
in relation to any exemption from or application of a rate
lower than that of general application pursuant to any
legislation in Spain or any double taxation treaty, or
pursuant to any other cause relating to residence status, any
Lender which is not a Domestic Lender shall supply the
Company, through the Agent, prior to the interest payment date
with a certificate of residence issued by the pertinent fiscal
administration, in the case of a Qualifying Lender which is
not a Domestic Lender, accrediting such Qualifying Lender as
resident for tax purposes in a Qualifying State or, as the
case may be, accrediting such Lender as resident for tax
purposes in a State which has signed and ratified a double
taxation treaty with Spain.
(b) As such certificates referred to in paragraph (a) of this
Clause 14.4 are, at the date hereof, only valid for a period
of one year, each such Lender will be required to so supply a
further such certificate upon expiry of the previous
certificate in relation to any further payment of interest.
14.5 Stamp Taxes
The Company 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 entering into of a
Transfer Certificate.
14.6 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.
15. INCREASED COSTS
15.1 Increased costs
(a) Subject to Clause 15.2 (Increased Cost Claims) and Clause 15.3
(Exceptions) the Company 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.
15.2 Increased cost claims
(a) A Finance Party intending to make a claim pursuant to Clause
15.1 (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 Company and provide the Company 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.
15.3 Exceptions
(a) Clause 15.1 (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 14.3 (Tax indemnity) (or
would have been compensated for under Clause 14.3 (Tax
indemnity) but was not so compensated solely because
any of the exclusions in paragraph (b) of Clause 14.3
(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 15.3, a reference to a "Tax Deduction" has the
same meaning given to the term in Clause 14.1 (Definitions).
16. OTHER INDEMNITIES
16.1 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.
16.2 Other indemnities
(a) 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:
(i) the occurrence of any Event of Default;
(ii) 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 29 (Sharing among the Finance
Parties);
(iii) funding, or making arrangements to fund, its
participation in a Loan requested by the Company 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
(iv) a Loan (or part of a Loan) not being prepaid in
accordance with a notice of prepayment given by the
Company.
(b) The Company shall procure that an Obligor will indemnify and
hold harmless each Finance Party and each of their respective
directors, officers, employees, agents, advisors and
representatives (each being an "Indemnified Person") from and
against any and all claims, damages, losses, liabilities,
costs, legal expenses and other expenses (all together
"Losses") which have been incurred by or awarded against any
Indemnified Person, in each case arising out of or in
connection with any claim, investigation, litigation or
proceeding (or the preparation of any defence with respect
thereto) commenced or threatened by any person in relation to
any of the Finance Documents (or the transactions contemplated
therein, including without limitation, the Offer (whether or
not made), the use of the proceeds of the Facilities or any
acquisition by the Company or Bidco or any person acting in
concert with the Company or Bidco of any of the Target Shares)
except to the extent such Losses or claims result from such
Indemnified Person's negligence or misconduct or a breach of
any Finance Document by an Indemnified Person provided that:
(i) the Indemnified Party shall as soon as reasonably
practicable inform the Cemex Parent of any
circumstances of which it is aware and which would be
reasonably likely to give rise to any such
investigation, litigation or proceeding (whether or
not an investigation, litigation or proceeding has
occurred or been threatened);
(ii) the Indemnified Party will, where reasonable and
practicable, and taking into account the provisions of
this Agreement, give Cemex Parent an opportunity to
consult with it with respect to the conduct or
settlement of any such investigation, litigation or
proceeding;
(iii) an Indemnified Party will provide the Company on
request (and, to the extent practicable without any
waiver of legal professional privilege or breach of
confidentiality obligation) with copies of material
correspondence in relation to the Losses and allow the
Company to attend all material meetings in relation to
the Losses, receive copies of material legal advice
obtained by the Indemnified Party in relation to the
Losses;
(iv) the Company will keep strictly confidential all
information received by it in connection with the
Losses and will not disclose any information to any
third party without the prior written consent of the
Indemnified Party;
(v) no Obligor shall be liable for any settlement of the
Losses unless the Company has consented to that
settlement; and
(vi) no Indemnified Party shall be required to comply with
paragraphs (i) or (ii) or (iii) nor shall paragraph
(v) apply unless the Indemnified Party is and
continues to be indemnified on a current basis for its
costs and expenses.
Any third party referred to in this paragraph (b) may rely on
this Clause 16.2 subject to Clause 1.4 (Third Party Rights)
and the provisions of the Third Parties Act.
16.3 Indemnity to the Agent
The Company 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
Company) 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.
17. MITIGATION BY THE LENDERS
17.1 Mitigation
(a) Each Finance Party shall, in consultation with the Company,
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 9.1 (Illegality of a
Lender), Clause 14 (Tax Gross-up and Indemnities) or Clause 15
(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.
17.2 Limitation of liability
(a) The Company 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 17.1 (Mitigation).
(b) A Finance Party is not obliged to take any steps under Clause
17.1 (Mitigation) if, in the opinion of that Finance Party
(acting reasonably), to do so might be prejudicial to it.
18. COSTS AND EXPENSES
18.1 Transaction expenses
The Company shall pay the Agent and the Arranger the amount of all
transaction costs and expenses as set out in the Costs and Expenses
Letter.
18.2 Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an
amendment is required pursuant to Clause 30.9 (Change of currency),
the Company 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.
18.3 Enforcement costs
The Company 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
19. GUARANTEE AND INDEMNITY
19.1 Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a) guarantees to each Finance Party punctual performance by each
Borrower of that Borrower's obligations under the Finance
Documents;
(b) undertakes with each Finance Party that whenever a 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.
19.2 Continuing Guarantee
This guarantee is a continuing guarantee and will extend to the
ultimate balance of sums payable by each Borrower under the Finance
Documents, regardless of any intermediate payment or discharge in
whole or in part.
19.3 Reinstatement
If any payment by any Borrower or any discharge given by a Finance
Party (whether in respect of the obligations of any 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 each 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 each Borrower, as if
the payment, discharge, avoidance or reduction had not
occurred.
19.4 Waiver of defences
The obligations of each Guarantor under this Clause 19 will not be
affected by an act, omission, matter or thing which, but for this
Clause 19, would reduce, release or prejudice any of its obligations
under this Clause 19 (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,
any Borrower or other person;
(b) the release of any 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, any
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 a 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.
19.5 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 19. 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.
19.6 Appropriations
Until all amounts which may be or become payable by a 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 19.
Provided that the operation of this Clause 19.6 shall not be deemed to
create any Security.
19.7 Deferral of Guarantors' rights
Until all amounts which may be or become payable by a Borrower under
or in connection with the Finance Documents have been irrevocably paid
in full and unless the Agent 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 a Borrower;
(b) to claim any contribution from any other guarantor of any
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.
19.8 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
REPRESENTATION, UNDERTAKINGS AND EVENTS OF DEFAULT
20. REPRESENTATIONS
Each Obligor makes the representations and warranties set out in this
Clause 20 to each Finance Party.
20.1 Status
(a) It is a corporation, duly organised and validly existing under
the laws and regulations of its jurisdiction of incorporation.
(b) It has the power to own its assets and carry on its business
as it is being conducted.
20.2 Binding obligations
The obligations expressed to be assumed by it in each Finance Document
are, subject to any reservations which are specifically referred to in
any Legal Opinion, legal, valid, binding and enforceable obligations.
20.3 Non-conflict with other obligations
The entry into and performance by it of, and the transactions
contemplated by, the Finance Documents do not and will not conflict
with:
(a) any law or regulation applicable to it;
(b) its constitutional documents; or
(c) any agreement or instrument binding upon it or any of its
assets.
20.4 Power and authority
It has the power to enter into, perform and deliver, and has taken all
necessary action to authorise its entry into, performance and delivery
of, the Finance Documents to which it is a party and the transactions
contemplated by those Finance Documents.
20.5 Validity and admissibility in evidence
All Authorisations required or desirable:
(a) to enable it lawfully to enter into, exercise its rights and
comply with its obligations in the Finance Documents to which
it is a party; and
(b) to make the Finance Documents to which it is a party
admissible in evidence in its jurisdiction of incorporation,
have been obtained or effected and are in full force and effect.
20.6 Governing law and enforcement
(a) The choice of English law as the governing law of the Finance
Documents will be recognised and enforced in its jurisdiction
of incorporation subject to any reservations which are
specifically referred to in any legal opinion.
(b) Any judgment obtained in England in relation to a Finance
Document will be recognised and enforced in its jurisdiction
of incorporation, subject to any reservations which are
specifically referred to in any Legal Opinion.
20.7 Deduction of Tax
It is not required under the laws and regulations of its jurisdiction
of incorporation to make any deduction for or on account of Tax from
any payment it may make under any Finance Document to any Qualifying
Lender.
20.8 No filing or stamp taxes
Under the laws and regulations of its jurisdiction of incorporation it
is not necessary that the Finance Documents be filed, recorded or
enrolled with any court or other authority in that jurisdiction or
that any stamp, registration or similar tax be paid on or in relation
to the Finance Documents or the transactions contemplated by the
Finance Documents.
20.9 No default
(a) No Default or Event of Default is continuing or might
reasonably be expected to result from the making of any
Utilisation.
(b) No other event or circumstance is outstanding which
constitutes a default under any other agreement or instrument
which is binding on it or any of its Subsidiaries or to which
its (or its Subsidiaries') assets are subject which might have
a Material Adverse Effect.
20.10 No misleading information
(a) Any factual information provided by the Company for the
purposes of the Information Memorandum was true and accurate
in all material respects as at the date it was provided or as
at the date (if any) at which it is stated.
(b) The financial projections contained in the Information
Memorandum have been prepared in good faith on the basis of
recent historical information (which prior to the
Unconditional Date, in the case of Target, will consist of
publicly available information) and on the basis of the
assumptions stated therein, which assumptions were fair in the
light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the
Company's best estimate of its future performance.
(c) So far as the Company is aware, after reasonable enquiry,
nothing has occurred or been omitted from the Information
Memorandum and no information has been given or withheld that
results in the information contained in the Information
Memorandum being untrue or misleading in any material respect.
(d) All material written information (other than the Information
Memorandum) 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.
20.11 Financial statements
(a) Its Original Financial Statements were prepared in accordance
with GAAP consistently applied and are complete and accurate
in all material respects.
(b) Its Original Financial Statements fairly represent its
financial condition and operations during the relevant
financial year.
(c) For the purposes of any repetition of the representation
contained in paragraphs (a) and (b) of this Clause 20.11
(pursuant to Clause 20.21 (Times on which representations are
made)) the representations will be made in respect of the
latest consolidated financial statements of each Obligor
instead of the Original Financial Statements.
20.12 Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari
passu with the claims of all its other unsecured and unsubordinated
creditors, except for obligations mandatorily preferred by law or
regulation applying to companies generally.
20.13 No proceedings pending or threatened
No litigation, arbitration or administrative proceedings of or before
any court, arbitral body or agency which are likely to be adversely
determined and which, if so determined, would be reasonably likely to
have a Material Adverse Effect or purports to affect the legality,
validity or enforceability of any of the obligations under the Finance
Documents have been started or threatened against any Obligor or any
Material Subsidiary.
20.14 Offer Documents Information
Except as expressly permitted pursuant to Clause 23.16 (The Offer),
the Offer Documents contain all the material terms of the Offer and
the Offer Document reflects the terms of the Press Release in all
material respects.
20.15 No winding-up
No legal proceedings or other procedures or steps have been taken or,
to the Company's knowledge after reasonable enquiry, are being
threatened, in relation to the winding-up, dissolution, administration
or reorganisation of any Obligor or Material Subsidiary (other than a
solvent liquidation or reorganisation of any Material Subsidiary which
is not an Obligor).
20.16 Material Adverse Change
There has been no material adverse change in the Company's business,
condition (financial or otherwise), operations, performance or assets
taken as a whole (or the business, consolidated condition (financial
or otherwise) operations, performance or the assets generally of the
Group taken as a whole) since its Original Financial Statements.
20.17 Environmental compliance
Each member of the Group has performed and observed in all material
respects all Environmental Law, Environmental Permits and all other
material covenants, conditions, restrictions or agreements directly or
indirectly concerned with any contamination, pollution or waste or the
release or discharge of any toxic or hazardous substance in connection
with any real property which is or was at any time owned, leased or
occupied by any member of the Group or on which any member of the
Group has conducted any activity where failure to do so might
reasonably be expected to have a Material Adverse Effect.
20.18 Environmental Claims
No Environmental Claim has been commenced or (to the best of its
knowledge and belief) is threatened against any member of the Group
where that claim would be reasonably likely, if determined against
that member of the Group to have a Material Adverse Effect.
20.19 No Immunity
In any proceedings taken in its jurisdiction of incorporation in
relation to this Agreement, it will not be entitled to claim for
itself or any of its assets immunity from suit, execution, attachment
or other legal process.
20.20 Private and commercial acts
Its execution of the Finance Documents constitutes, and its exercise
of its rights and performance of its obligations hereunder will
constitute, private and commercial acts done and performed for private
and commercial purposes.
20.21 Times on which representations are made
(a) All the representations and warranties in this Clause 20 are
made to each Finance Party on the date of this Agreement
except for the representations and warranties set out in
Clause 20.10 (No misleading information) which are deemed to
be made by each Obligor on the date that the Information
Memorandum is approved by Bidco and on the date the Facilities
are primarily syndicated (and for this purpose, the
Information Memorandum referred to therein shall be the
Information Memorandum as updated in accordance with the
principles agreed between the Arranger and Bidco).
(b) The Repeating Representations are deemed to be made by each
Obligor to each Finance Party on the Unconditional Date, the
date of each Utilisation Request and on the first day of each
Interest Period provided that in respect of any Acquisition
Utilisation made during the Certain Funds Period, only the
Major Representations will be deemed to be repeated by the
relevant Obligor on the date such Acquisition Utilisation is
made and on first day of each Interest Period relating thereto
and provided further that the representations given in Clause
20.14 (Offer Documents Information) shall not be repeated
after the end of the Certain Funds Period.
(c) The Repeating Representations and each of the representations
and warranties set out in Clause 20.5 (Validity and
admissibility in evidence), 24.6 (Insolvency), Clause 20.9 (No
default), and Clause (b) of Clause 20.10 (No misleading
information) (in respect only of information given by it) are
deemed to be made by each Additional Guarantor to each Finance
Party on the day on which it becomes an Additional Guarantor
and are repeated on the Unconditional Date for the Target
Group.
(d) Each representation or warranty deemed to be made after the
date of this Agreement shall be made by reference to the facts
and circumstances existing at the date the representation or
warranty is made.
21. INFORMATION UNDERTAKINGS
The undertakings in this Clause 21 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.
21.1 Financial statements
The Company shall supply to the Agent:
(a) as soon as the same become available, but in any event within
180 days after the end of each of such Obligor's respective
financial years:
(i) the Company's audited consolidated and unconsolidated
financial statements for that financial year; and
(ii) each Guarantor's respective audited consolidated (to
the extent available) and unconsolidated financial
statements for that financial year; and
(b) as soon as the same become available, but in any event within
90 days after the end of each of the first three quarters of
each of its financial years its unaudited consolidated
financial statements for that period.
21.2 Compliance Certificate
(a) The Company shall supply to the Agent, with each set of
consolidated financial statements delivered pursuant to
paragraphs (a) (i) and (b) of Clause 21.1 (Financial
statements), a Compliance Certificate setting out (in
reasonable detail) computations as to compliance with Clause
22 (Financial 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 the Company and, if required to be delivered with
the consolidated financial statements delivered pursuant to
paragraph (a) (i) of Clause 21.1 (Financial statements), by
the Company's auditors.
21.3 Requirements as to financial statements
(a) Each set of financial statements delivered by the Company
pursuant to Clause 21.1 (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 Company shall procure that each set of financial
statements delivered pursuant to Clause 21.1 (Financial
statements) is prepared using 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 GAAP, or the accounting practices or reference periods and,
unless amendments are agreed in accordance with paragraph (c)
of this Clause 21.3, 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 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 22 (Financial
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.
(c) If the Company adopts International Accounting Standards or,
subject to paragraph (b) above, there are changes to GAAP, or
the accounting practices or reference periods the Company and
the Agent shall, at the Company's request, negotiate in good
faith with a view to agreeing such amendments to the financial
covenants in Clause 22 (Financial 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 Company not adopted
International Accounting Standards or there had not been a
change in 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 Company subject to the consent of the
Majority Lenders. If no such agreement is reached within 90
days of the Company's request, the Company will remain subject
to the obligation to deliver the information specified in
paragraph (b) of this Clause 21.3.
21.4 Information: miscellaneous
The Company shall supply to the Agent:
(a) all documents dispatched by the Company to its shareholders
(or any class of them) or its creditors generally at the same
time as they are dispatched;
(b) promptly upon becoming aware of them, the details of any
litigation, arbitration or administrative proceedings which
are current, or which, to the Company's knowledge after
reasonable enquiry, are being threatened or are pending and
are likely to be adversely determined against any member of
the Group which, in the reasonable opinion of the Company, are
not spurious or vexatious, and which might, if adversely
determined, have a Material Adverse Effect;
(c) promptly, such further information regarding the financial
condition, assets and business of any Obligor or member of the
Group as the Agent (or any Lender through the Agent) may
reasonably request (including, but not limited to, information
on Ratings, if such credit rating has not been publicly
announced) other than any information the disclosure of which
would result in a breach of any applicable law or regulation
or confidentiality agreement entered into in good faith
provided that the Company shall use reasonable efforts to be
released from any such confidentiality agreement; and
(d) promptly upon becoming aware of them, the details of any
Environmental Claim which is current, threatened or pending
against any member of the Group which is referred to in Clause
23.12 (Environmental claims) which are not spurious or
vexatious, which are likely to be adversely determined against
any member of the Group and which could reasonably be
expected, if adversely determined, to have a Material Adverse
Effect;
21.5 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 (unless that Obligor is aware
that a notification has already been provided by another
Obligor).
(b) Promptly upon a request by the Agent, the Company 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).
21.6 "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 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.
(b) The Company shall, by not less than five 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 26 (Changes to the Obligors).
(c) Following the giving of any notice pursuant to paragraph (b)
above, the Company 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.
21.7 Notarisations
Each Obligor shall notify the Agent of any Notarisations referred to
in paragraph (a)(iv) of Clause 23.5 (Notarisation) promptly upon such
Notarisations taking place.
22. FINANCIAL COVENANTS
22.1 Financial definitions
In this Clause 22:
"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, as determined in accordance
with GAAP for such Relevant Period, provided that the Company need
only make the adjustments contemplated by "(b)" above if the operating
income and depreciation and amortization expense of the acquired
business in the 12 Months prior to its acquisition amount to
US$10,000,000 or more.
"Cemex Capital Contributions" means contributions in cash to the
capital of the Company by CEMEX S.A. de C.V. or by any of its
Subsidiaries not being a Subsidiary of the Company made after 1
January 2004.
"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 amortisation of intangible
assets plus annual amortisation of start-up costs of the Group plus
dividends received from non-consolidated companies and from companies
consolidated by the equity method 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 GAAP.
"Finance Charges" means for any Relevant 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
GAAP.
"Guarantees" means any guarantee or indemnity of Financial
Indebtedness of another person (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.
"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.
"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 the Company and its Subsidiaries at such time: cash on
hand, marketable securities, investments in money market funds,
banker's acceptances, short-term deposits and other liquid
investments.
"Off-Balance-Sheet Transactions" means any present or future financing
transaction not reflected as indebtedness on the consolidated balance
sheet of the Company, but being structured in a way that may result in
payment obligations by any Group member, 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 any Group member
(e.g. via a put-option agreement or similar structures) under
which payments are incapable of being triggered until three
days after the Termination Date in relation to Facility C3; 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.
"Relevant Period" means each period of twelve Months ending on the
last day of each consecutive quarter of the Company's financial year
and each period of twelve Months ending on the last day of the
Company's financial year.
"Rolling Basis" means the calculation of a ratio or an amount made at
the end of a financial quarter in respect of that financial quarter
and the three immediately preceding financial quarters.
"Royalty Expenses" means expenses incurred by the Company or any of
its Subsidiaries to CEMEX S.A. de C.V. or any of its Subsidiaries not
being a Subsidiary of the Company as (a) consideration for the
granting to the Company or any Subsidiary of a licence 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 S.A. de C.V. or any of its Subsidiaries
not being a Subsidiary of the Company; 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 paragraphs (a) and (b) such
amounts shall have been taken into consideration in the calculation of
operating profit under Spanish GAAP.
"Subordinated Debt" means debt granted by CEMEX S.A. de C.V. (a
company registered in Mexico) or any of its Subsidiaries not being a
member of the Group to the Company 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, concurso de acreedores or
other like event of the Company) until the Agent has confirmed in
writing that all amounts outstanding hereunder have been paid in full.
"Total Borrowings" means without duplication, in respect of any person
all Guarantees granted by such person, plus all Off-Balance-Sheet
Transactions entered into by such person, plus all such person's
Financial Indebtedness, but excluding any Subordinated Debt.
22.2 Financial condition
The Company shall ensure that in respect of any Relevant Period:
(a) the ratio of Net Borrowings to Adjusted EBITDA calculated on a
Rolling Basis shall be less than or equal to 3.5:1; and
(b) the ratio of EBITDA to Finance Charges calculated on a Rolling
Basis shall be greater than or equal to 3:1.
22.3 Financial testing
The financial covenants set out in Clause 22.2 (Financial condition)
shall be tested quarterly by reference to each of the Company's
consolidated financial statements delivered pursuant to and/or each
Compliance Certificate delivered with respect to any such consolidated
financial statements pursuant to Clause 21.1 (Financial statements)
and Clause 21.2 (Compliance Certificate).
22.4 Accounting terms
All accounting expressions which are not otherwise defined herein
shall have the meaning ascribed thereto in GAAP.
23. GENERAL UNDERTAKINGS
The undertakings in this Clause 23 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.
23.1 Authorisations
Each Obligor shall promptly:
(a) obtain, comply with and do all that is necessary to maintain
in full force and effect; and
(b) supply certified copies to the Agent of,
any Authorisation required under any law or regulation of its
jurisdiction of incorporation to enable it to perform its obligations
under the Finance Documents and to ensure the legality, validity,
enforceability or admissibility in evidence in its jurisdiction of
incorporation of any Finance Document.
23.2 Preservation of corporate existence
Subject to Clause 23.8 (Merger), each Obligor shall (and the Company
shall ensure that each of its Material Subsidiaries will), preserve
and maintain its corporate existence and rights.
23.3 Preservation of properties
Each Obligor shall (and the Company shall ensure that each of its
Material Subsidiaries will) 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.
23.4 Compliance with laws and regulations
(a) Each Obligor shall (and shall procure that each of its
Subsidiaries will) comply in all respects with all laws and
regulations to which it may be subject, if failure to so
comply would be likely to have a Material Adverse Effect.
(b) The Company shall (and shall procure that each of its
Subsidiaries will) ensure that the levels of contribution to
pension schemes are and continue to be sufficient to comply
with all its and their material obligations under such schemes
and generally under applicable laws (including ERISA) and
regulations, except where failure to make such contributions
would not reasonably be expected to have a Material Adverse
Effect.
23.5 Notarisation
(a) Subject to paragraph (b) of this Clause 23.5, at any time when
notarised Spanish Public Documents have priority status on
insolvency of a Spanish company under Spanish law, the Company
shall not (and shall procure that none of its Subsidiaries
will) permit any of its unsecured indebtedness to be notarised
as a Spanish Public Document (any such notarisation, a
"Notarisation"), other than the following permitted
Notarisations ("Permitted Notarisations"):
(i) any Permitted Notarisations listed in Schedule 11
(Existing Notarisations) and any amendments or
modifications thereof, provided that any such
amendment or modification shall not result in the
increase of the principal amount of the relevant
indebtedness nor the extension of the maturity thereof
nor, for the avoidance of doubt, relate to any
refinancing of the relevant indebtedness;
(ii) Notarisations which are required by applicable law or
regulation or which arise by operation of law other
than pursuant to any issue of debt securities in
accordance with Article 285 of the Spanish
Corporations Law (Ley de Sociedades Anonimas);
(iii) Notarisations with the prior written consent of the
Majority Lenders;
(iv) any Notarisations securing indebtedness the principal
amount of which (when aggregated with the principal
amount of any other Notarisations other than any
Permitted Notarisations under paragraphs (i) or (iii)
above) do not exceed US$100,000,000 (or its equivalent
in another currency or currencies); and
(v) any Notarisations relating to indebtedness in respect
of any sale and purchase agreement customarily
registered in a public register in Spain and payment
of which indebtedness is made within seven days of the
date of such agreement.
(b) Paragraph (a) of this Clause 23.5 shall not apply if
the Company, concurrently with any such Notarisation
(not being a Permitted Notarisation) referred to in
paragraph (a) of this Clause 23.5 and at its own cost
and expense, causes this Agreement to be the subject
of a Notarisation.
23.6 Negative pledge
The Company shall not and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit to exist any
Security 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 Security ("Permitted Security"):
(a) Security 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 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 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 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) Security existing on the date of this Agreement as described
in Schedule 10 (Existing Security) provided that the principal
amount secured thereby is not increased;
(f) any Security on property acquired by the Company 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 Security was not incurred in anticipation of such
acquisition; and any Security 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 the Company or any of its
Subsidiaries after the date of this Agreement provided,
further, that (i) any such Security 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 by
which the acquired Subsidiary will be directly or indirectly
controlled) and, if required by the terms of the instrument
originally creating such Security, other property which is an
improvement to, or is acquired for specific use with, such
acquired property; (ii) if applicable, any such Security shall
be created within nine Months after, in the case of property,
its acquisition, or, in the case of improvements, their
Completion; and (iii) no such Security shall be made in
respect of any indebtedness in relation to repayment of which
recourse may be had to any member of the Group (in the form of
Security) other than in relation to the item or items as
referred to in (i) above;
(g) any Security renewing, extending or refinancing the
indebtedness to which any Security permitted by paragraph (f)
above relates; provided that the principal amount of
indebtedness secured by such Security immediately prior
thereto is not increased and such Security is not extended to
other property;
(h) any Security created on shares representing no more than a
Stake in the capital stock of any of the Company'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 the Company's or any Subsidiary's
interest in such trust, corporation or entity are applied as
provided under Clause 23.7 (Disposals) and provided further
that such Security may not secure Financial Indebtedness of
the Company or any Subsidiary unless otherwise permitted under
this Clause 23.6 and that the economic and voting rights in
such capital stock is maintained by the Company in its
Subsidiaries;
(i) any Security permitted by the Agent, acting on the
instructions of the Majority Lenders;
(j) any securitisation of receivables notwithstanding that it is
made at discount from the amount due on such receivables and
provided that it is made on a non recourse basis or that
recourse is directly or indirectly limited to collection of
the receivables plus related interest and financial and
collection costs and expenses;
(k) any Security created which is necessary in order to undertake
the steps contemplated in the Funds Flow Statement; and
(l) in addition to the Security permitted by the foregoing
paragraphs (a) to (k), Security securing indebtedness of the
Company and its Subsidiaries (taken as a whole) not in excess
of an amount equal to 5% of the Adjusted Consolidated Net
Tangible Assets of the Group, as determined in accordance with
GAAP,
unless, in each case, the Obligors have made or caused to be made
effective provision whereby the obligations hereunder are secured
equally and rateably with, or prior to, the indebtedness secured by
such Security (other than Permitted Security) for so long as such
indebtedness is so secured.
For the purposes of paragraph (l) of this Clause 23.6, "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 GAAP (other than with
respect to items referred to in (ii) below), minus (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, licences, concessions, patents, un-amortised debt discount
and expense and other intangibles, all as determined on a consolidated
basis in accordance with GAAP.
23.7 Disposals
(a) Subject to paragraph (b) of this Clause 23.7, the Company
shall not (and the Company shall ensure that none of its
Subsidiaries will), without the prior written consent of the
Majority Lenders, enter into a single transaction or a series
of transactions (whether related or not) and whether voluntary
or involuntary to sell, lease, transfer or otherwise dispose
of all its assets or a substantial part of its assets
representing more than 5 per cent. in aggregate of the total
consolidated assets of the Group, calculated by reference to
the latest consolidated financial statements of the Company,
delivered pursuant to paragraph (a) (i) of Clause 21.1
(Financial statements), unless (i) full value for such assets
is received by the Company or its Subsidiaries; (ii) an amount
equal to the net proceeds of any such sale, lease, transfer or
other disposal is reinvested within twelve Months of receipt
by the Company or its Subsidiaries in the business of the
Group; and (iii) neither such sale, lease, transfer or other
disposal nor such reinvestment directly results in a downgrade
from the then current Ratings of the Company.
(b) Paragraph (a) of this Clause 23.7 does not apply to any sale,
lease, transfer or other disposal of assets:
(i) made on arm's length terms and for fair market value
in the ordinary course of business of the disposing
entity;
(ii) in respect of any securitisation of receivables
notwithstanding that it is made at discount from the
amount due on such receivables and provided that it is
made on a non-recourse basis or that recourse is
directly or indirectly limited to collection of the
receivables plus related interest and financial and
collection costs and expenses;
(iii) from any member of the Group to another member of the
Group on arm's length terms and for fair market or
book value provided that the exception contained in
this paragraph (iii) shall not apply to any sale,
lease, transfer or other disposal of an asset:
(A) from any Obligor to another member of the
Group which is not an Obligor unless the
person to whom such sale, lease, transfer or
other disposal is made (the "Transferee")
becomes a Guarantor; or
(B) from any Material Subsidiary to another member
of the Group which is not a Material
Subsidiary unless the person making such sale,
lease, transfer or other disposal does not
cease to be a Material Subsidiary or, if it
ceases to be a Material Subsidiary, any
Transferee shall be deemed to be a Material
Subsidiary;
(iv) in respect of which the net proceeds are used to repay
any amounts outstanding hereunder in an amount equal
to such net proceeds and if the Available Commitments
in an amount equal thereto are cancelled;
(v) in respect of which the proceeds are applied pursuant
to any prepayment requirement included as at the date
hereof in existing loan agreements of any Subsidiary
in relation to the use of proceeds received from the
disposal of any assets; or
(vi) contemplated in the Funds Flow Statement.
23.8 Merger
(a) Subject to paragraphs (b) and (c) of this Clause 23.8, unless
it has obtained the prior written approval of the Majority
Lenders, no Obligor shall (and the Company shall ensure that
none of its Subsidiaries will) enter into any amalgamation,
demerger, merger or other corporate reconstruction (a
"Reconstruction"), other than (i) a Reconstruction relating
only to the Company's Subsidiaries inter se; (ii) a
Reconstruction between the Company and any of its
Subsidiaries; (iii) a solvent reorganisation or liquidation of
any of the Subsidiaries not being Obligors, provided that in
any case no Default shall have occurred and be continuing at
the time of such transaction or would result therefrom and
provided further that (a) none of the Security (if any)
granted to the Lenders nor the guarantees granted by the
Guarantors hereunder is or are adversely affected as a result,
and (b) the resulting entity, if it is not an Obligor, assumes
the obligations of the Obligor the subject of the merger; or
(iv) as contemplated in the Funds Flow Statement.
(b) Subject to paragraph (c) of this Clause 23.8, the Obligors may
merge with any other person if the book value of such person's
assets prior to the merger does not exceed 3 per cent. of the
book value of the Group's assets taken as a whole considered
on a consolidated basis.
(c) In paragraphs (a) and (b) of this Clause 23.8, the then
existing Ratings of the Company shall not be downgraded
whether at the time of, or within 3 Months of, the date of
announcement of a Reconstruction, directly as a result of any
merger involving the Company, and the resulting entity, if it
is not an Obligor, shall assume the obligations of the Obligor
the subject of the merger.
23.9 Change of business
(a) None of the Obligors shall make a substantial change to the
general nature of its business from that carried on at the
date of this Agreement and there shall be no cessation of
business in relation to any of the Obligors (save (except in
the case of the Company which shall in no event cease or
substantially change its business) unless another Obligor
continues to operate any such business).
(b) The Company shall procure that no substantial change is made
to the general nature of the business of any of its Material
Subsidiaries (other than a Guarantor) from that carried on at
the date of this Agreement and that there shall be no
cessation of such business.
23.10 Insurance
The Obligors shall (and the Company shall ensure that each of its
Material Subsidiaries (other than the Obligors) will) maintain
insurances on and in relation to its business and assets with
reputable underwriters or insurance companies against those risks and
to the extent as is usual for companies carrying on the same or
substantially similar business where such insurance is available on
reasonable commercial terms.
23.11 Environmental Compliance
The Company shall (and the Company shall ensure that each of its
Subsidiaries will) comply in all material respects with all
Environmental Law and obtain and maintain any Environmental Permits
and take all reasonable steps in anticipation of known or expected
future changes to or obligations under the same, in each case where
failure to do so might reasonably be expected to have a Material
Adverse Effect.
23.12 Environmental Claims
The Company shall inform the Agent in writing as soon as reasonably
practicable upon becoming aware of the same:
(a) if any Environmental Claim has been commenced or (to the best
of the Company's knowledge and belief) is threatened against
any member of the Group which is likely to be determined
adversely to the member of the Group; or
(b) of any facts or circumstances which will or are reasonably
likely to result in any Environmental Claim being commenced or
threatened against any member of the Group, where the claim
would be reasonably likely, if determined against that member
of the Group, to have a Material Adverse Effect.
23.13 Transactions with Affiliates
Except as contemplated in the Funds Flow Statement in respect of the
option to purchase Bidco shares referred to therein, each Obligor
shall (and the Company shall ensure that its Subsidiaries will) ensure
that any transactions with respective Affiliates are on terms that are
fair and reasonable and no less favourable to such Obligor or such
Subsidiary than it would obtain in a comparable arm's-length
transaction with a person not an Affiliate.
23.14 Pari passu ranking
Save as regards Permitted Nortarisations, each Obligor shall ensure
that at all times its payment obligations under the Finance Documents
rank at least pari passu with the claims of all its other unsecured
and unsubordinated creditors, except for obligations mandatorily
preferred by law or regulation applying to companies generally from
time to time.
23.15 Subsidiary Financial Indebtedness incurrence
If, at any time following the date falling 90 days after the first
Utilisation after the Unconditional Date, the aggregate outstanding
principal amount of Financial Indebtedness of the Subsidiaries of the
Company exceeds the amount which is the Threshold Percentage (defined
below) of the aggregate total assets of the Group (as shown in the
latest consolidated financial statements of the Company delivered
under Clause 21 (Information Undertakings)), then for so long as such
remains the case, no Subsidiary of the Company may, directly or
indirectly, refinance any of its Financial Indebtedness nor create,
incur, assume, guarantee, have outstanding or otherwise become liable
with respect to any new Financial Indebtedness other than:
(a) Financial Indebtedness owed under or in respect of or by way
of guarantee of the fixed rate senior notes issued by Cemex
Espana Finance LLC pursuant to a Note Purchase Agreement dated
as of June 23, 2003;
(b) Financial Indebtedness of Subsidiaries existing on the date of
this Agreement up to US$100,000,000 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 paragraph (b) 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, refinancing and refundings shall
be counted against the foregoing amount; and
(Y) any Financial Indebtedness incurred in a
currency other than dollars pursuant to this
paragraph (b) shall continue to be permitted
under this paragraph (b), 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);
(c) Financial Indebtedness of a Subsidiary owed to the Company or
another Subsidiary;
(d) Financial Indebtedness of a Subsidiary that is:
(i) outstanding at the time such Subsidiary became 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 and provided that there is no recourse to any
member of the Group other than such Subsidiary following the
date falling 60 days after such Subsidiary became a
Subsidiary;
(e) any Financial Indebtedness extending the maturity of the
Financial Indebtedness referred to in paragraph (d) above, or
any refunding or refinancing of the same, provided that 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;
(f) 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
the Company and the lending or other advance of the
net proceeds of such debt obligations (whether
directly or indirectly) to the Company or any
Guarantor which is a Holding Company (as defined in
sub-Clause 26.3 (Additional Obligors)); and
(ii) has no significant assets other than promissory notes
and other contract rights in respect of funds advanced
to the Company or such Guarantors; and
(g) 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 the Company or its Subsidiaries
pursuant to such pooling arrangement.
"Threshold Percentage" means fifteen per cent. (15%) save that when
seventy five per cent. or more of the issued ordinary share capital of
the Target are owned by members of the Group and the long term public
debt rating of the Company most recently published by the relevant
Ratings Agency (following the Unconditional Date and taking account of
the acquisition by Bidco of the Target), is lower than BBB- (as rated
by S&P) and Baa3 (as rated by Moody's), the Threshold Percentage shall
be reduced to ten per cent. (10%).
23.16 Refinancing Relevant Target Facilities
(a) To the extent necessary for the Company to be in compliance
with the requirements of Clause 23.15 (Subsidiary Financial
Indebtedness incurrence), the Company will procure that once
the Target has become a Subsidiary of Bidco, any undrawn
commitment under the Relevant Target Facilities will be
cancelled and any outstanding Financial Indebtedness of the
Target or any member of the Target Group under such Relevant
Target Facilities will be refinanced (and any Security given
in relation thereto released and discharged), in each case, as
soon as practicable (with a view to avoiding any prepayment,
repayment or broken funding costs and expenses).
(b) The Company will, as soon as practicable after the date or
dates upon which any Target Shares are acquired by Bidco,
ensure that those shares are registered in the register of
shareholders of Target.
23.17 Under 75% Restrictions
(a) If on the Unconditional Date, Bidco owns less than seventy
five per cent. (75%) of the Ordinary Shares, the Company shall
procure that:
(i) as soon as reasonably practicable and in any event not
later than 60 days after the Unconditional Date, the
Target (and each Subsidiary of the Target which is a
borrower under Relevant Target Facilities or any other
Financial Indebtedness of the Target (or such
Subsidiary) which becomes repayable before the end of
such 60 day period) accedes to this Agreement as an
Additional Borrower; and
(ii) to the extent available, Facility C1 Loans are
borrowed by the Target (or its relevant Subsidiary)
and used in repayment of Relevant Target Facilities
(or any other Financial Indebtedness of the Target
Group which becomes repayable before the end of such
60 day period) as soon as practicable (with a view to
avoiding any prepayment, repayment or broken funding
costs and expenses) and such repayment shall be
permitted for the purpose of Clause 23.15 (Subsidiary
Financial Indebtedness incurrence) and shall not
create a breach thereof.
(b) To the extent Facility C1 Loans are available for utilisation,
at any time when Bidco owns less than seventy five per cent.
(75%) of the Ordinary Shares, the Company shall ensure that no
member of the Group (other than a member of the Target Group)
shall incur any obligation in respect of any Financial
Indebtedness of any member of the Target Group or provide any
loan or investment or other financial assistance to any member
of the Target Group to assist such person in servicing or
repaying any Financial Indebtedness save as regards guarantees
of the Facilities.
23.18 The Offer
The Company further undertakes to ensure that:
(a) if it has not already done so, Bidco shall issue the Press
Release within 7 Business Days of the date of this Agreement;
(b) without the prior agreement of the Majority Lenders Bidco will
not:
(i) take or permit to be taken any step as a result of
which any increase in the offer price for any of the
Target Shares from that specified in the Press Release
is or may be required to be made save to the extent
funded out of additional equity or subordinated debt;
(ii) declare the Offer unconditional as to acceptances
until it has acquired or agreed to acquire (either
pursuant to the Offer or otherwise) shares in the
Target carrying over 50% of the voting rights
attributable to the Target's share capital (ignoring
any shares in the Target held in treasury); or
(iii) (and will procure that no member of the Group will)
issue any press release or make any public statement
or announcement which makes reference to the
Facilities or to some or all of the Finance Parties,
unless required by law or by the Code (in which case
Bidco shall notify the Agent as soon as practicable
upon becoming aware of the requirement) (other than
the Press Release or any amended or updated Press
Release, the form of which has been approved by the
Arranger);
(c) Bidco will:
(i) comply in all material respects with the Code (subject
to any waivers granted by the Panel) and all
applicable laws and regulations relevant in the
context of the Offer;
(ii) keep the Agent informed as to the status and progress
of the Offer and, in particular, will from time to
time and promptly upon request give to the Agent
reasonable details as to the current level of
acceptances of the Offer;
(iii) promptly supply to the Agent:
(A) copies of all documents, certificates, notices
or announcements received or issued by it (or
on its behalf) in relation to the Offer
(including every material certificate
delivered by the receiving agent for the Offer
to it and/or its advisers pursuant to the
Code); and
(B) any other information regarding the progress
of the Offer as the Agent may reasonably
request;
(iv) other than pursuant to the Offer or sections 428-430
of the Companies Act 1985, not purchase any Target
Shares if to do so would compel it, and shall
otherwise ensure that it is not obliged, to make a
mandatory offer under Rule 9 of the Code;
(v) comply in all material respects with all of its
obligations under the Scheme;
(d) if Bidco becomes aware of a circumstance or event which, if
not waived, would entitle Bidco (with the Panel's consent, if
needed) to lapse or withdraw the Offer it shall promptly
notify the Agent;
(e) Bidco will promptly give notices under Section 429 of the
Companies Act 1985 in respect of all classes of the Target
Shares upon the conditions contained in the Companies Act 1985
for the giving of those notices being satisfied; and
(f) all of the ordinary share capital (including any convertible
securities or share options) of the Target will be subject to
the Offer (except for any such shares already owned by Cemex
Parent and its Subsidiaries).
23.19 Payment restrictions affecting Subsidiaries
The Company shall not enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement or
arrangement directly limiting the ability of any of its Subsidiaries
to:
(a) declare or pay dividends or other distributions in respect of
its or their respective equity interests in a Subsidiary,
except any agreement or arrangement (other than in relation to
the Asia Fund as at the date hereof) entered into by a person
prior to such person becoming a Subsidiary, in which case the
Company shall use its reasonable endeavours to remove such
limitations. If however, such limitations are reasonably
likely to affect the ability of the Company to satisfy its
payment obligations under this Agreement, the Company shall
use its best endeavours to remove such limitations as soon as
possible;
or
(b) repay or capitalise any intercompany indebtedness owed by any
Subsidiary to any Obligor and, for the avoidance of doubt,
subordination provisions shall not be considered a limitation
for the purpose of this Clause 23.19.
23.20 Indebtedness of Guarantors
None of the Guarantors (other than the Company) shall incur or permit
to exist any Financial Indebtedness other than:
(a) Financial Indebtedness in respect of its taxes or costs,
incurred pursuant to legal requirements;
(b) Financial Indebtedness owed to another member of the Group;
(c) Financial Indebtedness of another member of the Group
guaranteed by a Guarantor;
(d) Financial Indebtedness in relation to the Loan Notes; and
(e) Financial Indebtedness not falling within paragraphs (a) to
(d) above, in an aggregate amount not exceeding EUR3,000,000
(or the equivalent thereof in any other currency).
23.21 Notification of adverse change in Ratings
The Company shall promptly notify the Agent of any change in its
Ratings or Outlook.
23.22 Company/Bidco Intercompany Loan
The Company shall immediately on receipt of relevant funds on-lend to
Bidco pursuant to the Company/Bidco Intercompany Loan Agreement the
proceeds of all Loans.
23.23 Ownership of Bidco
The Company shall procure that Bidco becomes its direct wholly owned
Subsidiary by the date falling one hundred (100) days after the
Unconditional Date or, if such is not practicable, as soon as
practicable after such date.
24. EVENTS OF DEFAULT
Each of the events or circumstances set out in this Clause 24 is an
Event of Default.
24.1 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to
a Finance Document at the place at and in the currency in which it is
expressed to be payable unless such failure to pay is caused by an
administrative error or technical difficulties within the banking
system in relation to the transmission of funds and payment is made
within three Business Days of its due date.
24.2 Financial Covenants
Any requirement of Clause 22 (Financial Covenants) is not satisfied.
24.3 Other obligations
(a) An Obligor does not comply with any provision of the Finance
Documents (other than those referred to in Clause 24.1
(Non-payment) and Clause 22 (Financial covenants)).
(b) No Event of Default under paragraph (a) of this Clause 24.3
above will occur if the failure to comply is capable of remedy
and is remedied within fifteen Business Days of the Agent
giving written notice to the Company or the Company becoming
aware of the failure to comply whichever is the earlier.
24.4 Misrepresentation
Any representation or statement made or deemed to be made by an
Obligor in the Finance Documents or any other document delivered by or
on behalf of any Obligor under or in connection with any Finance
Document is or proves to have been incorrect or misleading in any
material respect when made or deemed to be made.
24.5 Cross acceleration
(a) Any Financial Indebtedness of any Obligor or member of the
Group is not paid when due nor within any originally
applicable grace period.
(b) Any Financial Indebtedness of any Obligor or member of the
Group is declared to be or otherwise becomes due and payable
prior to its specified maturity as a result of an event of
default (however described).
(c) No Event of Default will occur under this Clause 24.5 if the
aggregate amount of Financial Indebtedness falling within
paragraphs (a) and (b) of this Clause 24.5 above is less than
$50,000,000 (or its equivalent in any other currency or
currencies).
24.6 Insolvency
(a) Any of the Obligors or Material Subsidiaries is unable or
admits inability to pay its debts as they fall due or, by
reason of actual or anticipated financial difficulties,
suspends making payments on any of its debts or commences
negotiations with one or more of its creditors with a view to
rescheduling any of its indebtedness.
(b) The value of the assets of any of the Obligors or Material
Subsidiaries is less than its liabilities (taking into account
contingent and prospective liabilities).
(c) A moratorium is declared in respect of any indebtedness of any
of the Obligors or Material Subsidiaries.
24.7 Insolvency proceedings
Any corporate action, legal proceedings or other procedure or step is
taken in relation to:
(a) a moratorium of any indebtedness, winding-up, dissolution,
administration or reorganisation (by way of voluntary
arrangement, scheme of arrangement or otherwise) of any of the
Obligors or Material Subsidiaries other than a solvent
liquidation or reorganisation of any of the Material
Subsidiaries not being Obligors;
(b) a composition, assignment or arrangement with any class of
creditor of any of the Obligors or Material Subsidiaries;
(c) the appointment of a liquidator (other than in respect of a
solvent liquidation of any of the Material Subsidiaries not
being Obligors), receiver, administrator, administrative
receiver, compulsory manager or other similar officer in
respect of any of the Obligors or Material Subsidiaries or any
of their assets;
or any analogous procedure or step is taken in any jurisdiction.
This paragraph shall not apply to any winding-up petition which is
frivolous or vexatious and is discharged, stayed or dismissed within
60 days of commencement.
24.8 Expropriation and sequestration
Any expropriation or sequestration affects any asset or assets of any
Obligor or any Material Subsidiary and has a Material Adverse Effect.
24.9 Creditors' process and enforcement of Security
(a) Any Security is enforced against any Obligor or any Material
Subsidiary.
(b) Any attachment, distress or execution affects any asset or
assets of any Obligor or any Material Subsidiary which is
reasonably likely to cause a Material Adverse Effect.
(c) No Event of Default under paragraphs (a) or (b) of this Clause
24.9 above will occur if:
(i) the action is being contested in good faith by
appropriate proceedings;
(ii) the principal amount of the indebtedness secured by
such Security or in respect of which such attachment,
distress or execution is carried out represents less
than $50,000,000 (or its equivalent in any other
currency or currencies); and
(iii) the enforcement proceedings, attachment, distress or
execution is or are discharged within 60 days of
commencement.
24.10 Failure to comply with judgment
Any Obligor or any Material Subsidiary fails to comply with or pay any
sum due from it under any judgment or any order made or given by any
court of competent jurisdiction save unless payment of any such sum is
suspended pending an appeal.
24.11 Unlawfulness
It is or becomes unlawful for an Obligor to perform any of its
obligations under the Finance Documents where non-performance is
reasonably likely to cause a Material Adverse Effect.
24.12 Repudiation
An Obligor repudiates a Finance Document or evidences an intention to
repudiate a Finance Document.
24.13 Change of Control
If CEMEX, S.A. de C.V. ceases to:
(a) be entitled to (whether by way of ownership of shares
(directly or indirectly), proxy, contract, agency or
otherwise):
(i) cast, or control the casting of, at least 51 per cent.
of the maximum number of votes that might be cast at a
general meeting of the Company;
(ii) appoint or remove all, or the majority, of the
directors or other equivalent officers of the Company;
(iii) give directions with respect to the operating and
financial policies of the Company which the directors
or other equivalent officers of the Company are
obliged to comply with; or
(b) hold at least 51 per cent. of the common shares in the
Company.
24.14 Material adverse change
Any material adverse change arises in the financial condition of the
Group taken as a whole which the Majority Lenders reasonably determine
would result in the failure by any Obligor to perform its payment
obligations under any of the Finance Documents.
24.15 Completion of Funds Flow
If Bidco has not become a wholly-owned Subsidiary of the Company
pursuant to the steps and on the basis outlined in the Funds Flow
Statement by the date falling as soon as practicable but, in any case,
100 days after the Unconditional Date.
24.16 Acceleration
On and at any time after the occurrence of an Event of Default the
Agent may, while such Event of Default is continuing and shall if so
directed by the Majority Lenders, by notice to the Company:
(a) cancel the Total Commitments whereupon they shall immediately
be cancelled;
(b) declare that all or part of the Loans, together with accrued
interest, and all other amounts accrued under the Finance
Documents be immediately due and payable, whereupon they shall
become immediately due and payable; and/or
declare that all or part of the Loans be payable on demand, whereupon
they shall immediately become payable on demand by the Agent on the
instructions of the Majority Lenders.
24.17 Clean Up Period
If during the Clean-Up Period a matter or circumstance exists in
respect of the Target and/or any member of the Target Group which
would constitute a breach under the Finance Documents including (i) a
breach of any representation or warranty made in Clause 20
(Representations), or (ii) a breach of any covenant set out in Clause
23 (General Undertakings) or (iii) a Default, such matter or
circumstance will not constitute a Default until after the end of the
Clean-Up Period, provided that reasonable steps are being taken to
cure such matter or circumstance (following Bidco or Cemex Parent
becoming aware of the same), unless such matter or circumstance (1)
could reasonably be expected to have a Material Adverse Effect
(assuming for this purpose that the definition thereof is deemed to be
adjusted such that sub paragraph (c) thereof refers solely to payment
obligations and financial covenant obligations) or (2) has been
procured by, or approved by, Cemex Parent or Bidco.
SECTION 9
CHANGES TO PARTIES
25. CHANGES TO THE LENDERS
25.1 Assignments and transfers by the Lenders
Subject to this Clause 25, 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 any Utilisation,
to another bank or financial institution or to a securitisation trust
or fund or (subject to paragraph (a) of Clause 25.2 (Conditions of
assignment or transfer)) other entity (the "New Lender").
25.2 Conditions of assignment or transfer
(a) The Borrower must be given prior notification of any
assignment or transfer becoming effective under Clause 25.1
(Assignments and transfers by the Lenders) and the consent of
the Company 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 Company to an assignment or transfer must
not be unreasonably withheld or delayed. The Company 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 Company 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 25.5 (Procedure for transfer) is complied with.
(e) 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 14 (Tax gross-up and indemnities) or Clause 15
(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.
(f) In addition to the other assignment rights provided in this
Clause 25, each Lender may assign, as collateral or otherwise,
any of its rights under this Agreement (including rights to
payments of principal or interest on the Loans) to any trustee
for the benefit of the holders of such Lender's securities
provided that no such assignment shall release the assigning
Lender from any of its obligations under this Agreement.
25.3 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
US$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.
25.4 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 25; 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.
25.5 Procedure for transfer
(a) Subject to the conditions set out in Clause 25.2 (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 Company.
(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".
25.6 Copy of Transfer Certificate to Borrower
The Agent shall, as soon as reasonably practicable after it has
received a Transfer Certificate, send to the Company a copy of that
Transfer Certificate.
25.7 Disclosure of information
(a) Any Lender may disclose to any of its Affiliates and any other
person:
(i) 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;
(ii) with (or through) whom that Lender enters into (or may
potentially enter into) any sub-participation in
relation to, or any other transaction under which
payments are to be made by reference to, the Finance
Documents; or
(iii) 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.
25.8 Interest
All interest accrued in the Interest Period in which a transfer is
effective shall be paid to the Existing Lender.
26. CHANGES TO THE OBLIGORS
26.1 Assignment and Transfers by Obligors
No Obligor may assign any of its rights or transfer any of its rights
or obligations under the Finance Documents.
26.2 Additional Borrowers
(a) Subject to compliance with the provisions of paragraphs (b)
and (c) of Clause 21.6 ("Know your customer" checks), the
Company may request that any of its wholly owned Subsidiaries
which is not a dormant Subsidiary becomes an Additional
Borrower. That Subsidiary shall become an Additional Borrower
if:
(i) all the Lenders approve the addition of that
Subsidiary;
(ii) the Company and that Subsidiary deliver to the Agent a
duly completed and executed Accession Letter;
(iii) the Subsidiary is (or becomes) a Guarantor prior to
becoming a Borrower;
(iv) the Company confirms that no Default is continuing or
would occur as a result of that Subsidiary becoming an
Additional Borrower; and
(v) the Agent has received all of the documents and other
evidence listed in Part II of Schedule 2 (Conditions
precedent to be delivered by an Additional Obligor) in
relation to that Additional Borrower, each in form and
substance satisfactory to the Agent.
(b) The Agent shall notify the Company and the Lenders promptly
upon being satisfied that it has received (in form and
substance satisfactory to it) all the documents and other
evidence listed in Part II of Schedule 2 (Conditions precedent
to be delivered by an Additional Obligor).
26.3 Additional Guarantors
(a) Subject to compliance with the provisions of paragraphs (b)
and (c) of Clause 21.6 ("Know your client" checks), the
Company may request that any of its wholly owned Subsidiaries
become an Additional Guarantor.
(b) The Company 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 pursuant to paragraph (b)(iii)(A) of
Clause 23.7 (Disposals); (ii) each of its Subsidiaries which
is or which is deemed to be a Material Subsidiary, whether
pursuant to paragraph (b)(iii)(B) of Clause 23.7 (Disposals)
or otherwise, such Subsidiary or the Holding Company of such
Material Subsidiary (at the election of the Company) 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 Company delivering to the Agent a duly-completed
and executed Accession Letter; and
(B) the Agent receiving from the Company all of the
documents and other evidence referred to in Part II of
Schedule 2 (Conditions Precedent required to be
delivered by an Additional Obligor) 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 Obligor).
(d) For the purposes of this Clause 26.3 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)).
26.4 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 26.3 (Additional
Obligors); 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 26.4; and
(iii) the Company may not resign as a Guarantor without the
consent of all Lenders.
26.5 Repetition of Representation
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
27. ROLE OF THE AGENT AND THE ARRANGER
27.1 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.
27.2 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
Company'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.
27.3 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.
27.4 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.
27.5 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.
27.6 Rights and discretions
(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 36.1 (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 Clause 24.1
(Non-payment));
(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 Company (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.
27.7 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.
27.8 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.
27.9 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 Transaction
Document and any officer, employee or agent of the Agent may
rely on this Clause 27 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.
27.10 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).
27.11 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 Company.
(b) Alternatively the Agent may resign by giving notice to the
other Finance Parties and the Company, in which case the
Majority Lenders (after consultation with the Company) 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 Company) 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 27.11. 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 Company, 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.
27.12 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.
27.13 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).
27.14 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.
27.15 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 Company) appoint another Lender or an
Affiliate of a Lender to replace that Reference Bank.
27.16 Agent's Management Time
Any amount payable to the Agent under Clause 16.3 (Indemnity to the
Agent) and Clause 27.10 (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 Company and the
Lenders, and is in addition to any fee paid or payable to the Agent
under Clause 13 (Fees).
27.17 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.
28. 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.
29. SHARING AMONG THE FINANCE PARTIES
29.1 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 30
(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 30
(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 30.5 (Partial payments).
29.2 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
30.5 (Partial payments).
29.3 Recovering Finance Party's rights
(a) On a distribution by the Agent under Clause 29.2
(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.
29.4 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 29.2 (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.
29.5 Exceptions
(a) This Clause 29 shall not apply to the extent that the
Recovering Finance Party would not, after making any payment
pursuant to this Clause, 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
30. PAYMENT MECHANICS
30.1 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.
30.2 Distributions by the Agent
Each payment received by the Agent under the Finance Documents for
another Party shall, subject to Clause 30.3 (Distributions to an
Obligor), Clause 30.4 (Clawback) and Clause 27.17 (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).
30.3 Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with
Clause 31 (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.
30.4 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.
30.5 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.
30.6 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.
30.7 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 an Unpaid Sum under this Agreement interest is
payable on the principal or Unpaid Sum at the rate payable on
the original due date.
30.8 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.
30.9 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 Company); 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 Company) 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.
31. 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.
32. NOTICES
32.1 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 32.5
(Electronic Communication)) by email.
32.2 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 Company, 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.
32.3 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 32.2
(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 Company 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 Company
in accordance with this Clause 32.3 will be deemed to have
been made or delivered to each of the Obligors.
32.4 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 32.2 (Addresses) or
changing its own address or fax number, the Agent shall notify the
other Parties.
32.5 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.
32.6 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.
32.7 Obligor Agent
(a) Each Obligor (other than the Company) by its execution of this
Agreement or an Accession Letter (as the case may be)
irrevocably appoints the Company to act on its behalf as its
agent in relation to the Finance Documents and irrevocably
authorises (i) the Company 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 Company 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 Company, or given
to the Company, in its capacity as agent in accordance with
paragraph (a) of this Clause 32.7, 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 Company and any
other Obligor, those of the Company shall prevail.
32.8 Use of Websites
(a) The Company 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 Company 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 Company 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 Company 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 Company accordingly and the Company shall supply
the information to the Agent in paper form. In any event the
Company 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 Company
and the Agent.
(c) The Company 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 Company 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 Company notifies the Agent under paragraph (c)(i) or
paragraph (c)(v) above, all information to be provided by the
Company 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
Company shall comply with any such request within ten Business
Days.
33. CALCULATIONS AND CERTIFICATES
33.1 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.
33.2 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.
33.3 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.
33.4 Spanish Civil Procedure
In the event that this Agreement is raised to a Spanish Public
Documents, for the purposes of Article 572.2 of the Spanish Civil
Procedure Law (Ley de Enjuiciamiento Civil), all parties expressly
agree that the exact amount due at any time by the Obligors to the
Lenders will be the amount specified in a certificate issued by the
Agent (and/or any Lender) in accordance with Clause 33.2 (Certificates
and Determinations) as representative of the Lenders reflecting the
balance of the accounts referred to in Clause 33.1 (Accounts).
33.5 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.
34. 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.
35. REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of
any Finance Party or 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.
36. AMENDMENTS AND WAIVERS
36.1 Required consents
(a) Subject to Clause 36.2 (Exceptions) any term of the Finance
Documents may be amended or waived only with the consent of
the Majority Lenders and the Company 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 36.
(c) The Company may effect, as agent of each Obligor, any
amendment or waiver permitted by this Clause 36.
36.2 Exceptions
(a) An amendment or waiver that has the effect of changing or
which relates to:
(i) the definition of "Majority Lenders", "Optional
Currency" or "Certain Funds Period" in Clause 1.1
(Definitions);
(ii) an extension to the Availability Period or to the date
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 Borrowers or any of the Guarantors
other than in accordance with Clause 26 (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 19 (Guarantee and Indemnity), Clause 25
(Changes to the Lenders), Clause 26 (Changes to the
Obligors) or this Clause 36,
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.
37. 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
38. GOVERNING LAW
This Agreement is governed by English law.
If 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.
39. ENFORCEMENT
39.1 Jurisdiction of English Courts
(a) The courts of England have exclusive jurisdiction 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 the courts of England are the most
appropriate and convenient courts to settle Disputes and
accordingly no Party will argue to the contrary.
(c) This Clause 39.1 is for the benefit of the Finance Parties
only. As a result, no Finance Party shall be prevented from
taking proceedings relating to a Dispute in any other courts
with jurisdiction. To the extent allowed by law or regulation,
the Finance Parties may take concurrent proceedings in any
number of jurisdictions.
39.2 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) irrevocably appoints 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
Bidco by its execution of this Agreement accepts that
appointment ; and
(b) agrees that failure by the Process Agent to notify the
relevant Obligor of the process will not invalidate the
proceedings concerned.
This Agreement has been entered into on the date stated at the beginning of
this Agreement.
SCHEDULE 1
The Original Parties
Part I
The Obligors
Name of Original Borrower Registration number
(or equivalent, if any)
Cemex Espana, S.A. N(0) Hoja-Registro Mercantil, Madrid:
M- 156542
NIF: A46/004214
Name of Guarantor Registration number
(or equivalent, if any)
Cemex Espana, S.A. N(0) Hoja-Registro Mercantil, Madrid:
M- 156542
NIF: A46/004214
Trade Register of the Chamber of
Commerce and Industry in Amsterdam (The
Netherlands)
Cemex Caracas Investments B.V. 34121194
Cemex Caracas II Investments B.V. 34159953
Cemex Egyptian Investments B.V. 34108365
Cemex Manila Investments B.V. 34108359
Cemex American Holdings B.V. 34213058
Part II
The Original Lenders
Name of Original Lender Facility C1 Facility C2 Facility C3
Commitment Commitment Commitment
(US$) (US$) (US$)
Citibank International plc, 750,000,000 575,000,000 575,000,000
Sucursal en Espana /
Citibank, N.A.
Goldman Sachs Credit 750,000,000 575,000,000 575,000,000
Partners L.P.
Total 1,500,000,000 1,150,000,000 1,150,000,000
SCHEDULE 2
CONDITIONS PRECEDENT
Part I
Conditions Precedent to Initial Utilisation
1. Obligors
(a) A copy of the current constitutional documents of each
Original Obligor.
(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 a copy of a resolution of
the board of directors of each Original Obligor:
(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 referred to in paragraph (b) above in relation to
the Finance Documents.
(d) A certificate of the Company (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
Original Obligor to be exceeded.
(e) A certificate of an Authorised Signatory of the relevant
Original 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. Transaction Documents and related documents
A copy of the Company/Bidco Intercompany Loan Agreement in the agreed
form.
3. Finance Documents
(a) This Agreement executed by the members of the Group party to
this Agreement.
(b) The Syndication and Fee Letter, the Sub Underwriter Fee Letter
and the Costs and Expenses Letter, each executed by all
parties thereto.
4. Legal Opinions
(a) A legal opinion of 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
Kingdom of Spain from Clifford Chance, 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 The
Netherlands from Warendorf, substantially in the form
distributed to the Original Lenders prior to signing this
Agreement.
(d) An opinion from in-house counsel of the Company, substantially
in the form distributed to the Original Lenders prior to
signing this Agreement.
5. Offer Related Conditions
(a) A copy, certified as being a true and complete copy by an
Authorised Signatory of Bidco, of the Press Release, in
substantially the form distributed to the Agent prior to
signing of this Agreement (where any changes are not relevant
to the interests of the Finance Parties).
(b) Copies, certified as being true and complete copies by an
Authorised Signatory of Bidco, of each Offer Document
incorporating the terms set out in the Press Release or any
subsequent press announcements released by Bidco in connection
with the Offer or such other changes to reflect the Offer (in
each case, which are not relevant to the interests of the
Finance Parties) and any other terms required by the Code or
the Panel.
(c) A copy, certified as being a true and complete copy by an
Authorised Signatory of Bidco, of the announcement that each
Offer has become or has been declared unconditional in all
respects together with a certificate from an Authorised
Signatory of Bidco that in having declared each Offer
unconditional it is not in breach of Clause 23.18 (The Offer).
6. Other Documents and Evidence
(a) The Group Structure Chart.
(b) The Funds Flow Statement.
(c) The Original Financial Statements of each Obligor.
(d) A certificate of the Company (signed by a director) certifying
that the Company/Bidco Intercompany Loan Agreement is in full
force and effect.
(e) Copies of forms PE-1 and PE-3 stamped by the Bank of Spain
(Banco de Espana), whereby it assigns a Financial Operation
Number ("NOF") to the Facilities and to the Company/Bidco
Intercompany Loan.
Part II
Conditions Precedent Required to be
Delivered by an Additional Obligor
Obligors:
1. An Accession Letter, duly executed by the Additional Obligor and the
Company.
(a) A copy of the constitutional documents of the Additional
Obligor.
(b) A copy of a resolution of the board of directors of the
Additional Obligor:
(i) approving the terms of, and the transactions
contemplated by, the Accession Letter and the Finance
Documents and resolving that it execute the Accession
Letter;
(ii) authorising a specified person or persons to execute
the Accession Letter and other Finance Documents 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 or Selection Notice) 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 referred to in paragraph (b) above.
(d) 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 Obligor, approving the
terms of, and the transactions contemplated by, the Finance
Documents to which the Additional Obligor is a party.
(e) A certificate of the Additional Obligor (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.
(f) A certificate of an Authorised Signatory of the Additional
Obligor 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
Obligor 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 Obligor if not Clifford Chance, legal
advisers to the Lenders.
3. Other documents and evidence
(a) Evidence that any process agent referred to in Clause 39.2
(Service of process) has accepted its appointment.
(b) In relation to any Additional Borrower incorporated in Spain,
a copy of form PE-1 stamped by the Bank of Spain (Banco de
Espana), whereby it assigns a Financial Operation Number
("NOF") to the accession of the such Additional Borrower.
(c) 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 Obligor and the Company
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.
(d) The Original Financial Statements of the Additional Guarantor.
SCHEDULE 3
REQUESTS
Part I A
Utilisation Request
From: [Borrower]
To: [Agent]
Dated:
Dear Sirs
Cemex - US$3,800,000,000 Term and Revolving Facilities Agreement
dated [O] 2004 (the "Facilities Agreement")
1. We refer to the Facilities Agreement. This is a Utilisation Request.
Terms defined in the Facilities 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:
(a) Proposed Utilisation Date: [O] (or, if that is not a Business
Day, the next Business Day)
(b) Borrower [O]
(c) Facility to be utilised: [Facility C1] [Facility C2] [Facility
C3] **
(d) Currency of Loan: [O]
(e) Amount: [O] or, if less, the relevant Available Facility
(f) Interest Period: [O]
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 Facilities Agreement shall
have the meaning given to those terms in the Facilities Agreement.
Yours faithfully
................................
authorised signatory for
[the Borrower]
NOTES:
** Select the Facility to be utilised and delete references to the other
Facilities.
Part II
Selection Notice
Applicable to a Term Loan
From: [Borrower]
To: [Agent]
Dated:
Dear Sirs
Cemex - US$3,800,000,000 Term and Revolving Facilities Agreement
dated [O] 2004 (the "Facilities Agreement")
1. We refer to the Facilities Agreement. This is a Selection Notice.
Terms defined in the Facilities Agreement have the same meaning in
this Selection Notice unless given a different meaning in this
Selection Notice.
2. We refer to the following Term Loan[s]
Utilisation Date: [ o ]
Borrower [ o ]
Amount: [ o ]
Final Day of Interest Period: [ o ]
3. [We request that the above Term Loan[s] be divided into [O] Term Loans
with the following Interest Periods:]
or
[We request that the next Interest Period for the above Term Loan[s]
is [O]].
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 Facilities Agreement shall
have the meaning given to those terms in the Facilities Agreement.
Yours faithfully
............................
authorised signatory for
[the Borrower]
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 10.3 (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 7 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 Company
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 - US$3,800,000,000 Term and Revolving Facilities Agreement
dated [O] 2004 (the "Facilities Agreement")
1. We refer to the Facilities Agreement. This is a Transfer Certificate.
Terms defined in the Facilities Agreement have the same meaning in
this Transfer Certificate unless given a different meaning in this
Transfer Certificate.
2. We refer to Clause 25.5 (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 25.5 (Procedure for transfer).
(b) The proposed Transfer Date is [O].
(c) The Facility Office and address, fax number and attention
details for notices of the New Lender for the purposes of
Clause 32.2 (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 25.4(c)
(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]
By:
SCHEDULE 6
FORM OF ACCESSION LETTER
To: [Agent]
From: [Subsidiary] and [Company]
Dated:
Dear Sirs
Cemex - US$3,800,000,000 Term and Revolving Facilities Agreement
dated [O] 2004 (the "Facilities Agreement")
1. [Subsidiary] agrees to become an [Additional Guarantor/Additional
Borrower] and to be bound by the terms of the Facilities Agreement and
the other Finance Documents as an [Additional Guarantor/Additional
Borrower] pursuant to Clause 26.3 (Additional Obligors)] of the
Agreement. [Subsidiary] is a limited liability company duly
incorporated under the laws of [name of relevant jurisdiction] with
registered number [o].
2. [Subsidiary's] administrative details are as follows:
Address:
Fax No.:
Attention:
3. This letter is governed by English law.
4. Terms which are used in this Accession Letter which are not defined in
this Accession Letter but are defined in the Facilities Agreement
shall have the meaning given to those terms in the Facilities
Agreement.
[This Accession Letter is entered into by deed.]**
Signed by:
--------------------------- -------------------------
[Company] [Subsidiary]
NOTES:
* Delete as appropriate.
** If the Facilities are fully drawn there may be an issue in relation to
past consideration for a proposed Additional Obligor. This can be
overcome by acceding by way of deed.
SCHEDULE 7
FORM OF COMPLIANCE CERTIFICATE
To: [o] as Agent
From: [Company]
Dated:
Dear Sirs
Cemex - US$3,800,000,000 Term and Revolving Facilities Agreement
dated [O] 2004 (the " Facilities Agreement")
1. We refer to the Facilities 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 22.2 (Financial condition) the financial
condition of the Group as of [ ] evidenced by the
consolidated financial statements for the financial
year/four quarters then ended comply with the following
conditions:
(i) Net Borrowings EUR______________ ("A")
comprising EUR [Guarantees]
EUR [Off-Balance-Sheet Transactions]
EUR [Financial Indebtedness]
EUR [Liquid Investments]
Adjusted EBITDA
comprising:
EUR [operating profit]
EUR [annual depreciation for fixed assets]
EUR [annual amortisation of intangible assets]
EUR [annual amortisation of start-up costs of the
Group]
EUR [dividends received from non-consolidated
companies]
EUR [dividends received from companies consolidated
by the equity method]
EUR [Cemex Capital Contributions]
EUR [acquired business (i) operating income and
(ii) depreciation and amortisation expense]
EUR ______________ ("B")
A:B to be less than or equal to 3.5:1
(ii) EBITDA EUR ______________ ("B")
Finance Charges
comprising EUR [interest expenses]
EUR [other expenses]
EUR ______________ ("C")
B:C to be greater than or equal to 3:1
(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.
Signed:
---------------------------
Authorised Signatory
of
Company
[insert applicable certification language]
- ----------------------------------------
For and on behalf of
[name of auditors of the Company]
SCHEDULE 8
TIMETABLES
Loans in euro or dollars Loans in sterling
Agent notifies the Company if a currency is - -
approved as an Optional Currency in
accordance with Clause 4.4 (Conditions
relating to Optional Currencies)
Delivery of a duly completed Utilisation U-3 U-1
Request (Clause 5.1 (Delivery of a
Utilisation Request)) or a Selection Notice 11.00am 11.00am
(Clause 11.1 (Selection of Interest
Periods))
Agent determines (in relation to a U-3 U-1
Utilisation) the Base Currency Amount of
the Loan, if required under paragraph (c) 3.00pm 3.00pm
of Clause 5.4 (Lenders' participation) and
notifies the Lenders of the Loan in
accordance with Clause 5.4 (Lenders'
participation)
Agent receives a notification from a Lender U-2 U
under Clause 6.2 (Unavailability of a
currency) 9.30am 9.30am
Agent gives notice in accordance with U- 2 U
Clause 6.2 (Unavailability of a currency) 10.30am 10.30am
LIBOR or EURIBOR is fixed Quotation Day as of 11:00 Quotation Day as of
a.m. London time in respect 11:00 a.m.
of LIBOR and as of 11.00
a.m. Brussels time in
respect of EURIBOR
"U" = date of utilisation
"U - X" = X Business Days prior to date of utilisation
SCHEDULE 9
FORM OF LMA CONFIDENTIALITY UNDERTAKING
[Letterhead of Existing Bank]
To:
=====================================
[insert name of Potential Lender]
=====================================
Re: The Facilities
=====================================
Borrower:
Amount:
Agent:
=====================================
Dear Sirs
We understand that you are considering participating in the Facilities. 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 You undertake:
(a) 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 Facilit[y/ies];
(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 Facilities.
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; or
(c) with the prior written consent of us and the Company.
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) 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 Facilities 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 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 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 under this letter 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 under this
letter. The terms of this letter and your obligations under this
letter 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
Company 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:
(a) 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
(b) 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 the Company 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 is excluded.
(b) The Relevant Persons 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) Notwithstanding any provisions of this letter, the parties to
this letter do not require the consent of any Relevant Person
or any member of the Group to rescind or vary this letter at
any time.
12. Governing Law and Jurisdiction This letter (including the agreement
constituted by your acknowledgement of its terms) shall be governed by
and construed in accordance with the laws of England and the parties
submit to the non-exclusive jurisdiction of the English courts.
13. Definitions In this letter (including the acknowledgement set out
below):
"Confidential Information" means any information relating to the
Company, the Group, and the Facilities 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 after that date, 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 Company 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 Facilities.
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 Company and each other member of the Group
We acknowledge and agree to the above:
- -------------------------
For and on behalf of
[Potential New Lender]
SCHEDULE 10
EXISTING SECURITY
Company Lender Security Total Principal Amount of
Indebtedness Secured as of
30 June 2004
(millions of euro)
1. CEMEX Construction GE Capital (FKIT Equipment related with 1.263
Materials, L.P. 279,280) the Credit
2. CEMEX Construction Hampton Land related with the 0.338
Materials, L.P. Credit
3. Kosmos Cement Company First Corp (FKIT Equipment related with 0.035
101649) the Credit
4. Mineral Resource Met-South, Inc. Ash storage facility 0.248
Technologies, Inc.
5. Any security existing at
the date of this Agreement
constituted by the transfer
of shares or any other
instrument of title
representing an equity
participation in the Asia
Fund into a trust
----------------------------
1.883 and the security
under item 5
SCHEDULE 11
EXISTING NOTARISATIONS
Type of Agreement Borrower/Guarantor Maturity Date Total Principal Amount
of Indebtedness
notarised as of
30 June 2004
Bilateral lines Cemex Espana, S.A./n.a. Between Jan. and Dec. 2005 EUR 51,086,0291
Deferred purchase Aricemex S.A./n.a. July, 2005 EUR 961,619
price
- ------------------------------------------------------------------------------
1 Corresponds to the total committed amount under the facilities. Amount drawn
as of 06.30.04: EUR 18,712,797.
SCHEDULE 12
MATERIAL SUBSIDIARIES
Cemex Inc.
Cemex Corp.
Cemex Venezuela SACA
Vencement Investments
Construction Funding Corporation
SIGNATURES
THE COMPANY
CEMEX ESPANA, S.A.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
THE ORIGINAL GUARANTORS
CEMEX ESPANA, S.A.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
CEMEX CARACAS INVESTMENTS B.V.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
CEMEX CARACAS II INVESTMENTS B.V.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
CEMEX EGYPTIAN INVESTMENTS B.V.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
CEMEX MANILA INVESTMENTS B.V.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
CEMEX AMERICAN HOLDINGS B.V.
By: /s/ RAMIRO VILLARREAL MORALES
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/Ramiro Villarreal
THE ARRANGER
CITIGROUP GLOBAL MARKETS LIMITED
By: /s/ CARLOS BARONA
Address: Citigroup Centre, 33 Canada Square, Canary Wharf, London E14 5LB
Fax: + 44 20 7986 8278
GOLDMAN SACHS INTERNATIONAL
By: /s/ JAVIER LAZARO
Address: Peterborough Court, 133 Fleet Street, London EC4A 2BB
Fax: + 44 (20) 7774 4477
Attention: Javier Lazaro
THE AGENT
CITIBANK INTERNATIONAL PLC
By: /s/ CARLOS BARONA
Address: Loans Agency Office, 2nd Floor,
4 Harbour Exchange Square, London E14 9GE
Fax: 00 44 208 636 3824/3825
Attention: Ian Hayton
THE LENDERS
CITIBANK INTERNATIONAL PLC, SUCURSAL EN ESPANA
By: /s/ CARLOS BARONA
Address: C/Jose Ortega v Gasset 29, Madrid 28006, Spain
Fax: + 34 91 435 2811
CITIBANK, N.A.
By: /s/ CARLOS BARONA
Address: Citigroup Centre, 33 Canada Square, Canary Wharf, London E14 5LB
Fax: + 44 20 7986 8278
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By: /s/ JAVIER LAZARO
Address: 85 Broad Street, New York, NY 10004, United States of America
Fax: + 44 (20) 7774 4477
EXHIBIT 4.18
DATED 27 SEPTEMBER 2004
RMC GROUP p.l.c.
and
CEMEX UK LIMITED
_______________________________________
IMPLEMENTATION AGREEMENT
_______________________________________
Slaughter and May
One Bunhill Row
London EC1Y 8YY
(RRO)
CONTENTS
PAGE
1. Interpretation 1
2. Press Announcement 5
3. Implementation and Documentation 5
4. Conduct of Business 8
5. Representations, Warranties and Covenants 10
6. Inducement Fee 11
7. Termination 11
8. Notices 12
9. Remedies and Waivers 13
10. Invalidity 13
11. No Partnership 13
12. Time of Essence 14
13. Contracts (Rights of Third Parties) Act 1999 14
14. Entire Agreement 14
15. Assignment 14
16. Announcements 14
17. Costs and Expenses 15
18. Counterparts 15
19. Choice of Governing Law 15
20. Jurisdiction 15
SCHEDULE 1 17
SCHEDULE 2 18
This Agreement is made 27 September, 2004
BETWEEN:
(1) RMC GROUP p.l.c. (incorporated in England and Wales No. 249776) of
Bromo House, Coldharbour Lane, Thorpe, Egham, Surrey TW20 8TD (the
"Company"); and
(2) CEMEX UK LIMITED (incorporated in England and Wales with registered
no. 05196131) of 2 Lambs Passage, London EC1Y 8BB (the "Offeror").
WHEREAS
(A) The Offeror is a subsidiary of Omega and intends to announce a
takeover offer for the Company to be implemented by way of, and the
Company has agreed to implement, a scheme of arrangement of the
Company, on the terms and subject to the conditions set out in the
Press Announcement.
(B) The parties wish to enter into this Agreement to set out certain
mutual commitments to implement the scheme of arrangement described in
paragraph (A) above and certain matters relating to the conduct of
business of the Company and its Group.
WHEREBY IT IS AGREED as follows:
1. Interpretation
1.1 In this Agreement (but not in Schedule 1), the following terms have
the following meanings:
"Clearances" means all consents, clearances, permissions and
waivers as may be necessary, and all filings and
waiting periods as may be necessary, from or
under the laws, regulations or practices applied
by any relevant Competition Authority in
connection with the implementation of the
Acquisition, the Scheme or the Offer and
references to Clearances having been satisfied
shall be construed as meaning that the foregoing
have been obtained on terms satisfactory to the
Offeror or, where appropriate, made or expired;
"Competition means any relevant government, governmental,
Authority" national, supranational, competition or antitrust
body or other authority, in any jurisdiction,
which is responsible for applying merger control
or other competition or antitrust legislation or
regulation in such jurisdictions;
"Conditions" means the conditions set out in Appendix I to the
Press Announcement;
"Confidentiality means the Confidentiality Agreement relating to
Agreement" the Acquisition dated 23 September 2004 between
the parties hereto;
"Court Hearing" the hearing by the Court of the petition to
sanction the Scheme under Section 425 of the
Companies Act and to confirm the reduction of
capital provided for by the Scheme under Section
137 of the Companies Act;
"Directors" means the board of directors of the Company from
time to time; "Effective Date" means the date
upon which:
(A) the Scheme becomes effective in accordance
with its terms; or
(B) if the Offeror elects to implement the
Acquisition by way of the Offer, the Offer
becomes or is declared unconditional in all
respects;
"EGM Resolutions" means the resolutions to be proposed at the
Extraordinary General Meeting in connection with
the Scheme to approve certain amendments to the
Articles of Association of the Company for the
purposes of approving and implementing the
Scheme, the reduction of capital and such other
matters as may be agreed between the Company and
the Offeror as necessary or desirable for the
purposes of implementing the Scheme;
"Exchange Act" means the Securities Exchange Act of 1934, as
amended;
"Group" means, in relation to any person, its
subsidiaries, subsidiary undertakings and holding
companies and the subsidiaries and subsidiary
undertakings of any such holding company;
"Inducement Fee" means (pound)23,870,000 plus a sum equal to any
amount of VAT for which the Offeror is liable to
account on any supply made pursuant to this
Agreement, provided that in no event shall the
inducement fee payable by the Company pursuant to
clause 6 less the part of such amount as is paid
in respect of VAT and is recoverable by the
Company or another member of the VAT group of
which the Company is a member exceed
(pound)23,870,000;
"Offer Document" means the document to be despatched to (amongst
others) Bromo Shareholders pursuant to which the
Offer would be made;
"Offer Price" means 855 pence per Bromo Share;
"Personnel" means, in relation to any person, its board of
directors, members of their immediate families,
related trusts and persons connected with them,
as such expressions are construed in accordance
with the Code;
"Press Announcement" means the draft Press Announcement set out in
Schedule 1;
"Registrar" means the Registrar of Companies for England and
Wales;
"Scheme Document" means the document to be despatched to (amongst
others) Bromo Shareholders setting out the full
terms of the Scheme and, where the context so
admits, includes any form of proxy, election,
notice, application, affidavit, court document or
other document required in connection with the
Scheme;
"Third Party means an offer or proposal (as amended or revised
Transaction" from time to time):
(A) made by a third party, which is not acting in
concert with the Offeror, or the announcement of
an intention to make an offer, (whether or not
subject to any pre-conditions and howsoever
implemented) for the entire issued share capital
of the Company or any class thereof (other than
those shares owned or contracted to be acquired
by the person making such offer and its
associates, within the meaning of section 430(E)
of the Companies Act), pursuant to Rule 2.5 of
the Code; or
(B) by the Company or to holders of the shares of
the Company which involves, in any such case, a
change of control of the Company (other than the
acquisition of control by the Offeror and/or a
person acting in concert with the Offeror) or
which involves the disposal of any interest in a
material part of the business of the Company or
its Group (other than to the Offeror and/or a
person acting in concert with the Offeror);
"Timetable" means the indicative timetable for implementation
of the Scheme and despatch of the Scheme Document
set out in Schedule 2; and
"Working Hours" means 9.30 a.m. to 6.30 p.m. on a Business Day.
1.2 Terms used but not defined expressly herein shall, unless the context
otherwise requires, have the meaning given to them in the Press
Announcement.
1.3 In this Agreement, unless otherwise specified:
(A) references to clauses, sub-clauses and Schedules are to clauses
and sub-clauses of, and Schedules to, this Agreement;
(B) use of any gender includes each other gender;
(C) any word or expression defined in the Companies Act and not
defined in this Agreement shall have the meaning given in the
Companies Act;
(D) when used in this Agreement, the expressions "acting in
concert", "concert parties", "control" and "offer" shall be
construed in accordance with the Code;
(E) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever and
however incorporated or established;
(F) references to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a
state, local or municipal authority or government body or any
joint venture, association or partnership (whether or not having
separate legal personality);
(G) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may
from time to time be, amended, modified or re-enacted;
(H) any reference to a "day" (including within the phrase "Business
Day") shall mean a period of 24 hours running from midnight to
midnight;
(I) references to times are to London time;
(J) a reference to any other document referred to in this Agreement
is a reference to that other document as amended, revised,
varied, novated or supplemented at any time;
(K) references to the singular include the plural and vice versa;
and
(L) (i) the rule known as the ejusdem generis rule shall not apply
and accordingly general words introduced by the word
"other" shall not be given a restrictive meaning by reason
of the fact that they are preceded by words indicating a
particular class of acts, matters or things; and
(ii) general words shall not be given a restrictive meaning by
reason of the fact that they are followed by particular
examples intended to be embraced by the general words.
1.4 All headings and titles are inserted for convenience only. They are to
be ignored in the interpretation of this agreement.
2. Press Announcement
2.1 The parties shall procure the release of the Press Announcement at or
before 7.00 a.m. on 27 September, 2004 or such other time and date as
may be agreed by the parties.
3. Implementation and Documentation
3.1 The parties undertake to implement the Scheme in accordance with, and
subject to the terms and conditions of, the Press Announcement and, so
far as possible, the Timetable with the overall intention that all
Clearances are satisfied prior to the Court Hearing. Accordingly,
without prejudice to the preceding sentence, each party agrees to use
all reasonable endeavours to, and to procure that its Group and its
directors and its relevant professional advisers assist it to, prepare
all such documents and take all such steps as are necessary or
desirable:
(A) in connection with the Acquisition, the Scheme and the Offer;
and
(B) for the purposes of obtaining all Clearances.
3.2 The Company shall not seek to amend the Scheme or the EGM Resolutions
after despatch of the Scheme Document without the prior written
consent of the Offeror.
3.3 The Offeror will undertake to the Court to be bound by the terms of
the Scheme insofar as it relates to the Offeror, including as to
discharge of the consideration for the Acquisition.
3.4 The Company will, save as otherwise agreed with the Offeror, take or
cause to be taken all such steps as are necessary to implement the
Scheme in accordance with the Timetable and, in particular, but
without limitation:
(A) the Company will, no later than sixteen days after the date of
this Agreement, issue a Part 8 claim form in order to seek the
Court's permission to convene the Court Meeting and file such
documents as may be necessary in connection therewith;
(B) upon:
(i) the necessary documents being settled with the Court and,
where required, approved by the Offeror under clause 3.8;
and
(ii) the Court making the order necessary for the purpose of
convening the Court Meeting,
the Company shall promptly, and in any event within fourteen
days, publish the requisite documents, including the Scheme
Document, and thereafter in a timely manner, publish and/or post
such other documents and information as the Court or the UK
Listing Authority may approve or require from time to time in
connection with the proper implementation of the Scheme
according to the Timetable;
(C) the Company will convene the Extraordinary General Meeting to be
held immediately following the Court Meeting to consider and, if
thought fit, approve the EGM Resolutions;
(D) following the Court Meeting and the Extraordinary General
Meeting, and assuming the resolutions to be proposed at such
meeting have been passed by the requisite majorities, the
Company shall, as contemplated by Schedule 2 but in consultation
with the Offeror and always with the overall intention that all
Clearances are satisfied prior to the Court Hearing, seek the
sanction of the Court to the Scheme at the Court Hearing and
take all other action necessary to make the Scheme effective;
(E) if the Court so requires or indicates, or if it is necessary to
implement the Scheme, the Company shall reconvene the Court
Meeting and any other necessary shareholder meeting;
(F) as soon as practicable after the sanction of the Court of the
Scheme (including the capital reduction) at the Court Hearing,
and in any event within one Business Day, the Company shall
cause an office copy of the relevant Court Order to be filed
with the Registrar and registered by him;
(G) the Company will not allot or issue any Bromo Shares between
6.00 p.m. on the Business Day before the Court Hearing and the
time at which the Scheme becomes effective; and
(H) the Company will use all reasonable endeavours to ensure that
the steps to be taken between the posting of the Scheme Document
and the Effective Date are undertaken in accordance with a
process agreed with the Offeror and always with the overall
intention that all Clearances are satisfied prior to the Court
Hearing.
3.5 The Company agrees that the Scheme Document shall incorporate a
unanimous and unqualified recommendation of the Directors to Bromo
Shareholders to vote in favour of the Scheme and the EGM Resolutions
except to the extent that the Directors have determined in good faith
with the benefit of legal and financial advice that such
recommendation should not be given or should be withdrawn, modified or
qualified in order to comply with their fiduciary duties.
3.6 The Offeror may elect at any time to implement the Acquisition by way
of the Offer, whether or not the Scheme Document has been despatched.
Provided that the Offer is made in accordance with the terms and
conditions set out in the Press Announcement (and with the
consideration being equal to or greater than that specified in the
Press Announcement), the Company agrees that the Offer Document shall
incorporate a unanimous and unqualified recommendation of the
Directors to the Bromo Shareholders to accept the Offer, except to the
extent that the Directors have determined in good faith with the
benefit of legal and financial advice that such recommendation should
not be given or should be withdrawn, modified or qualified in order to
comply with their fiduciary duties.
3.7 The obligations of the parties to implement the Scheme, or if
applicable the Offer, are subject to satisfaction or, where
permissible, waiver of the Conditions. The Company agrees that it
shall only file the relevant Court Order with the Registrar if all of
the Conditions are satisfied or, where permissible, waived by the
Offeror prior to the grant of the relevant Court Order. The Offeror
shall not be under any obligation to waive or treat as satisfied any
of the conditions in paragraph (b), (c), (e) or (f) of Appendix I to
the Press Announcement until the Clearances are satisfied.
3.8 The Company agrees to co-ordinate the preparation and despatch of the
Scheme Document with the Offeror and only to despatch the Scheme
Document with the consent of the Offeror (which shall not be
unreasonably withheld). Accordingly the Company will submit drafts and
revised drafts of the Scheme Document to the Offeror for review and
comment and shall discuss such comments with the Offeror for the
purposes of preparing revised drafts. The Offeror undertakes to
provide to the Company for the purposes of inclusion in the Scheme
Document all such information about the Offeror, its Group and their
respective Personnel as may reasonably be required by the Company
(having regard to the Code and applicable regulations) for inclusion
in the Scheme Document (including all information that would be
required under the Code or applicable regulations) and to provide all
such other assistance as the Company may reasonably require in
connection with the preparation of the Scheme Document including
access to and ensuring the assistance of its management and that of
Omega and relevant professional advisers.
3.9 The Offeror agrees to co-ordinate the preparation and despatch of the
Offer Document with the Company unless any of the Directors have
determined that the recommendation contemplated by sub-clause 3.6
shall not be given or should be withdrawn, modified or qualified in
order to comply with their fiduciary duties. Subject thereto, the
Offeror will submit drafts and revised drafts of the Offer Document to
the Company for review and comment and shall discuss such comments
with the Company for the purposes of preparing revised drafts.
3.10 (A) The Offeror will procure that its directors, and those of Omega,
accept responsibility for all of the information in the Scheme
Document relating to the Offeror, its Group and its Personnel.
(B) The Company will procure that the Directors accept
responsibility for all of the information in the Scheme Document
other than that relating to the Offeror, its Group and their
respective Personnel.
3.11 If the Offeror elects to exercise the right described in Part A of
Appendix I to the Press Announcement to implement the Acquisition by
way of the Offer:
(A) the Offeror will procure that its directors, and those of Omega,
accept responsibility for all of the information in the Offer
Document other than that relating to the Company, its Group and
their respective Personnel; and
(B) the Company will procure that the Directors accept
responsibility for the information in the Offer Document
relating to the Company, its Group and its Personnel.
3.12 The Company undertakes to provide the Offeror with all such
information about the Company, its Group and its Personnel as may
reasonably be required for inclusion in the Offer Document and to
provide all such other assistance as the Offeror may reasonably
require in connection with the preparation of the Offer Document,
including access to, and ensuring the provision of assistance by, its
management and relevant professional advisers.
3.13 The Company undertakes to co-operate with and assist the Offeror by
providing the Offeror and any relevant Competition Authority as
promptly as is reasonably practicable upon request and in good faith
any necessary information and documents for the purpose of making any
submissions, filings and notifications to such Competition Authority
in relation to the Acquisition, including making any joint filings
with the Offeror where required by any such Competition Authority.
3.14 Each party undertakes:
(A) to keep the other informed reasonably promptly of developments
which are material or potentially material to the obtaining of
the Clearances within 81 days of the posting of the Scheme
Document; and
(B) to disclose to each other material correspondence with any
relevant Competition Authority (subject to redaction of
confidential information).
3.15 The parties will consult with the Panel from time to time as necessary
in order to keep the Panel informed, and where appropriate seek the
consent of the Panel, as to the Timetable and the process to obtaining
the Clearances.
4. Conduct of Business
4.1 The Company undertakes, without prejudice to Rule 21 of the Code, that
prior to the earlier of the Effective Date and termination of this
Agreement in accordance with its terms, it will not, and it will
procure that no member of its Group shall:
(A) carry on business other than in the ordinary course (and the
parties agree that the entering into of any agreement or
arrangement (whether or not legally binding but excluding, for
the avoidance of doubt, the submission of a second-round
non-binding bid) to acquire the US business as notified by the
Company to the Offeror on 24 September 2004, without the prior
agreement of the Offeror, is not in the ordinary course of
business) and in all material respects consistent with past
practice; or
(B) alter the nature or scope of its business in any way which is
material in the context of either the business of the Company
and its Group taken as a whole or the implementation of the
Acquisition; or
(C) enter into, amend, supplement or terminate any agreement which
is material in the context of either the business of the Company
and its Group taken as a whole or the implementation of the
Acquisition; or
(D) subject to the fiduciary duties of its board of directors, take
any action which would be reasonably likely materially to delay
or prejudice, or increase the cost of, the Acquisition, the
Scheme or the Offer; or
(E) agree to do any of the foregoing.
4.2 Subject to the fiduciary duties of its Directors, the Company
undertakes that, except with the prior written consent of the Offeror,
it will not submit to its shareholders for approval in general meeting
any resolution which, if passed, would constitute approval for the
purposes of Rule 21.1 of the Code or seek the consent of the Panel to
proceed without such approval.
4.3 The Company undertakes that it will, and shall procure that its Group
does, co-operate with the Offeror in dealing with any party to an
agreement or arrangement with the Company or any member of its Group
which is affected by the Acquisition or would be affected by its
implementation and shall support the reasonable requests of the
Offeror as to how such effect shall be managed.
4.4 The Company shall not, and shall procure that its Group and their
respective management and professional advisers do not, directly or
indirectly solicit an offer or approach from any third party:
(A) to acquire all or a substantial part of the share capital of the
Company or a substantial part or value of the respective assets
of the Company or any member of its Group; or
(B) with a view to undertaking a transaction which is an alternative
to the Acquisition.
4.5 If any third party makes any unsolicited offer or approach:
(A) to acquire all or a substantial part of the share capital of the
Company or a substantial part or value of the respective assets
of the Company or any member of its Group; or
(B) with a view to undertaking a transaction which is an alternative
to the Acquisition,
the Company shall not (subject to its obligations under Rule 20.2 of
the City Code and subject to compliance by the Directors with their
fiduciary duties and (without prejudice to the foregoing) the
Directors shall be deemed to be acting in accordance with their
fiduciary duties if they in good faith believe that the third party is
a bona fide potential offeror) directly or indirectly, engage with
that third party or enter into any discussions or negotiations with
that third party in relation to such unsolicited offer or approach.
4.6 The Company will promptly inform the Offeror if any third party makes
any such unsolicited offer or approach and, subject to any
confidentiality obligations to which the Company may be subject and
subject to compliance by the Directors with their fiduciary duties,
the Company shall keep the Offeror informed of any communications it
receives from such third party in connection with any such unsolicited
offer or approach.
5. Representations, Warranties and Covenants
5.1 Each of the parties represents and warrants to the other on the date
hereof that:
(A) it has the requisite power and authority to enter into and
perform this Agreement;
(B) this Agreement constitutes its binding obligations in accordance
with its terms;
(C) the execution and delivery of, and performance of its
obligations under, this Agreement will not:
(i) result in a breach of any provision of its constitutional
documents;
(ii) result in a breach of, or constitute a default under, any
instrument to which it is a party or by which it is bound;
or
(iii) result in a breach of any order, judgement or decree of
any court or governmental agency to which it is a party or
by which it is bound.
5.2 The Company confirms and undertakes that, so far as its executive
directors are actually aware:
(A) it is a "foreign private issuer" as such term is defined under
Rule 3b-4(c) under the Exchange Act;
(B) the Company undertakes to furnish to the Offeror upon request of
the Offeror in writing a copy of the Company's register of
shareholders dated as of (i) a date on or around the 30th
calendar day prior to commencement (within the meaning of Rule
14d-2 ("Rule 14d-2") under the US Securities Exchange Act of
1934 (the "Exchange Act")) of a tender offer (within the meaning
of the Exchange Act) by the Offeror for the entire share capital
of the Company or (ii) such other date as may be agreed by the
Company and the Offeror for the purpose of assisting the Offeror
in making its calculation in accordance with instruction 2 to
Rules 14d-2(c) and (d).
6. Inducement Fee
6.1 If the Press Announcement is issued and thereafter:
(A) the Directors do not unanimously and without qualification
recommend the Acquisition or they (or any committee of the
Directors) at any time do withdraw or adversely modify or
qualify their recommendation of the Acquisition; or
(B) a Third Party Transaction is announced prior to the Acquisition
lapsing or being withdrawn which Third Party Transaction
subsequently becomes or is declared wholly unconditional or is
completed,
(in each case such an event being a "Relevant Event"), the Company
shall, in consideration of the Offeror procuring the release of the
Press Announcement, pay the Offeror the Inducement Fee in accordance
with sub-clause 6.2.
6.2 The Company shall pay the Inducement Fee no later than 5 Business Days
after demand from the Offeror which may only be made after the
occurrence of a Relevant Event. All sums payable under this clause 6
shall be paid in the form of an electronic funds transfer for same day
value to such bank as may be notified to the Company by the Offeror
and shall be paid in full free from any deduction or withholding
whatsoever (save only as may be required by law) and without regard to
any lien, right of set-off, counter-claim or otherwise.
7. Termination
7.1 This Agreement shall be terminated and all rights and obligations of
the parties shall cease, save under clauses 6 and 8-20, as follows:
(A) by notice in writing from the Offeror to the Company following a
material breach of any of the obligations of the Company set out
in clause 4;
(B) by notice in writing from the Offeror to the Company if a Third
Party Transaction becomes or is declared wholly unconditional or
is completed;
(C) if the Scheme is not sanctioned by Bromo Shareholders at the
Court Meeting or the EGM Resolutions are not approved at the
Extraordinary General Meeting;
(D) if the Court Orders are not granted or (save as the parties may
otherwise agree in writing) the Effective Date has not occurred
on or before the date which is six months after the date hereof;
(E) if the Offeror elects to implement the Acquisition by way of the
Offer, if the Offer, once announced under Rule 2.5 of the Code,
lapses in accordance with its terms or is withdrawn or not made;
or
(F) if the European Commission initiates proceedings under Article
6(1)(c) of the Regulation or, following a referral by the
European Commission under Article 9(1) of the Regulation to a
competent authority in the United Kingdom, there is a subsequent
reference to the Competition Commission; or
(G) by notice in writing from one party to the other, if the
recommendation of the Directors contemplated by sub-clauses 3.5
and 3.6, as the case may be, is not given or is withdrawn,
modified or qualified at any time prior to the grant of the
Court Orders.
7.2 Termination shall be without prejudice to the rights of either party
that may have arisen prior to termination. Clauses 6 and 8 - 20 shall
survive termination.
8. Notices
8.1 A notice under this Agreement shall only be effective if it is in
writing. Any notice must be given either by fax or be delivered by
hand or by same day courier.
8.2 Notices under this Agreement shall be sent to a party at its address
or number and for the attention of the individual set out below:
Party and title of individual Address Facsimile no.
----------------------------- ------- -------------
The Company Bromo House 01932 568933
FAO: Group Legal Adviser Coldharbour Lane
Thorpe
Egham
Surrey TW20 8TD
The Offeror 2 Lambs Passage 020 7240 5072
FAO: General Counsel London EC1Y 8BB
(Ref: RRO)
with a copy to:
Av. Ricardo Margain Zozaya + 52 81 8888 4399
# 325, Colonia
Valle del Campestre
Garza Garcia
Nuevo Lien
Mexico 66265
provided that a party may change its notice details on giving notice
to the other party of the change in accordance with this clause.
8.3 Any notice given under this Agreement shall, in the absence of earlier
receipt, be deemed to have been duly given as follows:
(A) if delivered personally, on delivery;
(B) if sent by facsimile, when sent (with receipt confirmed); and
(C) if sent by courier, on delivery.
8.4 Any notice given under this Agreement outside Working Hours in the
place to which it is addressed shall be deemed not to have been given
until the start of the next period of Working Hours in such place.
9. Remedies and Waivers
9.1 No delay or omission by any party to this Agreement in exercising any
right, power or remedy provided by law or under this Agreement shall:
(A) affect that right, power or remedy; or
(B) operate as a waiver of it.
9.2 The single or partial exercise of any right, power or remedy provided
by law or under this Agreement shall not preclude any other or further
exercise of it or the exercise of any other right, power or remedy.
9.3 The rights, powers and remedies provided in this Agreement are
cumulative and not exclusive of any rights, powers and remedies
provided by law.
9.4 Without prejudice to any other rights and remedies which any party may
have, each party acknowledges and agrees that damages would not be an
adequate remedy for any breach by any party of the provisions of this
Agreement and any party shall be entitled to seek the remedies of
injunction, specific performance and other equitable relief (and
neither of the parties shall contest the appropriateness or
availability thereof), for any threatened or actual breach of any such
provision of this Agreement by any party and no proof of special
damages shall be necessary for the enforcement by any party of the
rights under this Agreement.
10. Invalidity
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:
(A) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(B) the legality, validity or enforceability under the law of any
other jurisdiction of that or any other provision of this
Agreement.
11. No Partnership
Nothing in this Agreement and no action taken by the parties under
this agreement shall constitute a partnership, association, joint
venture or other co-operative entity between any of the parties.
12. Time of Essence
Except as otherwise expressly provided, time is of the essence of this
Agreement.
13. Contracts (Rights of Third Parties) Act 1999
The parties to this Agreement do not intend that any term of this
Agreement should be enforceable, by virtue of the Contracts (Rights of
Third Parties) Act 1999, by any person who is not a party to this
Agreement.
14. Entire Agreement
14.1 This Agreement and the Confidentiality Agreement constitute the whole
and only Agreement between the parties relating to the Acquisition and
supersede any previous agreement whether written or oral between the
parties in relation to the Acquisition. Nothing in this Agreement
shall have the effect of varying or limiting the provisions of the
Confidentiality Agreement.
14.2 Each party acknowledges that in entering into this agreement it is not
relying upon any pre-contractual statement that is not set out in this
agreement.
14.3 Except in the case of fraud, no party shall have any right of action
against any other party to this Agreement arising out of or in
connection with any pre-contractual statement except to the extent
that it is repeated in this Agreement.
14.4 For the purposes of this clause, "pre-contractual statement" means any
draft, agreement, undertaking, representation, warranty, promise,
assurance or arrangement of any nature whatsoever, whether or not in
writing, relating to the subject matter of this agreement made or
given by any person at any time prior to the date of this Agreement.
14.5 This Agreement may only be varied in writing signed by each of the
parties.
15. Assignment
No party shall assign or create a trust over all or any part of the
benefit of, or its rights or benefits under, this Agreement.
16. Announcements
16.1 Subject to sub-clause 16.2, and unless the recommendation of the
Directors contemplated by sub-clauses 3.5 and 3.6, as the case may be,
has not been given or has been withdrawn, modified or qualified, no
announcement (other than the Press Announcement) concerning the
Acquisition or any ancillary matter contemplated by this agreement
shall be made by either party hereto without the prior written
approval of the other, such approval not to be unreasonably withheld
or delayed.
16.2 The Company and the Offeror may each make such announcements as are
required by:
(A) the law of any relevant jurisdiction; or
(B) any securities exchange or regulatory or governmental body to
which that party is subject or submits, wherever situated,
including (without limitation) the UK Listing Authority, the
London Stock Exchange, the New York Stock Exchange, the Mexico
Stock Exchange and the Panel whether or not the requirement has
the force of law; or
(C) for the better implementation of the Acquisition, the Scheme,
the Offer or any ancillary matter,
in which case the party concerned shall take all such steps as may be
reasonable and practicable in the circumstances to agree the contents
of such announcement with the other party before making such
announcement.
17. Costs and Expenses
Each party shall pay its own costs and expenses in relation to the
negotiation and preparation of this Agreement and the implementation
of the transactions contemplated hereby.
18. Counterparts
18.1 This Agreement may be executed in any number of counterparts, and by
the parties on separate counterparts, but shall not be effective until
each party has executed at least one counterpart.
18.2 Each counterpart shall constitute an original of this Agreement, but
all the counterparts shall together constitute but one and the same
instrument.
19. Choice of Governing Law
This agreement is to be governed by and construed in accordance with
English law.
20. Jurisdiction
20.1 Each of the parties to this Agreement irrevocably agrees that the
courts of England shall have exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this Agreement
and that accordingly any proceedings may be brought in the courts of
England.
20.2 Each party irrevocably waives any objection which it may have now or
hereafter to the laying of the venue of any proceedings in the courts
of England and any claim that any such proceedings have been brought
in an inconvenient forum and further irrevocably agrees that a
judgement in any proceedings brought in the courts of England shall be
conclusive and binding upon such party and may be enforced in the
courts of England.
IN WITNESS of which this document has been executed and delivered as a deed on
the date which first appears on page 1 above.
Executed as a deed ) ../s/ Illegible..................
by RMC Group p.l.c. acting by ) ---------------------------------
Name:
Director
../s/ Illegible..................
---------------------------------
Name:
Director/Secretary
Executed as a deed by ) ../s/ Illegible..................
Cemex UK Limited acting by ) ---------------------------------
Name:
Director
../s/ Illegible..................
---------------------------------
Name:
Director/Secretary
SCHEDULE 1
(Press Announcement)
SCHEDULE 2
(Timetable)
- -------------------------------------------------------------------------------
Date Action
- -------------------------------------------------------------------------------
D-28 Press Announcement released
- -------------------------------------------------------------------------------
D-12 Issue application for permission to convene Court Meeting
- -------------------------------------------------------------------------------
D-8 Swearing and filing of affidavit exhibiting Scheme Document
- -------------------------------------------------------------------------------
D-5 Hearing of application for permission to convene Court Meeting
- -------------------------------------------------------------------------------
D Scheme Document posted
- -------------------------------------------------------------------------------
D+23 Court Meeting and Extraordinary General Meeting
US Business
Days/D+24 Presentation of petition applying for Court Orders
- -------------------------------------------------------------------------------
D+32 Application for directions
- -------------------------------------------------------------------------------
D+35 Advertising
- -------------------------------------------------------------------------------
D+49 Court Hearing (depending on Clearances)
- -------------------------------------------------------------------------------
D+50 Effective Date
- -------------------------------------------------------------------------------
D+71 Advertise reduction
- -------------------------------------------------------------------------------
Notes:
1. The parties recognise that the Timetable will be affected by the
occurrence of non-Business Days and the availability of the Court and
its staff.
2. The parties recognise that the Timetable may be affected by the
requirement to obtain Clearances.
3. The parties will discuss the timing of the matters to occur following
the Court Meeting and Extraordinary General Meeting in the light of
progress towards obtaining Clearances.
Exhibit 4.19
THE SCHEME OF ARRANGEMENT
IN THE HIGH COURT OF JUSTICE No. 6270 of 2004
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF
RMC GROUP p.l.c.
AND IN THE MATTER OF
THE COMPANIES ACT 1985
______________________________
SCHEME OF ARRANGEMENT
(under section 425 of the Companies Act 1985)
BETWEEN
RMC GROUP p.l.c.
AND
THE HOLDERS OF SCHEME SHARES
(as hereinafter defined)
______________________________
PRELIMINARY
(A) In this Scheme, unless inconsistent with the subject or context, the
following expressions bear the following meanings:
"Act" the Companies Act 1985 (as amended)
"Business Day" any day, other than a
Saturday, Sunday or public
holiday or bank holiday, on
which banks are open for
business in the City of London
"Cancellation Shareholders" holders of Cancellation Shares
"Cancellation Shares" Scheme Shares, other than
the Transfer Shares but including
Transfer Shares treated as
Cancellation Shares pursuant to
clause 3.2 of this Scheme
"CEMEX" CEMEX, S.A. de C.V.
"CEMEX Group" CEMEX and its subsidiary
undertakings
"CEMEX UK" CEMEX UK Limited, incorporated
in England and Wales with
registered number 05196131
"certificated" or
"in certificated form" a share which is not in
uncertificated form (that is, not
in CREST)
"Circular" the document dated 25 October 2004
sent by the Company to the holders
of its Ordinary Shares of which
this Scheme forms part
"Company" or "RMC" RMC Group p.l.c., incorporated in
England and Wales with registered
number 00249776
"Court" the High Court of Justice in
England and Wales
"Court Meeting" the meeting of the holders of
Ordinary Shares (other than
Ordinary Shares beneficially owned
by a member of the CEMEX Group)
convened by order of the Court
pursuant to section 425 of the
Companies Act 1985 to consider
and, if thought fit, approve this
Scheme, including any adjournment
thereof
"Court Order" the order of the Court sanctioning
the Scheme under section 425 of
the Act and confirming the
reduction of share capital under
section 137 of the Act provided
for by this Scheme
"CREST" the system for the paperless
settlement of trades in securities
and the holding of uncertificated
securities operated by CRESTCo
Limited in accordance with the
Uncertificated Securities
Regulations 2001 (SI 2001 No.
3755)
"CRESTCo" CRESTCo. Limited
"Effective Date" the date on which this Scheme
becomes effective in accordance
with clause 7 of this Scheme
"holder" includes any person entitled by
transmission
"Interim Dividend" the dividend of 9.4 pence per
Ordinary Share announced on 2
September 2004 in respect of the
six-month period ended 30 June
2004 payable on 1 December 2004 to
all holders of Ordinary Shares on
the register at the close of
business on 5 November 2004
"Loan Notes" the floating rate guaranteed
unsecured loan notes of CEMEX UK
to be issued pursuant to the Loan
Note Alternative, particulars of
which are summarised in Part VI of
the Circular
"Loan Note Alternative" the alternative consideration for
which a holder of Scheme Shares
(other than a Restricted Overseas
Person) may elect under clause 3
of this Scheme
"Loan Note Form of Election" the green form of election
relating to the Loan Note
Alternative and accompanying the
Circular
"members" members of the Company on the
register of members at any
relevant date
"Ordinary Shares" ordinary shares of 25 pence each
in the capital of the Company
"Restricted Overseas Person" a person (including an individual,
partnership, unincorporated
syndicate or organisation,
incorporated association, trust,
trustee, executor, administrator
or other legal representative) in
or resident in the United States,
Canada, Australia, Japan, Malaysia
or New Zealand or a U.S. Person
(as defined in Regulation S under
the U.S. Securities Act of 1933,
as amended)
"Scheme" this scheme of arrangement in its
present form or with or subject to
any modification, addition or
condition approved or imposed by
the Court
"Scheme Record Time" 6:00 p.m. on the Business Day
immediately preceding the
Effective Date
"Scheme Shares" (i) the Ordinary Shares in issue
at the date of this Scheme;
(ii) any Ordinary Shares issued
after the date of this
Scheme and before the
Voting Record Time; and
(iii) any Ordinary Shares issued
at or after the Voting
Record Time and before 6:00
p.m. on the day before the
date on which the Court
Order is made in respect of
which the original or any
subsequent holders thereof
are, or shall have agreed
in writing to be, bound by
this Scheme, in each case
other than any Ordinary
Shares beneficially owned
by the CEMEX Group
"Transfer Shares" Scheme Shares in respect of which
valid elections for the Loan Note
Alternative shall have been made
in accordance with this Scheme
"uncertificated" or
"in uncertificated form" recorded on the relevant register
as being held in uncertificated
form in CREST and title to which
may be transferred by means of
CREST
"U.S." or "United States" the United States of America, its
territories and possessions, any
State of the United States, and
the District of Columbia
"U.S. Securities Act" the United States Securities Act
of 1933 (as amended)
"Voting Record Time" 6:00 p.m. on the day which is two
days before the date of the Court
Meeting or, if the Court Meeting
is adjourned, 6:00 p.m. on the
second day before the day of such
adjourned meeting
and references to clauses are to clauses of this Scheme.
(B) The authorised share capital of the Company at the date of this Scheme
is (pound)100,000,000 divided into 400,000,000 Ordinary Shares, of
which, as at the close of business on 21 October 2004, 266,447,314
have been issued and are credited as fully paid and the remainder are
unissued.
(C) At the date of this Scheme the CEMEX Group beneficially owns
50,000,000 Ordinary Shares.
(D) CEMEX UK has agreed to appear by counsel on the hearing of the
petition to sanction this Scheme and to submit to be bound by and to
undertake to the Court to be bound by the Scheme and to execute and do
and procure to be executed and done all such documents, acts and
things as may be necessary or desirable to be executed or done by it
for the purpose of giving effect to this Scheme.
(E) CEMEX has agreed to procure that any holder (other than CEMEX UK) of
Ordinary Shares beneficially owned by a member of the CEMEX Group will
appear by counsel on the hearing of the petition to sanction this
Scheme and will undertake in respect of such Ordinary Shares to be
bound by this Scheme.
THE SCHEME
1 Cancellation of the Cancellation Shares
1.1 The capital of the Company shall be reduced by cancelling and
extinguishing the Cancellation Shares.
1.2 Subject to and forthwith upon the said reduction of capital taking
effect:
1.2.1 the authorised share capital of the Company shall be
increased to its former amount by the creation of such number
of Ordinary Shares as is equal to the number of Cancellation
Shares; and
1.2.2 the reserve arising in the books of account of the Company as
a result of the said reduction of capital shall be
capitalised and applied in paying up in full at par the
Ordinary Shares created pursuant to clause 1.2.1 of this
Scheme, which shall be allotted and issued credited as fully
paid to CEMEX UK and/or its nominees.
2 Consideration for cancellation of the Cancellation Shares
In consideration for the cancellation of the Cancellation Shares and the
allotment and issue of the Ordinary Shares as provided in clause 1 of this
Scheme, CEMEX UK shall (subject as hereinafter provided) pay to or for the
account of the holders of Cancellation Shares (as appearing in the register of
members of the Company at the Scheme Record Time):
for every Cancellation Share 855 pence in cash
3 Loan Note Alternative
3.1 If any holder of Scheme Shares shall validly so elect in respect of
all or some of his Scheme Shares, CEMEX UK shall, in consideration for
the transfer of the Transfer Shares (and subject as hereinafter
provided), allot and issue to such holder (as appearing in the
register of members at the Scheme Record Time) Loan Notes on the
following basis:
for every Transfer Share 855 pence nominal value of Loan Notes
provided that the Loan Note Alternative shall not be available to
Restricted Overseas Persons, or persons whom CEMEX UK believes to be
Restricted Overseas Persons.
3.2 If valid elections for the Loan Note Alternative would result in the
issue of less than (pound)10,000,000 nominal value of Loan Notes in
aggregate, CEMEX UK will not issue any Loan Notes. If no Loan Notes
are issued pursuant to this clause 3.2, any relevant Scheme Shares
whose holders have elected for the Loan Note Alternative shall be
treated as Cancellation Shares for the purposes of this Scheme, such
holders shall then receive the cash to which they would otherwise be
entitled under this Scheme, and clause 4 of this Scheme shall not
apply.
3.3 The Loan Notes shall be issued credited as fully paid and in amounts
and integral multiples of (pound)1 nominal. No fraction of a Loan Note
shall be issued to any holder of Scheme Shares and the cash
entitlement relating thereto shall be disregarded and not paid to such
holder.
3.4 The election referred to in clause 3.1 of this Scheme shall be made by
the completion and delivery of a Loan Note Form of Election in
accordance with the instructions thereon.
3.5 CEMEX UK shall be entitled, in determining whether a Loan Note Form of
Election is valid, or not, to exercise the powers and discretions
provided for in Part VII of the Circular.
3.6 Upon execution and delivery by a holder of Scheme Shares of a valid
Loan Note Form of Election such holder shall be bound by the terms and
provisions contained in the Loan Note Form of Election and in Part VII
of the Circular and in particular (but without prejudice to the
generality of the foregoing):
(i) shall be responsible for the representations and warranties
contained in Notes 2 and 4 on page 4 of the Loan Note Form of
Election and those set out in section 14 of Part VI of the
Circular; and
(ii) shall be bound by the provisions set out in section 14 of
Part VI and section 2 of Part VII of the Circular.
3.7 The Loan Notes will be constituted by an instrument substantially in
the form already prepared and initialled for the purpose of
identification by Linklaters solicitors, with such modifications or
additions, if any, as may prior to the execution thereof be agreed
between RMC and CEMEX UK.
3.8 The provisions of this clause 3 shall be subject to any prohibition or
condition imposed by law. Without prejudice to the generality of the
foregoing, if, in respect of any holder of Scheme Shares with a
registered address outside the United Kingdom or who is a citizen,
resident or national of a jurisdiction outside the United Kingdom,
CEMEX UK is advised that the issue of Loan Notes pursuant to this
clause 3 would or may infringe the laws of any such jurisdiction, or
would or may require CEMEX UK to observe any governmental or other
consent to any registration, filing or other formality with which
CEMEX UK is unable to comply or which CEMEX UK regards as unduly
onerous, CEMEX UK may determine that the Loan Note Alternative shall
not be available to such holder so that such holder shall be deemed to
be a Restricted Overseas Person and any Loan Note Form of Election
completed and delivered by such holder shall be invalid.
3.9
3.9.1 If at the Scheme Record Time the number of Scheme Shares held
by a person who has elected to receive Loan Notes is equal to
or exceeds the number of Scheme Shares in respect of which an
election for Loan Notes made by him would otherwise be
effective, the validity of his election shall not be affected
by any alteration in his holding of Scheme Shares between the
date on which he made such election and the Scheme Record
Time and any reductions in his holding shall, if applicable,
be treated as disposals of those Scheme Shares in respect of
which he did not elect to receive Loan Notes.
3.9.2 If at the Scheme Record Time the number of Scheme Shares held
by a person who has so elected to receive Loan Notes is less
than the number of Scheme Shares in respect of which the
holder has elected to receive such Loan Notes, he shall be
treated as having validly elected to receive Loan Notes in
respect of all of his Scheme Shares.
4 Acquisition of Transfer Shares
Forthwith and contingently upon the cancellation of the Cancellation Shares,
the allotment of the Ordinary Shares referred to in clause 1.2.2 of this Scheme
and the registration of such Ordinary Shares in the name of CEMEX UK but
subject to clause 3.2 of this Scheme, CEMEX UK shall acquire the Transfer
Shares fully paid, with full title guarantee, free from all liens, equities,
charges, encumbrances and other interests and together with all rights at the
date of this Scheme or thereafter attached thereto including the right to
receive and retain all dividends and other distributions declared, paid or made
thereon, on or after 27 September 2004, other than the Interim Dividend.
For such purposes, the Transfer Shares shall be transferred to CEMEX UK and/or
its nominees and to give effect to such transfer any person may be appointed by
CEMEX UK to execute as transferor an instrument or instruction of transfer of
any Transfer Shares and every instrument or instruction of transfer so executed
shall be as effective as if it had been executed by the holder or holders of
the Transfer Shares thereby transferred.
5 Payments
5.1 As soon as practicable after the Effective Date and in any event not
more than 14 days thereafter, CEMEX UK shall:
5.1.1 in the case of Cancellation Shares which at the Scheme Record
Time were in certificated form, despatch or procure the
despatch to the persons entitled thereto, or as they may
direct, in accordance with the provisions of clause 5.2,
cheques and/or warrants for the sums payable to them
respectively in accordance with clause 2 of this Scheme or,
in the case of Cancellation Shares which at the Scheme Record
Time are in uncertificated form, ensure that an assured
payment obligation in respect of the sums payable to the
persons entitled thereto is created in accordance with the
CREST assured payment arrangements PROVIDED that CEMEX UK
reserves the right to make payment of the said consideration
by cheque and/or warrant as aforesaid if, for any reason, it
wishes to do so; and
5.1.2 against the execution of any instrument or instruction of
transfer referred to in clause 4 of this Scheme, in the case
of Transfer Shares, issue the Loan Notes which it is required
to issue pursuant to clause 3 of this Scheme and deliver
certificates therefor to the persons entitled thereto, or as
they may direct.
5.2 All deliveries of cheques, warrants and certificates required
to be made pursuant to this Scheme shall be effected by
posting the same by first class post in pre-paid envelopes
addressed to the persons entitled thereto at their respective
addresses as appearing in the register of members of the
Company at the Scheme Record Time (or, in the case of joint
holders, at the address of that one of the joint holders
whose name stands first in the said register in respect of
such joint holding at such time) or in accordance with any
special instructions regarding communications, and neither
CEMEX UK nor the Company shall be responsible for any loss or
delay in the transmission of cheques, warrants or
certificates sent in accordance with this clause 5.2 which
shall be sent at the risk of the person entitled thereto.
5.3 All cheques and warrants shall be made payable to the person
to whom in accordance with the foregoing provisions or this
clause the envelope containing the same is addressed and the
encashment of any such cheque or warrant shall be a complete
discharge to CEMEX UK for the moneys represented thereby.
5.4 The provisions of this clause 5 shall be subject to any
prohibition or condition imposed by law.
6 Certificates and Cancellations
With effect from and including the Effective Date:
6.1 all certificates representing Scheme Shares shall cease to have effect
as documents of title to the Scheme Shares comprised therein and every
holder of Scheme Shares shall be bound at the request of the Company
to deliver up the same to the Company or as it may direct; and
6.2 CRESTCo shall be instructed to cancel the entitlements to Scheme
Shares of holders of Scheme Shares in uncertificated form.
7 Dividend Mandates
All mandates and other instructions to the Company in force at the Scheme
Record Time relating to Transfer Shares shall, unless and until revoked or
amended, be deemed as from the Effective Date to be valid and effective
mandates in relation to the payment of interest and capital and instructions to
CEMEX UK in relation to the Loan Notes issued in respect thereof.
8 The Effective Date
8.1 This Scheme shall become effective in accordance with its terms as
soon as an office copy of the Court Order sanctioning this Scheme
under section 425 of the Companies Act 1985 and confirming under
section 137 of the said Act the reduction of the capital provided for
by this Scheme shall have been delivered to the Registrar of Companies
for registration and, in the case of the confirmation of the reduction
of capital, shall have been registered by him.
8.2 Unless this Scheme shall become effective on or before 26 March 2005
or such later date, if any, as CEMEX UK and the Company may agree and
the Court may allow, this Scheme shall never become effective.
9 Modification
CEMEX UK and the Company may jointly consent on behalf of all concerned to any
modification of, or addition to, this Scheme or to any condition which the
Court may approve or impose.
Dated 25 October 2004
EXHIBIT 4.20
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CEMEX, INC.
AND
VOTORANTIM PARTICIPACOES S.A.
* * *
Dated as of February 4, 2005
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND TERMS
1.1 CERTAIN DEFINITIONS.............................................................................1
1.2 OTHER DEFINITIONAL PROVISIONS..................................................................11
ARTICLE II TRANSFER OF ASSETS AND LIABILITIES
2.1 ASSETS. 11
2.2 LIABILITIES....................................................................................16
2.3 PURCHASE PRICE.................................................................................19
2.4 PURCHASE PRICE ADJUSTMENT......................................................................19
2.5 ALLOCATION OF THE PURCHASE PRICE...............................................................22
2.6 PRORATION OF CERTAIN AMOUNTS AND UTILITIES.....................................................23
ARTICLE III THE CLOSING
3.1 GENERALLY......................................................................................25
3.2 GENERAL CONDITIONS.............................................................................25
3.3 CONDITIONS TO SELLER'S OBLIGATIONS.............................................................26
3.4 CONDITIONS TO PURCHASER'S OBLIGATIONS..........................................................26
3.5 DELIVERIES BY SELLER...........................................................................27
3.6 DELIVERIES BY PURCHASER........................................................................29
3.7 POST-CLOSING ACTIONS...........................................................................29
ARTICLE IV SELLER'S REPRESENTATIONS AND WARRANTIES
4.1 ORGANIZATION, ETC..............................................................................30
4.2 AUTHORIZATION..................................................................................30
4.3 BINDING EFFECT.................................................................................31
4.4 NO VIOLATIONS..................................................................................31
4.5 FINANCIAL INFORMATION..........................................................................31
4.6 CONDUCT IN THE ORDINARY COURSE; ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS..............32
4.7 LITIGATION.....................................................................................32
4.8 MATERIAL CONTRACTS.............................................................................32
4.9 OWNED REAL PROPERTY; TANGIBLE PERSONAL PROPERTY; LEASES; VESSEL................................34
4.10 PERMITS. 34
4.11 NOTICES OF VIOLATIONS..........................................................................35
4.12 EMPLOYEE, EMPLOYEE BENEFIT AND LABOR MATTERS...................................................35
4.13 ENVIRONMENTAL MATTERS..........................................................................36
4.14 TAXES. ......................................................................................36
4.15 BROKERS AND FINDERS............................................................................37
4.16 DISCLAIMERS....................................................................................37
ARTICLE V PURCHASER'S REPRESENTATIONS AND WARRANTIES
5.1 ORGANIZATION...................................................................................38
5.2 AUTHORIZATION..................................................................................38
5.3 BINDING EFFECT.................................................................................38
5.4 NO VIOLATIONS..................................................................................38
5.5 FINANCING......................................................................................39
5.6 BROKERS AND FINDERS............................................................................39
5.7 VESSELS. 39
ARTICLE VI COVENANTS
6.1 OPERATION OF THE BUSINESS BETWEEN SIGNING AND CLOSING..........................................39
6.2 ACCESS TO INFORMATION..........................................................................42
6.3 COMMERCIALLY REASONABLE EFFORTS................................................................43
6.4 GOVERNMENT NOTIFICATION........................................................................44
6.5 BULK TRANSFER LAWS.............................................................................44
6.6 PUBLIC ANNOUNCEMENTS...........................................................................45
6.7 ACCOUNTS RECEIVABLE; RECEIPTS AND DISBURSEMENTS................................................45
6.8 TRANSITION SERVICES............................................................................45
6.9 LIKE-KIND EXCHANGE.............................................................................48
6.10 INSURANCE; RISK OF LOSS........................................................................49
6.11 INTRACOMPANY ARRANGEMENTS......................................................................51
6.12 RETAINED NAMES.................................................................................51
6.13 OWEN SOUND TERMINAL............................................................................51
6.14 MAINTENANCE OF INDEMNIFICATION RIGHTS..........................................................52
6.15 VESSELS. 52
6.16 CONFIDENTIALITY................................................................................53
6.17 NOTICE OF DEVELOPMENTS.........................................................................53
6.18 NON-COMPETITION................................................................................54
6.19 WHITE OAK LITIGATION...........................................................................57
6.20 CHARLEVOIX LANDFILL OPERATING LICENSE..........................................................57
ARTICLE VII EMPLOYEE MATTERS
7.1 OFFERS OF EMPLOYMENT...........................................................................58
7.2 EMPLOYEE-RELATED OBLIGATIONS AND COSTS.........................................................58
7.3 SEVERANCE......................................................................................59
7.4 SERVICE CREDIT.................................................................................60
7.5 WELFARE PLANS..................................................................................60
7.6 BONUSES. 60
ARTICLE VIII SURVIVAL; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................61
8.2 INDEMNIFICATION BY SELLER......................................................................61
8.3 INDEMNIFICATION BY PURCHASER...................................................................63
8.4 CERTAIN LIMITATIONS............................................................................63
8.5 INDEMNIFICATION PROCESS........................................................................65
8.6 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS...................................................67
8.7 SATISFACTION OF INDEMNIFICATION OBLIGATIONS....................................................67
8.8 ADDITIONAL ENVIRONMENTAL INDEMNIFICATION.......................................................67
8.9 REMEDIATION PROCEDURES AND STANDARDS...........................................................69
8.10 CORRECTIVE ACTION PROCEDURES AND STANDARDS.....................................................71
8.11 DIXON PURCHASE AGREEMENT.......................................................................72
8.12 EXCLUSIVE REMEDIES.............................................................................74
ARTICLE IX TERMINATION AND ABANDONMENT
9.1 TERMINATION....................................................................................74
9.2 EFFECT OF TERMINATION..........................................................................75
9.3 DETROIT TERMINAL LIQUIDATED DAMAGES............................................................75
ARTICLE X MISCELLANEOUS PROVISIONS
10.1 EXPENSES AND TAXES.............................................................................76
10.2 FURTHER ASSURANCES.............................................................................76
10.3 NOTICES. 77
10.4 HEADINGS AND SCHEDULES.........................................................................78
10.5 APPLICABLE LAW.................................................................................78
10.6 NO THIRD PARTY RIGHTS..........................................................................78
10.7 COUNTERPARTS...................................................................................78
10.8 AMENDMENT......................................................................................78
10.9 WAIVER. 78
10.10 SEVERABILITY...................................................................................79
10.11 ENTIRE AGREEMENT...............................................................................79
10.12 CONSENT TO JURISDICTION........................................................................79
10.13 BINDING EFFECT; NO ASSIGNMENT..................................................................80
* * * * *
Schedule A - Knowledge Persons
Schedule B - Title Insurance Policies/Commitments
Exhibit 2.4-1 - Preliminary Closing Statement
Exhibit 2.4-2 - Accounting Principles and Practices
Exhibit 3.3(f) - Detroit Lease
Exhibit 3.5(a) - General Bill of Sale
Exhibit 3.5(b) - General Assignment and Assumption Instrument
Exhibit 3.5(c) - Special Warranty Deed
Exhibit 3.5(d) - Legal Opinion
DEFINED TERMS
Accounts Receivable..........................................................12
Action........................................................................1
Affiliate.....................................................................1
Agreement.....................................................................1
Allocation...................................................................23
Allocation Disagreement......................................................23
Antitrust Division...........................................................44
Assumed Collective Bargaining Agreements......................................2
Assumed Contracts............................................................17
Assumed Environmental Liabilities............................................18
Assumed Leases...............................................................17
Assumed Liabilities..........................................................16
Base Working Capital..........................................................2
Business.....................................................................12
Business Day..................................................................2
Business Employees............................................................2
Casualty Loss................................................................49
Casualty Loss Election.......................................................50
Casualty Termination Election................................................50
CCPC..........................................................................2
Challenger....................................................................2
Challenger Agreements.........................................................2
Change of Control Transaction.................................................2
Charlevoix Facility...........................................................1
Charlevoix Landfill..........................................................57
Charlevoix Landfill Operating License.....................................2, 57
Charlevoix PSD Matter........................................................63
Citizen.......................................................................2
Claim Notice.................................................................65
Closing......................................................................25
Closing Date.................................................................25
Closing Working Capital.......................................................3
CMC...........................................................................3
Code..........................................................................3
Co-Generation Lease...........................................................3
Confidentiality Agreement.....................................................3
Conquest......................................................................3
Conquest Bill of Sale........................................................29
Contract......................................................................3
Conveyance Taxes..............................................................3
CTL..........................................................................22
Current NOx Patent Application................................................3
Damages......................................................................62
Deeds........................................................................28
Detroit Lease Agreement......................................................27
Detroit Terminal.............................................................75
Direct Claim.................................................................65
Dixon Amendment No. 1.........................................................3
Dixon Business................................................................3
Dixon Environmental Litigation................................................3
Dixon Facility................................................................1
Dixon Material Adverse Effect.................................................4
Dixon Petition................................................................4
Dixon Purchase Agreement......................................................4
Dixon Real Property...........................................................4
Dixon Retained Real Property..................................................4
Environmental Condition.......................................................4
Environmental Cost Sharing Matters............................................4
Environmental Law.............................................................4
Environmental Permit..........................................................4
ERISA.........................................................................5
ERISA Affiliate...............................................................5
Exchange Act.................................................................55
Excluded Assets..............................................................16
Excluded Environmental Liabilities............................................5
Excluded Liabilities.........................................................18
Excluded Taxes................................................................5
Facilities....................................................................1
Facility Employees...........................................................35
Final Allocation.............................................................23
Final Closing Statement......................................................21
Final Valuation..............................................................22
Financial Statements.........................................................32
Former Prairie Allocated Liability............................................5
FTC..........................................................................44
GAAP..........................................................................5
General Assignment and Assumption Instrument..................................5
General Bill of Sale..........................................................5
Governmental Authority........................................................5
Governmental Order............................................................6
Grant Thornton...............................................................21
Hazardous Substances..........................................................6
HSR Act.......................................................................6
Income Taxes..................................................................6
Indemnified Party............................................................65
Indemnifying Party...........................................................65
Independent Accounting Firm..................................................21
Interest Rate................................................................22
Intracompany Liabilities.....................................................19
Intracompany Receivables.....................................................15
Inventory.....................................................................6
Judgments.....................................................................6
Knowledge.....................................................................6
Known Environmental Matters...................................................6
Landfill Account.............................................................57
Law...........................................................................6
Lease.........................................................................7
Leased Real Property..........................................................7
Liability.....................................................................7
Lien..........................................................................7
Material Adverse Effect.......................................................7
Miller.......................................................................51
Miller Supply Agreement......................................................51
Non-Transferred Employee.....................................................58
Notice of Disagreement.......................................................21
Off-Site Location.............................................................7
Owen Sound Terminal...........................................................7
Owned Real Property..........................................................34
Payroll Amount...............................................................47
Payroll Services.............................................................46
Permit........................................................................7
Permitted Liens...............................................................7
Person........................................................................8
Plans........................................................................36
Post-Acquisition Contacts....................................................33
Post-Closing Tax Period......................................................24
Prairie.......................................................................8
Prairie Allocated Liability...................................................8
Pre-Acquisition Contacts.....................................................33
Pre-Closing Tax Period.......................................................24
Preliminary Closing Statement................................................20
PSD Damages..................................................................63
Purchase Price...............................................................20
Purchased Assets.............................................................12
Purchaser.....................................................................1
Purchaser Detroit Liabilities................................................62
Real Property.................................................................9
Real Property Leases..........................................................9
Real Property Sublease........................................................9
Reference Balance Sheet.......................................................9
Reference Balance Sheet Date..................................................9
Release.......................................................................9
Remediation...................................................................9
Resolution Period............................................................21
Restricted Building Region....................................................9
Restricted Cement Business...................................................54
Restricted Cement Region.....................................................10
Restricted Period............................................................54
Retained Names...............................................................15
Retained Policies............................................................14
Seller........................................................................1
Seller Disclosure Schedule...................................................30
Seller Representatives.......................................................53
Seller Retained Environmental Fines and Penalties............................10
Seller Retained Off-site Liabilities.........................................10
Seller's Severance Cap.......................................................60
Shipping Act.................................................................10
Significant Business Combination Transaction.................................10
Significant Restricted Business..............................................10
Specified Affiliates.........................................................11
Straddle Period..............................................................11
Surveys......................................................................29
Tangible Personal Property...................................................13
Tax Returns..................................................................11
Taxes........................................................................11
Terminals.....................................................................1
Third Party Claim............................................................65
Threshold Damage Amount......................................................50
Title Company................................................................28
Title Policy.................................................................28
Title Representation Damages.................................................64
Transaction Documents........................................................11
Transferred Employee.........................................................58
Unassigned Contracts.........................................................43
Valenciana...................................................................11
Vessels......................................................................11
WARN Act.....................................................................11
Worker's Compensation Claim..................................................59
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of February 4, 2005, by and
between CEMEX, Inc., a Louisiana corporation ("Seller"), and Votorantim
Participacoes S.A., a corporation (sociedade anonima) organized under the laws
of the Federative Republic of Brazil ("Purchaser").
This Agreement sets forth the terms and conditions upon which Seller
will, and will cause its Affiliates to, sell to Purchaser or its Affiliates or,
with respect to the Conquest, its nominee, and Purchaser will purchase, or will
cause its Affiliates and, with respect to the Conquest, its nominee, to
purchase, from Seller or Seller's Specified Affiliates, certain assets of
Seller and its Specified Affiliates relating to Seller's cement plants located
in Dixon, Illinois (the "Dixon Facility") and in Charlevoix, Michigan (the
"Charlevoix Facility") and its related cement distribution business with
terminals located in Owen Sound, Ontario Canada (subject to Section 6.13);
Ferrysburg, Michigan; Cleveland and Toledo, Ohio; Chicago, Illinois; and
Milwaukee, Manitowoc and Green Bay, Wisconsin (collectively, the "Terminals,"
and together with the Dixon Facility and the Charlevoix Facility, the
"Facilities"), and Purchaser will assume certain liabilities of Seller and its
Specified Affiliates relating to such assets.
ARTICLE I
DEFINITIONS AND TERMS
1.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"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.
"Agreement" means this Asset Purchase Agreement, together with the
Exhibits and Schedules hereto, the Seller Disclosure Schedule and the Purchaser
Disclosure Schedule, as the same may by amended or supplemented from time to
time in accordance with the terms of this Agreement.
"Assumed Collective Bargaining Agreements" means, collectively, the
collective bargaining agreements applicable to the Facility Employees that are
being assumed by Purchaser as set forth on Section 2.1(a)(xiii) of the Seller
Disclosure Schedule.
"Base Working Capital" means $30,959,000.
"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.
"Business Employees" means the current employees, officers and
directors of the Business.
"CCPC" means CEMEX Central Plains Cement LLC, a Delaware limited
liability company.
"Challenger" means the vessel named "Southdown Challenger."
"Challenger Agreements" means, collectively, (i) the Participation
Agreement, dated as of May 28, 2002, among Seller, as Charterer, Valenciana, as
Guarantor, Citicorp Railmark, Inc. as Owner Participant, and Wilmington Trust
Company, not in its individual capacity, except as expressly provided for
therein, but solely as Owner Trustee, and (ii) the Time Charter Party, made and
concluded on May 31, 2002, by and between Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee and Seller.
"Change of Control Transaction" means any business combination
transaction (including any merger, consolidation, stock or asset purchase or
sale or other similar transaction) involving CEMEX S.A. de C.V. or Seller or
any of their respective Affiliates or subsidiaries that results in (i) CEMEX
S.A. de C.V. owning, immediately following the closing of such transaction,
less than 50% of the voting equity of Seller, (ii) the shareholders of CEMEX
S.A. de C.V. immediately prior to the closing of such transaction owning,
immediately following the closing of such transaction, less than 50% of the
voting equity of CEMEX S.A. de C.V. or (iii) CEMEX S.A. de C.V. or Seller
having, immediately following the closing of such transaction, sold all or
substantially all of their respective assets or businesses.
"Charlevoix Landfill Operating License" means the Solid Waste Disposal
Area Operating License for the operation of a Type III Low Hazard Industrial
Landfill, License No. 9069, in connection with the Charlevoix Facility.
"Citizen" means any Person within the meaning of 46 U.S.C. ss.
12102(a)(4) who is qualified to own and document vessels in the United States.
"Closing Working Capital" means the current assets of the Business as
of the Closing Date, minus the current liabilities of the Business, as of the
Closing Date, in each case as reflected on the balance sheet of the Business
included in the Final Closing Statement as provided in Section 2.4.
"CMC" means Canadian Medusa Cement Limited (f/k/a Miller Terminals
Limited and 843343 Ontario Limited), a company organized under the laws of
Ontario, Canada.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Co-Generation Lease" means the Co-Generation Plant Lease Agreement,
dated July 30, 2002, by and between Dixon Energy Partners, LLC and Prairie
Materials Sales, Inc., which was assigned to CCPC pursuant to the Dixon
Purchase Agreement.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
February 27, 2004, by and between Seller and Votorantim Cimentos Ltda., as the
same may by amended or supplemented from time to time in accordance with the
terms of the Confidentiality Agreement.
"Conquest" means the vessel named "CEMEX Conquest."
"Contract" means any contract, agreement, license, purchase order,
sale order, bid, unaccepted bid, instrument of indebtedness, guarantee or other
binding arrangement, whether written or oral.
"Conveyance Taxes" means all excise, sales, use, value added,
transfer, stamp, real property transfer, value added or gains and similar Taxes
and any transfer, recording, documentary, filing, registration and similar
levies, fees and charges.
"Current NOx Patent Application" means the United States provisional
patent application No. 60/583,663 filed by Licensor on June 29, 2004 entitled
"Method of Reducing Cement Kiln NOx Emissions by Water Injection".
"Dixon Amendment No. 1" means the First Amendment to Purchase
Agreement, dated as of February 3, 2005, by and between Seller and Prairie.
"Dixon Business" means the "Business" as such term is defined in the
Dixon Purchase Agreement.
"Dixon Environmental Litigation" means the "Environmental Litigation"
as such term is defined in the Dixon Purchase Agreement.
"Dixon Material Adverse Effect" means a "Material Adverse Effect" as
such term is defined in the Dixon Purchase Agreement.
"Dixon Petition" means the "Petition" as such term is defined in the
Dixon Purchase Agreement.
"Dixon Purchase Agreement" means the Purchase Agreement, dated June
20, 2003, between Prairie and Seller, as amended by (i) the letter agreement,
dated September 25, 2003, between Prairie and Seller and (ii) Dixon Amendment
No. 1.
"Dixon Real Property" means the "Real Property" as such term is
defined in the Dixon Purchase Agreement.
"Dixon Retained Real Property" means the "Retained Real Property" as
such term is defined in the Dixon Purchase Agreement.
"Environmental Condition" means the presence of Hazardous Substances
in the environment or building materials, the Release of Hazardous Substances
to the environment, or the disposal of Hazardous Substances to land-based
storage, treatment or disposal facilities (such as landfills), whether at the
Facilities, the Purchased Assets or any Off-Site Location, including any
migration of Hazardous Substances through air, soil, surface water,
groundwater, sediments, land or surface or subsurface strata at, to or from the
Facilities, the Purchased Assets or any Off-Site Location.
"Environmental Cost-Sharing Matters" means those Actions, Liabilities
and Damages described in clauses (i) through (iii) of Section 8.8(b), except in
each case to the extent that such Actions, Liabilities and Damages arise from
or relate to Known Environmental Matters.
"Environmental Law" means all Laws, including rules of common law,
relating to pollution or protection of the environment or human health and
safety, including Laws relating to Releases or threatened Releases of Hazardous
Substances into the indoor or outdoor environment (including air, soil, surface
water, groundwater, sediment, land and surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, Release, transport or handling of Hazardous Substances; all
Laws that relate to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances; all Laws relating to wildlife,
including endangered or threatened species of fish and plants and the
management or use of natural resources; and all Laws regulating or setting
standards with respect to noise and, as such relates to mining and quarrying
activities conducted at the Facilities, seismic vibrations.
"Environmental Permit" means Permits issued pursuant to Environmental
Laws.
"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.
"Excluded Environmental Liabilities" means the Seller Retained
Environmental Fines and Penalties and the Seller Retained Off-Site Liabilities.
"Excluded Taxes" means (i) all Income Taxes owed by Seller or any of
its Affiliates for any period, (ii) all Taxes relating to the Excluded Assets
or Excluded Liabilities for any period, (iii) all Taxes relating to the
Purchased Assets, the Business or the Assumed Liabilities for any Pre-Closing
Tax Period or the allocable portion of a Straddle Period (as determined under
Section 2.6(a)), (iv) Seller's allocable portion of any Conveyance Taxes as
determined under Section 10.1(a) and (v) subject to Section 8.6, all Taxes
imposed on Purchaser or any of its Affiliates as a result of Seller breaching
(A) its representations and warranties set forth in Article IV or (B) its
covenants under Sections 2.6 and 10.1, except in the case of clauses (i), (ii)
and (iii), to the extent of any Tax Liabilities reflected in the Final Closing
Statement and that are taken into account in determining any Purchase Price
adjustment under Section 2.4.
"Former Prairie Allocated Liability" means any Damage with respect to
any matter or event for which Purchaser or any of its Affiliates would have
been entitled to indemnification from Prairie solely as a result of the
inaccuracy of any representation or warranty of Prairie (other than the
representations and warranties in Sections 6.1(a), 6.1(b), 6.1(c), 6.1(l), and
6.1(r)) under the terms of the Dixon Purchase Agreement had the Dixon Amendment
No. 1 not become effective. To the extent that Purchaser or any of its
Affiliates would be entitled to indemnification from Prairie under other terms
of the Dixon Purchase Agreement (including, for example, indemnification for
matters that are retained liabilities under the Dixon Purchase Agreement), such
Damages shall not be considered a Former Prairie Allocated Liability.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time.
"General Assignment and Assumption Instrument" means an instrument of
general assignment and assumption with respect to the Assumed Liabilities in
substantially the form of Exhibit 3.5(b).
"General Bill of Sale" means a bill of sale in substantially the form
of Exhibit 3.5(a).
"Governmental Authority" means any U.S. or non-U.S. federal, state,
foreign or local legislative, executive, administrative, judicial, provincial,
quasi-judicial or other public authority, agency, department, bureau, division,
unit, court or other public body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Substances" means (i) any petrochemical or petroleum
products, radioactive materials, radon gas, asbestos or asbestos-containing
materials, mold, lead-based paint, urea formaldehyde foam insulation and
polychlorinated biphenyls, (ii) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning
and regulatory effect under any applicable Environmental Law and (iii) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" means any and all Taxes based on or measured by
reference to gross or net income (and franchise or other Taxes imposed in lieu
thereof).
"Inventory" means all inventory held for sale and all raw materials,
work in process, finished products, supply and packaging materials, in each
case primarily relating to the Business and located at the Facilities and the
Detroit Terminal.
"Judgments" means any judgments, decisions, injunctions, orders,
decrees, writs, rulings or awards of any court or other judicial authority or
any Governmental Authority of competent jurisdiction.
"Knowledge" means, with respect to Seller, the actual knowledge of
those Persons set forth in Schedule A after such Person reviewed this Agreement
and the disclosures schedules and made a reasonable investigation with respect
to matters set forth in this Agreement relating to such Person's particular
area of responsibility; provided, however, that if any such Person fails to
make such an investigation, "Knowledge" of such Person shall include the
matters such Person would have known had such reasonable investigation been
conducted.
"Known Environmental Matters" means those matters identified on
Section 2.2(a)(viii) of the Seller Disclosure Schedule.
"Law" means each applicable provision of any constitution, statute,
law, ordinance, code, rule, regulation, Judgment, release, license or other
official legally binding pronouncement of any Governmental Authority.
"Lease" means any (i) Real Property Lease, (ii) Real Property Sublease
and (iii) written or oral lease, sublease, rental contract or similar contract
related to the Business or the Purchased Assets and pursuant to which Seller or
any of its Affiliates leases any Tangible Personal Property from a third party
(together with all amendments, modifications, supplements, waivers and consents
thereto or thereunder).
"Leased Real Property" means any real property leased by Seller or its
Affiliates from third parties pursuant a Real Property Lease.
"Liability" means any liability, expense, fee, penalty, fine, damage
or obligation of any nature, whether known or unknown, accrued, absolute,
contingent or otherwise, and whether due or to become due.
"Lien" means any lien (statutory or otherwise), encumbrance or adverse
claim, deed to secure debt, mortgage, preferred ship mortgage, maritime lien,
lease, license the interest of a lessor under any capital lease, security
interest, option, charge, pledge, hypothecation, title defect or objection,
reversion, reverter, preferential arrangement, easement, encroachment,
restrictive covenant or restriction of any kind.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition or results of operations of the Business, taken
as a whole, except to the extent any such effect is attributable to or results
from (i) any change in applicable Law or in the interpretation of any
applicable Law by any Governmental Authority, (ii) any change in GAAP, (iii)
the execution or announcement of this Agreement or compliance with the terms
hereof, (iv) any circumstances or conditions generally affecting the portland
cement or aggregates industry in the United States and Canada that do not
affect the Business in a materially disproportionate manner relative to other
Persons engaged in such business, or (v) general economic, political or market
conditions in the United States and Canada that do not affect the Business in a
materially disproportionate manner relative to other Persons engaged in the
portland cement or aggregates business in the United States and Canada;
provided that the exception set forth in clause (iii) above shall not apply in
respect of representations and warranties of Seller contained in Sections 4.4
and 4.12(d).
"Off-Site Location" means any real property other than the Real
Property.
"Owen Sound Terminal" means Seller's cement terminal located in Owen
Sound, Ontario Canada.
"Permit" means any license, approval, registration, variances, permit,
authorization, certificate or similar rights granted or issued by a
Governmental Authority.
"Permitted Liens" means the following: (i) Liens set forth in Section
1.1(a) of the Seller Disclosure Schedule, (ii) mechanics', carriers',
workmen's, repairmen's, landlord's or other like Liens arising or incurred in
the ordinary course of business (as to which no enforcement, execution, levy or
foreclosure shall have commenced or for which no bill shall have been sent),
(iii) Liens for Taxes, assessments and other governmental charges which are not
delinquent or are being contested in good faith in appropriate proceedings and
for which adequate reserves have been maintained in accordance with GAAP, (iv)
all matters shown on those certain surveys of the Dixon Facility by S and E
Enterprises, Inc. d/b/a Survey-Tech (File Numbers 316-03 and 317-03), copies of
which have been provided to Purchaser, (v) all matters shown on each of the
Surveys to the extent such matters do not, individually or in the aggregate,
materially impair the present occupancy or use of the applicable Real Property,
(vi) any matters shown on those certain title insurance policies/commitments
set forth on Schedule B attached hereto (other than those matters identified as
unpermitted on such schedule), (vii) any other covenants, conditions,
restrictions, reservations, rights, claims, rights-of-ways, easements and other
encumbrances or matters of record affecting title to the Purchased Assets but
which, in any event, do not materially interfere with the present occupancy or
use of the applicable Purchased Asset in the Business which (A) were not
incurred in connection with any indebtedness for borrowed money and (B) do not
render title to the applicable Real Property encumbered thereby unmarketable,
(viii) zoning, building, land use, conservation and other similar restrictions
imposed by Law, (ix) the terms of the Assumed Leases and Assumed Contracts and
liens of the other parties to such Assumed Leases and Assumed Contracts arising
thereunder for sums not yet due and payable, (x) Liens related to Assumed
Liabilities, (xi) Liens affecting a lessor's or licensor's interest in Tangible
Personal Property leased or licensed to Seller, (xii) Liens registered under
the Uniform Commercial Code as adopted in any applicable state or similar
legislation in other jurisdictions by any lessor or licensor of Tangible
Personal Property to Seller, (xiii) Liens arising in the ordinary course of
business after the date hereof that do not, individually or in the aggregate,
materially impair the present use or value of the Purchased Assets, provided
that such Liens do not arise as a result of Seller incurring or assuming any
indebtedness for borrowed money, and (xiv) Liens arising or resulting, during
or after the Closing, from any action taken by Purchaser or any of its
Affiliates.
"Person" means any individual, sole proprietorship, partnership, joint
venture, corporation, estate, trust, unincorporated organization, association,
limited liability company, institution, Governmental Authority, or other
entity.
"Prairie" means Prairie Material Sales, Inc., an Illinois corporation.
"Prairie Allocated Liability" means any Damage with respect to any
matter or event for which Seller or any of its Affiliates would have been
entitled to indemnification from Prairie under the terms of the Dixon Purchase
Agreement had the transactions contemplated by this Agreement not occurred,
without regard to (i) any defense that Prairie may otherwise have to such
indemnification obligation under any applicable bankruptcy, insolvency or
similar Law affecting creditors' rights generally, (ii) any defense that
Prairie may otherwise have to such indemnification obligation by virtue of any
act or omission of Purchaser or any of its Affiliates, (iii) any failure or
inability of Purchaser or any of its Affiliates to collect on any judgment
against Prairie with respect to any such claim or (iv) any modifications to the
Dixon Purchase Agreement that occur after the Closing.
"Real Property" means, collectively, the Leased Real Property and the
Owned Real Property.
"Real Property Leases" means any lease, sublease or similar agreement
pursuant to which Seller or any of its Affiliates leases, subleases or
otherwise occupies any real property primarily used in (or intended to be used
in) or primarily related to the Business.
"Real Property Sublease" means any lease, sublease or similar
agreement granting to any other Person any right to the use or occupancy of the
Owned Real Property.
"Reference Balance Sheet" means the unaudited combined balance sheet
of the Business, dated October 31, 2004 and expressed in U.S. dollars, a copy
of which is set forth in Section 4.5(a) of the Seller Disclosure Schedule.
"Reference Balance Sheet Date" means October 31, 2004.
"Release" means any release, spill, emission, discharge, leaking,
pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or
migration of Hazardous Substances into soil, surface water, ground water,
sediments, land or surface or subsurface strata.
"Remediation" means actions undertaken to address an Environmental
Condition, including the following activities: (i) monitoring, investigation,
assessment, treatment, cleanup, containment, removal, mitigation, response or
restoration work; (ii) obtaining any Permits, consents, approvals or
authorizations of any Governmental Authority necessary to conduct any such
activity; (iii) preparing and implementing any plans or studies for any such
activity; (iv) obtaining a written notice from a Governmental Authority with
jurisdiction over the Facilities, the Purchased Assets, or an Off-Site Location
under Environmental Laws that no material additional work is required by such
Governmental Authority; (v) the use, implementation, application, installation,
operation or maintenance of removal actions on the Facilities, the Purchased
Assets or Off-Site Locations, remedial technologies applied to the surface or
subsurface soils, excavation and treatment or disposal of soils at an Off-Site
Location, systems for long-term treatment of surface water or groundwater,
engineering controls or institutional controls; and (vi) any other activities
reasonably determined to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition.
"Restricted Building Region" means the areas that fall within a 150
mile radius around each of (i) the Dixon Facility and (ii) the Charlevoix
Facility.
"Restricted Cement Region" means, unless this definition is modified
pursuant to Section 6.13, (i) the State of Michigan and (ii) the areas that
fall within a 150 mile radius around each of (A) the Dixon Facility, (B) the
Terminals located in the cities of Milwaukee, Manitowoc and Green Bay,
Wisconsin and (C) the Terminal located in the city of Owen Sound, Ontario
Canada.
"Seller Retained Environmental Fines and Penalties" means any fines
and penalties arising out of or related to any violations of or non-compliance
with Environmental Laws or Environmental Permits by Seller or any of its
Affiliates with respect to the Facilities or the Purchased Assets during the
period of Seller's ownership of the Facility or Purchased Asset; provided,
however, that "Seller Retained Environmental Fines and Penalties" shall not
include (i) any costs associated with correcting any such violations or
non-compliance, (ii) any such fines or penalties that arise out of any Known
Environmental Matter or (iii) any fines or penalties attributable to violations
of, or non-compliance with, Environmental Laws or Environmental Permits that
occur after the Closing Date, including any portion of any fine or penalty to
the extent that portion is attributed to the continuation after the Closing
Date of any violations of, or non-compliance with, applicable Environmental
Laws or Environmental Permits that commenced prior to the Closing Date.
"Seller Retained Off-Site Liabilities" means Liabilities relating to
or resulting or arising from the off-site transportation, storage, disposal,
treatment, or recycling of Hazardous Substances generated by and transported by
or on behalf of Seller or any of its Affiliates in connection with the Business
prior to the Closing Date, including claims related to loss of life, injury to
persons or property or Remediation of Environmental Conditions.
"Shipping Act" means the Shipping Act, 1916 (46 U.S.C. ss. 801 et
seq.), as amended, and the rules and regulations promulgated thereunder.
"Significant Business Combination Transaction" means any business
combination transaction (including any merger, consolidation, stock purchase or
sale or other similar transaction) involving Seller or any of its subsidiaries
or Affiliates where immediately following the consummation of such transaction
the shareholders of the other party to such transaction or any of such Person's
Affiliates or subsidiaries owns at least 20% of the outstanding equity of
CEMEX, S.A. de C.V. (or any Person who shall be a successor, by merger or
otherwise, to Seller or any of its subsidiaries or Affiliates of any of the
foregoing in connection with or at any time after such transaction).
"Significant Restricted Business" means, with respect to a particular
Person, the Restricted Cement Businesses of such Person if more than 25% of
such Person's consolidated total revenues during the most recently completed
fiscal year were derived from such Person's Restricted Cement Businesses.
"Specified Affiliates" means, collectively, CCPC and CMC.
"Straddle Period" means any taxable period beginning on or prior to
and ending after the Closing Date.
"Tax Returns" means any report, return, declaration or other filing
required to be supplied to any taxing authority or jurisdiction with respect to
any Tax, including any amendments or attachments thereto and including any
information return, claim for refund, amended return or declaration of
estimated Tax.
"Taxes" means any and all taxes, assessments, charges, duties,
tariffs, imposts, fees, levies or other governmental charges, including all
federal, state, local, foreign or other income, windfall or other profits,
unitary, gross receipts, payroll, business, franchise, capital stock, real
property, personal property, intangible taxes, withholding, FICA, unemployment
compensation, transfer, sales, use, ad valorem, stamp, value added, excise and
other taxes, assessments, charges, duties, fees, or levies of any kind
whatsoever (whether or not requiring the filing of returns), any transferee or
secondary liability in respect of taxes and all deficiency assessments,
additions to tax, penalties and interest.
"Transaction Documents" means this Agreement, the General Assignment
and Assumption Agreement, the General Bill of Sale, the Deeds, the Conquest
Bill of Sale, the Detroit Lease Agreement and any other deeds, endorsements,
assignments or other documents delivered in connection with this Agreement.
"Valenciana" means CEMEX Espana, S.A., a company organized and
existing under the laws of Spain that was formerly known as Compania Valenciana
De Cementos Portland, S.A.
"Vessels" means, collectively, the Challenger and the Conquest.
"WARN Act" means the Worker Adjustment and Retraining Notification Act
of 1988, as amended from time to time, and the rules and regulations
promulgated thereunder.
1.2 Other Definitional Provisions.
(a) Any reference to an Article, Section, Exhibit or
Annex is a reference to an Article or Section of, or an Exhibit or Annex to,
this Agreement, unless otherwise specified.
(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.
(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 February 4, 2005.
ARTICLE II
TRANSFER OF ASSETS AND LIABILITIES
2.1 Assets.
(a) Purchased Assets. Upon the terms and subject to
the conditions of this Agreement, at the Closing, Seller shall, and shall cause
its Specified Affiliates to, sell, transfer, convey, assign, lease and deliver
to Purchaser and/or one or more Affiliates or, with respect to the Conquest,
the nominee of Purchaser (as designated by Purchaser), and Purchaser shall, and
shall cause any such designated Affiliate or, with respect to the Conquest,
such nominee to, purchase, acquire and accept from Seller all of Seller's and
the Specified Affiliates' right, title and interest in all of the (y) fixed
assets located at the Facilities and (z) other properties, assets, rights,
claims and contracts (collectively, the "Purchased Assets") primarily used in
(or intended to be primarily used in) or primarily related to Seller's business
of producing, marketing, distributing and selling portland cement and coarse
construction aggregates (as customarily performed by Seller prior to the
Closing) at or from the Facilities (the "Business"), free and clear of any and
all Liens (other than Permitted Liens) and excluding the Excluded Assets.
Without limiting the generality of the foregoing, the Purchased Assets shall
include (other than Excluded Assets) all right, title and interest in the
following assets, rights, properties and contracts of Seller and its Specified
Affiliates as of the Closing Date:
(i) the Inventory for which title of ownership
has not passed from Seller to its customers prior to the Closing;
(ii) all prepaid expenses, prepaid Taxes,
advance payments, deposits and prepaid items, including prepaid
interest and deposits with lessors, suppliers or utilities, to the
extent related to the Business;
(iii) Seller's and Seller's Affiliates' accounts
receivable primarily arising out of and primarily related to the
conduct of the Business and outstanding as of the Closing, other than
the Intracompany Receivables ("Accounts Receivable");
(iv) the Owned Real Property, including, to the
extent of Seller's or its Specified Affiliates' rights, titles and
interests therein, all mineral rights appurtenant to the Owned Real
Property, all buildings, structures, fixtures and other improvements
located thereon and all easements, rights-of-way and other rights and
interests appurtenant thereto;
(v) all equipment, motor vehicles and other
tangible personal property owned or leased by Seller and/or a
Specified Affiliate, as the case may be, and located on the Real
Property or used primarily in the conduct of the Business as presently
conducted, including all vehicles (both plant and delivery), office
furniture, and operating and other supplies (including fuel), tools,
repair parts and spare parts located at the Facilities, including
those assets listed in Section 2.1(a)(v) of the Seller Disclosure
Schedule (collectively, "Tangible Personal Property");
(vi) subject to receipt of any required
contractual consents, all Assumed Leases;
(vii) subject to receipt of any required
contractual or governmental consents and, with respect to the
Challenger Agreements, Purchaser satisfying its obligations under
Section 6.15, all Assumed Contracts;
(viii) other than the Charlevoix Landfill
Operating License, all Permits issued to Seller or its Specified
Affiliates in connection with its operation of the Business or its
ownership, possession, occupancy or use of any of the Purchased
Assets, including those Permits listed in Section 2.1(a)(viii) of the
Seller Disclosure Schedule;
(ix) all claims and rights of action, including
warranty, indemnification and other rights (including performance
guarantees and, except as set forth in Section 6.10, rights to
insurance proceeds) (to the extent transferable), in each case to the
extent primarily relating to the ownership or operation of, or
primarily used for the conduct of, the Business or the Purchased
Assets, but excluding (A) any of the foregoing that exclusively relate
to any Excluded Liabilities, (B), except as set forth in Section 6.10,
any claim for reimbursement under insurance policies for losses or
damages suffered or incurred with respect to the Business or any
Purchased Assets prior to the Closing Date and (C) those referred to
in Sections 2.1(b)(xv) and 2.1(b)(xvii);
(x) all originals (or if originals are
unavailable, copies) of (A) the Assumed Contracts and other documents
that constitute an Assumed Liability, and (B) all other books of
account, records, files, customer and supplier lists, price lists,
vessel records and logs and correspondence (including that on
microfiche and computer tapes and disks) primarily associated with, or
used by Seller in the operation, ownership or use of, the Facilities
or the ownership, use, possession or occupancy of any of the Purchased
Assets, but specifically excluding records that are a part of Seller's
accounting system; provided that Seller may, subject to Section 6.16,
retain one copy of any such items listed in clauses (A) and (B) of
this Section 2.1(a)(x);
(xi) the goodwill of the Business;
(xii) subject to Purchaser satisfying its
obligations under Section 6.15, the Conquest;
(xiii) subject to receipt of contractual
consents from the applicable union, to the Assumed Collective
Bargaining Agreements;
(xiv) all Real Property Tax Returns and sales
Tax Returns specified in Section 2.1(a)(xiv) of the Seller Disclosure
Schedule and related workpapers to the extent exclusively related to
the Purchased Assets or the Business; and
(xv) the assets described in Section 2.1(a)(xv)
of the Seller Disclosure Schedule.
(b) Excluded Assets. Except to the extent expressly
described above, Purchased Assets shall not include any other assets,
properties, rights and interest of Seller or any of its Affiliates, and,
without limiting the generality of the foregoing and notwithstanding Section
2.1(a), Purchased Assets shall not include the following:
(i) the assets described in Section 2.1(b)(i) of
the Seller Disclosure Schedule;
(ii) cash, cash equivalents and other short term
investments;
(iii) any Inventory sold or otherwise disposed
of in accordance with Section 6.1(d) to non-Affiliates of Seller
during the period from the date of this Agreement until the Closing;
(iv) except as set forth in Section 6.10, any
insurance policies or insurance coverage (or assumed coverage) of
Seller or any of its Affiliates, including any policy or coverage
relating to the Purchased Assets or the Business (the "Retained
Policies");
(v) any rights pursuant to any agreement or
contract between Seller and any of its Affiliates, unless otherwise
listed on Section 2.1(b)(v) of the Seller Disclosure Schedule;
(vi) subject to Section 6.7, all outstanding
amounts, including Accounts Receivable, owing to the Business from
other businesses of Seller or Seller's Affiliates (the "Intracompany
Receivables");
(vii) all rights, including the right to use, in
or to (a) any intellectual property of Seller and its Affiliates,
whether or not exclusively used in or necessary for the conduct of the
Business, including Seller's and its Affiliates' patents, copyrights,
tradenames, trademarks, service marks, logos, slogans, internet domain
names, licenses and software (whether or not registered in any country
in the world), (b) Seller's and its Affiliates' rights to the
trademarks "CEMEX", "Southdown" or "Medusa" and (c) those items listed
on Section 2.1(b)(vii) of the Seller Disclosure Schedule (such names,
collectively, the "Retained Names");
(viii) the services of the Non-Transferred
Employees;
(ix) all refunds, rebates or similar payments of
Taxes to the extent related to the Excluded Taxes (other than any such
amount for which Seller has received a Purchase Price adjustment
pursuant to Section 2.4);
(x) the assets of any employee benefits plan,
program, agreement or arrangement maintained by Seller or any of its
Affiliates;
(xi) all Tax Returns of Seller other than those
specified in Section 2.1(a)(xiv) of the Seller Disclosure Schedule;
(xii) any books and records related to the
Business that Seller or any of its Affiliates is required by Law to
retain, so long as Seller delivers at least one copy thereof to
Purchaser;
(xiii) rights of Seller or any of its Affiliates
under this Agreement and the other Transaction Documents entered into
by Seller or any of its Affiliates pursuant to or in connection with
this Agreement;
(xiv) all other assets and rights (excluding
Purchased Assets) of every kind and nature, real or personal, tangible
or intangible, used primarily or held by Seller or any of its
Affiliates for use primarily in connection with its ownership,
possession, occupancy, use or management of the Excluded Assets;
(xv) all rights with respect to claims or legal
proceedings relating to the Business set forth on Section 2.1(b)(xv)
of the Seller Disclosure Schedule;
(xvi) the shares of ownership or other ownership
interests in any Affiliate or subsidiary of Seller and any Tax
attributes of any Affiliate or subsidiary of Seller;
(xvii) all rights, privileges, claims, demands,
choses in action, prepayments, deposits, refunds, claims in
bankruptcy, indemnification agreements with, and indemnification
rights against, third parties, warranty claims, offsets and other
rights and claims primarily relating to any Excluded Asset or any
Excluded Liability and the rights and claims excluded from the
Purchased Assets pursuant to Section 2.1(b)(xv);
(xviii) all correspondence and documents
prepared by Seller for its internal evaluation purposes or related to
any third party bid to purchase the assets of the Business in
connection with the sale of the Business;
(xix) any collective bargaining agreement
between Seller or any of its Affiliates and any union other than the
Assumed Collective Bargaining Agreements; and
(xx) the Charlevoix Landfill Operating License.
The assets retained by Seller and/or any of its Affiliates pursuant to this
Section 2.1(b) are "Excluded Assets".
2.2 Liabilities.
(a) Assumed Liabilities. Subject to the terms and
conditions set forth herein, at Closing, Purchaser agrees to assume and pay,
discharge and perform when due (or to cause its Affiliates or, with respect to
the Conquest, its nominee to pay, discharge and perform when due) and shall
assume (or cause its Affiliates or, with respect to the Conquest, its nominee
to assume) pursuant to the General Assignment and Assumption Instrument (or
such other assignment and assumption agreement acceptable to Purchaser and
Seller), the following Liabilities, except for the Excluded Liabilities (the
"Assumed Liabilities"):
(i) Liabilities relating to periods on or after
the Closing Date (and all Liabilities arising prior to the Closing
Date in the ordinary course of business to the extent performance is
required after the Closing Date and to the extent Purchaser receives
the benefit corresponding to such Liabilities) under the Leases
(excluding Leases that are Unassigned Contracts) that are either (A)
listed on Section 4.9(c) of the Seller Disclosure Schedule (unless
designated in such Schedule as not being assumed by Purchaser), or (B)
entered into between the date hereof and the Closing by the Seller or
any of its Specified Affiliates in accordance with Section 6.1,
excluding in each case Liabilities attributable to any breach or
default of such Lease by Seller or any Specified Affiliate prior to
the Closing (collectively, the "Assumed Leases");
(ii) Liabilities relating to periods on or after
the Closing Date (and all Liabilities arising prior to the Closing
Date in the ordinary course of business to the extent performance is
required after the Closing Date and to the extent Purchaser receives
the benefit corresponding to such Liabilities) under the Contracts
(excluding Contracts that are Unassigned Contracts) related to the
Business that are either (A) listed on Section 2.2(a)(ii) of the
Seller Disclosure Schedule (unless designated in such Schedule as not
being assumed by Purchaser), or (B) entered into between the date
hereof and the Closing by Seller or any of its Specified Affiliates in
accordance with Section 6.1, excluding in each case Liabilities
attributable to any breach or default of such Contract by Seller or
any Specified Affiliate prior to the Closing (collectively, the
"Assumed Contracts");
(iii) reclamation obligations with respect to
the Charlevoix Facility and the Dixon Facility;
(iv) all Liabilities for Taxes (other than
Excluded Taxes) with respect to the Purchased Assets or the Business,
including those taxes for which Purchaser is liable pursuant to
Section 2.6(a) for taxable periods (or portions thereof) ending after
the Closing Date and Section 10.1(a);
(v) all Liabilities relating to, or occurring or
existing in connection with, or arising out of, the ownership and
operation of the Purchased Assets or the conduct of the Business on or
after the Closing Date;
(vi) all Liabilities of Seller or any of its
Specified Affiliates under any Permit constituting a Purchased Asset
that arise on or after the Closing Date (and all Liabilities arising
prior to the Closing Date in the ordinary course of business to the
extent performance is required after the Closing Date and to the
extent Purchaser receives the benefit corresponding to such
Liabilities);
(vii) all Liabilities arising out of or in
connection with product liability claims for personal injuries,
property damage or losses that involve the use of any product sold or
otherwise disposed of by Purchaser or any of its Affiliates on or
after the Closing Date;
(viii) all Liabilities relating to or resulting
or arising from the following: (A) any violation or alleged violation
of or non-compliance with Environmental Laws or Environmental Permits
whether prior to, on or after the Closing Date, with respect to the
ownership, lease, maintenance or operation of the Facilities, the
Purchased Assets or the Business, including any fines or penalties and
the costs associated with correcting any such violations or
non-compliance, but excluding any Seller Retained Environmental Fines
or Penalties; (B) Environmental Conditions or exposure to Hazardous
Substances at, on, in, under, adjacent to or migrating or discharged
to or from the Facilities or Purchased Assets prior to, on or after
the Closing Date, including loss of life, injury to persons or
property (including from exposure to asbestos-containing materials),
damage to natural resources, and Remediation of Environmental
Conditions; (C) the off-site transportation, storage, disposal,
treatment, or recycling of Hazardous Substances generated by and
transported by or on behalf of Purchaser or any of its Affiliates in
connection with the Business on or after the Closing Date, including
claims related to loss of life, injury to persons or property or
Remediation of Environmental Conditions; and (D) Known Environmental
Matters. The Liabilities described in this subsection are collectively
the "Assumed Environmental Liabilities."
(ix) all Liabilities reflected on the Final
Closing Statement;
(x) the Assumed Collective Bargaining
Agreements;
(xi) all Liabilities arising out of, relating
to, or occurring or existing in connection with, for the period after
the Closing Date, the employment, compensation, benefits, severance or
termination of employment of the Transferred Employees by Purchaser or
its Affiliates pursuant to plans, arrangements and policies of
Purchaser or its Affiliates (including the Assumed Collective
Bargaining Agreements), except as otherwise provided in Article VII of
this Agreement; and
(xii) all Liabilities specifically assumed by
Purchaser pursuant to Sections 6.10(d).
(b) Excluded Liabilities. Except as otherwise
provided in this Section 2.2(b) with respect to the Prairie Allocated
Liabilities, Seller and its Specified Affiliates shall retain, and shall be
responsible for paying, performing and discharging when due, and Purchaser
shall not assume or have any responsibility for, the Liabilities of Seller and
the Specified Affiliates other than the Assumed Liabilities (the "Excluded
Liabilities"), including:
(i) all Liabilities with respect to Excluded
Taxes;
(ii) all Liabilities relating to, or occurring
or existing in connection with, or arising out of, the ownership and
operation of the Excluded Assets, whether before, on or after, the
Closing Date;
(iii) relating to, or occurring or existing in
connection with, or arising out of, the ownership and operation of the
Business prior to the Closing Date, except obligations or liabilities
assumed pursuant to Sections 2.2(a)(i), (ii), (iii), (iv), (vi),
(viii), (ix) and (xii);
(iv) all Liabilities arising out of or in
connection with product liability claims for personal injuries,
property damage or losses that involve the use of any product sold or
otherwise disposed of by Seller or any of its Affiliates prior to the
Closing Date;
(v) all Liabilities relating to litigation of
Seller and its Affiliates pending as of the Closing, including the
Actions identified in Section 2.2(b)(v) of the Seller Disclosure
Schedule;
(vi) all Excluded Environmental Liabilities;
(vii) all Liabilities arising out of, relating
to, or occurring or existing in connection with, (A) for the period
ending on and including the Closing Date, the employment,
compensation, benefits, severance or termination of employment of the
Business Employees by Seller or its Affiliates, (B) for the period
prior to, on and after the Closing Date, the employment, compensation,
benefits, severance or termination of employment of the
Non-Transferred Employees and (C) for the period prior to, on and
after the Closing Date, the employment, compensation, benefits,
severance or termination of employment of any former employees,
officers or directors of the Facilities, in each case except as
otherwise provided in Article VII;
(viii) all Liabilities relating to indebtedness
for borrowed money, obligations evidenced by notes, bonds, debentures
or similar instrument or obligations as lessee under capital leases
(other than, to the extent assumed by Purchaser, Liabilities under the
Challenger Agreements) relating to the Business; and
(ix) all amounts, including accounts payable,
due from the Business to other businesses of Seller or any of its
Affiliates (the "Intracompany Liabilities");
provided, however, that, notwithstanding the foregoing, with respect to any
such Liabilities that constitute Prairie Allocated Liabilities, such
liabilities shall not constitute Excluded Liabilities to the extent that either
(x) Seller has an indemnification right with respect thereto pursuant to
Section 8.11(a) or (y) Purchaser is not entitled to seek indemnification from
Seller with respect thereto under Section 8.11(b).
2.3 Purchase Price. The purchase price for the sale,
conveyance, assignment, transfer and delivery of the Purchased Assets, shall be
the sum of (a) $389,200,000, plus (b) the value of the Landfill Account as of
the Closing Date (the "Purchase Price"), subject to adjustment as set forth in
Section 2.4, plus the assumption of the Assumed Liabilities in accordance with
Section 2.2(a). Notwithstanding any other provision of this Agreement, if
Seller does not deliver the certificate described in Section 3.5(e) at or prior
to the Closing, Purchaser shall be permitted to withhold from the Purchase
Price the amount required to be withheld pursuant to Section 1445 of the Code
as calculated by Purchaser in good faith.
2.4 Purchase Price Adjustment.
(a) As promptly as practicable, but in any event not
later than 60 calendar days after the Closing Date, Seller shall cause to be
prepared and delivered to Purchaser a statement (the "Preliminary Closing
Statement") substantially in the form of Exhibit 2.4-1, setting forth (i) the
balance sheet of the Business at the close of business on the day immediately
preceding the Closing Date, which shall be prepared in accordance with GAAP on
a basis consistent with the preparation of the Reference Balance Sheet and
consistent with the accounting principles, practices and methodologies set
forth in Exhibit 2.4-2 (and excluding the items identified therein) and (ii)
Seller's calculation (based on the amounts set forth on the balance sheet
contained in the Preliminary Closing Statement) of the Closing Working Capital.
Seller shall allow Purchaser's employees, accountants and other authorized
representatives the opportunity to review Seller's preparation of the
Preliminary Closing Statement, including the opportunity (A) to observe any
counting of inventory and similar activity conducted in the preparation of the
Preliminary Closing Statement and other accounting procedures, and (B) to
obtain copies of Seller's work papers and, to the extent Seller can obtain
access using commercially reasonable efforts, access to Seller's accountant's
work papers).
(b) Subject to the provisions of Section 2.4(c),
Purchaser shall have 30 calendar days from the date of delivery of the
Preliminary Closing Statement to review and approve or disapprove the
Preliminary Closing Statement. Seller shall provide Purchaser and its
representatives with copies of Seller's work papers and, to the extent Seller
can obtain access using commercially reasonable efforts, access to Seller's
accountants' work papers generated in connection with the preparation of the
Preliminary Closing Statement, as well as access to employees and
representatives of Seller and its accounting firm to assist Purchaser in its
review of such work papers and the Preliminary Closing Statement. If Purchaser
has no objections to the Preliminary Closing Statement or to Seller's
calculation of the Closing Working Capital contained in the Preliminary Closing
Statement, Purchaser shall promptly so advise Seller in writing. If Purchaser
so advises Seller, or if Purchaser fails to deliver the Notice of Disagreement
referred to below within the requisite 30 calendar day period, the calculation
of the Closing Working Capital set forth in the Preliminary Closing Statement
shall be deemed final.
(c) If Purchaser has any objections to the
Preliminary Closing Statement or to the calculation of the Closing Working
Capital set forth in the Preliminary Closing Statement, including objections to
the valuation of the Inventory, Purchaser shall notify Seller in writing (the
"Notice of Disagreement") of such disagreement within 30 calendar days after
delivery of the Preliminary Closing Statement (such 30 calendar day period, the
"Resolution Period"). The Notice of Disagreement shall set forth in reasonable
detail the basis for the disagreement. Thereafter, Seller and Purchaser shall
attempt in good faith to resolve any such objection. Except with respect to
disagreements regarding the valuation of the Inventory (which will be resolved
pursuant to Section 2.4(d)), if Seller and Purchaser are unable to resolve the
disagreement within 30 calendar days after the delivery of the Notice of
Disagreement, such disagreement shall be referred to Grant Thornton LLP ("Grant
Thornton") or, if for any reason such public accounting firm is not independent
of Seller or Purchaser or is not able or declines to be engaged to resolve such
disagreement, an independent public accounting firm mutually selected by Seller
and Purchaser for resolution of such disagreement, in accordance with the
requirements of Section 2.4(a) (either Grant Thornton or the selected or
appointed public accounting firm, as the case may be, the "Independent
Accounting Firm"). If Seller and Purchaser do not promptly agree on the
selection of an independent public accounting firm, each of them shall appoint
an independent public accounting firm and such two independent public
accounting firms shall jointly select the Independent Accounting Firm. The
determinations made by the Independent Accounting Firm with respect to any such
disagreement shall be final and binding upon Seller and Purchaser for all
purposes under this Agreement. Each of Seller and Purchaser shall use its
commercially reasonable efforts to cause the Independent Accounting Firm to
render its determination as soon as practicable after referral of such
disagreement to such firm, and each shall cooperate with such firm and shall
provide such firm with reasonable access to its books, records, personnel and
representatives and such other information as such firm may require in order to
render its determination. The scope of the Independent Accounting Firm's
engagement (which shall not be an audit) shall be limited to the resolution of
the items contained in the Notice of Disagreement (other than the resolution of
any disagreement regarding the valuation of the Inventory), and the
recalculation, if any, of the Closing Working Capital in light of such
resolution. In its review of the Preliminary Closing Statement and
recalculation of the Closing Working Capital, the Independent Accounting Firm
will be limited to using the procedures and methodologies set forth in Exhibit
2.4-2, and if there is a disagreement as to the valuation of the Inventory, the
Independent Accounting Firm shall use the Final Valuation determined pursuant
to Section 2.4(d). The fees, costs and expenses of the Independent Accounting
Firm, if any, will be borne equally by Seller and Purchaser. The Preliminary
Closing Statement, as adjusted in accordance with the resolution of any
disagreement with respect thereto or, if no Notice of Disagreement is timely
given, as delivered to Purchaser pursuant to Section 2.4(a), is referred to in
this Agreement as the "Final Closing Statement."
(d) Subject to Section 2.4(c), if Purchaser has any
objections to the valuation of the Inventory included in the Preliminary
Closing Statement, Purchaser shall notify Seller of such disagreement in the
Notice of Disagreement. If Seller and Purchaser are unable to resolve the
disagreement within the Resolution Period, such disagreement shall be referred
to Construction Technology Laboratories, Inc. ("CTL") or, if for any reason
such organization or firm is not independent of Seller or Purchaser or is not
able or declines to be engaged to resolve such disagreement, an organization or
firm mutually selected by Seller and Purchaser for resolution of such
disagreement (either CTL or the selected or appointed organization or firm, as
the case may be, the "Independent Appraiser"). If Seller and Purchaser do not
promptly agree on the selection of an independent appraiser, each of them shall
appoint an independent appraiser and such two independent appraisers shall
jointly select the Independent Appraiser. The determinations made by the
Independent Appraiser with respect to any such Inventory valuation disagreement
shall be final and binding upon Seller and Purchaser for all purposes under
this Agreement. Each of Seller and Purchaser shall use its commercially
reasonable efforts to cause the Independent Appraiser to render its
determination as soon as practicable after referral of such disagreement to
such organization, and each shall cooperate with such organization and shall
provide such organization with reasonable access to its books, records,
personnel and representatives and such other information as such firm may
require in order to render its determination. The scope of the Independent
Appraiser's engagement shall be limited to the resolution of the valuation of
the Inventory contained in the Notice of Disagreement. The fees, costs and
expenses of the Independent Appraiser, if any, will be borne equally by Seller
and Purchaser. The valuation of the Inventory, as adjusted in accordance with
the resolution of any disagreement with respect thereto is referred to in this
Agreement as the "Final Valuation."
(e) No later than five Business Days after the time
the Preliminary Closing Statement becomes final pursuant to the provisions of
this Section 2.4, the following payments shall be made in immediately available
funds by wire transfer to an account specified by the recipient prior to such
date:
(i) if the Closing Working Capital as shown on
the Final Closing Statement is less than the Base Working Capital,
Seller shall pay to Purchaser an amount equal to such shortfall,
together with interest on such amount at an annual rate equal to the
prime rate of interest (as quoted daily by The Wall Street Journal),
calculated on the basis of a 365-day year (the "Interest Rate") from
and including the Closing Date to but excluding the date of the
payment of such amount to Purchaser; and
(ii) if the Closing Working Capital as shown on
the Final Closing Statement is greater than the Base Working Capital,
Purchaser shall pay to Seller an amount equal to such excess, together
with interest on such amount at the Interest Rate from and including
the Closing Date to but excluding the date of the payment of such
amount to Seller.
2.5 Allocation of the Purchase Price.
(a) Seller and Purchaser agree that (i) the sum of
the Purchase Price and the Assumed Liabilities shall be allocated among the
Purchased Assets in accordance with Section 1060 of the Code and the Treasury
regulations promulgated thereunder and (ii) the portion of the Purchase Price
allocable to the Owen Sound Terminal is $20 million (the "Allocation"). No
later than 90 days after the Closing Date, Purchaser shall provide Seller with
a proposed Allocation for Seller's review. Purchaser shall allow Seller's
employees, accountants and other authorized representatives the opportunity (y)
to review Purchaser's proposed Allocation and (z) to obtain and review copies
of Purchaser's work papers and appraisal reports and, to the extent Purchaser
can obtain access using commercially reasonable efforts, access to Purchaser's
accountant's work papers and Purchaser's appraiser's work papers.
(b) If Seller has any objections to the proposed
Allocation, Seller shall notify Purchaser in writing (the "Allocation
Disagreement") of such disagreement no later than 30 calendar days after
delivery of the proposed Allocation. The Allocation Disagreement, if any, shall
set forth in reasonable detail the basis for the disagreement. Thereafter,
Seller and Purchaser shall attempt in good faith to resolve any such objection.
If Seller and Purchaser are unable to resolve the disagreement no later than 30
calendar days after the delivery of the Allocation Disagreement, such
disagreement shall be referred to the Independent Accounting Firm. If for any
reason the Independent Accounting Firm is no longer independent of Seller or
Purchaser or is not able or declines to be engaged to resolve such
disagreement, another independent public accounting firm shall be mutually
selected by Seller and Purchaser for resolution of such disagreement. If Seller
and Purchaser do not promptly agree on the selection of an independent public
accounting firm, each of them shall appoint an independent public accounting
firm and such two independent public accounting firms shall jointly select a
new independent accounting firm (such new accounting firm shall also be deemed
the "Independent Accounting Firm" for purposes of this Section 2.5(b)). Absent
manifest error, the determinations made by the Independent Accounting Firm with
respect to any such disagreement shall be final and binding upon Seller and
Purchaser for all purposes under this Agreement. Each of Seller and Purchaser
shall use its commercially reasonable efforts to cause the Independent
Accounting Firm to render its determination as soon as practicable after
referral of such disagreement to such firm, and each shall cooperate with such
firm and shall provide such firm with reasonable access to its books, records,
personnel and representatives and such other information as such firm may
require in order to render its determination. The scope of the Independent
Accounting Firm's engagement (which shall not be an audit) shall be limited to
the resolution of the items contained in the Allocation Disagreement, and the
determination of an Allocation that accurately conforms to Section 1060 of the
Code and the Treasury regulations promulgated thereunder. The fees, costs and
expenses of the Independent Accounting Firm, if any, will be borne equally by
Seller and Purchaser. The Allocation, as adjusted in accordance with the
resolution of any disagreement with respect thereto or, if no Allocation
Disagreement is timely given, as delivered to Seller pursuant to Section
2.5(a), is referred to in this Agreement as the "Final Allocation."
(c) After determination of the Final Allocation by
agreement of Seller and Purchaser or by binding determination of the
Independent Accounting Firm, Seller and Purchaser shall follow the Final
Allocation for all Tax purposes (including the filing of any Tax Return). Any
subsequent adjustments to the sum of the Purchase Price and Assumed Liabilities
shall be reflected in the Final Allocation in a manner consistent with Section
1060 of the Code and the Treasury regulations promulgated thereunder. The
transactions contemplated in this Agreement shall be reported in a manner
consistent with the terms of this Agreement (including the Final Allocation),
and neither Seller nor Purchaser shall, except as required by applicable Law,
take any position inconsistent therewith in any Tax Return, in any refund
claim, in any litigation, or otherwise. Each of Seller and Purchaser agrees to
cooperate with the other in preparing IRS Form 8594, and to furnish the other
with a copy of such form within a reasonable period before its filing due date.
2.6 Proration of Certain Amounts and Utilities.
(a) All real property, personal property Taxes and
similar ad valorem obligations levied with respect to the Purchased Assets for
a taxable period that includes (but does not end on) the Closing Date shall be
apportioned between Purchaser and Seller as of the Closing Date based on the
number of days of such taxable period included in the period prior to and
ending with and including the Closing Date (with respect to any such taxable
period, the "Pre-Closing Tax Period"), and the number of days of such taxable
period beginning with, but excluding, and continuing after the Closing Date
(with respect to any such taxable period, the "Post-Closing Tax Period").
Seller shall be liable for the proportionate amount of such Taxes that is
attributable to the Pre-Closing Tax Period (except to the extent any such
amount is reflected in the Final Closing Statement and is taken into account in
determining any Purchase Price adjustment under Section 2.4), and Purchaser
shall be liable for the proportionate amount of such Taxes that is attributable
to the Post-Closing Tax Period. Notwithstanding the foregoing, if the amount of
accrued real property taxes for the period included in the period prior to and
ending with and including the Closing Date is not known at the time of the
Closing, the foregoing apportionment shall be based upon the most current
actual tax bill, and promptly after such time in which the bill evidencing the
actual amount of the accrued real property taxes is issued (but in no event
later than 30 days after the issuance of such bills), there shall be a cash
adjustment between the parties to this Agreement with the appropriate
reimbursements. The provisions of this Section 2.6(a) shall survive the
Closing.
(b) Seller and Purchaser further agree to prorate at
Closing all other items which are normally prorated in connection with
transactions similar to the transaction contemplated by this Agreement, with
all such prorations being final. Notwithstanding the foregoing, if the amount
of prorations with respect to any such transaction provided for in this Section
2.6(b) for the period included in the period prior to and ending with and
including the Closing Date is not known at the time of the Closing, such
apportionment shall be based upon the most current actual bill, and promptly
after such time in which the bill evidencing the actual amount of the accrued
Liability is issued (but in no event later than 30 days after the issuance of
such bills), there shall be a cash adjustment between the parties to this
Agreement with the appropriate reimbursements. The provisions of this Section
2.6(b) shall survive the Closing.
(c) Seller shall be responsible for all utilities
used in the conduct of the Business prior to the Closing Date (except to the
extent any such amount is reflected in the Final Closing Statement and is taken
into account in determining any Purchase Price adjustment under Section 2.4).
Purchaser shall be responsible for all utilities used in the conduct of the
Business on or after the Closing Date. Promptly upon receipt of any utility
bill that includes charges for periods prior to the Closing Date, Purchaser
shall forward a copy of such utility bill to Seller, and Seller shall promptly
pay to Purchaser its pro rata share of such bill (based on the number of days
prior to the Closing Date included in such bill as compared to the total number
of days included in such bill.) Promptly after the Closing (but in any event,
no later than 30 days after the Closing), Purchaser shall notify all relevant
utilities that Purchaser's name or the name of an Affiliate designated by
Purchaser should replace Seller's name on all bills and that Purchaser or such
designee shall be responsible for payment of all utility bills going forward.
ARTICLE III
THE CLOSING
3.1 Generally. The payments and deliveries contemplated
by Sections 3.5 and 3.6 (the "Closing") will be made at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036,
commencing at 10:00 a.m., local time on (a) the third Business Day following
the satisfaction or waiver of the conditions to Closing set forth in Sections
3.2, 3.3 and 3.4 (other than those conditions that by their nature can only be
satisfied at the time of Closing) or (b) at such other place, time or date as
Seller and Purchaser may agree in writing (the "Closing Date").
3.2 General Conditions. The obligations of each party to
this Agreement to consummate the transactions contemplated by this Agreement
and the other Transaction Documents shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
(a) No Challenge to Transaction. No action, suit,
arbitration or proceeding shall have been instituted, proposed or threatened by
any Governmental Authority that has not been withdrawn, dismissed with
prejudice, rescinded, or otherwise eliminated either to enjoin, restrain or
prohibit the performance of this Agreement.
(b) Governmental Consents Obtained or Requirements
Satisfied. All authorizations, consents and approvals, if any, of any
Governmental Authority necessary for the execution, delivery and performance of
this Agreement and the other Transaction Documents shall have been obtained and
being in full force and effect. Without limiting the foregoing, (i) all
applicable governmental pre-acquisition filing, information furnishing and
waiting period requirements (including those under the HSR Act) shall have been
met or such compliance shall have been waived by the Governmental Authorities
having authority to grant such waivers and (ii), with respect to the transfer
and assignment of the Conquest and the Challenger Agreements, all approvals
from the United States Maritime Administration, if required, shall have been
obtained.
(c) Third Party Consents. All third party consents,
each in form and substance reasonably satisfactory to Seller and Purchaser,
relating to the Assumed Contracts set forth in Section 3.2(c) to the Seller
Disclosure Schedule shall have been obtained.
(d) No Restraints. No Governmental Order or Law
shall have been enacted, entered, promulgated or enforced by any Governmental
Authority or instrumentality that prohibits the consummation of the
transactions contemplated by this Agreement.
(e) FERC Filing. The Federal Energy Regulatory
Commission shall have (i) approved the parties' application under Section 203
of the Federal Power Act in connection with the transfer of the Co-Generation
Lease from Seller to Purchaser or (ii) disclaimed jurisdiction over that
transaction under Section 203 of the Federal Power Act.
3.3 Conditions to Seller's Obligations. Seller's
obligation to consummate the transactions contemplated by this Agreement and
the other Transaction Documents shall be subject to the satisfaction or waiver
at or prior to the Closing of each of the following conditions:
(a) Representations and Warranties True. The
representations and warranties of Purchaser contained in this Agreement (i)
that are qualified by "materiality" shall have been true and correct in all
respects when made and shall be true and correct in all respects as of the
Closing as though made on and as of the Closing Date (except to the extent any
such representation and warranty is expressly made as of an earlier date, in
which case as of such date) and (ii) that are not so qualified shall be true
and correct in all material respects as of the Closing as though made on and as
of the Closing Date (except to the extent any such representation and warranty
is expressly made as of an earlier date, in which case as of such date).
(b) Agreements Complied With. Purchaser shall have
performed or complied in all material respects with all covenants and
agreements required to be performed or complied with by Purchaser under this
Agreement at or prior to the Closing.
(c) Payment of Purchase Price. Seller shall have
received from Purchaser the Purchase Price.
(d) Officer's Certificate. Seller shall have
received from Purchaser a certificate signed by an appropriate officer of
Purchaser that the conditions set forth in paragraphs (a) and (b) of this
Section 3.3 have been satisfied.
(e) Deliveries. Seller shall have received the
documents referred to in Section 3.6 in form and substance reasonably
satisfactory to Seller.
(f) Detroit Lease Agreement. Seller shall have
received a Lease Agreement, substantially in the form attached hereto as
Exhibit 3.3(f) (the "Detroit Lease Agreement"), duly executed by Purchaser.
3.4 Conditions to Purchaser's Obligations. Purchaser's
obligation to consummate the transactions contemplated by this Agreement and
the other Transaction Documents shall be subject to the satisfaction or waiver
at or prior to the Closing of each of the following conditions:
(a) Representations and Warranties True. The
representations and warranties of Seller contained in this Agreement (i) that
are qualified by "Material Adverse Effect" shall have been true and correct in
all respects when made and shall be true and correct in all respects (subject
to such qualifier) as of the Closing as though made on and as of the Closing
Date (except to the extent any such representation and warranty is expressly
made as of an earlier date, in which case as of such date), (ii) that are
qualified by "materiality" or that are not qualified by either "materiality" or
"Material Adverse Effect" (other than the representations and warranties set
forth in Sections 4.2 and 4.3) shall be true and correct (without giving effect
to any limitation as to "materiality" set forth therein) in all respects as of
the Closing as though made on and as of the Closing Date (except to the extent
any such representation and warranty is expressly made as of an earlier date,
in which case as of such date), except where the failure or failures of such
representations or warranties to be so true and correct would not have, in the
aggregate, a Material Adverse Effect and (iii) that are set forth in Sections
4.2 and 4.3 shall be true and correct in all respects as of the Closing as
though made on and as of the Closing Date (except to the extent any such
representation and warranty is expressly made as of an earlier date, in which
case as of such date).
(b) Agreements Complied With. Seller shall have
performed or complied in all material respects with all covenants and
agreements required to be performed or complied with by Seller under this
Agreement at or prior to the Closing.
(c) Officer's Certificate. Purchaser shall have
received from Seller a certificate signed by an appropriate officer of Seller
that the conditions set forth in paragraphs (a) and (b) of this Section 3.4
have been satisfied.
(d) Permits. All Permits shall have been transferred
to Purchaser or, if such Permits are not transferable, shall have been reissued
to Purchaser, except where the failure to have transferred or reissued such
Permits would not reasonably prohibit Purchaser from operating the Facilities
and the Purchased Assets after the Closing in substantially the same manner as
operated by Seller prior to the Closing.
(e) No Material Adverse Change. Since the Reference
Balance Sheet Date, no event, circumstance or development shall have occurred
that, individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect.
(f) Deliveries. Purchaser shall have received the
documents referred to in Section 3.5 in form and substance reasonably
satisfactory to Purchaser.
3.5 Deliveries by Seller. Seller will deliver or cause
to be delivered to Purchaser at the Closing the following:
(a) General Bill of Sale. The General Bill of Sale,
duly executed by Seller and/or its Specified Affiliates, as appropriate.
(b) General Assignment and Assumption Instrument.
The General Assignment and Assumption Instrument, duly executed by Seller
and/or its Specified Affiliates, as appropriate.
(c) Deeds. A special warranty deed (or its local
equivalent) in substantially the form of Exhibit 3.5(c) with respect to each
tract of Owned Real Property in proper statutory form for recording, duly
executed and acknowledged by Seller and with all required documentary and
transfer tax stamps affixed, conveying fee simple title to the Owned Real
Property to Purchaser free and clear of all Liens (other than Permitted Liens)
(collectively, the "Deeds").
(d) Assignment of Permits. An assignment of, or
documentation requesting the assignment of, the Permits of the Facilities to be
transferred hereunder in the form reasonably acceptable to Purchaser and, to
the extent applicable, the Governmental Authorities issuing such Permits, duly
executed by Seller.
(e) Code ss. 1445 Affidavit. A certificate from each
of Seller and CCPC, 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 Closing Date, such Person is not a "foreign
person" within the meaning of Section 1445.
(f) Title Insurance for Owned Real Property.
Purchaser shall have received from First American Title Insurance Company (the
"Title Company") an ALTA owner's policy of title insurance, or irrevocable and
unconditional binder to issue the same (the "Title Policy"), in the amount of
the fair market value of the applicable Owned Real Property (as reasonably
determined by Seller and Purchaser), dated, or updated to, the Closing Date,
insuring, or committing to insure, Purchaser's good and marketable title in fee
simple to each parcel of Owned Real Property with extended coverage over the
standard exceptions waived, and containing at Purchaser's option such
affirmative endorsements as desired by Purchaser, acting reasonably. Each of
Seller and Purchaser shall pay one-half of the costs of the premium for each of
the Title Policies (including the costs of any endorsements).
(g) Title Affidavits. Such customary affidavits,
documents, disclosures and forms as reasonably requested by the Title Company
in connection with the issuance of each of the Title Policies and consummation
of the transactions contemplated by this Agreement.
(h) Surveys. Surveys of each parcel of the Owned
Real Property (other than the Dixon Facility) (collectively, the "Surveys")
certified to Seller, Purchaser and the Title Company in accordance with a form
of certification which is reasonably acceptable to Seller, Purchaser and the
Title Company, such certification to include a statement that the Surveys have
been prepared in accordance with 1999 (or most recent) minimum standard details
for a land survey jointly adopted by ALTA/ACSM and to include Table A Items
1-4, 6-11 and 13-16. Each of Seller and Purchaser shall pay one-half of the
costs of the Surveys.
(i) Conquest Bill of Sale. A Bill of Sale for the
Conquest (the "Conquest Bill of Sale") in form suitable for recordation of
title thereto in the name of Purchaser or its nominee, duly executed by the
appropriate Specified Affiliate.
(j) Releases of Liens. Releases of liens evidencing
the discharge and removal of all Liens on the Purchased Assets, other than
Permitted Liens.
(k) Receipt. A receipt for the Purchase Price.
(l) Other Instruments. All such other deeds,
endorsements, assignments or other instruments, in form and substance
reasonably satisfactory to Purchaser, as shall be necessary to vest in
Purchaser title to the Purchased Assets.
(m) Detroit Lease Agreement. The Detroit Lease
Agreement, duly executed by Seller.
3.6 Deliveries by Purchaser. Purchaser shall pay or
deliver or shall cause to be paid or delivered to Seller at the Closing the
following:
(a) Payment of Purchase Price. Payment to Seller of
the Purchase Price in same day funds (in U.S. dollars) by wire transfer based
on wiring instructions given by Seller to Purchaser at least three Business
Days prior to the Closing Date.
(b) General Assignment and Assumption Instrument.
The General Assignment and Assumption Instrument, duly executed by Purchaser
and/or its designated Affiliate, as appropriate.
(c) General Bill of Sale. The General Bill of Sale,
duly executed by Purchaser and/or its designated Affiliate, as appropriate.
(d) Legal Opinion. The opinion of Ray, Robinson,
Carle & Davies, P.L.L. in the form attached hereto as Exhibit 3.6(d).
(e) Detroit Lease Agreement. The Detroit Lease
Agreement, duly executed by Purchaser.
(f) Affidavit of Citizenship. An affidavit from
Purchaser or Purchaser's nominee that it meets all requirements of 46 U.S.C.
ss. 12102(a)(4).
3.7 Post-Closing Actions.
(a) Mail. From and after the Closing Date, (i)
Purchaser may open all mail and other communications received by Purchaser at
the Facilities addressed to Seller, and may act with respect to such
communications in such manner as Purchaser may elect if such communications
relate to the Purchased Assets, the Assumed Liabilities or the Facilities and
the Business (other than payments to which Seller is entitled) or if such
communications do not so relate, Purchaser will forward the same promptly to
Seller, and (ii) Seller may open all mail and other communications received by
it with respect to the Facilities and the Business, and if such communications
relate to the Purchased Assets, the Assumed Liabilities or the Facilities and
the Business (including payments to which Purchaser is entitled), Seller will
promptly forward the same to Purchaser.
(b) Access to Books and Records. From and after the
Closing Date, and until the seventh anniversary of the Closing Date, each of
Seller and Purchaser shall permit the other and its authorized representatives
to have reasonable access to the books and records relating to the Business in
its possession and to make copies of them upon the following conditions: (i)(A)
with respect to Seller, the requested information relates to the Excluded
Assets or the Excluded Liabilities and (B) with respect to Purchaser, the
requested information relates to the Purchased Assets or the Assumed
Liabilities, (ii) the requesting party providing notice to the other that sets
forth a valid business reason for the request for access and (iii) the access
being at such times and on such other reasonable conditions appropriate to
avoid any material interference with the other party's business operations.
ARTICLE IV
SELLER'S REPRESENTATIONS AND WARRANTIES
Except as set forth in the disclosure schedules (the "Seller
Disclosure Schedule") delivered by Seller to Purchaser concurrently with the
execution of this Agreement, Seller and its Specified Affiliates, jointly and
severally, hereby represent and warrant to Purchaser on the date of this
Agreement as follows:
4.1 Organization, Etc. Each of Seller and its Specified
Affiliates is a corporation, limited liability company or other entity, duly
organized, validly existing and in good standing under the Laws of the State of
Louisiana, with respect to Seller, the Laws of the State of Delaware, with
respect to CCPC, and the Laws of Ontario, Canada, with respect to Canadian
Medusa Cement Limited. Each of Seller and its Specified Affiliates has all
requisite power and authority to carry on the Business as it is now being
conducted and to own or lease and operate the Purchased Assets as and in the
places where now conducted, owned, leased or operated. Each of Seller and its
Specified Affiliates is duly licensed or qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of the Purchased Assets or the conduct of the Business requires
such qualification, except where the failure to be so qualified or licensed or
in good standing, as the case may be, would not, individually or in the
aggregate, (a) adversely affect the ability of Seller or any of the Specified
Affiliates to carry out its respective obligations under, or consummate the
transactions contemplated by, this Agreement or (b) otherwise have a Material
Adverse Effect.
4.2 Authorization. Each of the Seller and each Specified
Affiliate has the requisite power and authority to execute and deliver each
Transaction Document to which it is a party and to perform its obligations
thereunder. The execution, delivery and performance of this Agreement by Seller
has been, and the execution, delivery and performance of each other Transaction
Document to which each of Seller or the Specified Affiliates is a party shall
be, on or prior to the Closing Date, duly and validly authorized by all
necessary corporate or other similar action on the part of Seller or such
Specified Affiliate, as the case may be, and no additional authorization on the
part of Seller is necessary in connection with the execution, delivery and
performance by Seller of this Agreement.
4.3 Binding Effect. This Agreement has been, and each
other Transaction Document will be, duly executed and delivered by each of
Seller and each Specified Affiliate that is a party thereto, and (assuming the
due authorization, execution and delivery by the other parties thereto) this
Agreement constitutes, and each other Transaction Document to which Seller or a
Specified Affiliate is to be a party, when so executed and delivered, will
constitute legal, valid and binding obligations of Seller or such Specified
Affiliate that is a party thereto, enforceable against Seller or such Specified
Affiliate, as the case may be, in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar Laws affecting creditors' rights
generally and to the general principles of equity.
4.4 No Violations. The execution, delivery and
performance by Seller or any Specified Affiliate of the Transaction Documents
to which it is or will be a party, and the consummation of the transactions
contemplated thereby, do not and will not (a) conflict with or violate any
provision of the articles of incorporation, bylaws or similar governing
documents of Seller or any of its Specified Affiliates, or (b) (i) violate any
Law, Permit or Judgment applicable to Seller or any of its Specified
Affiliates, or any of its respective properties or assets, or (ii) subject to
obtaining the consents set forth in Section 4.4(ii) of the Seller Disclosure
Schedule, 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 Specified Affiliates,
including the Purchased Assets, under, any of the terms, conditions or
provisions note, bond, mortgage, indenture, of any deed of trust, license,
Lease, Contract or other instrument or obligation to which Seller or any of its
Specified Affiliates is a party, or by which Seller, any of its Specified
Affiliates or any of their respective properties or assets, including the
Purchased Assets, may be bound or affected, except (in the case of clause
(b)(ii) above) for such violations, conflicts, breaches or defaults which,
would not, individually or in the aggregate, (a) adversely affect the ability
of Seller and any of the Specified Affiliates to carry out its respective
obligations under, and to consummate the transactions contemplated by, this
Agreement and the other Transaction Documents or (b) otherwise have a Material
Adverse Effect.
4.5 Financial Information. True and complete copies of
the Reference Balance Sheet and the unaudited balance sheets of the Business
for (a) the Charlevoix Facility, the Terminals, and the Detroit Terminal for
each of the two fiscal years ended December 31, 2002 and December 31, 2003 and
for the period between January 1, 2004 and October 31, 2004 and (b) the Dixon
Facility for the period between October 1, 2003 and October 31, 2004, and the
related statements of income of the Business (with such statements of income
including income related to the Detroit Terminal), together with all related
notes and schedules thereto (collectively referred to herein as the "Financial
Statements") have been delivered by Seller to Purchaser. To Seller's Knowledge,
the Reference Balance Sheet (i) has been prepared in accordance with the books
of account and other financial records of Seller and (ii) has been prepared in
accordance with GAAP applied on a basis consistent with the past practices of
Seller and Seller's normal monthly reporting process (except that it excludes
the Excluded Assets and Excluded Liabilities) and consistent with the
accounting principles, practices and methodologies set forth in Exhibit 2.4-2.
To Seller's Knowledge, the Financial Statements (x) were prepared in accordance
with the books of account and other financial records of Seller and (y) have
been prepared in accordance with GAAP applied on a basis consistent with the
past practices of Seller.
4.6 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Except as (i) contemplated by this Agreement or
(ii) set forth in Section 4.6 of the Seller Disclosure Schedule, since the
Reference Balance Sheet Date and as of the date of this Agreement, Seller has
conducted the Business in the ordinary and usual course and consistent with
past practice. As amplification and not limitation of the foregoing, except as
set forth in Section 4.6 of the Seller Disclosure Schedule, since the Reference
Balance Sheet Date and as of the date of this Agreement, Seller has not, in
respect of the Business, (x) taken or allowed to occur any actions that would,
if taken after the date hereof, constitute a breach of clauses (c) through (l)
of Section 6.1 or (y) suffered any casualty loss or damage with respect to any
of the Purchased Assets (other than any such loss or damage that has been
repaired in all material respects by Seller) which in the aggregate have
replacement costs of more than $150,000, whether or not such loss or damage
shall have been covered by insurance.
4.7 Litigation. Except as set forth in Section 4.7 of
the Seller Disclosure Schedule (which, with respect to each Action set forth
therein, sets forth the parties, nature of the proceeding, date and method
commenced, amount of charges or other relief sought (if known) and, if
applicable, paid or granted), to Seller's Knowledge, there are no material
Actions by or against Seller or any Specified Affiliate and relating to the
Business or the Purchased Assets pending before any Governmental Authority (or
threatened in writing to be brought by or before any Governmental Authority).
Except as set forth in Section 4.7 of the Seller Disclosure Schedule, to
Seller's Knowledge, neither Seller nor any of the Specified Affiliates, nor any
of the Purchased Assets, is subject to any Governmental Order (nor has any
Governmental Authority threatened in writing any such Governmental Order) that
(a) would have a Material Adverse Effect or (b) as of the date of this
Agreement, would affect the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents.
4.8 Material Contracts.
(a) Section 4.8(a) of the Seller Disclosure Schedule
lists each of the material Contracts, written or, to Seller's Knowledge, oral,
of Seller or any Specified Affiliate relating to the Business that is currently
in effect and was entered into by Seller or any Specified Affiliate since
September 25, 2003, with respect to any such Contract relating to the Dixon
Facility, and November 16, 2000, with respect to any such Contract relating to
the Charlevoix Facility and the Terminals (such Contracts being referred to
herein as the "Post-Acquisition Contacts"). Neither Seller nor any Specified
Affiliate has received any notice of breach or default under any
Post-Acquisition Contracts that would have, individually or in the aggregate, a
Material Adverse Effect. Seller has made available to Purchaser true and
complete copies (or with respect to oral contracts, summaries thereof) of all
Post-Acquisition Contracts.
(b) To Seller's Knowledge, (i) Section 4.8(b) of the
Seller Disclosure Schedule lists each of the material Contracts, written or
oral, of Seller or any Specified Affiliate relating to the Business that is
currently in effect and was acquired by Seller or a Specified Affiliate in
connection with Seller's acquisition of the Dixon Facility or of the Charlevoix
Facility and the Terminals (such Contracts being referred to herein as the
"Pre-Acquisition Contacts"), (ii) neither Seller nor any Specified Affiliate
has received any notice of breach or default under any Pre-Acquisition
Contracts that would have, individually or in the aggregate, a Material Adverse
Effect and (iii) Seller has made available to Purchaser true and complete
copies (or with respect to oral contracts, summaries thereof) of all
Post-Acquisition Contracts, provided that Seller makes no representation or
warranty that it received as a result of such acquisitions accurate and
complete originals or copies of the Pre-Acquisition Contracts.
(c) Except as specified in Section 4.8(c) of the
Seller Disclosure Schedule, and in each case other than any such failure,
breach, default, or waiver, as applicable, which would not be reasonably likely
to have a Material Adverse Effect, (i) to the Knowledge of Seller, the Dixon
Purchase Agreement is valid, binding, in full force and effect, and enforceable
by Seller or its Specified Affiliate, as the case may be, in accordance with
its terms; (ii) neither Seller nor any Specified Affiliate, as the case may be,
is in breach or default under the Dixon Purchase Agreement that has had, or if
not cured would have, individually or in the aggregate, a material adverse
effect on Seller's rights and remedies under the Dixon Purchase Agreement;
(iii) neither Seller nor any Specified Affiliate, as the case may be, has
waived any of its rights under the Dixon Purchase Agreement or modified any of
the terms thereof and (iv) to the Knowledge of Seller, no other party to the
Dixon Purchase Agreement is in breach or default thereunder. Seller has
provided to Purchaser prior to the date of this Agreement a complete and
correct copy of the Dixon Purchase Agreement.
(d) Section 4.8(d) of the Seller Disclosure Schedule
sets forth the supply schedule under the Cement Supply Agreement, dated as of
September 25, 2003, as amended (the "Prairie CSA"), between Seller and Prairie,
for calendar year 2005, as such supply schedule is in effect as of the date of
this Agreement.
4.9 Owned Real Property; Tangible Personal Property;
Leases; Vessel.
(a) Owned Real Property. (i) Section 4.9(a) of the
Seller Disclosure Schedule lists all of the real property owned by Seller
and/or a Specified Affiliate, as the case may be, which are primarily used in
(or intended to be used in) or primarily related to the Business and are
intended to be transferred to Purchaser pursuant to the terms of this Agreement
(collectively, the "Owned Real Property"). Seller has made available to
Purchaser correct and complete copies of each deed for each parcel of Owned
Real Property to the extent that the same are in Seller's possession or
control. Either Seller or a Specified Affiliate, as the case may be, is in
peaceful and undisturbed possession of each parcel of Real Property, subject to
Permitted Liens and Liens designated on Schedule B as unpermitted exceptions
that will be released on or prior to the Closing. As of the date of this
Agreement, there are no condemnation proceedings or eminent domain proceedings
of any kind pending or, to the Knowledge of Seller, threatened against the Real
Property.
(b) Tangible Personal Property. Section 2.1(a)(v) of
the Seller Disclosure Schedule lists all of the Tangible Personal Property.
(c) Leases. Section 4.9(c) of the Seller Disclosure
Schedule (i) lists (A) each Real Property Lease and Real Property Sublease and
(B) each other written Lease exclusively used in or exclusively related to the
Business that has annual aggregate rental payments of $250,000 or more and a
term of more than 12 months (copies of which have been made available to
Purchaser) and (ii) generally describes the terms of each oral Lease
exclusively used in or exclusively related to the Business.
(d) Vessel. Seller or one of its Specified
Affiliates is the owner of the Conquest and, upon recordation of the Bill of
Sale contemplated by this Agreement, title to the Conquest will be vested in
Purchaser or its nominee free and clear of all Liens except Permitted Liens. At
the time of delivery the Conquest will be documented under the laws and flag of
the United States and in class.
(e) Title to Property. Seller has good title to all
of the Tangible Personal Property, free and clear of all Liens other than
Permitted Liens. Seller is in possession of the Leased Real Property or
Tangible Personal Property, as the case may be, leased pursuant to each Lease,
and each such Lease grants to Seller the exclusive right to possess, without
disruption, the property leased pursuant thereto. Seller has not assigned its
interest in any such Lease to any Person. Immediately following the Closing,
Purchaser (or its designated Affiliates or, with respect to the Conquest, its
nominee) will own, with good, valid and marketable title, or lease, under valid
and subsisting leases, the Purchased Assets, free and clear of any Liens, other
than Permitted Liens.
4.10 Permits. Section 2.1(a)(viii) of the Seller
Disclosure Schedule list all material Permits possessed by Seller or a
Specified Affiliate in connection with the Business, and true and complete
copies of all such Permits have heretofore been made available to Purchaser.
Except as set forth in Section 4.10 of the Seller Disclosure Schedule, neither
Seller nor any Specified Affiliate has received any written notice or, to
Seller's Knowledge, oral communication from any Governmental Authority
regarding non-compliance with or the possible non-renewal of any such Permits,
except for such non-compliance or non-renewal as would not have, individually
or in the aggregate, a Material Adverse Effect.
4.11 Notices of Violations. Except as set forth in
Section 4.11 of the Seller Disclosure Schedule, neither the Seller nor any
Specified Affiliate has, since September 25, 2003, with respect to the Dixon
Facility, and November 16, 2000, with respect to the Charlevoix Facility and
the Terminals, been charged with or received any notice of, or, to Seller's
Knowledge, been under investigation with respect to, any failure or alleged
failure to comply with any provision of any applicable Law in the operation of
the Business (except where any such issue of non-compliance has been resolved
to the satisfaction of the party sending such notice or conducting such
investigation), except for such failures to comply that would not have,
individually or in the aggregate, a Material Adverse Effect.
4.12 Employee, Employee Benefit and Labor Matters.
(a) Seller has provided to Purchaser under separate
cover the following information relating to each individual employed by Seller
or its Affiliates in respect of the Facilities (including individuals on
maternity leave, short-term disability leave or another approved leave of
absence, and excluding any individuals on long-term disability leave, the
individuals employed in connection with the Detroit Terminal or individuals
identified in Section 4.12(a) of the Seller Disclosure Schedule) (the "Facility
Employees"): a true and complete list of the names, date of hire, position or
job title, department, employment location, status as full or part-time and
active or on leave, description of such leave (if applicable), base salary or
wages for the 2004 fiscal year, two-year incentive compensation and equity
award history, compensation guarantees payable in 2004 or any future years,
legal employer, or work authorization and status as unionized, non-unionized,
exempt or non-exempt employee.
(b) Section 4.12(b) of the Seller Disclosure
Schedule sets forth a complete list all benefit and compensation plans,
contracts, policies or arrangements, including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA, and any workers'
compensation, disability, vacation, leave of absence, change in control,
employment agreements, severance agreements, plans and policies, and deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans, to which Seller or its ERISA Affiliates is a
party, with respect to which Seller or its ERISA Affiliates has any obligation
or which is maintained, sponsored, contributed to or required to be contributed
to by Seller or its ERISA Affiliates on behalf of any current or former
employee or officer of the Business (all of which are hereinafter referred to
as the "Plans"). True and complete copies of all Plans have been made available
to Purchaser.
(c) 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 Purchased Assets or a
Liability of Purchaser.
(d) Except as set forth in Section 4.12(d) of the
Seller Disclosure Schedule, neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will (i) entitle any
Transferred Employees to severance pay or any increase in severance pay upon
any termination of employment after the date hereof or (ii) in respect of
Transferred Employees, accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, or increase the amount payable or trigger any other material
obligation pursuant to, any of the Plans.
(e) Except as set forth in Section 4.12(e) of the
Seller Disclosure Schedule, in respect of the Business, neither Seller nor its
Affiliates is a party to, or otherwise bound by, any collective bargaining
agreement, contract or other agreement with a labor union or labor organization
nor, to Seller's Knowledge, are there any activities or proceedings of any
labor union to organize any Facility Employee nor, as of the date of this
Agreement, is Seller or the Specified Affiliates the subject of any Action
asserting that Seller or the Specified Affiliates has committed an unfair labor
practice or seeking to compel it to bargain with any labor union or labor
organization nor is there pending or, to the Knowledge of Seller, threatened,
nor has there been (with respect to the Charlevoix Facility and the Terminals,
in the past three years and, with respect to the Dixon Facility, since
September 25, 2003) any labor strike, material dispute, walk-out, work
stoppage, slow-down or lockout involving Seller or its Affiliates. In respect
of the Business, Seller and its Affiliates are currently in compliance in all
material respects with all applicable Laws relating to the employment of labor,
including, but not limited to, the Fair Labor Standards Act of 1938, as
amended.
4.13 Environmental Matters. To the Seller's Knowledge,
Seller has made available to Purchaser prior to the date of this Agreement all
material documents (or copies thereof) in the possession or control of Seller
or any Specified Affiliate that relate to Environmental Conditions,
Environmental Laws, Environmental Liabilities, Environmental Permits or
Hazardous Substances, in each case as it relates to the Business or the Real
Property; provided that Seller makes no representation or warranty with respect
to the completeness or accuracy of such documents prepared prior to September
25, 2003, with respect to the Dixon Facility, and November 16, 2000, with
respect to the Charlevoix Facility and the Terminals.
4.14 Taxes. (a) All material Tax Returns required to be
filed by or with respect to the Business or the Purchased Assets have been
timely filed, (b) all Taxes required to be shown on such Tax Returns or all
material Taxes otherwise due by or with respect to the Business or the
Purchased Assets have been timely paid, (c) all such Tax Returns are true,
correct and complete in all material respects, (d) no adjustment relating to
such Tax Returns has been proposed formally or informally by any taxing
authority and (e) neither Seller nor any Specified Affiliate has received any
notice or inquiry from any jurisdiction where Seller or such Specified
Affiliate does not currently file Tax Returns to the effect that such filings
may be required with respect to the Purchased Assets or the Business or that
the Business may otherwise be subject to taxation by such jurisdiction.
4.15 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.
4.16 DISCLAIMERS. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN THIS ARTICLE IV, THE DEEDS AND THE CERTIFICATE TO BE
DELIVERED BY SELLER AT THE CLOSING PURSUANT TO SECTION 3.4(C), (I) NEITHER
SELLER NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY, AND
HEREBY DISCLAIMS ANY OTHER REPRESENTATION AND WARRANTY, EXPRESS OR IMPLIED, AT
LAW OR IN EQUITY, RELATING TO THE BUSINESS, THE PURCHASED ASSETS, THE ASSUMED
LIABILITIES OR THE FACILITIES, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO
VALUE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR FOR ORDINARY
PURPOSES, OR ANY OTHER MATTER, WHETHER MADE BY SELLER OR ANY OF ITS AFFILIATES
OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
REPRESENTATIVES OR ANY OTHER PERSON, AND NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO PURCHASER OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES OR ANY OTHER PERSON OF ANY DOCUMENTATION OR OTHER INFORMATION
BY SELLER OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES OR ANY OTHER PERSON, AND (II) THE
BUSINESS, THE PURCHASED ASSETS, THE ASSUMED LIABILITIES AND THE FACILITIES
BEING TRANSFERRED TO PURCHASER ARE CONVEYED ON AN "AS IS, WHERE IS" BASIS AS OF
THE CLOSING, AND PURCHASER SHALL RELY UPON ITS OWN EXAMINATION THEREOF. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NEITHER SELLER NOR ANY OF ITS
AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY REGARDING ANY ASSETS OTHER THAN
THE PURCHASED ASSETS OR ANY LIABILITIES OTHER THAN THE ASSUMED LIABILITIES OR
ANY OPERATIONS OTHER THAN THE FACILITIES, AND NONE SHALL BE IMPLIED AT LAW OR
IN EQUITY.
ARTICLE V
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization. Purchaser is duly organized, validly
existing and in good standing under the Laws of the Federative Republic of
Brazil.
5.2 Authorization. Purchaser has the requisite power and
authority to execute and deliver each Transaction Document to which it is a
party and to perform its obligations thereunder. The execution, delivery and
performance of this Agreement by Purchaser have been, and the execution,
delivery and performance of each other Transaction Document to which Purchaser
is a party shall be, on or prior to the Closing Date, duly and validly
authorized by all necessary corporate action on the part of Purchaser and no
additional authorization on the part of Purchaser is necessary in connection
with the execution, delivery and performance by Purchaser of this Agreement.
5.3 Binding Effect. This Agreement has been, and each
other Transaction Document will be, duly executed and delivered by Purchaser
and (assuming the due authorization, execution and delivery by the other
parties thereto) this Agreement constitutes, and each other Transaction
Document to which Purchaser is to be a party, when so executed and delivered,
will constitute legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar Laws affecting creditors' rights generally
and to general principles of equity.
5.4 No Violations. The execution, delivery and
performance by Purchaser of the Transaction Documents to which it is or will be
a party, and the consummation of the transactions contemplated thereby, do not
and will not (a) conflict with or violate any provision of the certificate of
incorporation, bylaws or other organizational documents of Purchaser or any of
its Affiliates, or (b) (i) violate any Law, Permit or Judgment applicable to
Purchaser or any of its Affiliates or any of their respective properties or
assets, or (ii) 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 properties or assets of Purchaser 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 Purchaser or any of its Affiliates is a party, or by which Purchaser, any
of its Affiliates or any of their respective properties or assets may be bound
or affected, except (in the case of clause (b)(ii) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
would not materially impair Purchaser's ability to effect the Closing.
5.5 Financing. Purchaser has available to it sufficient
funds to enable it to consummate the transactions contemplated by this
Agreement.
5.6 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 Purchaser or any Affiliate of Purchaser who
might be entitled to any fee or commission from Purchaser or any Affiliate of
Purchaser in connection with the transactions contemplated by this Agreement.
5.7 Vessels. As of the Closing Date, Purchaser will be,
or will have nominated, a Citizen that will be qualified to purchase and
document the Conquest under the Laws of the United States so as to permit
Seller to transfer the Conquest and assign the Challenger Agreements to
Purchaser or its nominee pursuant to the terms of this Agreement without
contravention of the Shipping Act or any other requirements of United States
maritime law.
ARTICLE VI
COVENANTS
6.1 Operation of the Business Between Signing and
Closing. During the period from the date of this Agreement to the Closing
(except as otherwise expressly provided for in this Agreement or as Purchaser
shall otherwise consent to in writing, which consent shall not be unreasonably
withheld, delayed or conditioned), Seller covenants and agrees (x) to operate
the Business only in the ordinary course and consistent with past practice and
(y), except as described in Section 6.1 of the Seller Disclosure Schedule or as
required by Law, during the period from the date of this Agreement to the
Closing:
(a) Seller shall, and shall cause each of its
Specified Affiliates to, (i) carry on the Business substantially in the manner
heretofore conducted by Seller and its Specified Affiliates and (ii) use
commercially reasonable efforts to (A) keep available to the Business the
services of the Facility Employees and (B) maintain its relationships with
suppliers, customers and others having business relations with Seller or such
Specified Affiliate, as the case may be, that relate to the Business;
(b) Seller shall, and shall cause each of its
Specified Affiliates to, use, operate, maintain and repair the Facilities and
the Conquest in a manner consistent with past practices;
(c) Seller shall, and shall cause each of its
Specified Affiliates to, not loan or borrow any money or otherwise incur any
indebtedness that would constitute an Assumed Liability or that would impose
any Lien on any Purchased Asset; provided, however, that the foregoing does not
prohibit credit extended to customers in the ordinary course of business
consistent with past practice or trades payables or other current expenses
incurred in the ordinary course of business consistent with past practice;
(d) Seller shall, and shall cause each of its
Specified Affiliates to, not transfer, assign, lease or otherwise convey any
interest in any property that would otherwise be a Purchased Asset (except for
sales of Inventory in the ordinary course of business consistent with past
practice);
(e) Seller shall, and shall cause each of its
Specified Affiliates to, not enter into any Lease or other Contract that would
otherwise be a Purchased Asset and Assumed Liability (or modify or terminate
any existing one) except to the extent required by this Agreement and except
Contracts for the purchase of raw materials, products and supplies and the sale
of Inventory entered into in the ordinary course of business consistent with
past practice;
(f) Seller shall, and shall cause each of its
Specified Affiliates to, not (i) grant any increase, or announce any increase,
in the wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable to any of its employees to whom offers of employment will be
made pursuant to Section 7.1, including any increase or change pursuant to any
Plan, or (ii) establish or increase or promise to increase any benefits under
any Plan in respect of the Facility Employees to whom offers will be made
pursuant to Section 7.1, in either case except as required by Law or any
collective bargaining agreement or involving ordinary increases consistent with
the past practices;
(g) Seller shall, and shall cause each of its
Specified Affiliates to, not permit or allow any of the Purchased Assets to be
subjected to any Lien, other than Permitted Liens or Liens that will be
released at or prior to the Closing;
(h) Seller shall, and shall cause each of its
Specified Affiliates to, (i) not write down or write up the value of any
Inventory or receivables or revalued any of the Purchased Assets other than in
the ordinary course of business consistent with past practice and in accordance
with GAAP or (ii) not fail to write down or write up the value of any Inventory
or receivables or any of the Purchased Assets in accordance with GAAP;
(i) Seller shall, and shall cause each of its
Specified Affiliates to, not amend, terminate, cancel or compromise any
material claims related to the Business or waive any other rights of
substantial value to the Business or amend, modify or consent to the
termination of any Assumed Contract or Seller's or any Specified Affiliate's
rights thereunder;
(j) except as necessary to safeguard life, property
or the environment, Seller shall, and shall cause each of its Specified
Affiliates to, not make any capital expenditure or commitment for any capital
expenditure, in each case relating to the Business, in excess of $100,000
individually or $500,000 in the aggregate;
(k) Seller shall, and shall cause each of its
Specified Affiliates to, not make any Tax election or change any method of
accounting, other than in the ordinary course of business consistent with past
practice, or settle any Tax contest not involving federal income Taxes, in each
case, with respect to the Purchased Assets or the Business; and
(l) Seller shall, and shall cause each of its
Specified Affiliates to, not enter into any agreement, contract, commitment or
arrangement to do any of the foregoing.
6.2 Access to Information.
(a) Beginning on the date of this Agreement and
ending on the Closing Date, Seller shall, and shall cause each of its Specified
Affiliates to, cause its officers, employees and agents to (i) afford Purchaser
and its authorized representatives reasonable access, during normal business
hours and upon reasonable advance notice, to the offices, properties, plants,
other facilities, books and records of Seller and the Specified Affiliates
relating to the Business and to those officers, directors, employees, agents,
accountants and counsel of the Seller and the Specified Affiliates who have any
knowledge relating to the Business, (ii) furnish to Purchaser and its
authorized representatives such additional financial and operating data and
other information (or legible copies thereof) regarding the Business that is
available with respect to the Business or the Purchased Assets as Purchaser may
from time to time reasonably request, provided that Purchaser shall have no
right to have access to, to be furnished with or to review any Tax Returns of
Seller or any of its subsidiaries or Affiliates (other than any Tax Returns
that are described in Section 2.1(a)(xiv)), and (iii) provide Purchaser and its
authorized representatives access to the Real Property in order to conduct
environmental assessments, provided that such environmental assessments shall
not include any sampling or testing, and provided, further, that Purchaser and
its authorized representatives shall not (A) have access to the Real Property
or (B) communicate with any environmental Governmental Authority or any
employees or representatives of Seller regarding any environmental matters
relating to the Business or the Purchased Assets unless Dan Heintz or another
authorized representative of Seller accompanies Purchaser or its authorized
representatives on such visits to the Real property or participates with
Purchaser or its authorized representatives with respect to such
communications; provided, however, that if Dan Heintz or another authorized
representative of Seller does not respond to a request by Purchaser to
communicate with an environmental Governmental Authority within a reasonable
period of time (which shall be no longer than four Business Days), Purchaser
and its authorized representatives shall be able to communicate with any
Governmental Authority without Dan Heintz or another authorized representative
of Seller participating in such communication. Purchaser and its authorized
representatives will conduct all such information gathering in a manner that
will minimize any disruptions of the Business. Notwithstanding the foregoing,
neither Seller nor any of its Affiliates shall be required to disclose
information where such disclosure would violate or jeopardize any
attorney-client privilege or contravene any Law, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. Both Seller and
Purchaser will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) (i) Prior to the Closing, each of Purchaser or
any of Purchaser's Affiliates, agents, employees or representatives will hold
and will cause its representatives to hold in strict confidence all documents
and information concerning the Purchased Assets and the Business to the extent
and in accordance with the terms and conditions of the Confidentiality
Agreement and (ii) after the Closing, Purchaser shall promptly return to Seller
all documents and information concerning the Excluded Assets and the Retained
Liabilities furnished by Seller or any of Seller's Affiliates, agents,
employees, or representatives (including all copies, if any) and shall hold in
strict confidence all such documents and information to the extent and in
accordance with the terms and conditions of the Confidentiality Agreement
(except with respect to the NOx Technology as provided in Section 6.8(d)).
6.3 Commercially Reasonable Efforts.
(a) Upon the terms and subject to the conditions of
this Agreement, (i) each of Seller and Purchaser will cooperate and use
commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all Permits, consents, approvals and
authorizations of all Governmental Authorities that are necessary or advisable
to consummate the transactions contemplated by this Agreement, and (ii) Seller
shall use its commercially reasonable efforts, and Purchaser shall cooperate
with Seller, to obtain all consents, authorizations or approvals, and to send
all notices, required in connection with the assignment or transfer of any
Permit, Assumed Contract or Lease to Purchaser as contemplated by this
Agreement; provided, however, that Seller shall have no obligation to give any
guarantee or other consideration in connection with any such consent,
authorization or approval. Without limiting the generality of the foregoing,
Seller and Purchaser shall cooperate with one another: (A) in the preparation
and filing of any required filings under the applicable Environmental Laws; (B)
in determining whether action by or in respect of, or filing with, any
Governmental Authority is required, proper or advisable or any actions,
consents, waivers or approvals are required to be obtained from parties to any
Assumed Contracts, in connection with the transactions contemplated by this
Agreement; and (C) in seeking timely to obtain any such actions, consents,
waivers or to make any such filings. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
(b) Notwithstanding anything to the contrary
contained in this Agreement, this Agreement shall not constitute an agreement
to transfer, sell or otherwise assign any of the Assumed Contracts or Leases
that requires the consent of or notice to the other party thereto to avoid any
breach or default thereunder, to the extent any required consent, approval or
authorization in respect of such Contract, Lease or Permit obtained
(collectively, the "Unassigned Contracts"). Without limitation of any right
Purchaser or Seller may have not to consummate the transactions contemplated by
this Agreement pursuant to Section 3.2(c) and if Purchaser and Seller waive
such right and the Closing occurs, the beneficial interest in and to each
Unassigned Contract shall in any event pass to Purchaser at the Closing, and
Seller covenants and agrees to use commercially reasonable efforts to obtain
the consent, approval or authorization to such Unassigned Contract as promptly
thereafter as possible; provided, however, that Seller shall have no obligation
to give any guarantee or other consideration in connection with any such
consent, authorization or approval. If such consent, approval or authorization
cannot be obtained, Seller shall use commercially reasonable efforts, in any
lawful and economically reasonable arrangement to provide Purchaser with
Seller's and its Specified Affiliates' entire interest in the benefits under
each of the Unassigned Contracts. Seller shall, and shall cause each of its
Specified Affiliates to, exercise or exploit their respective rights and
options under all such Unassigned Contracts referred to in this Section 6.3(b)
only as reasonably directed by Purchaser; provided, that, except in cases of
gross negligence or willful misconduct on the part of Seller or its Specified
Affiliates (or their respective officers, employees, agents or
representatives), Purchaser shall be responsible, and shall indemnify, defend
and hold harmless Seller and its Specified Affiliates hereunder from and
against, for any liability or Damages to the extent incurred by Seller or any
of its Specified Affiliates as a result of such direction. If and solely to the
extent Seller provides the rights and benefits under an Unassigned Contract,
Purchaser shall accept the burdens and perform the obligations under such
Unassigned Contract as subcontractor of Seller or its Specified Affiliates to
the extent such burdens and obligations would have constituted an Assumed
Liability if such Unassigned Contract had been transferred to Purchaser at the
Closing. Furthermore, if the other party(ies) to an Unassigned Contract
subsequently consent to the assignment of such contract to Purchaser, Purchaser
shall thereupon agree to assume and perform all Liabilities arising thereunder
after the date of such consent, at which time such Unassigned Contract shall be
deemed a Purchased Asset and the Liabilities so assumed thereunder shall be
deemed Assumed Liabilities, without the payment of further consideration.
(c) In addition to the requirements set forth above
in this Section 6.3 (and subject to the limitations set forth therein), each of
Seller and Purchaser shall use commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
reasonably practicable the transactions contemplated by this Agreement,
including the obtaining of all necessary waivers, consents and approvals and
the fulfillment of each condition to the other party's obligations set forth in
Article III of this Agreement (it being understood and agreed that neither
Seller nor Purchaser shall be required to expend any amounts, assume any
obligations or incur any liabilities in connection with obtaining any
third-party waivers, consents or approvals).
6.4 Government Notification. Seller and Purchaser have
filed with the United States Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") pursuant to HSR Act, the notification and documentary material
required in connection with the acquisition of the Purchased Assets by
Purchaser, pursuant to this Agreement. Seller and Purchaser shall as soon as
practicable, comply with any request for additional information and documentary
practicable, comply with any request for additional information and documentary
material received from the FTC or Antitrust Division and shall coordinate and
cooperate with one another in exchanging such information and providing such
reasonable assistance as may be requested in connection with such request.
6.5 Bulk Transfer Laws. Without admitting the
applicability of the bulk transfer Laws of any jurisdiction, each of Seller and
Purchaser hereby waives compliance by the other party with any applicable bulk
sale or bulk transfer Laws of any jurisdiction in connection with the sale of
the Purchased Assets to Purchaser (other than any obligations of Seller with
respect to the application of the proceeds therefrom).
6.6 Public Announcements. Purchaser and Seller shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated by this Agreement, and neither Purchaser nor Seller shall issue
any such press release or make any such public statement without the prior
approval of the other party to this Agreement, such approval not to be
unreasonably conditioned, delayed or withheld, except as may be required by
applicable Law or any securities exchange on which the securities of Seller or
its Affiliates are listed.
6.7 Accounts Receivable; Receipts and Disbursements.
(a) Accounts Receivable. In the event that Seller
receives any payments relating to any Accounts Receivable (other than
Intracompany Receivables) after the Closing, such payments shall be the
property of, and shall be forwarded and remitted to Purchaser on a monthly
basis. Seller shall advise Purchaser of any counterclaims or set offs of which
it receives notice subsequent to the Closing with respect to any such Accounts
Receivable.
(b) Intracompany Receivables. In the event that
Purchaser receives any payments after the Closing relating to any Intracompany
Receivables, such payments shall be the property of, and shall be forwarded and
remitted to Seller on a monthly basis. Notwithstanding the foregoing and for
the avoidance of doubt, Seller shall not be obligated to, and shall not owe or
make payments to Purchaser in respect of Intracompany Receivables, and
Purchaser shall not be obligated to, and shall not owe or make any payments to
Seller in respect of Intracompany Liabilities.
6.8 Transition Services.
(a) Services. In order to facilitate an orderly
transition of the Business to Purchaser, Seller agrees to provide to Purchaser
in respect of the Business, as reasonably required by Purchaser, the following
services:
(i) E-mail Services. Seller shall use
commercially reasonable efforts, prior to the Closing Date, to assist
Purchaser in transitioning the Transferred Employees to Purchaser's
e-mail systems by (A) instructing the Transferred Employees how to
save contact lists in the Lotus Notes system and transfer personal
files to a central server, and (B) providing such contact lists and
personal files to Purchaser.
(ii) Payroll Services. Seller shall use
commercially reasonable efforts, prior to the Closing Date, to obtain
from the applicable vendors the right to use the ADP payroll software
and the eTime time clock software, and to obtain from SourceNet
Solutions the permission to use its services, in each case for Seller
or a newly-created Affiliate of Seller, on Purchaser's behalf, to
continue processing payrolls for Transferred Employees (the "Payroll
Services") for 60 days following the Closing Date or such earlier date
that Purchaser shall designate to Seller (the "Payroll Transition
Period"). Such Payroll Services shall be subject to the following
conditions:
(A) No new employees may be added to the
Payroll Services during the Payroll Transition Period, and Purchaser
shall promptly notify Seller of any Transferred Employees that are
terminated by Purchaser. Seller and such Affiliate shall have no
liability in connection with payments made to any such terminated
Transferred Employees.
(B) Purchaser must provide to Seller all
required Federal, State, and Local Employer Identification Numbers,
along with Purchaser's current unemployment rates, at least 15
Business Days prior to the Closing Date.
(C) Seller or such Affiliate will not
withhold benefit deductions from employee payrolls. Seller or such
Affiliate will only withhold required federal, state, local and
payroll taxes. At or before the Closing, Seller or such Affiliate will
solicit from each Transferred Employee a new IRS Form W-4, to be
effective as of Closing. Seller or such Affiliate will continue tax
withholdings at the level in effect as of Closing for any Transferred
Employee who does not properly complete such a new Form W-4.
(D) Seller or such Affiliate will not be
responsible for any payroll or human resources administrative issues
in respect of the Transferred Employees, including updating employee
addresses, tracking cost centers, processing salary increases,
transferring employees between locations, tracking vacation or sick
time or providing any type of benefits in respect of the period after
the Closing Date.
(E) Seller or such Affiliate shall provide
the Payroll Services using Seller's existing payroll forms, including
Seller's check stock, provided that Seller or such Affiliate may use
appropriate disclaimers and/or other notices with respect to the fact
that Seller or such Affiliate is providing the Payroll Services on
Purchaser's behalf.
(F) On a weekly basis, Seller or such
Affiliate shall provide documentation to Purchaser of the Payroll
amount to be processed for that week (including wages and applicable
taxes) (the "Payroll Amount"). Purchaser shall execute a wire transfer
for the Payroll Amount to Seller's account in immediately available
funds by the end of business on the Business Day following the day
Seller or such Affiliate provides documentation of the Payroll Amount.
Seller's obligation to provide Payroll Services shall terminate
immediately if Purchaser defaults on its obligations under this
paragraph (F).
(iii) Procurement, Maintenance and Parts
Inventory Services. Seller shall use its commercially reasonable
efforts to allow continued use by Purchaser of the JDE procurement,
maintenance and parts inventory software systems (A) at the Charlevoix
Facility and the Dixon Facility for 60 days following the Closing Date
and (B) the Terminals for 30 days following the Closing Date.
(b) Third Party Consents. If Seller and Purchaser
are unable to obtain any of the third party consents required for the services
contemplated under this Section 6.8, each of Seller and Purchaser shall work
together in good faith to find alternate means to provide Purchaser with the
services contemplated in this Section 6.8; provided that neither Seller nor its
Affiliates shall be required to make any payments or incur any out-of-pocket
costs, obligations or liabilities in connection therewith, and Seller shall not
be obligated to provide any service for which a required third-party consent is
not obtained.
(c) Reimbursement. Purchaser shall reimburse Seller
for (i) the direct hourly or equivalent salary cost of the employee providing
the services described in this Section 6.8, (ii) the hiring of temporary
personnel from the payroll service provider, or other source, to set up the
Employer Identification Numbers and transfer all the Transferred Employees to
the new payroll service provider, (iii) all out of pocket costs and expenses in
providing such services, including communications costs, (iv) a per employee
pro rata share of Seller's or such Affiliate's allocated costs for providing
the Payroll Services and (v) all transaction charges directly associated with
Purchaser's payroll. Purchaser shall execute a wire transfer to Seller's
account in the amount of reimbursement requested by Seller within three
business days of receipt from Seller of the request.
(d) NOx Technology.
(i) Purchaser acknowledges that (A) Seller has
developed certain technology that reduces NOx emissions by injecting
water into a cement kiln flame (the "NOx Technology"), which
technology is currently implemented at the Charlevoix Facility, (B)
the NOx Technology is an Excluded Asset, (C) the NOx Technology is the
proprietary and confidential information of Seller, and (D) except as
set forth in this Section, Purchaser is acquiring no rights in the NOx
Technology.
(ii) Within 90 days after the Closing Date,
Purchaser shall remove the NOx Technology from all facilities owned or
controlled by Purchaser or its Affiliates.
(iii) Absent a written license agreement from
Seller, neither Purchaser nor any of its Affiliates may implement the
NOx Technology, or any improvement or derivative thereof, at any
facility owned or controlled by Purchaser or its Affiliates for the
longer of (A) any period in which Seller or its assignee owns or
controls any United States patent that would be infringed by the use
of the NOx Technology, including the Current NOx Patent Application
(and any patents claiming priority therefrom, and any divisions,
continuations, reissues, reexaminations, extensions and renewals
thereof) and (B) five years and after such five-year period, the
shorter of (1) any period in which Seller or its assignee owns or
controls any United States patent application that relates to the NOx
Technology, including the Current NOx Patent Application (and any
patent applications claiming priority therefrom, and any divisions,
continuations, reissues, reexaminations, extensions and renewals
thereof) and (2) eight years. Upon Seller's request, the senior
officer for Purchaser's United States operations shall certify
Purchaser's compliance with the provisions of this Section 6.8(d).
(iv) With respect to the NOx Technology, the
provisions of Section 6.16 shall survive the termination of this
Agreement indefinitely, provided that information disclosed in any
United States patent or patent application that is made available for
public examination by the United States Patent and Trademark Office
shall no longer be deemed the confidential information of Seller.
(e) Release From Liability. Except in the case of gross negligence or
willful misconduct on the part of Seller or its Affiliates (or their
respective officers, employees, agents and representatives), Purchaser
does hereby release and forever discharge Seller and its Affiliates
and any of their respective present, future and former agents,
representatives, attorneys, and associates and their respective
predecessors, successors, assigns, with respect to, and shall
indemnify, defend and hold harmless each such Person from and against,
any matter, liability or cause of action, arising out of or in any way
relating to, directly or indirectly, any of the matters described in
this Section 6.8.
6.9 Like-Kind Exchange.
(a) Seller, upon providing written notice at least
30 calendar days prior to Closing Date, may, with respect to some or all of the
Purchased Assets, elect to effect a simultaneous or non-simultaneous
tax-deferred exchange pursuant to Section 1031 of the Code and the regulations
thereunder. Purchaser expressly agrees to use reasonable efforts to cooperate
with Seller, upon Seller's reasonable request, 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 Purchaser in connection with this
Agreement shall remain in full force and effect and continue to inure to the
benefit of Purchaser, notwithstanding any assignment of this Agreement to a
third party in connection with such Section 1031 exchange. Nothing in this
Section 6.9 shall in any manner relieve Seller from any of its obligations
under this Agreement, and Seller shall remain primarily liable to Purchaser
pursuant to the terms of this Agreement.
(b) Purchaser's obligation to cooperate in a Section
1031 exchange is conditioned upon each of the following: (i) Purchaser 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 Purchaser under Section 6.9(a) or such
Section 1031 exchange, and Seller shall indemnify and hold Purchaser harmless
from any Damages or any other cost, expense, liability or loss of Tax benefits
incurred by Purchaser in connection with any action taken by Purchaser under
Section 6.9(a) or such Section 1031 exchange, (ii) the Closing shall not be
delayed as a result of such Section 1031 exchange, (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 Purchaser as if such Section 1031 exchange had not been made and (iv)
Purchaser shall not be required to hold legal title to any assets other than
the Purchased Assets.
6.10 Insurance; Risk of Loss.
(a) Purchaser acknowledges that the Retained
Policies will not continue to insure the Purchased Assets or the Business after
the Closing Date. Purchaser hereby further acknowledges (and acknowledges on
behalf of its Affiliates) that after the Closing Date, if the Business suffers
any casualty or loss for which Purchaser is responsible under the terms of this
Agreement, such loss shall be payable solely from any substitute policies to be
obtained by the Purchaser. Each of Purchaser and Seller shall, and shall cause
its Affiliates to, not assert any claim with respect to indemnified Damages
under insurance policies maintained by the other party or any subsidiary,
division or Affiliate of the other party. Except as Seller shall otherwise
consent to in writing (which consent shall not be unreasonably withheld,
delayed or conditioned), 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 Retained Policies.
(b) Except as set forth in this Section 6.10(b), the
risk of loss or damage by fire or other casualty to any of the Owned Real
Property or Tangible Personal Property before the Closing is retained by
Seller. In the event that any of the Owned Real Property or Tangible Personal
Property shall suffer any damage as a result of a fire or other casualty prior
to the Closing (each such event, a "Casualty Loss"), in addition to and without
limitation of any right of Purchaser not to consummate the transactions
contemplated by this Agreement pursuant to Section 3.4, Seller agrees to, at
its option, (i) repair the damage at its sole cost and expense before the
Closing, or (ii) make an appropriate reduction in the Purchase Price herein set
forth based on Seller's good faith estimate for the cost of such repair, or
(iii) assign to Purchaser at Closing all insurance claims and proceeds payable
to Seller as a result of such fire or other casualty, and to the extent the
costs of repair for the applicable Casualty Loss are in excess of the insurance
proceeds, the Purchase Price will be appropriately reduced only to the extent
of such excess costs (each a "Casualty Loss Election"). Notwithstanding the
foregoing, in the event that Seller's good faith estimate of the cost of
repairing any Casualty Loss does not exceed $50,000 and Seller makes a Casualty
Loss Election under subclause (iii), there shall be no adjustment of the
Purchase Price regardless of whether the insurance proceeds are sufficient to
cover the Casualty Loss. In addition to its right to make a Casualty Loss
Election pursuant to the foregoing, in the event that Seller's good faith
estimate of the cost of repairing any Casualty Loss exceeds $2,500,000 (the
"Threshold Damage Amount"), Seller shall also have the right, exercisable in
its sole discretion, to terminate this Agreement unless Purchaser waives any
rights it may have against Seller in respect of such Casualty Loss (a "Casualty
Termination Election"), in which case Seller and Purchaser shall have not
further obligations under this Agreement (other than obligations that are
expressly intended to survive the termination of this Agreement). In the event
that any of the Owned Real Property or Tangible Personal Property shall suffer
a Casualty Loss prior to the Closing, Seller shall deliver a written notice
thereof to Purchaser on or before the earlier of (i) ten days after Seller
obtains Knowledge of the damage or (ii) the Closing Date, which written notice
shall include Seller's good faith estimate of the cost to repair such damage
and an identification of Seller's Casualty Loss Election or Casualty
Termination Election, as the case may be. In the event that Seller fails to
timely deliver notice of its election to Purchaser, (A) if Seller's good faith
estimate of the cost of repairing the Casualty Loss does not exceed the
Threshold Damage Amount, Seller shall be deemed to have made a Casualty Loss
Election pursuant to clause (iii) above or (B) if Seller's good faith estimate
of the cost of repairing the Casualty Loss exceeds the Threshold Damage Amount,
Seller shall be deemed to have made a Casualty Termination Election and Seller
subsequently notifies Purchaser of such Casualty Loss prior to the Closing (and
the Closing does not occur). Seller shall have no right to terminate this
Agreement pursuant to this Section 6.10(b) if Seller's good faith estimate of
the cost to repair the damage does not exceed the Threshold Damage Amount.
(c) Except as set forth in this Section 6.10(c), the
risk of loss or damage to the Owned Real Property by condemnation before the
Closing is retained by the Seller. In the event any condemnation proceeding is
commenced with respect to the Owned Real Property, in addition to and without
limitation of any right of Purchaser not to perform its obligations under this
Agreement pursuant to Section 3.4(f), Seller shall assign to Purchaser at the
Closing all of Seller's right, title and interest in and to all awards made in
respect of such condemnation and shall pay over to the Purchaser all amounts
theretofore received by Seller in connection with such condemnation.
(d) Upon the Closing, the full risk of loss with
respect to the Owned Real Property and the Tangible Personal Property shall
pass to, and be assumed by, Purchaser.
6.11 Intracompany Arrangements. Notwithstanding any other
provision herein (other than Section 6.8), as of the Closing, all services,
commitments or other arrangements that existed pre-Closing among the Business
and other businesses of Seller or Seller's Affiliates shall cease.
6.12 Retained Names. To the extent any of the Retained
Names appear on any plants, buildings, signs, equipment or other structures
that constitute Purchased Assets, Purchaser shall, within 60 calendar days
after the Closing Date, remove or obliterate, or cause to be removed or
obliterated, the Retained Names from such plants, buildings, signs, equipment
or other structures. Seller shall use commercially reasonable efforts to
remove, or cause to be removed, from the Real Property on or prior to the
Closing all stationery, business forms, packaging, containers and other similar
personal property on which any of the Retained Names appear; provided, however,
to the extent any such items are inadvertently left on the Real Property,
Purchaser shall not use any such items without first removing or obliterating,
or causing to be removed or obliterated, the Retained Names from such
materials. For the avoidance of doubt, except as set forth in this Section
6.12, Purchaser shall have no rights to, and shall not use in any manner, the
Retained Names on or after the Closing.
6.13 Owen Sound Terminal.
(a) The parties acknowledge that CMC, in accordance
with its obligations under Section 11.2 of the Cement Supply & Distribution
Agreement (the "Miller Supply Agreement"), dated as of December 18, 1989, by
and among CMC, Miller Cement Limited (f/k/a 835675 Ontario Limited) and Miller
Paving Limited ("Miller"), has delivered to Miller a notice of Seller's receipt
of Purchaser's offer to purchase the Owen Sound Terminal for a purchase price
of $20 million and on the other terms and subject to the conditions set forth
in this Agreement that relate to the Owen Sound Terminal. In the event that
Miller exercises its right, in accordance with the Miller Supply Agreement, to
purchase the Owen Sound Terminal on the terms and subject to the conditions set
forth in such notice:
(i) the Owen Sound Terminal shall no longer be
deemed to be a "Terminal" for purposes of this Agreement;
(ii) the Owen Sound Terminal shall no longer be
deemed to be part of the Owned Real Property;
(iii) the Purchase Price shall be $369,200,000;
(iv) the current assets and current liabilities
of the Owen Sound Terminal shall be disregarded for purposes of the
Preliminary Closing Statement and the Final Closing Statement;
(v) the Base Working Capital shall be
$28,461,000;
(vi) all items relating solely to the Owen Sound
Terminal set forth in the Seller Disclosure Schedule shall be
disregarded, and for purposes of this Agreement (including Section
3.4(a) and Article VIII), Seller's representations and warranties set
forth in Article IV shall be deemed to have been made without
reference to the Owen Sound Terminal and, for avoidance of doubt, the
representations and warranties of Seller set forth in Article IV shall
not be deemed untrue or incorrect as of the date of this Agreement by
virtue of the exercise by Miller of its right to purchase the Owen
Sound Terminal under the Miller Supply Agreement, or by virtue of any
matter relating to the Owen Sound Terminal; and
(vii) the definition of "Restricted Cement
Region" set forth in Section 1.1 shall be deleted in its entirety and
the following language shall be substituted in lieu thereof:
"Restricted Cement Region" means (i) the State of Michigan and (ii)
the areas that fall within a 150 mile radius around each of (A) the
Dixon Facility, and (B) the Terminals located in the cities of
Milwaukee, Manitowoc and Green Bay, Wisconsin."
(b) Each of Seller and Purchaser shall pay one-half
of the CDN$750,000 fee required to be paid by CMC pursuant to Section 11.2 of
the Miller Supply Agreement.
6.14 Maintenance of Indemnification Rights. Purchaser
shall not, and shall cause each of its Affiliates and subsidiaries to not, take
or fail to take any action that would limit or otherwise adversely affect any
indemnification rights of Seller, Seller's Affiliates and their respective
directors, officers, shareholders, attorneys, accountants, agents and
employees, and their respective heirs, successors and assigns would have been
entitled to under the Dixon Purchase Agreement had the transactions
contemplated by this Agreement not occurred.
6.15 Vessels.
(a) Prior to the Closing, Purchaser shall, or shall
cause each of its Affiliates to, use its commercially reasonable efforts to
take all actions necessary to establish, or nominate, a Person that is a
Citizen and qualified to purchase and document the Conquest under 46 U.S.C. ss.
12102(a)(4) so as to permit Seller to transfer the Conquest and assign the
Challenger Agreements to Purchaser or its nominee pursuant to the terms of this
Agreement without contravention of the Shipping Act or any other requirements
of United States maritime law.
(b) The Seller or its Specified Affiliate shall
deliver the Conquest to the Purchaser or its nominee in class with all
equipment, machinery, items of outfit and spares, bunkers, any unused
lubricating oils and other materials on board, together with all equipment and
spare parts specific and exclusive to the Conquest stored on shore.
6.16 Confidentiality. From and after the Closing, Seller
agrees to, and shall cause its agents, representatives, Affiliates, employees,
officers and directors (collectively, the "Seller Representatives") to: (a)
treat and hold as confidential (and not disclose or provide access to any
Person to) any information primarily relating to the Business, including trade
secrets, processes, price, customer and supplier lists, pricing and marketing
plans, policies and strategies, details of client and consultant contracts,
operations and methods, (b) in the event that Seller or any of the Seller
Representatives becomes legally compelled to disclose any such information,
provide Purchaser with prompt written notice of such requirement so that
Purchaser may seek a protective order or other remedy or waive compliance with
this Section 6.16, and in the event that such protective order or other remedy
is not obtained, or Purchaser waives compliance with this Section 6.16, furnish
only that portion of such confidential information which is legally required to
be provided and exercise its commercially reasonable efforts to obtain
assurances that confidential treatment will be accorded such information, and
(c) except with respect to copies allowed under Section 2.1(a)(ix), promptly
furnish (prior to, at, or as soon as practicable following, the Closing) to
Purchaser all such confidential information (in whatever form or medium) then
in the possession of Seller or any of the Seller Representatives and destroy
any and all additional copies then in the possession of Seller or any of the
Seller Representatives of such information and of any analyses, compilations,
studies or other documents prepared, in whole or in part, on the basis thereof;
provided, however, that this Section 6.16 shall not apply to any information
(v) that is or becomes generally available to the public other than as a result
of a disclosure by Seller or any of the Seller Representatives, (w) that
becomes available to Seller or any of the Seller Representatives on a
non-confidential basis from a source that did not acquire such information from
Seller or Purchaser on a confidential basis, (x) to the extent reasonably
necessary for Seller to retain, perform and/or discharge any Retained
Liability, provided Seller exercises reasonable efforts to obtain reasonable
assurance that confidential treatment is accorded such information so
disclosed, or (y) that is disclosed in connection with the prosecution or
defense of a dispute between Purchaser and Seller with respect to this
Agreement and the other Transaction Documents or the transactions contemplated
hereby or thereby.
6.17 Notice of Developments. Prior to the Closing, each
of Seller and Purchaser shall promptly notify the other in writing of all
events, circumstances, facts and occurrences arising subsequent to the date of
this Agreement that has resulted in a breach of a representation or warranty or
covenant of Seller or Purchaser, as the case may be, in this Agreement in a
manner that would cause a condition set forth in Section 3.2, 3.3 or 3.4, as
the case may be, not to be satisfied.
6.18 Non-Competition.
(a) Non-Compete.
(i) Subject to Section 6.18(b), during the
five-year period immediately following the Closing Date (the
"Restricted Period"), neither Seller nor any Affiliate of Seller (for
so long during such period as such Person shall remain an Affiliate of
Seller) shall actively sell or distribute (including through any
distributorship arrangement to resell bulk gray portland cement on
behalf of Seller or any of its Affiliates) gray portland cement for
delivery in the Restricted Cement Region (the "Restricted Cement
Business").
(ii) Subject to Sections 6.18(b)(v) and
6.18(b)(vi), during the Restricted Period, neither Seller nor any
Affiliate of Seller (for so long during such period as such Person
shall remain an Affiliate of Seller) shall construct and commence
commercial operation of (A) a gray portland cement manufacturing
facility in the Restricted Building Region or (B) a gray portland
cement terminal in the area that falls within a 20 mile radius around
the Cleveland Terminal; provided, however, that the foregoing
restriction shall not apply with respect to the operation of any
manufacturing facility or gray portland cement terminal (or the
prosecution or completion of construction or development, or
commencement of commercial operation, of any project in respect of
such facility or terminal) of any Person that engages in the
Restricted Cement Business (or any of such Person's Affiliates or
subsidiaries) acquired in accordance with Section 6.18(b).
(iii) Nothing contained in this Agreement shall
be construed to prohibit Seller or any of its Affiliates or
subsidiaries from engaging in any businesses other than the Restricted
Businesses.
(b) Exceptions. Nothing contained in this Agreement
shall prohibit Seller or any of its subsidiaries or Affiliates from:
(i) acquiring (whether by merger, consolidation,
stock or asset purchase or other similar transaction) or holding any
or all of the shares of capital stock or any or all of the partnership
or other equity interest in, or all or substantially all of the
business or assets of, any Person that engages in the Restricted
Cement Business if such Restricted Cement Business does not constitute
a Significant Restricted Business. In such event, the conduct of such
Restricted Cement Business shall not be prohibited by this Agreement;
(ii) acquiring or holding shares of capital
stock or a partnership or other equity interest in any Person that
engages in the Restricted Cement Business if such Restricted Cement
Business constitutes a Significant Restricted Business, where such
shares or interest represent no more than (A) 10% of the outstanding
voting power, or 15% of the outstanding equity interest, in such
Person, if such Person does not have any class of equity securities
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or (B) 15% of the outstanding voting power or equity
interest in such Person, if such Person has any class of equity
securities registered under the Exchange Act; provided, however, that
in each such case, such shares or interests are purchased and/or held
solely for investment purposes and Seller has no management or similar
rights with respect to such Person, provided that, notwithstanding the
foregoing, Seller will be able to possess rights customarily held by a
minority investor (including the right to appoint no more than one
member of the board of directors of such Person);
(iii) acquiring (whether by merger,
consolidation, stock or asset purchase or other similar transaction)
all or substantially all of the shares of capital stock of, or all or
substantially all of the partnership or other equity interest in, or
all or substantially all of the assets or business of, any Person that
engages in the Restricted Cement Business where such Restricted Cement
Business constitutes a Significant Restricted Business; provided,
however, that, solely in the case of the acquisition of a Significant
Restricted Business, if either (A) the total sales of such Significant
Restricted Business during the most recently completed fiscal year
exceeded $70,000,000, or (B) the total revenues derived from such
Significant Restricted Business during the most recently completed
fiscal year exceeded 50% of such Person's total revenues during the
most recently completed fiscal year, then Seller shall use reasonable
efforts to sell to an unaffiliated third party within 12 months after
such acquisition such portion of the business or operations of such
Significant Restricted Business as shall be necessary so that the
revenues derived from the remaining Restricted Cement Business of such
Person following such sale would not constitute more than (x)
$70,000,000 or (y) 50% of the pro forma total revenues of such Person
during the most recently completed fiscal year, as the case may be (in
each case, after giving effect to such sale); provided, further,
however, that notwithstanding the foregoing, there shall be no such
divestiture obligation if the transaction in which such Significant
Restricted Business was acquired constituted a Significant Business
Combination Transaction. In each such event, the conduct of such
Restricted Cement Business pending such sale and the conduct of such
remaining Restricted Cement Business following such sale shall not be
prohibited by this Agreement;
(iv) engaging in (A) any sales of gray portland
cement to, or swaps of gray portland cement with, other cement
companies ("industry transactions") or (B) the Restricted Cement
Business solely to the extent Seller or any of its Affiliates is
selling gray portland cement to any Person for which Seller or any of
its Affiliates then has an account if no more than 20% of the cement
purchased by such Person (not to exceed 25,000 tons per annum) is
purchased for use in the Restricted Cement Region;
(v) entering into an agreement providing for, or
from consummating, a Significant Business Combination Transaction, and
in the event that Seller or any of its subsidiaries or Affiliates
consummates any Significant Business Combination Transaction, then
nothing contained in this Agreement shall prohibit Seller or any of
its Affiliates or subsidiaries (including, in each case, any such
Person who shall be a successor, by merger or otherwise, to Seller or
any of its subsidiaries or Affiliates or to all or substantially all
of the business or assets of any of the foregoing in connection with
or at any time after such Significant Business Combination
Transaction) from (A) engaging in the Restricted Cement Business, if
the other party to such Significant Business Combination Transaction
or any of its Affiliates or subsidiaries is engaged in the Restricted
Cement Business at the time of such transaction, or (B) taking any
action that would otherwise be prohibited under Section 6.18(a)(ii);
or
(vi) entering into an agreement providing for,
or from consummating, a Change of Control Transaction, and in the
event that Seller or any of its subsidiaries or Affiliates consummates
any Change of Control Transaction, then nothing contained in this
Agreement shall prohibit the other party to such transaction or any of
its subsidiaries or Affiliates (including, in each case any such
Person who shall be a successor, by merger or otherwise, to Seller or
any of its subsidiaries or Affiliates or to all or substantially all
of the business or assets of any of the foregoing in connection with
or at any time after such Change of Control Transaction) from (A)
engaging in the Restricted Cement Business or (B) taking any action
that would otherwise be prohibited under Section 6.18(a)(ii).
(c) Non-Solicitation. Except with respect to
Non-Transferred Employees, as a separate and independent covenant, Seller
agrees with Purchaser that, for a period of five years following the Closing,
Seller will not in any way, directly or indirectly, interfere with or attempt
to interfere with any officers, employees, representatives or agents of the
Business, or induce or attempt to induce any of them to leave the employ of
Purchaser or any of its Affiliates or violate the terms of their contracts, or
any employment arrangements, with Purchaser or any of its Affiliates; provided,
however, that (i) the foregoing will not prohibit a general solicitation or
general advertisement that is not directed to such employees, and (ii) in the
event that Seller or any of its subsidiaries or Affiliates consummates any
Significant Business Combination Transaction or Change of Control Transaction,
then the foregoing shall not apply to the other party to such transaction or
any of its subsidiaries or Affiliates (including, in each case any such Person
who shall be a successor, by merger or otherwise, to Seller or any of its
subsidiaries or Affiliates or to all or substantially all of the business or
assets of any of the foregoing in connection with, or at any time after, such
Significant Business Combination Transaction or Change of Control Transaction,
as the case may be).
(d) Seller acknowledges that the covenants of Seller
set forth in this Section 6.18 are an essential element of this Agreement and
that, but for the agreement of Seller to comply with these covenants, Purchaser
would not have entered into this Agreement. Seller acknowledges that this
Section 6.18 constitutes an independent covenant that shall not be affected by
performance or nonperformance of any other provisions in this Agreement by
Purchaser or any Affiliates or, with respect to the Conquest, the nominee, of
Purchaser unless a Governmental Authority determines that Seller's
non-compliance with this Section 6.18 is an appropriate remedy for any breach
of this Agreement by Purchaser or any Affiliates or, with respect to the
Conquest, the nominee, of Purchaser. Seller has independently consulted with
its counsel and after such consultation agrees that the covenants set forth in
this Section 6.18 are reasonable and proper. Seller agrees and acknowledges
that remedies at law for any breach of its obligations under this Section 6.18
are inadequate and that in addition thereto the Purchaser shall be entitled to
seek equitable relief, including injunction and specific performance, in the
event of any such breach.
6.19 White Oak Litigation. Seller agrees that, without
the prior written consent of Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned), it shall not enter into any settlement with
the Dixon Township in connection with the lawsuit filed in September 2004 in
the Circuit Court of the Fifteenth Judicial Circuit in Lee County, Illinois.
6.20 Charlevoix Landfill Operating License. Each of
Seller and Purchaser acknowledge that: (a) Seller has received a Solid Waste
Disposal Area Operating License for the operation of a Type III Low Hazard
Industrial Landfill ("Charlevoix Landfill"), License No. 9069, in connection
with the Charlevoix Facility ("Charlevoix Landfill Operating License"), such
license being necessary to operate the Charlevoix Landfill; (b) the Charlevoix
Landfill Operating License is not transferable to Purchaser; and (c) there
exists an escrow account known as the Perpetual Care Fund (the "Landfill
Account"), which was established pursuant to that certain Solid Waste Landfill
Perpetual Care Fund Escrow Agreement dated as of December 14, 1998, by and
between Southdown, Inc., the Michigan Department of Environment Quality and
National City Bank of Indianapolis, IN, as escrow agent, the value of such
account to be determined as of the Closing Date, which value shall be the price
of this Purchased Asset. The parties agree that: (x) on or before the Closing
Date, the Landfill Account shall be transferred to Purchaser or its designees
as part of the Purchased Assets; (y) on or before the Closing Date, the parties
shall perform whatever actions are necessary to transfer the benefits of the
Landfill Account to Purchaser, including entering into an amendment of the
agreement governing the Landfill Account transferring Seller's interest in such
account to Purchaser or its designees; and (z) if Purchaser is not able to
obtain a license to operate the Charlevoix Landfill on or before the Closing
Date, Purchaser and Seller shall, in accordance with Section 6.3(c) hereof,
work together in good faith to facilitate Purchaser's ability to operate the
Charlevoix Landfill, including entering into an agreement providing that
Purchaser shall act as Seller's agent with respect to the operation of the
Charlevoix Landfill until such time as Purchaser obtains its own operating
license for the Charlevoix Landfill or receives a final denial of its
application for an operating license.
ARTICLE VII
EMPLOYEE MATTERS
7.1 Offers of Employment. No more than 21 and at least
three days before the Closing Date, Purchaser shall offer employment to (a) at
least 85% of the Facility Employees in the aggregate and (b) at least 85% of
the Facility Employees employed in each of the Dixon Facility and the
Charlevoix Facility. In making hiring determinations pursuant to this Section
7.1, Purchaser shall comply with all applicable Laws respecting employment
offers and hiring, including the National Labor Relations Act, Title VII of the
Civil Rights Act or 1964, the Americans with Disabilities Act and the Age
Discrimination in Employment Act. Seller shall provide Purchaser and its
representatives reasonable access to the Facility Employees to assist Purchaser
in its determination. Purchaser agrees that following the Closing Date, it
shall maintain employee benefit and compensation plans, programs and
arrangements for the benefit of the Transferred Employees (as defined below)
that in the aggregate provide a level of compensation and benefits that is
substantially similar to the level provided under the corresponding employee
benefit plans and arrangements of Purchaser or its Affiliates that are
applicable to their respective similarly situated employees, or, as applicable,
in accordance with the terms and conditions of any Assumed Collective
Bargaining Agreement. Each Facility Employee who receives an offer and accepts
such offer of employment shall be referred to herein as a "Transferred
Employee," and each other Business Employee (including those individuals
identified on Section 4.12(a) of the Seller Disclosure Schedule and the
Facility Employees who do not receive offers of employment from Purchaser)
shall be referred to herein as a "Non-Transferred Employee," provided, however,
that in the event a Transferred Employee fails to pass the drug test(s) given
by the Purchaser in the ordinary course of hiring new employees and in
accordance with applicable Law, such Transferred Employee shall be deemed a
Non-Transferred Employee for all purposes of this Agreement. Seller shall
terminate the employment of each Transferred Employee effective as of 11:59
p.m. on the Closing Date. Purchaser shall inform Seller not later than one
Business Day after the Closing Date of the identity of the Transferred
Employees, subject to subsequent updates based on the foregoing.
7.2 Employee-Related Obligations and Costs.
(a) Subject to Section 8.11, Seller agrees to remain
obligated for expenses in connection with (i) any claim of a Business Employee
arising under the workers' compensation laws of any state (a "Worker's
Compensation Claim") that was incurred on or prior to the Closing Date and (ii)
any Worker's Compensation Claim of a Non-Transferred Employee that was incurred
prior to, on or after the Closing Date. Effective as of the day following the
Closing Date, Purchaser shall assume all obligations and Liabilities for all
Worker's Compensation Claims arising from events occurring after the Closing
Date with respect to any Transferred Employee. A Worker's Compensation Claim is
deemed to be incurred when the facts and events giving rise to such claim
occur.
(b) Seller agrees to remain obligated to provide
continuation health care coverage (including the issuance of any required
notices), in accordance with Section 4980B of the Code and Section 601 et seq.
of ERISA ("COBRA"), to all Business Employees and their qualified dependents
and beneficiaries (x) who incur a qualifying event on or prior to the Closing
Date and (y) to whom Seller is on the Closing Date providing such continuation
coverage or under an obligation to provide such continuation coverage at the
election of the Business Employee, including solely as a result of the
transactions contemplated by this Agreement. Seller also agrees to remain
obligated to provide continuation coverage to all Non-Transferred Employees and
their qualified dependents and beneficiaries (x) who incur a qualifying event
prior to, on and after the Closing Date and (y) to whom Seller is on the
Closing Date providing such continuation coverage or under an obligation to
provide such continuation coverage at the election of the Non-Transferred
Employee. Purchaser shall have responsibility for any and all obligations under
COBRA with respect to any Transferred Employees and their qualified dependents
and beneficiaries who incur qualifying events following the Closing Date.
(c) Effective as of the day following the Closing
Date, Purchaser shall be responsible for (i) any Liability arising under the
WARN Act and any state or local equivalent in connection with the termination
of the employment of any Transferred Employee by Purchaser after the Closing
Date, (ii) issuance of any notices required by the WARN Act with respect to the
termination of any Transferred Employee after the Closing Date and (iii) any
obligation with respect to the Transferred Employees under any applicable state
or local equivalent arising or accruing after the Closing Date. Seller shall be
responsible for any Liability arising under the WARN Act and any state or local
equivalent in connection with the termination of the employment of any Business
Employee prior to or on the Closing Date and with the termination of employment
of any Non-Transferred Employee prior to, on or after the Closing Date. Each of
Seller and Purchaser shall cooperate to the extent necessary in determining
such other party's duties under the WARN Act and any state or local equivalent.
7.3 Severance. Seller shall remain solely responsible
for all Liabilities and claims with respect to severance as a result of or
related to the termination of employment of a Facility Employee prior to the
Closing (including severance (if any) payable to any Transferred Employee as a
result of the termination of employment with Seller or any of its Affiliates as
a consequence of the transactions contemplated hereby, or in the event a
Facility Employee who receives an offer of employment from Purchaser does not
accept such offer), and any such severance claims shall not count against the
Seller's Severance Cap. Seller shall also remain responsible for all
Liabilities and claims with respect to severance for (a) each Non-Transferred
Employee who is not offered employment with Purchaser because of the
Non-Transferred Employee's failure to pass a required, lawfully-administered
drug test, (b) up to an additional 15 Non-Transferred Employees (at an average
severance rate for all of the Non-Transferred Employees whose employment is
terminated, excluding a termination as a result of clauses (a) or (c) in this
Section 7.3), and (c) each of the individuals listed on Section 4.12(a) of the
Seller Disclosure Schedule (collectively (a), (b) and (c) are referred herein
as "Seller's Severance Cap"). Subject to the foregoing and once Seller's
Severance Cap has been met, Purchaser shall promptly reimburse Seller, upon
written demand, for all Liabilities with respect to all other severance for
Non-Transferred Employees. Purchaser shall also be responsible for all
Liabilities and claims with respect to severance for any Transferred Employee
as a result of any termination of employment with the Purchaser or one of its
Affiliates following the Closing. Any severance paid in accordance with the
immediately preceding sentence shall be in accordance with Purchaser or one of
its Affiliates' severance benefit plans as in effect at the time of the
termination of employment, or, as applicable, in accordance with the terms and
conditions of any Assumed Collective Bargaining Agreement.
7.4 Service Credit. As of the day immediately following
the Closing Date, Purchaser shall, and shall cause its Affiliates to, credit
Transferred Employees with all service with Seller and its Affiliates for
purposes of eligibility and vesting (but not for purposes of benefit accruals,
other than with respect to vacation benefits) under any employee benefit plans,
programs, agreements or arrangements maintained by Purchaser or its Affiliates,
to the extent such service was recognized by the Seller immediately prior to
the Closing Date, provided, that such crediting of service shall not operate to
duplicate any benefit or the funding of any such benefits. Effective as of
11:59 p.m. on the Closing Date, each Transferred Employee shall cease to accrue
benefits, earn service credit or otherwise actively participate under any
employee benefits plan, program, agreement or arrangement maintained by Seller
or any of its Affiliates.
7.5 Welfare Plans.Purchaser shall (a) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the
Transferred Employees under any welfare benefit plans that such employees may
be eligible to participate in after the Closing Date and (b) provide each
Transferred Employee with credit for any payments and deductibles paid prior to
the Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that the Transferred Employee is eligible
to participate in after the Closing Date.
7.6 Bonuses. As soon as practicable after December 31,
2004, Seller shall pay to each Transferred Employee a bonus (but only if
payable and not already paid) pursuant to any annual bonus plan maintained by
Seller or its Affiliates for Transferred Employees in respect of 2004,
including Seller's Plant Employee Compensation Plan and Seller's Logistics
Incentive Plan, in any event determined without regard to any requirement
otherwise applicable under such plan that a Transferred Employee be employed by
Seller on the date the bonus payment is made.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties.
(a) The covenant Seller made pursuant to Section
6.17 and the representations and warranties of Seller contained in this
Agreement shall survive for a period of 18 months following the Closing Date;
provided, however, that (i) the representations and warranties made pursuant to
Sections 4.1, 4.2, 4.3, 4.9(d), 4.9(e) and 4.15 shall survive indefinitely,
(ii) the representations and warranties made pursuant to Section 4.14 shall
survive until 60 days after the expiration of the relevant statute of
limitations for the assessment or collection of any Tax and (iii) the
representations and warranties made pursuant to Sections 4.12 and 4.13 shall
survive the Closing until the third anniversary of the Closing Date. Neither
the period of survival nor the liability of Seller with respect to Seller's
representations and warranties shall be reduced by any investigation made at
any time by or on behalf of Purchaser. If written notice of a claim, which sets
forth the facts that Purchaser believes, in good faith, constitute a reasonable
basis for indemnification, has been given prior to the expiration of the
applicable representations and warranties by Purchaser to Seller, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved.
(b) The covenant Purchaser made pursuant to Section
6.17 and the representations and warranties of Purchaser contained in this
Agreement shall survive the Closing for a period of 18 months following the
Closing Date; provided, however, that the representations and warranties made
pursuant to Sections 5.1, 5.2, 5.3 and 5.6 shall survive indefinitely. Neither
the period of survival nor the liability of Purchaser with respect to
Purchaser's representations and warranties shall be reduced by any
investigation made at any time by or on behalf of Seller. If written notice of
a claim, which sets forth the facts that Seller believes, in good faith,
constitute a reasonable basis for indemnification, has been given prior to the
expiration of the applicable representations and warranties by Seller to
Purchaser, then the relevant representations and warranties shall survive as to
such claim, until such claim has been finally resolved.
8.2 Indemnification by Seller. From and after the
Closing and subject to the provisions of this Article VIII, Seller agrees to
pay and to indemnify, defend and hold Purchaser and its Affiliates and their
respective directors, officers, employees and agents harmless from and against
any and all claims and/or losses, Liabilities, damages, judgments, settlements,
costs and expenses (including interest and penalties recovered by a third party
with respect thereto, reasonable attorneys' fees, and expenses and reasonable
accountants' fees and expenses incurred in the investigation or defense of any
of the same or in asserting, preserving or enforcing any rights, but excluding,
unless payable to a third party, punitive, exemplary, special losses or
damages) (collectively, "Damages") arising out of or relating to any of the
following:
(a) Excluded Liabilities. Any Excluded Liability;
(b) Representations and Warranties. Any breach of
any representation or warranty made by Seller in Article IV of this Agreement,
the Deeds or the certificate to be delivered by Seller at the Closing pursuant
to Section 3.4(c) (it being understood that such representations and warranties
shall be interpreted without giving effect to any limitations or qualifications
as to "materiality" (including the word "material") or "Material Adverse
Effect" set forth therein);
(c) Covenants. Any breach of any covenant or
agreement of Seller contained in this Agreement or the other Transaction
Documents;
(d) Allocation. The failure by Seller to report the
sale of the Purchased Assets in accordance with the Final Allocation;
(e) Other Environmental Matters. The Environmental
Cost-Sharing Matters, subject to any relevant and applicable provisions of this
Agreement, including the limitations and conditions set forth in Section 8.8;
(f) Detroit Terminal. Except as provided in the
Detroit Lease Agreement, Liabilities with respect to claims and/or Damages of
unaffiliated third parties arising from, or related to, Purchaser's operation
of the Detroit Terminal, except to the extent any such Liabilities (i) are
caused by the negligence, gross negligence or willful misconduct of Purchaser,
any of its Affiliates or any of their respective employees, representatives or
agents (excluding, for this purpose, any employee, representative or agent of
Seller or any of its Affiliates) or (ii) relate to portland cement sold by
Purchaser and its Affiliates, including product liability claims for personal
injuries, property damages or other losses (such exceptions, collectively, the
"Purchaser Detroit Liabilities");
(g) Bulk Transfers. Liabilities arising from or
related to any failure to comply with laws relating to bulk transfers or bulk
sales with respect to the transactions contemplated by this Agreement
(notwithstanding the waiver contained in Section 6.5); and
(h) Charlevoix PSD Matter. Any fines and penalties
arising out of certain changes at the Charlevoix Facility undertaken during
outages in 2003 and 2004 that may be subject to enforcement, as described in
Section 2.2(a)(viii) of the Seller Disclosure Schedule, Charlevoix Facility,
item D. (the "Charlevoix PSD Matter"), and (ii) the reasonable costs associated
with the defense thereof, but only to the extent attributable to the period of
Seller's ownership or operation of the Charlevoix Facility and subject to the
limitations set forth in Section 8.4(f) (collectively, the "PSD Damages"). The
PSD Damages shall not include any costs to correct such violations (or alleged
violations) or non-compliance (or alleged non-compliance) with applicable
Environmental Law. Seller shall take the lead with respect to the defense of
this matter, provided, that (i) Purchaser shall retain the right to make final
determinations (subject to applicable Environmental Law) with respect to any
actions required to correct any violation or non-compliance with applicable
Environmental Law associated with such matter, (ii) Seller shall promptly
provide copies to Purchaser of all written correspondence from Seller to any
applicable Governmental Authority, and from any applicable Governmental
Authority to Seller, and (iii) Seller shall provide Purchaser with reasonable
advance notice of all planned meetings and telephone conferences with the
applicable Governmental Authority and Purchaser shall have the right to send
representative to attend and participate in such meetings.
8.3 Indemnification by Purchaser. From and after the
Closing and subject to the provisions of this Article VIII, Purchaser agrees to
pay and to indemnify, defend and hold Seller and its Affiliates and their
respective directors, officers, employees and agents harmless from and against
any and all claims and/or Damages arising out of or relating to any of the
following:
(a) Assumed Liabilities. Any Assumed Liability,
except to the extent such Assumed Liability is subject to indemnification by
Purchaser pursuant to Section 8.2(h) or Section 8.8;
(b) Representations and Warranties. Any breach of
any representation or warranty made by Purchaser in Article V of this Agreement
or the certificate to be delivered by Purchaser pursuant to Section 3.3(d) (it
being understood that such representations and warranties shall be interpreted
without giving effect to any limitations or qualifications as to "materiality"
(including the word "material") set forth therein);
(c) Covenants. Any breach of any covenant or
agreement of Purchaser contained in this Agreement or the other Transaction
Documents;
(d) Detroit Terminal. Any Purchaser Detroit
Liabilities; and
(e) Allocation. The failure by Purchaser to report
the purchase of the Purchased Assets in accordance with the Final Allocation.
8.4 Certain Limitations.
(a) Deductible. No indemnification pursuant to
Section 8.2(b) or Section 8.2(c), with respect to any breach by Seller of its
obligations under Section 6.17, shall be required with respect to any
individual Damage of Purchaser, unless (i) such item (of series of related
items) exceeds $40,000 and (ii) the aggregate of all Damages of Purchaser
described in Section 8.2(b) or Section 8.2(c), with respect to any breach by
Seller of its obligations under Section 6.17, with respect to of this Agreement
shall exceed $3,000,000, in which case Seller shall be liable only for the
Damages in excess of $3,000,000.
(b) Cap. Except in the case of actual fraud, the
maximum aggregate amount of Damages (other than with respect to Damages arising
from a breach of representation or warranty in Section 4.14) against which
Purchaser shall be entitled to be indemnified under (i) Sections 8.8 and
8.2(e), Section 8.2(c) solely with respect to any breach by Seller of its
obligations under Section 6.17, and Section 8.2(b) with respect to all claims
thereunder (other than with respect to claims for breach of a representation or
warranty that, pursuant to Section 8.1, survive the Closing and remain in full
force and effect indefinitely) shall be equal to 20% of the Purchase Price and
(ii) Section 8.2(b) with respect to all claims for breaches of representation
and warranty which, pursuant to Section 8.1, survive the Closing and remain in
full force and effect indefinitely, shall be equal to the Purchase Price.
Furthermore, as an additional limitation on Purchaser's indemnification rights
hereunder, the aggregate amount of Damages against which Purchaser shall be
entitled to be indemnified under Section 8.2(b), with respect to any breach by
Seller of its representations and warranties set forth in Sections 4.9(d) and
4.9(e) (collectively, "Title Representation Damages") shall be limited as
follows: (x) Damages with respect to each individual Terminal shall not exceed
the sum of the Purchase Price and the Assumed Liabilities allocated to such
Terminal (including all Tangible Personal Property and other assets used
primarily in connection with such Terminal) in the Final Allocation; (y)
Damages with respect to the Dixon Facility shall not exceed the sum of the
Purchase Price and the Assumed Liabilities allocated to the Dixon Facility
(including all Tangible Personal Property and other assets used primarily in
connection with the Dixon Facility) in the Final Allocation; and (z) Damages
with respect to the Charlevoix Facility shall not exceed the sum of the
Purchase Price and the Assumed Liabilities allocated to the Charlevoix Facility
and all of the Terminals (including all Tangible Personal Property and other
assets used primarily in connection with the Charlevoix Facility and such
Terminals) in the Final Allocation. For the avoidance of doubt, any Title
Representation Damages (x) are also subject to the other limitations set forth
in this Agreement and (y) count against the other limitations set forth in this
Agreement.
(c) Third Party Recoveries. The amount of any
Damages for which indemnification is provided to an Indemnified Party under
this Article VIII shall be net of any amounts recovered by the Indemnified
Party with respect to such Damages from any third party. Upon making any
payment to any Indemnified Party, the Indemnifying Party shall be subrogated to
all rights of the Indemnified Party against any third party (other than any
insurance carrier of Seller or its Affiliates or Purchaser or its Affiliates,
as the case may be) in respect of Damages to which such payment relates, and
such Indemnified Party will execute upon request all instruments reasonably
necessary to evidence and perfect such subrogation rights.
(d) Consequential and Incidental Damages. No
indemnification pursuant to Section 8.2 or Section 8.3 with respect to any
Damages that are consequential or incidental damages shall be required (i)
unless any such Damages related to a single item (or series of related items
resulting from the same event, fact or occurrence) exceed $1,000,000, in which
case Seller shall be liable for such Damages in excess of $1,000,000. Except in
the case of actual fraud, the maximum aggregate amount of Damages against which
either party shall be required to indemnify the other in respect of
consequential or incidental Damages shall be an amount equal to 10% of the
Purchase Price. Purchaser shall make commercially reasonable efforts to
mitigate any consequential or incidental Damages that an Indemnified Party
asserts under this Article VIII. For the avoidance of doubt, any consequential
or incidental damages (x) are also subject to the other limitations set forth
in this Agreement and (y) count against the other limitations set forth in this
Agreement.
(e) No Duplication. Notwithstanding anything in this
Article VIII to the contrary, Purchaser shall not be deemed to have incurred
any Damages with respect to any Liability to the extent such Liability was
included in the calculation of the Closing Working Capital pursuant to the
Final Closing Statement.
(f) Charlevoix PSD Matter. With respect to the
indemnification for the Charlevoix PSD Matter, Seller shall be responsible for
the first $250,000 in PSD Damages; Purchaser shall be responsible for the next
$250,000 in PSD Damages; and each party to this Agreement shall be responsible
for fifty percent (50%) of the PSD Damages in excess of $500,000.
8.5 Indemnification Process. The party or parties making
a claim for indemnification under Section 8.2 or Section 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 VIII
shall be, for the purposes of this Agreement, referred to as the "Indemnifying
Party." All claims by any Indemnified Party under this Article VIII shall be
asserted and resolved as follows:
(a) Notice. In the event that (i) any Action
(whether or not by or before a Governmental Authority) is asserted or
instituted by any Person other than Purchaser or Seller or their respective
Affiliates that 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 that does not involve a Third Party Claim (such
claim, a "Direct Claim"), the Indemnified Party shall promptly 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"); provided, however, that
the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Article VIII except to the extent that
the Indemnifying Party is materially prejudiced by such failure. In the event
of a Direct Claim, the Indemnifying Party shall notify the Indemnified Party
within 90 Business Days of receipt of a Claim Notice whether or not the
Indemnifying Party disputes such claim.
(b) Right to Contest Third Party Claims. In the
event of a Third Party Claim, if the Indemnifying Party acknowledges in writing
its obligations to indemnify the Indemnified Party hereunder against any
Damages that may result from such 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). 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
Indemnified Party reasonably believes that there exists a conflict of interest
that, under applicable principles of legal ethics, could prohibit a single
legal counsel from representing both the Indemnified Party and the Indemnifying
Party in such claim, demand or proceeding or (ii) the Indemnifying Party has
failed or is failing to prosecute or defend vigorously such claim, demand or
proceeding. 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.
(c) Settlement. 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 conditioned,
withheld or delayed, or (ii) by the Indemnifying Party without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably conditioned, withheld or delayed; provided that if the
Indemnifying Party submits to the Indemnified Party a bona fide settlement
offer from a third party claimant of any Third Party Claim (which settlement
offer will include as an unconditional term of it the full and unconditional
release by the claimant or the plaintiff to the Indemnified Party from all
liability in respect of such claim) and the Indemnified Party refuses to
consent to such settlement, then thereafter the Indemnifying Party's liability
to the Indemnified Party with respect to such Third Party Claim will not exceed
the settlement amount included in such bona fide settlement offer, and the
Indemnified Party will either assume control and responsibility for the payment
of the defense of such Third Party Claim or pay the attorneys' fees and other
out-of-pocket costs and expenses incurred by the Indemnifying Party thereafter
in continuing the defense of such Third Party Claim. 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, such Indemnified Party shall be deemed to
have waived all rights against the Indemnifying Party for indemnification under
this Article VIII with respect to such Third Party Claim.
(d) Access to Information. 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 that will
not 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 Characterization of Indemnification Payments.
Purchaser and Seller agree to treat any payment made under this Article VIII as
an adjustment to the Purchase Price.
8.7 Satisfaction of Indemnification Obligations. Subject
to the procedures set forth above and in accordance with the deadlines
specified in the preceding subsections, claims for indemnified Damages will be
satisfied as follows:
(a) By Seller. Seller will satisfy their liability
for indemnified Damages by paying the amount of such liability to Purchaser.
(b) By Purchaser. Purchaser will satisfy its
liability for such indemnified Damages by paying the amount of such liability
to Seller.
Payments pursuant to the foregoing will be by wire transfer, as the recipient
may direct in writing; provided, however, that in the absence of directions
within a reasonable period of time, payment may be made by cashier's check.
8.8 Additional Environmental Indemnification.
(a) Seller shall indemnify, defend and hold harmless
Purchaser and its Affiliates with respect to certain environmental matters that
would otherwise be Assumed Environmental Liabilities as to which Purchaser owes
a duty to defend, indemnify and hold harmless Seller and its Affiliates
pursuant to Section 8.3. To the extent, pursuant to the terms of this Section
8.8, that Seller does not or no longer has an obligation to indemnify, defend
and hold harmless Purchaser and its Affiliates with respect to such Assumed
Environmental Liabilities (including because time periods with respect to such
indemnification have expired or because Seller is only obligated to indemnify
Purchaser and its Affiliates for a portion of the Damages associated with such
matter), Purchaser shall be obligated to defend, indemnify and hold harmless
Seller and its Affiliates pursuant to Section 8.3.
(b) The following Actions, Liabilities and Damages
that are Assumed Environmental Liabilities are subject to indemnification by
Seller on the terms and subject to the conditions set forth in this Section
8.8, except (x) that with respect to any such Actions, Liabilities and Damages
that constitute Prairie Allocated Liabilities, Seller shall have no
indemnification obligation to the extent that either (A) Seller has an
indemnification right with respect thereto pursuant to Section 8.11(a) or (B)
Purchaser is not entitled to seek indemnification from Seller with respect
thereto under Section 8.11(b) and (y) to the extent that any such Actions,
Liabilities and Damages arise from or relate to Known Environmental Matters:
(i) any costs, including reasonable costs associated with the defense of such
matters, associated with correcting violations of or non-compliance with
Environmental Laws or Environmental Permits occurring prior to the Closing Date
with respect to the ownership, lease, maintenance or operation of the
Facilities, the Purchased Assets or the Business; (ii) Actions, Liabilities and
Damages for or associated with Remediation of Environmental Conditions, or for
property damage or damages to natural resources associated with such
Environmental Conditions, on, at, in, under or migrating from the Real
Property, where such Environmental Conditions first came into existence at such
locations prior to the Closing Date; and (iii) Actions, Liabilities and Damages
for loss of life or injury to persons arising from exposure, prior to the
Closing Date, to Hazardous Substances at, on, in, under, migrating from or
Released from the Facilities or Purchased Assets (including from exposure to
asbestos-containing materials).
(c) With respect to Environmental Cost-Sharing
Matters as to which notice, as provided by this Agreement, is provided to
Seller within six years after the Closing Date, Purchaser shall be responsible,
in the aggregate, for the first $5,000,000 in Damages associated with all such
matters. Subject to Section 8.8(d), Damages in excess of $5,000,000 with
respect to Environmental Cost-Sharing Matters shall be shared by Purchaser and
Seller as follows:
(i) With respect to Environmental Cost-Sharing
Matters as to which notice is provided to Seller in the first two
years after the Closing Date, Seller shall be responsible for 75% of
the Damages incurred with respect to such matters;
(ii) With respect to Environmental Cost-Sharing
Matters as to which notice is provided to Seller in the third and
fourth years after the Closing Date, Seller shall be responsible for
60% of the Damages incurred with respect to such matters; and
(iii) With respect to Environmental Cost-Sharing
Matters as to which notice is provided to Seller in the fifth and
sixth years after the Closing Date, Seller shall be responsible for
50% of the Damages incurred with respect to such matters.
(d) Seller's obligation to indemnify Purchaser and
its Affiliates pursuant to this Section 8.8 shall be subject to the limitation
set forth in Section 8.4(b).
(e) Seller's obligation to indemnify Purchaser and
its Affiliates pursuant to Section 8.8 shall expire six years after the Closing
Date except with respect to any matter for which a written notice of a claim,
which sets forth the facts that Purchaser believes, in good faith, constitute a
reasonable basis for indemnification, has been given prior to that date. Except
to the extent of Seller's indemnification obligation, if any, under this
Section 8.8, Purchaser shall be obligated to defend, indemnify and hold
harmless Seller with respect to the Environmental Cost-Sharing Matters pursuant
to Section 8.3(a) of this Agreement.
(f) In the event that Purchaser sells, transfers or
otherwise conveys any portion of the Purchased Assets, Seller's obligation to
indemnify Purchaser and its Affiliates pursuant to Section 8.8 shall only
survive with respect to Purchaser and for the benefit of the Person that is the
recipient of said portion of the Purchased Assets to the extent that said
Person abides by the terms and conditions of this Agreement that apply to said
indemnification.
8.9 Remediation Procedures and Standards.
(a) Purchaser shall promptly provide Seller with
written notice of any claim for indemnification relating to any Remediation
with respect to Environmental Conditions on, at, under or migrating from the
Real Property. Purchaser shall retain the right to take the lead with respect
to any such Remediation, provided, however, that except and only to the extent
necessary to address an emergency or imminent threat to human health or the
environment, the following limitations shall apply to such rights:
(i) Purchaser shall retain a qualified
independent environmental consultant, which consultant shall be
subject to Seller's approval (such approval not to be unreasonably
withheld).
(ii) Purchaser shall provide to Seller for
review and comment drafts of any proposed work plans, reports or other
submissions for any Remediation that Purchaser intends to deliver or
submit to the appropriate Governmental Authority prior to such
submission. Seller shall have 14 days to provide comments to Purchaser
regarding any such draft submissions, unless such review period is not
reasonably possible within the schedule or due date established by the
Governmental Authority, in which case Purchaser shall endeavor to
provide Seller as much time as reasonably possible under the schedule
(up to the 14 days) for its review. Such review and comments shall be
at Seller's own expense, which expense shall not count toward any
indemnification limit under this Agreement. Purchaser shall give good
faith consideration to Seller's comments regarding such draft
submissions; provided, however, that in the event that, after such
good faith consideration, there is a disagreement between Seller and
Purchaser regarding whether Seller's comments should be incorporated
into the draft, Purchaser shall have the final decision to include or
exclude such comments, it being understood that such decision shall
not have any effect on Seller's rights pursuant to this Agreement,
including, without limitation, a right to assert that any Remediation
resulting from said submission is in excess of the Most Cost Effective
Manner.
(iii) Purchaser shall promptly provide copies to
Seller of all written notices, final submissions, final work plans and
final reports.
(iv) Purchaser shall provide Seller with
reasonable advance notice of all planned meetings and telephone
conferences with the applicable Governmental Authority, and Seller, at
its own expense (which expense shall not count towards any
indemnification limit under this Agreement) shall have the right to
send representatives to attend and participate in such meetings.
(v) Seller may, at its own expense (which
expense shall not count toward any indemnification limit under this
Agreement), hire its own consultants, attorneys or other professionals
to monitor the Remediation, including any field work undertaken by the
Purchaser, and Purchaser shall provide Seller with the results of all
such field work. Notwithstanding the above, Seller shall not take any
actions that shall unreasonably interfere with Purchaser's performance
of the Remediation.
(b) With respect to any Remediation conducted by or
on behalf of Purchaser related to the Purchased Assets, Seller shall only be
liable for its share of the costs incurred to the extent such a Remediation is
conducted in the most cost effective manner ("Most Cost Effective Manner"). The
Most Cost Effective Manner shall (i) include the least stringent cleanup
standards that, based upon the use classification (industrial, commercial, or
residential) of a subject Real Property as of the Closing Date, are allowed
under applicable Environmental Law, and (ii) include the least costly methods
that are allowed under applicable Environmental Law and that are approved by or
otherwise acceptable to applicable Governmental Authorities to achieve such
standards, including the use of institutional or engineering controls to
eliminate or minimize exposure pathways; provided, however, that the Most Cost
Effective Manner shall not include any standard or method that (A) disrupts or
interferes with, in more than an insubstantial manner, the Business or the
operations of the Real Property as such property was used as of the Closing,
(B) from the perspective of a reasonable business person acting without
regarding to the availability of indemnification hereunder, unreasonably
exposes Purchaser to a risk of liability from third parties as a result of the
off-site migration of Hazardous Substances, or (C) with respect to
institutional or engineering controls, imposes for any Remediation in the
aggregate operation and maintenance costs of more than $25,000 per annum on
Purchaser or its successors or assigns. Purchaser shall be responsible for any
operation and maintenance with respect to any such institutional or engineering
controls and such costs shall not be subject to indemnification.
(c) Seller shall only be liable for its share of the
costs incurred to conduct a Remediation to the extent consistent with a
Remediation conducted in the Most Cost Effective Manner. If Purchaser
undertakes a Remediation that is not consistent with a Remediation conducted in
the Most Cost Effective Manner (such as a remediation standard to allow less
restrictive use of the property), Purchaser shall be responsible for any
additional costs associated with such action.
(d) Seller shall not be responsible for those costs
in connection with a Remediation at the Real Property to the extent that such
costs are caused by: (i) a Release of Hazardous Substances that first occurs
and originates after the Closing Date in connection with Purchaser's operation
of the applicable property after the Closing Date; (ii) Purchaser's negligent
or reckless action after the Closing Date resulting in the exacerbation of
Environmental Conditions otherwise subject to the indemnification pursuant to
this Agreement; (iii) the performance of a Remediation not required by
applicable Environmental Law or by a Governmental Authority or in response to a
third party Action; or (iv) Purchaser's voluntary closure of a waste management
treatment or storage unit, including a land based waste storage unit, or a
Hazardous Substances storage unit, such as an underground storage tank,
provided that Seller will continue to be liable for the costs of Remediation
for Releases of Hazardous Substances from such units into surrounding
environmental media to the extent otherwise provided in this Agreement. Sellers
shall also not be responsible for any consequential damages, including costs
incurred as a result of disruption of the business operations at the Real
Property, as a result of a requirement to undertake a Remediation subject to
indemnification pursuant to this Agreement.
8.10 Corrective Action Procedures and Standards.
(a) With respect to any claims for indemnification
related to violations of applicable Environmental Law or Environmental Permit,
other than matters that involve a Remediation of Environmental Conditions with
respect to the Release of Hazardous Substances at the Real Property, Purchaser
shall have the right, consistent with applicable Environmental Law, to
determine and implement the appropriate actions to correct any failures to
comply with applicable Environmental Law or Environmental Permit in effect as
of the Closing Date, provided that Seller shall have the right to control the
defense of any Actions seeking fines or penalties for violations of or
noncompliance with applicable Environmental Law prior to the Closing Date,
pursuant to Section 8.5 of this Agreement. Purchaser shall consult with Seller
in all material respects in connection with undertaking said corrective
actions, shall provide Seller with copies of all material correspondence
submitted to and received by any Governmental Authorities with respect to such
matters, and shall provide Seller with a reasonable opportunity to comment on
any material submissions to Governmental Authorities with respect to such
matters, including corrective action proposals; provided, that in the event of
a disagreement between Seller and Purchaser regarding whether Seller's comments
should be incorporated into the submission, Purchaser shall have the final
decision to include or exclude such comments, it being understood that such
decision shall not have any affect on Seller's rights pursuant to this
Agreement, including, without limitation, a right to assert that any corrective
action resulting from said submission is in excess of a corrective action
meeting the standard set forth in subparagraph (b) below. Purchaser shall
provide Seller with reasonable notice of all planned meetings and telephone
conferences with the applicable Governmental Authority, and Seller, at its own
expense (which expense shall not count towards any indemnification limit under
this Agreement) shall have the right to send representatives to attend and
participate in such meetings.
(b) Without limiting the foregoing, Seller shall not
be obligated to indemnify Purchaser for its share of the capital costs incurred
in connection with the implementation of a corrective action that are in excess
of the minimum amount required to achieve compliance with applicable
Environmental Law in effect as of the Closing Date, provided that the
corrective action for purposes of this Section 8.10(b) shall be sufficient to
allow Purchaser to operate the Facilities and the Purchased Assets in a manner
and at a level of production that is consistent with the operations of the
Facilities and the Purchased Assets during the 12 month period prior to the
date of this Agreement. Seller shall in no event be responsible for any
operating costs related to compliance with applicable Environmental Law after
the Closing Date. To the extent that Purchaser chooses to implement a
corrective action that goes beyond the standard set forth above, including
implementing a corrective action that allows for an expansion in operations at
a property or that is required to achieve compliance with Environmental Law
that does not become applicable to a property until after the Closing, Seller
shall not be responsible for its share of any additional or excess costs
associated with such corrective action.
(c) For the avoidance of doubt, corrective actions
contemplated by this Section 8.10 shall not include any Remediation related to
Releases of Hazardous Substances on the Real Property.
8.11 Dixon Purchase Agreement.
(a) Notwithstanding anything in this Agreement to
the contrary, in the event that Seller or any of its Affiliates suffers or
incurs any Liability or Damage with respect to any Prairie Allocated Liability
(other than any Known Environmental Liability), then Purchaser shall indemnify
and hold harmless Seller and/or such Affiliate from and against such Liability
or Damage to the full extent that Purchaser recovers from Prairie under the
Dixon Purchase Agreement or in the event that Purchaser does not use
commercially reasonable efforts to pursue such claims, or Purchaser is in
breach of its obligations under Section 6.14, the amount that Purchaser would
have recovered from Prairie had Purchaser used commercially reasonable efforts
to pursue remedies under the Dixon Purchase Agreement, as in effect as of the
Closing, and without regard to the effect, if any, of a breach by Purchaser of
its obligations under Section 6.14 on the indemnification rights under the
Dixon Purchase Agreement. Purchaser shall, and shall cause its Affiliates to,
use its commercially reasonable efforts to take all action and pursue all
claims for such indemnification under the Dixon Purchase Agreement with respect
to any such Liability or Damage.
(b) Notwithstanding anything in this Agreement to
the contrary, to the extent that any claim for indemnification that Purchaser
would have under this Article VIII but for the operation of this Section
8.11(b) arises out of or relates to a Prairie Allocated Liability, then (i)
Seller will have no obligation to indemnify any Purchaser Indemnified Party in
respect of such claim until Purchaser shall have used, and shall have caused
its Affiliates to have used, its commercially reasonable efforts to take all
action and pursue all claims for such indemnification under the Dixon Purchase
Agreement with respect to any such Liability or Damage and (ii) in addition to
the other limitations on indemnification set forth in this Article VIII,
Seller's indemnification obligation with respect to such matter shall be
limited to the amount by which such Liability or Damage exceeds the greater of
(x) the amount that Purchaser recovers from Prairie under the Dixon Purchase
Agreement or (y) in the event that Purchaser does not use commercially
reasonable efforts to pursue such claims, or Purchaser is in breach of its
obligations under Section 6.14, the amount that Purchaser would have recovered
from Prairie had Purchaser used commercially reasonable efforts to pursue
remedies under the Dixon Purchase Agreement, as in effect as of the Closing,
and without regard to the effect, if any, of a breach by Purchaser of its
obligations under Section 6.14 on the indemnification rights under the Dixon
Purchase Agreement.
(c) Notwithstanding anything in this Agreement to
the contrary, Purchaser hereby completely releases, acquits and forever
discharges Seller and any of Seller's Affiliates from any and all Actions,
Damages and Liabilities of any nature whatsoever (including Actions, Damages
and Liabilities under Environmental Law), and hereby expressly waives any and
all other rights, that may available either at law or in equity with respect to
any Prairie Allocated Liability to the extent that either (i) Seller has an
indemnification right with respect thereto pursuant to Section 8.11(a) or (ii)
Purchaser is not entitled to seek indemnification from Seller with respect
thereto under Section 8.11(b).
(d) Notwithstanding anything in this Agreement to
the contrary, in the event that Purchaser or any of its Affiliates suffers or
incurs any Liability or Damage with respect to any Former Prairie Allocated
Liability, then Seller shall indemnify and hold harmless Purchaser and/or such
Affiliate from and against such Liability or Damage to the same extent that,
and on the same terms and conditions as, Prairie would have been required to
indemnify Purchaser under the terms of the Dixon Purchase Agreement had the
Dixon Amendment No. 1 not become effective; provided that Seller shall have no
further liability or obligation under this Section 8.11(d) in the event that at
the time of such claim by Purchaser or its Affiliates, or at the time payment
of such claim would otherwise be due, (i) Prairie is insolvent, (ii) Prairie or
any of its significant subsidiaries is in payment default under the terms of
any material indebtedness with obligations in excess of $2,500,000, (iii)
Prairie shall have filed any petition for voluntary bankruptcy or similar
proceeding or (iv) a Governmental Authority shall have entered a judgment,
decree or order for relief in respect of Prairie in an involuntary bankruptcy
case or proceeding.
8.12 Exclusive Remedies. Except in the case of actual
fraud, Seller's and Purchaser's respective rights to indemnification under this
Article VIII with respect to any Damages (including Damages under Environmental
Law) shall be their sole and exclusive remedy and they shall not be entitled to
pursue, and hereby expressly waive, any and all rights that may otherwise be
available either at law or in equity with respect thereto. Any party's right to
indemnification hereunder shall not be affected by a party's waiver of its
right of termination pursuant to Article IX hereof if such right of termination
arises from a willful breach of this Agreement.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned at any time
prior to the Closing:
(a) by the mutual written agreement of Purchaser and
Seller;
(b) by either Purchaser or Seller by giving written
notice of such termination to the other party, if the Closing shall not have
occurred by June 30, 2005, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(c) by either Purchaser or Seller if there shall be
any Law that makes the consummation of the transactions contemplated by this
Agreement illegal or otherwise prohibited or if consummation of the
transactions contemplated by this Agreement would violate any nonappealable
final Judgment of any Governmental Authority having competent jurisdiction;
(d) by either Purchaser or Seller (provided that the
terminating party is not then in material breach of any material
representation, warranty, covenant or other material agreement contained
herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the part of the
other party, which breach is not cured within 30 calendar days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
9.1(d) unless the breach of representation or warranty, together with all other
such breaches, would entitle the party receiving such representation not to
consummate the transactions contemplated hereby under Section 3.3(a) (in the
case of a breach of representation or warranty by Purchaser) or Section 3.4(a)
(in the case of a breach of representation or warranty by Seller); or
(e) by either Purchaser or Seller (provided that the
terminating party is not then in material breach of any material
representation, warranty, covenant or other material agreement contained
herein) if there shall have been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of the other party, which
breach shall not have been cured within 30 calendar days following receipt by
the breaching party of written notice of such breach from the other party
hereto, or which breach, by its nature, cannot be cured prior to the Closing;
provided, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 9.1(e) unless the breach of covenant or
agreement, together with all other such breaches, would entitle the party
receiving such covenant or agreement not to consummate the transactions
contemplated hereby under Section 3.3(b) (in the case of a breach of a covenant
or agreement by Purchaser) or Section 3.4(b) (in the case of a breach of a
covenant or agreement by Seller).
9.2 Effect of Termination. If this Agreement is
terminated as permitted under Section 9.1, such termination shall be without
liability to any party to this Agreement or to any Affiliate, shareholder,
director, officer or representative of such party, and following such
termination no party to this Agreement shall have any liability under this
Agreement or relating to the transactions contemplated by this Agreement to any
other party except as contemplated in Section 10.1; provided that no such
termination shall relieve any party to this Agreement that has willfully
breached any provision of this Agreement from liability for such breach, and
any such breaching party shall remain fully liable for any and all Damages
incurred or suffered by another party to this Agreement as a result of such
breach. The provisions of this Section 9.2, Section 9.3, Section 10.1 and the
Confidentiality Agreement shall survive any termination of this Agreement
pursuant to this Article IX.
9.3 Detroit Terminal Liquidated Damages. In the event
this Agreement is terminated by Seller pursuant to Section 9.1(b) as a result
of Purchaser failing to perform or observe the covenants and agreements of
Purchaser in this Agreement or Section 9.1(d) or 9.1(e) and Seller has sold its
cement terminal located in Detroit, Michigan (the "Detroit Terminal") to the
City of Detroit, Purchaser shall pay to Seller, as liquidated damages and in
lieu of any other damages or amounts payable solely with respect to the Detroit
Terminal, an amount equal to $3,000,000. Both Seller and Purchaser agree that
the actual damages that may be sustained by Seller with respect to the Detroit
Terminal as a result of Purchaser failing to fulfill its obligations under this
Agreement, for reasons unexcused by this Agreement, are uncertain and difficult
to ascertain and that liquidated damages specified in this Section 9.3 are,
therefore, an appropriate remedy. Notwithstanding the foregoing, this Section
9.3 shall not relieve Purchaser from any other liability for willfully
breaching any provision of this Agreement, and, in addition to the liquidated
damages contemplated by this Section 9.3, Purchaser shall remain fully liable
for any and all Damages incurred or suffered by Purchaser as a result of such
breach.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Expenses and Taxes.
(a) Except as set forth in Sections 3.5(f), 3.5(h)
and 6.13(b) and below, each of Seller and Purchaser shall pay all fees and
expenses incurred by it in connection with this Agreement and the transactions
contemplated by this Agreement; provided however, that Seller and Purchaser
agree that all applicable Conveyance Taxes that may be imposed upon, or payable
or collectible or incurred in connection with, this Agreement and the
transactions contemplated by this Agreement shall be borne 50% by Seller and
50% by Purchaser and all refunds, credits, rebates or other reductions of such
Taxes shall be allocated 50% to Seller and 50% to Purchaser. Each of Seller and
Purchaser agrees to file all necessary documentation (including all Tax
Returns) with respect to such Taxes in a timely manner. Seller and Purchaser
shall reasonably cooperate in reducing or obtaining exemptions from the
assessment of any Conveyance Taxes.
(b) With respect to the Transferred Employees,
Purchaser shall notify Seller as to which procedure set forth in Revenue
Procedure 2004-53, 2004-34 I.R.B. 320, will be followed. Purchaser shall notify
Seller on or before the later of 90 calendar days after the Closing Date or the
earliest date Seller could be required to file any Tax Return that could be
affected by such decision of Purchaser.
(c) After the Closing, Purchaser and Seller shall
reasonably cooperate in the filing of any Tax Returns, to the extent such
filing requires providing each other with necessary records and documents
relating to the Purchased Assets or the Business or providing access to
employees on a mutually convenient basis. Seller and Purchaser shall reasonably
cooperate in the same manner in defending or resolving any Tax audit,
examination or Tax-related litigation. Any information obtained under this
Section 10.1 shall be kept confidential, except as may be otherwise necessary
in connection with dealing with a Governmental Authority.
(d) At the other party's request, Seller or
Purchaser, as the case may be, shall use reasonable efforts to obtain and
deliver to the other party any Tax clearance certificates available from the
relevant taxing authorities.
(e) The covenants and agreements of the parties
hereto contained in this Section 10.1 and any related rights of indemnification
shall survive the Closing and shall remain in full force and effect until 60
days after the expiration of the applicable statute of limitations on an
assessment or collection of Tax, as such may be extended from time to time at
the request of any Governmental Authority.
10.2 Further Assurances. From time to time after the
Closing and without further consideration, Seller, upon the request of
Purchaser, shall execute and deliver such documents and instruments of
conveyance and transfer as Purchaser may reasonably request in order to
consummate more effectively the purchase and sale of the Purchased Assets as
contemplated by this Agreement and to vest in Purchaser title to the Purchased
Assets transferred under this Agreement.
10.3 Notices. Any notices or other communications
required or permitted under this Agreement or otherwise in connection herewith
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon confirmation of receipt when transmitted by facsimile
transmission or on receipt after dispatch by internationally recognized courier
service or by registered or certified mail, postage prepaid, addressed, as
follows:
If to Seller:
CEMEX, Inc.
840 Gessner, Suite 1400
Houston, Texas 77024
Attention: General Counsel
Facsimile: 713-722-5110
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1600 Smith Street, Suite 4400
Houston, Texas 77002
Attention: Frank Ed Bayouth II
Facsimile: 713-655-5200
If to Purchaser to:
Votorantim Participacoes S.A.
Rua Amauri 255
Sao Paulo SP Brazil 01448-000
Attention: Alexandre D'Ambrosio
Facsimile: 55-11-3079-9345
With a copy to:
Votorantim Cimentos Ltda.
Praca Prof. Jose Lannes 40
Sao Paulo SP Brazil 04571-100
Attention: Marcelo Martins
Facsimile: 55-11-2162-0670
With a copy to:
St. Marys Cement Inc.
55 Industrial Street
Toronto, Ontario
Canada M4G 3W9
Attention: Dave Lumsden
Facsimile: 416-696-4435
With a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
Attention: John J. Madden
Facsimile: 212-848-7055
or such other address as the person to whom notice is to be given has furnished
in writing to the other parties. A notice of change in address shall not be
deemed to have been given until received by the addressee.
10.4 Headings and Schedules. The descriptive headings of
the several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. The disclosure
or inclusion of any matter or item on any Schedule to the Seller Disclosure
Schedule or the Purchaser Disclosure Schedule shall not be deemed an
acknowledgment or admission that any such matter or item is required to be
disclosed or is material for purposes of the representations and warranties set
forth in this Agreement.
10.5 Applicable Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of New York, and as to
the Vessels, the general maritime and statutory law of the United States.
10.6 No Third Party Rights. This Agreement is intended to
be solely for the benefit of the parties to this Agreement and is not intended
to confer any benefits upon, or create any rights in favor of, any Person other
than the parties to this Agreement.
10.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single instrument.
10.8 Amendment. Except as set forth in Section 6.13, this
Agreement may not be amended except by an instrument in writing signed by
Purchaser and Seller.
10.9 Waiver. Either party to this Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
the other party to this Agreement, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement
or in any document delivered by the other party pursuant to this Agreement or
(c) waive compliance with any of the agreements, or satisfaction of any of the
conditions, contained herein by the other party to this Agreement. Any
agreement on the part of a party to this Agreement to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
such party and will not restrict subsequent enforcement of any of the
obligations of this Agreement.
10.10 Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions of this Agreement shall not be affected
thereby, and there shall be deemed substituted for the provision at issue a
valid, legal and enforceable provision as similar as possible to the provision
at issue.
10.11 Entire Agreement. This Agreement, the other
Transaction Documents and the Confidentiality Agreement set forth the entire
understanding and agreement between the parties as to the matters covered in
this Agreement, the other Transaction Documents and the Confidentiality
Agreement and supersede and replace any prior understanding, agreement or
statement of intent, in each case, written or oral, of any and every nature
with respect to the subject matter hereof and thereof. Purchaser acknowledges
that it has conducted its own independent review and analysis of the Business
and the Purchased Assets. In entering into this Agreement, Purchaser has relied
solely upon its own investigation and analysis and the representations and
warranties set forth in this Agreement, the Deeds and the certificate to be
delivered by Seller pursuant to Section 3.4(c).
10.12 Consent to Jurisdiction.
(a) 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
(other than with respect to matters referred to in Section 2.5) shall be
instituted in the courts of the State of New York or of the United States in
the State of New York, in either case sitting in the Borough of Manhattan of
the City of New York. Each party to this Agreement irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and of the United
States sitting in the State of New York in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this Agreement.
Each party to this Agreement irrevocably appoints CT Corporation System as its
agent for the sole purpose of receiving service of process or other legal
summons in connection with any such dispute, litigation, action or proceeding
brought in any such court.
(b) Each party to this Agreement irrevocably waives
the right to a trial by jury in connection with any matter arising out of this
Agreement and, 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 New York
or of the United States sitting in the Borough of Manhattan of the City of New
York and any claim that any proceeding under this Agreement brought in any such
court has been brought in an inconvenient forum.
10.13 Binding Effect; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors, permitted assigns and legal representatives. This Agreement is not
assignable by any party to this Agreement without the prior written consent of
the other party to this Agreement, which consent shall not be unreasonably
withheld, and any other purported assignment shall be null and void; and
provided, however, that Purchaser may assign, in its sole discretion, any or
all of its rights and interests hereunder (including the right to acquire one
or more of the Purchased Assets and excluding any rights under this Agreement
with respect to the Vessels) to one or more direct or indirect wholly owned
Subsidiaries of Purchaser; and provided further that no such assignment shall
relieve Purchaser of its obligations if such assignee does not perform any of
the obligations of Purchaser hereunder.
[SIGNATURES ARE ON THE NEXT PAGE]
Each of the parties to this Agreement has caused this
Agreement to be executed on its behalf by its duly authorized representative,
all as of the date first above written.
VOTORANTIM PARTICIPACOES S.A.
By: /s/ Marcelo Martins
-------------------
Name: Marcelo Martins
Title: Attorney-In-Fact
By: /s/ Alexandre S. Dambrosio
--------------------------
Name: Alexandre S. Dambrosio
Title: Attorney-In-Fact
CEMEX, INC.
By: /s/ Gilberto Perez
------------------
Name: Gilberto Perez
Title: President
By: /s/ Philippe Gastone
--------------------
Name: Philippe Gastone
Title: Vice President
EXHIBIT 4.20.1
AMENDMENT NO. 1
TO ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT, dated as of March 31,
2005 (this "Amendment"), by and between CEMEX, Inc., a Louisiana corporation
("Seller"), and Votorantim Participacoes S.A., a corporation (sociedade
anonima) organized under the laws of the Federative Republic of Brazil
("Purchaser"). Capitalized terms used herein but not otherwise defined shall
have the meaning ascribed to such terms in the Purchase Agreement (as defined
below).
WITNESSETH:
WHEREAS, Seller and Purchaser have entered into that certain Asset
Purchase Agreement, dated as of February 4, 2005 (the "Purchase Agreement");
WHEREAS, Section 10.8 of the Purchase Agreement provides that the
Purchase Agreement may be amended by the parties thereto by an instrument in
writing signed by Purchaser and Seller; and
WHEREAS, the Closing has not occurred and Seller and Purchaser wish
to amend the Purchase Agreement as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in the Purchase Agreement and this
Amendment, and intending to be legally bound hereby, Seller and Purchaser
hereby agree as follows:
ARTICLE I
AMENDMENTS, ACKNOWLEDGEMENT AND COVENANTS
SECTION 1.1 Amendments to Article VI.
(a) Article VI of the Purchase Agreement (entitled
"Covenants") is hereby amended by adding the following new Section 6.21:
Section 6.21. Toledo Supplemental Sublease.
(a) As set forth on Section 2.2(a)(ii) of the Seller
Disclosure Schedule, that certain Sublease Agreement, dated August 1,
1986 (the "Toledo Sublease"), among Toledo-Lucas County Port
Authority ("TCPA"), Medusa Corporation ("Medusa"), and Merce
Industries, Incorporated ("Merce") constitutes an Assumed Contract.
TCPA, Medusa and Merce also entered into a certain Supplemental
Sublease Agreement, dated as of December 1, 1986 (the "Toledo
Supplemental Sublease") to (i) provide for the issuance of certain
industrial development revenue bonds (as defined in the Supplemental
Sublease, the "1986 Series Bonds") to fund certain improvements (as
defined in the Supplemental Sublease, the "Project") on the property
subleased by Medusa pursuant to the Toledo Sublease, (ii) provide for
the payment of "additional rent" to the Authority for payment of
principal, interest and any premium on the 1986 Series Bonds and
(iii) set forth certain other provisions governing the use by Medusa
of, and rights of Medusa with respect to, the Project. Except to the
extent hereinafter provided in this Section 6.21, the Toledo
Supplemental Sublease and the rights of Seller thereunder constitute
an Excluded Asset, and the obligations of Seller under the Toledo
Supplemental Sublease constitute an Excluded Liability. The rights
and obligations set forth in Article III and Sections 4.7, 4.8, 5.1,
5.3 and 6.5 (to the extent not relating to Purchaser's use of the
property subject to the Toledo Sublease and the Toledo Supplemental
Sublease) and Section 6.9 (with respect to the second sentence) of
the Toledo Supplemental Sublease (the "Bond Rights and Obligations")
shall be exercisable by, and be a burden upon, only Seller, and shall
not run to the benefit or burden (as the case may be) of Purchaser.
Seller shall exercise and/or exploit all of its rights and options
under the Toledo Supplemental Sublease only as reasonably directed by
Purchaser or Purchaser's designated Affiliate (except that Seller may
exercise any rights included within the Bond Rights and Obligations
in its sole discretion to the extent such exercise does not
materially impair Purchaser's use of the property leased pursuant to
the Toledo Sublease and the Toledo Supplemental Sublease); provided,
that, except in cases of gross negligence or willful misconduct on
the part of Seller (or its officers, employees, agents or
representatives), Purchaser shall be responsible, and shall
indemnify, defend and hold harmless Seller hereunder from, against,
for any liability or Damages to the extent incurred by Seller as a
result of such direction. If and solely to the extent Seller
preserves its rights under, and the benefits of, the Toledo
Supplemental Sublease for the enjoyment of Purchaser and complies
with the obligations included within the Bond Rights and Obligations,
Purchaser shall accept at the Closing the burdens and perform the
obligations under the Supplemental Sublease (other than the
obligations included within the Bond Rights and Obligations) as
subcontractor of Seller to the extent such burdens and obligations
would have constituted an Assumed Liability if the Toledo
Supplemental Sublease constituted an Assumed Contract.
(b) Upon the satisfaction of all of Seller's Bond Rights and
Obligations, each of Seller and Purchaser shall cooperate and use
commercially reasonable efforts obtain the necessary consents and
approvals in connection with the assignment of the Toledo
Supplemental Sublease to Purchaser (in form and substance reasonably
acceptable to Purchaser and Seller); provided, however, that neither
Seller nor Purchaser shall have any obligation to give any guarantee
or other consideration in connection with any such consent or
approval. Upon receipt of such consent or approval of such
assignment, Purchaser shall thereupon agree to assume and perform all
Liabilities arising under the Toledo Supplemental Sublease after the
date of such consent, at which time the Toledo Supplemental Sublease
shall be deemed a Purchased Asset and the Liabilities assumed
thereunder shall be deemed Assumed Liabilities, without payment of
any further consideration.
(c) This Section 6.21 shall survive the Closing until the
expiration or earlier termination of the Toledo Supplemental
Sublease, unless such earlier termination results from a default by
either party with respect to its obligations set forth in this
Section 6.21.
(b) Miller Termination Fee. Section 6.13(b) to the Purchase
Agreement is hereby amended by deleting it in its entirety and substituting in
lieu thereof the following sentence: Seller shall pay the CDN$750,000 fee
required to be paid by CMC pursuant to Section 11.2 of the Miller Supply
Agreement.
SECTION 1.2 Acknowledgement. Notwithstanding the provisions of
Section 6.8 of the Purchase Agreement (entitled "Transition Services"), Seller
shall not provide Purchaser, or its designated Affiliate, any Payroll
Services.
SECTION 1.3 Waivers.
(a) Owen Sound Lease. Each of Purchaser and Seller hereby
waives the requirement under Section 3.2(c) that the third party consent
relating to Item 3 set forth in Section 3.2(c) of the Seller Disclosure
Schedule (Lease for 38.65 square meters of wharf space in the Public Harbour
of Owen Sound, Ontario, Canada; dated August 28, 1987, by and between Her
Majesty, the Queen in right of Canada, represented by the Minister of
Transport as lessor; and Miller Paving Company as tenant, and subsequently
assigned to Miller Terminals Limited by the Assignment by Tenant dated March
27, 1990, and consented to by the Department of Transport Consent to
Assignment dated May 3, 1990; as amended by the Supplemental Agreement dated
as of November 1, 1989) be obtained prior to the Closing.
(b) Employment Offers. Seller hereby waives the requirement
under Section 7.1 of the Purchase Agreement that Purchaser makes its
employment offers to Facility Employees at least three days before the Closing
Date.
SECTION 1.4 Challenger Documents.
(a) Each of Purchaser and Seller hereby waives the
requirement under Section 3.2(c) that the third party consents relating to
Items 1 and 2 set forth in Section 3.2(c) of the Seller Disclosure Schedule
((1) Time Charter Party dated May 31, 2002 between Wilmington Trust Company,
not in its individual capacity but solely as owner trustee under an Owner
Amended and Restated Trust Agreement dated May 28, 2002 between Wilmington
Trust Company as owner trustee and Citicorp Railmark, Inc. as owner
participant and CEMEX, Inc. as time charterer (the "Time Charter") and (2)
Participation Agreement dated as of May 28, 2002 among Cemex, Inc., as
charterer, Compania Valenciana de Cementos Portland, S.A., as guarantor,
Citicorp Railmark, Inc., as owner participant, and Wilmington Trust Company,
not in its individual capacity, except as expressed therein, but solely as
owner trustee (the "Participation Agreement", and together with the Time
Charter, the "Challenger Documents")) be obtained prior to the Closing.
(b) Both Purchaser and Seller acknowledge that the
Challenger Documents shall be Unassigned Contracts as of the Closing Date.
Notwithstanding Section 6.3(b) of the Purchase Agreement, Seller and Purchaser
covenant and agree to use, and to cause their respective Affiliates to use,
commercially reasonable efforts to obtain the consent, approval or
authorization to the assignment of the Challenger Documents as promptly after
the Closing as possible; provided, however, that Seller shall have no
obligation to give any guarantee or other consideration in connection with any
such consent, authorization or approval. During the time between the Closing
and the receipt of such consent, approval or authorization, subject to the
terms of the Challenger Documents, Seller shall use commercially reasonable
efforts in any lawful and economically reasonable arrangement to provide
Purchaser with Seller's entire interest in the benefits under each of the
Challenger Documents. Seller shall exercise or exploit its rights and options
under Challenger Documents only as reasonably directed by Purchaser. Except in
cases of gross negligence or willful misconduct on the part of Seller or its
Affiliates (or their respective officers, employees, agents or
representatives), Purchaser shall be responsible, and shall indemnify, defend
and hold harmless Seller and its Affiliates in accordance with Article VIII of
the Purchase Agreement from and against any and all liabilities or Damages
incurred by Seller or any of its Affiliates arising on or after the Closing
Date in connection with or arising out of the Challenger Documents. If and
solely to the extent Seller provides to Purchaser, as a sub-charterer, the
rights and benefits under the Challenger Documents, Purchaser shall accept the
burdens and perform the obligations under the Challenger Documents as
sub-charterer of Seller or its Affiliates to the extent such burdens and
obligations would have constituted an Assumed Liability if the Challenger
Documents had been transferred to Purchaser at the Closing. When the other
party(ies) to the Challenger Documents subsequently consent to the assignment
of the Challenger Documents to Purchaser, Purchaser shall thereupon agree to
assume and perform all Liabilities arising thereunder after the date of such
consent (in accordance with the terms of the Challenger Assignment Agreement
(as defined below)), at which time each of the Challenger Documents shall be
deemed a Purchased Asset and the Liabilities so assumed thereunder shall be
deemed Assumed Liabilities, without the payment of further consideration.
(c) Purchaser shall also reimburse Seller and it Affiliates
for any and all costs and expenses incurred by Seller in its fulfillment of
obligations under the Challenger Documents on and after the Closing Date
(including, but not limited to, all costs associated with insuring the
Challenger in accordance with the Challenger Documents during such time).
Purchaser shall execute a wire transfer to Seller's account in the amount of
reimbursement requested by Seller within three business days of receipt from
Seller of the request.
(d) Seller and Purchaser hereby acknowledge and agree that
this provision is subject to and subordinate to the terms of the Time Charter,
and Purchaser hereby acknowledges that it has been provided with a copy of the
Time Charter and is fully familiar with the terms thereof.
(e) Seller and Purchaser hereby agree that neither Seller
nor Purchaser shall amend the terms of the Assignment, Assumption and
Amendment Agreement in the form attached hereto as Exhibit A (the "Challenger
Assignment Agreement") without the written consent of the other party (which
consent shall not be unreasonably, withheld, conditioned or delayed).
SECTION 1.5 Consent Order. Seller represents and warrants that it has
paid and satisfied its financial assurance obligations under Section 2.7 of
that certain Consent Order identified as WHMD Order No. 115-17-02, between
Seller and the State of Michigan Department of Environmental Quality, (the
"Consent Order"), through October 24, 2005. From and after the Closing, the
parties shall reasonably cooperate to ensure the obligations under the Consent
Order are satisfied.
ARTICLE II
REPRESENTATIONS
Each of Seller and Purchaser 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 Purchase Agreement. Except as
modified by this Amendment, all of the terms of the Purchase Agreement are
hereby ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
VOTORANTIM PARTICIPACOES S.A.
By: /s/ Alexandre S. Dambrosio
------------------------------
Name: Alexandre S. Dambrosio
Title: Attorney-In-Fact
By: /s/ Marcelo Martins
------------------------------
Name: Marcelo Martins
Title: Attorney-In-Fact
CEMEX, INC.
By: /s/ Jill Simeone
------------------------------
Name: Jill Simeone
Title: Assistant Secretary
By: /s/ Philippe Gastone
------------------------------
Name: Philippe Gastone
Title: Vice President
EXHIBIT 4.21
CLIFFORD EXECUTION VERSION
CHANCE
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.
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
WESTLB AG, LONDON BRANCH
AS MANDATED LEAD ARRANGERS
THE ROYAL BANK OF SCOTLAND PLC
AS AGENT
AND OTHERS
---------------------------------------------------------------------------
(pound)1,000,000,000 TERM AND REVOLVING CREDIT AGREEMENT DATED 18 OCTOBER 2002
AS AMENDED ON 10 DECEMBER 2002, 12 JANUARY 2004 AND AS AMENDED AND
RESTATED ON 16 MARCH 2005
---------------------------------------------------------------------------
CONTENTS
Clause Page
1. Definitions And Interpretation......................................1
2. The Facilities.....................................................18
3. Utilisation Of The Term Facility...................................19
4. Multicurrency Option...............................................19
5. Interest Periods For Term Advances.................................21
6. Payment And Calculation Of Interest On Term Advances...............23
7. Utilisation Of The Revolving Facility..............................23
8. Payment And Calculation Of Interest On Revolving Advances..........24
9. Market Disruption And Alternative Interest Rates...................25
10. Notification.......................................................26
11. Repayment Of The Revolving Facility................................26
12. Repayment Of The Term Facility.....................................26
13. Cancellation And Prepayment........................................27
14. Taxes..............................................................29
15. Tax Receipts.......................................................31
16. Increased Costs....................................................32
17. Illegality.........................................................33
18. Mitigation.........................................................33
19. Representations....................................................34
20. Financial Information..............................................37
21. Financial Condition................................................41
22. Covenants..........................................................47
23. Events Of Default..................................................54
24. Guarantee And Indemnity............................................57
25. Commitment Commission And Fees.....................................60
26. Costs And Expenses.................................................60
27. Default Interest And Break Costs...................................61
28. Parent's Indemnities...............................................62
29. Currency Of Account And Payment....................................63
30. Payments...........................................................64
31. Set-Off............................................................66
32. Sharing............................................................66
33. The Agent, The Mandated Lead Arrangers And The Banks...............67
34. Assignments And Transfers..........................................71
35. Changes To The Obligors............................................74
36. Calculations And Evidence Of Debt..................................75
37. Remedies And Waivers, Partial Invalidity...........................77
38. Notices............................................................77
39. Counterparts.......................................................79
40. Amendments.........................................................79
41. Governing Law......................................................79
42. Jurisdiction.......................................................80
Schedule 1 THE ORIGINAL PARTIES.................................81
Part I The Banks............................................81
Part II The Original Guarantors..............................82
Schedule 2 FORM OF TRANSFER CERTIFICATE.........................83
Schedule 3 CONDITIONS PRECEDENT.................................86
Schedule 4 NOTICE OF DRAWDOWN...................................87
Schedule 5 FORM OF COMPLIANCE CERTIFICATE.......................89
Part I Parent's Compliance Certificate......................89
Part II Original Borrower's Compliance Certificate...........91
Schedule 6 FORM OF ACCESSION MEMORANDUM.........................92
Schedule 7 ADDITIONAL CONDITIONS PRECEDENT......................94
Schedule 8 FORM OF RESIGNATION NOTICE...........................96
Part I Resignation Of Additional Borrower...................96
Part II Resignation Of Guarantor.............................97
Schedule 9 MANDATORY COST.......................................98
Schedule 10 EXISTING SECURITY...................................101
Schedule 11 MATERIAL SUBSIDIARIES...............................102
Schedule 12 EXISTING NOTARISATIONS..............................103
THIS AGREEMENT is a restatement of the (pound)1,000,000,000 term and revolving
credit agreement originally dated 18 October 2002, setting out the terms of
that agreement as amended on 10 December 2002, 12 January 2004 and 16 March
2005 and in its restated form is made:
BETWEEN
(1) RMC GROUP LIMITED (registered no. 00249776) (in its capacity as borrower
hereunder, the "Original Borrower");
(2) 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. (the "Original Guarantors");
(3) BANC OF AMERICA SECURITIES LIMITED, BNP PARIBAS, HSBC INVESTMENT BANK
PLC, THE ROYAL BANK OF SCOTLAND PLC and WESTLB AG, LONDON BRANCH as
mandated lead arrangers of the Facilities (the "Mandated Lead
Arrangers");
(4) THE ROYAL BANK OF SCOTLAND PLC as agent for the Banks (the "Agent"); and
(5) THE BANKS (as defined below).
IT IS AGREED as follows.
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions In this Agreement:
"Accession Memorandum" means a memorandum substantially in the form set
out in Schedule 6 (Form of Accession Memorandum).
"Additional Borrower" means any company which has become an Additional
Borrower in accordance with Clause 35 (Changes to the Obligors).
"Additional Guarantors" means any company which has become an Additional
Guarantor in accordance with Clause 35 (Changes to the Obligors).
"Advance" means a Revolving Advance or a Term Advance.
"Adjusted EBITDA" has the meaning given to it in Clause 21 (Financial
Condition).
"Amendment Agreement" means the amendment agreement in relation to this
Agreement entered into on 16 March 2005.
"Asia Fund" means Cemex Asia Holdings Ltd. ("CAH") or any other vehicles
used by the Parent or any other member of the Group 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 members of the Group or CEMEX, S.A. de C.V.
and its Subsidiaries and with the Parent maintaining control of its
management.
"Authorisation" means an authorisation, consent, approval, resolution,
licence, exemption, filing, notarisation or registration.
"Authorised Signatory" means, in relation to an Obligor or proposed
Obligor, any person who is duly authorised (in such manner as may be
reasonably acceptable to the Agent) and in respect of whom the Agent has
received a certificate signed by a director or another Authorised
Signatory of such Obligor or proposed Obligor setting out the name and
signature of such person and confirming such person's authority to act.
"Available Commitment" means, in relation to a Bank at any time, its
Available Revolving Commitment and its Available Term Commitment.
"Available Revolving Commitment" means, in relation to a Bank at any time
and save as otherwise provided herein, its Revolving Commitment at such
time less its share of the Sterling Amount of Revolving Advances which
are then outstanding provided that such amount shall not be less than
zero.
"Available Revolving Facility" means, at any time, the aggregate amount
of the Available Revolving Commitments adjusted, in the case of any
proposed drawdown, so as to take into account:
(a) any reduction in the Revolving Commitment of a Bank pursuant to the
terms hereof;
(b) any Revolving Advance which, pursuant to any other drawdown, is to
be made; and
(c) any Revolving Advance which is due to be repaid,
on or before the proposed drawdown date.
"Available Term Commitment" means, in relation to a Bank at any time and
save as otherwise provided herein, its Term Commitment at such time less
the aggregate of its share of the Original Sterling Amount of the Term
Advances which are then outstanding.
"Available Term Facility" means, at any time, the aggregate amount of the
Available Term Commitments adjusted, in the case of any proposed
drawdown, so as to take into account any reduction in the Term Commitment
of a Bank on or before the proposed drawdown date pursuant to the terms
hereof.
"Bank" means any financial institution:
(a) listed in Part I of Schedule 1 (The Original Parties); or
(b) which has become a party hereto in accordance with Clause 34.4
(Assignments by Banks) or Clause 34.5 (Transfers by Banks),
and which has not ceased to be a party hereto in accordance with the
terms hereof.
"Borrowers" means the Original Borrower and each Additional Borrower,
provided that such company has not been released from its rights and
obligations hereunder in accordance with Clause 35.3 (Resignation of an
Additional Borrower).
"Business Day" means a day (other than a Saturday or Sunday) which is not
a public holiday and on which banks are open for general business in
London and:
(a) (in relation to any date for payment or purchase of a sum
denominated in a currency other than the euro) the principal
financial centre of the country of such currency; or
(b) (in relation to any date for payment or purchase of a sum
denominated in the euro) any TARGET Day.
"Capital Lease" means any lease that is capitalised on the balance sheet
prepared in accordance with Spanish GAAP.
"Cemex Existing Facility Agreement" means the US$3,800,000,000 facility
agreement dated 24 September 2004 made between the Parent as borrower,
certain subsidiaries of the Parent as guarantors and the banks defined
therein.
"Cemex Capital Contributions" has the meaning given to it in Clause 21
(Financial Condition).
"Clean-Up Date" means the date falling 180 days after 1 March 2005.
"Clean-Up Period" means the period commencing on 1 March 2005 and ending
on the Clean-Up Date.
"Commitment" means, in relation to a Bank at any time, the aggregate of
its Revolving Commitment and its Term Commitment.
"Compliance Certificate" means, in relation to the Parent, a certificate
substantially in the form set out in Part I of Schedule 5 (Form of
Compliance Certificate) and, in relation to the Original Borrower, a
certificate substantially in the form set out in Part II of Schedule 5
(Form of Compliance Certificate).
"Confidentiality Undertaking" means a confidentiality undertaking in the
standard form from time to time of the LMA or in such other form as may
be agreed between the Parent and the Agent.
"Default" means an Event of Default or any event or circumstance
specified in Clause 23 (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.
"Dispute" means any dispute referred to in Clause 42 (Jurisdiction).
"EBITDA" has the meaning given to it in Clause 21 (Financial Condition).
"Effective Date" has the meaning given to that term in the Amendment
Agreement.
"Environmental Claim" means any claim, proceeding or investigation by any
person in respect of any Environmental Law.
"Environmental Law" means any applicable law in any jurisdiction in which
any member of the Group conducts business which relates to the pollution
or protection of the environment or harm to or the protection of human
health or the health of animals or plants.
"Environmental Permits" means any permit, licence, consent, approval and
other authorisation and the filing of any notification, report or
assessment required under any Environmental Law for the operation of the
business of any member of the Group conducted on or from the properties
owned or used by the relevant member of the Group.
"ERISA" means the United States Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"EURIBOR" means, in relation to any amount to be advanced to or owing by
an Obligor under the Finance Documents on which interest for a given
period is to accrue:
(a) the percentage rate per annum determined by the Banking Federation
of the European Union for the offering of deposits in euro for such
period displayed at the appropriate page of the Telerate screen or,
if such page or such service shall cease to be available, such other
page or such other service for the purpose of displaying the
percentage rate per annum determined by the Banking Federation of
the European Union for the offering of deposits in euro for such
period as the Agent, after consultation with the Banks and the
Parent, shall select; or
(b) if no percentage rate per annum for the offering of deposits in euro
is displayed for the relevant period, the arithmetic mean (rounded
upwards to four decimal places) of the rates (as notified to the
Agent) at which each of the Reference Banks was offering to prime
banks in the European interbank market deposits in euro of such
amount and for a period comparable to the relevant Interest Period,
as the case may be, as of 11 a.m. (Brussels time) on the Quotation
Date for such period.
"Event of Default" means any circumstance described as such in Clause 23
(Events of Default).
"Existing Amount" means, in relation to any Term Advance and any two
successive Interest Periods relating thereto, the amount of such Term
Advance at the beginning of the last day of the first of those Interest
Periods less any part thereof falling to be repaid on such day.
"Existing Facilities" means:
(a) the (pound)450 million syndicated revolving credit facility made
available to the Original Borrower and others on the terms of a
credit agreement dated 8th November, 1999 (as amended) (but not, for
the avoidance of doubt, the amortising term loan outstanding as Term
B under that credit agreement);
(b) the following bilateral facilities made available to the Original
Borrower:
(i) (euro)38,346,891 facility with Westdeutsche Landesbank
(Ireland) plc;
(ii) (euro)38,346,891 facility with Bayerische Hypo-und
Vereinsbank AG;
(iii) (euro)38,340,000 facility with Dresdner Bank AG;
(iv) (euro)38,346,891 facility with Sal. Oppenheim jr & Cie;
(v) (euro)25,560,000 facility with Deutsche Bank AG; and
(vi) (euro)38,340,000 facility with Commerzbank AG.
(c) the (euro)306,775,129 facility made available to the Original
Borrower by Deutsche Bank AG, Commerzbank AG, Dresdner Bank AG and
National Westminster Bank AG.
"Facilities" means the Revolving Facility and the Term Facility.
"Facility Office" means, in relation to the Agent, the office identified
with its signature below or such other office as it may select by notice
and, in relation to any Bank, the office notified by it to the Agent in
writing prior to the date hereof (or, in the case of a Transferee, at the
end of the Transfer Certificate to which it is a party as Transferee) or
such other office as it may from time to time select by notice to the
Agent.
"Final Term Repayment Date" means the day which is 60 months after the
date hereof.
"Finance Charges" has the meaning given to it in Clause 21 (Financial
Condition).
"Finance Document" means this Agreement, any Accession Memorandum, any
fee letter delivered pursuant to Clause 25 (Commitment Commission and
Fees), the Syndication Letter and any other document designated as such
by the Agent and the Parent.
"Finance Parties" means the Agent, the Mandated Lead Arrangers and the
Banks.
"Financial Indebtedness" means any indebtedness for or in respect of, and
without double counting:
(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 Securitisations 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) the 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 Security 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) guarantees of Financial Indebtedness of other persons.
"GAAP" means, in relation to an Obligor, the generally accepted
accounting principles applying to it (i) in the country of its
incorporation; or (ii) in a jurisdiction agreed to by the Agent.
"Group" means the Parent and its Subsidiaries from time to time.
"Guarantees" has the meaning given to it in Clause 21 (Financial
Condition).
"Guarantors" means each Original Guarantor and each Additional Guarantor.
"Holding Company" means, in relation to a company or corporation, any
other company or corporation in respect of which it is a Subsidiary.
"Information Memorandum" means the document concerning, among other
things, the Original Obligors and the proposed acquisition of RMC Group
Limited by Cemex UK Limited dated December 2004 which, at their request
and on their behalf, has been prepared in relation to this transaction,
approved by the Parent and distributed by The Royal Bank of Scotland plc
to selected financial institutions.
"Instructing Group" means:
(a) before any Advances have been made, a Bank or Banks whose
Commitments amount in aggregate to more than sixty-six and two
thirds per cent. of the Total Commitments; and
(b) thereafter, a Bank or Banks to whom in aggregate more than sixty-six
and two thirds per cent. of the Sterling Amount of the Loan is (or,
immediately prior to its repayment, was then) owed.
"Intellectual Property Rights" has the meaning given to it in Clause 21
(Financial Condition).
"Interest Period" means, save as otherwise provided herein:
(a) any of those periods mentioned in Clause 5.1 (Interest Periods for
Term Advances); and
(b) in relation to an Unpaid Sum, any of those periods mentioned in
Clause 27.1 (Default Interest Periods).
"Legal Opinions" means the legal opinions delivered to the Agent pursuant
to the Amendment Agreement in relation to the Original Obligors or
pursuant to Clause 35 (Changes to the Obligors) in relation to any
Additional Obligors.
"LIBOR" means, in relation to any amount to be advanced to or owing by an
Obligor under the Finance Documents on which interest for a given period
is to accrue:
(a) the percentage rate per annum equal to the offered quotation which
appears on the page of the Telerate Screen which displays the
British Bankers Association Interest Settlement Rate for the
currency of the relevant amount (being currently 3740 or, as the
case may be, 3750) for such period at or about 11.00 a.m. on the
Quotation Date for such period or, if such page or such service
shall cease to be available, such other page or such other service
for the purpose of displaying the British Bankers Association
Interest Settlement Rate for such currency as the Agent, after
consultation with the Banks and the Parent, shall select; or
(b) if no quotation for the relevant currency and the relevant period is
displayed and the Agent has not selected an alternative service on
which a quotation is displayed, the arithmetic mean (rounded upwards
to four decimal places) of the rates (as notified to the Agent) at
which each of the Reference Banks was offering to prime banks in the
London interbank market deposits in the currency of such amount and
for a period comparable to the relevant Interest Period or Term, as
the case may be, as of 11.00 a.m. on the Quotation Date for such
period.
"LMA" means the Loan Market Association.
"Loan" means, at any time, the aggregate of the Revolving Loan and the
Term Loan.
"Loan Notes" means the loan notes (if any) issued to the shareholders of
the Original Borrower.
"Mandatory Cost" means the rate determined in accordance with Schedule 9
(Mandatory Cost).
"Margin" means from the Effective Date until delivery of the first
Compliance Certificate thereafter in accordance with Clause 20.2(b)
(Compliance Certificate), 0.60 per cent. per annum. Thereafter, the
Margin at any time is calculated by reference to the RMC Borrowing/EBITDA
Ratio. If the RMC Borrowing/EBITDA Ratio as shown by the Compliance
Certificate most recently delivered under Clause 20 (Financial
Information) is:
(a) greater than 3.0:1.0, the Margin shall be 0.90 per cent. per annum;
(b) greater than 2.5:1.0 but less than or equal to 3.0:1.0, the Margin
shall be 0.75 per cent. per annum;
(c) greater than 2.0:1.0 but less than or equal to 2.5:1.0, the Margin
shall be 0.60 per cent. per annum;
(d) greater than 1.5:1 but less than or equal to 2.0:1, the Margin shall
be 0.50 per cent. per annum; or
(e) less than or equal to 1.5:1.0, the Margin shall be 0.425 per cent.
per annum.
Any change in the Margin shall take effect in relation to any Advance
outstanding or current Interest Period at the time of receipt by the
Agent of the Compliance Certificate pursuant to Clause 20 (Financial
Information) at the time of that receipt provided that if at any time
there is an Event of Default or Default then the Margin shall be 0.90 per
cent. per annum for such time.
"Material Adverse Effect" means a material adverse effect on:
(a) the business, condition (financial or otherwise) or operations of
the Group taken as a whole;
(b) the rights or remedies of any Finance Party under the Finance
Documents; or
(c) the ability of any Obligor to perform its obligations under the
Finance Documents.
"Material Subsidiary" means, at any time:
(a) from the Effective Date, the companies listed in Schedule 11
(Material Subsidiaries); and
(b) in addition, following the date on which the first Compliance
Certificate is delivered in accordance with Clause 20.2(a)
(Compliance Certificate), any other Subsidiary of the Parent:
(i) which becomes a Subsidiary of the Parent after the Effective
Date or acquires substantial assets or businesses after the
Effective Date; and
(ii) which:
(A) has total assets representing 5 per cent. or more of
the total consolidated assets of the Group; and/or
(B) has revenues representing 5 per cent. or more of the
consolidated turnover of the Group,
in each case calculated on a consolidated basis and any
Holding Company of any such Subsidiary (save unless such
company is already an Obligor hereunder).
Compliance with the conditions set out in sub-paragraphs (i)
and (ii) of paragraph (b) shall be determined by reference
to the most recent Compliance Certificate supplied by the
Parent and/or the latest audited financial statements of
that Subsidiary (consolidated in the case of a Subsidiary
which itself has Subsidiaries) and the latest audited
consolidated financial statements of the Group, but if a
Subsidiary has been acquired since the date as at which the
latest audited consolidated financial statements of the
Group were prepared, the financial statements shall be
adjusted in order to take into account the acquisition of
that Subsidiary (that adjustment being certified by the
Group's auditors as representing an accurate reflection of
each of the respective revised total assets and turnover of
the Group).
A report by the auditors of the Parent that a Subsidiary is
a Material Subsidiary shall, in the absence of manifest
error, be conclusive and binding on all Parties.
"Net Borrowings" has the meaning given to it in Clause 21 (Financial
Condition).
"New Amount" means, in relation to any Term Advance and any two
successive Interest Periods relating thereto, the amount of such Term
Advance at the beginning of the second of those Interest Periods, as
determined in accordance with Clause 4.3 (Amounts of Term Advances).
"Notarisation" has the meaning ascribed to such term in Clause 22.5
(Notarisation).
"Notice of Drawdown" means a notice substantially in the form set out in
Schedule 4 (Notice of Drawdown).
"Obligors" means the Borrowers and the Guarantors.
"Off-Balance Sheet Transactions" has the meaning given to it in Clause 21
(Financial Condition).
"Optional Currency" means Australian dollars, US dollars, Swiss francs,
Japanese yen and euros or any other currency (except sterling) which has
been previously approved in writing by the Agent (acting on the
instructions of all the Banks) as an optional currency for the purpose of
any drawdown at least three Business Days prior to delivery of the Notice
of Drawdown for such Advance or request under Clause 4.1 (Borrower's
Request for Optional Currency) and, at the time of drawdown or
denomination of Advance, the currency is:
(a) freely transferable and freely convertible into sterling; and
(b) available to banks in the relevant interbank market.
"Original Financial Statements" means:
(a) in relation to RMC Group Limited, its audited consolidated financial
statements for its financial year ended 31st December, 2003;
(b) in relation to each Guarantor (other than the Original Borrower, the
Parent, Cemex American Holdings B.V. and Cemex Shipping B.V.), its
respective audited unconsolidated (and, to the extent available, its
audited consolidated) financial statements for its financial year
ended 31 December 2003;
(c) in relation to the Parent, its audited consolidated financial
statements for its financial year ended 31 December 2003; and
(d) in relation to any Additional Borrower or Additional Guarantor, its
audited financial statements delivered pursuant to Schedule 7
(Additional Conditions Precedent).
"Original Obligors" means the Original Borrower and the Original
Guarantors.
"Original Sterling Amount" means:
(a) in relation to a Revolving Advance, the amount specified in the
Notice of Drawdown relating thereto, as the same may be reduced
pursuant to Clause 7.4 (Reduction of Available Revolving Commitment)
or, if such Revolving Advance is not denominated in sterling, the
equivalent of such amount (as the same may be so reduced) in
Sterling as at the date of such Notice of Drawdown; and
(b) in relation to a Term Advance:
(i) where such Advance came into existence as a result of a
drawing under the Term Facility, the amount specified as
such in the Notice of Drawdown relating thereto, as the same
may be reduced pursuant to Clause 3.3 (Reduction of
Available Term Commitment);
(ii) where such Term Advance came into existence upon the
consolidation of two or more Term Advances, the aggregate of
the Original Sterling Amounts of the Term Advances so
consolidated; and
(iii) where such Term Advance came into existence upon the
division of a Term Advance, the amount specified as such by
the Borrower pursuant to Clause 5.4 (Division of Term
Advances)
"Outlook" means a rating outlook of the Parent with regard to the
Parent's economic and/or fundamental business condition, as assigned by a
Rating Agency.
"Parent" means CEMEX Espana, S.A.
"Participating Member State" means any member state of the European Union
that adopts or has adopted the euro as its lawful currency at the
relevant time in accordance with legislation of the European Union
relating to the Economic and Monetary Union.
"Party" means a party to this Agreement.
"Permitted Notarisations" has the meaning ascribed to such term in Clause
22.5 (Notarisation).
"Permitted Securitisation" means a sale, transfer or other securitisation
of receivables and related assets by any member of the Group, including a
sale at a discount, provided that:
(a) such receivables have been transferred, directly or indirectly, by
the originator hereof to a Special Purpose Vehicle in a manner that
satisfies the requirements for an absolute conveyance, and not
merely a pledge, under the laws and regulations of the jurisdiction
in which such originator is organised;
(b) such Special Purpose Vehicle issues notes, certificates or other
obligations which are to be repaid from collections and other
proceeds of such receivables; and
(c) except for customary representations, warranties, covenants and
indemnities, such sale, transfer or other securitisation is carried
out on a non-recourse basis.
"Permitted Security" has the meaning given to it in Clause 22.6 (Negative
pledge).
"Proportion" means, in relation to a Bank:
(a) whilst no Advances are outstanding, the proportion borne by its
Commitment to the Total Commitments (or, if the Total Commitments
are then zero, by its Commitment to the Total Commitments
immediately prior to their reduction to zero); or
(b) whilst at least one Advance is outstanding, the proportion borne by
its share of the Sterling Amount of the Loan to the Sterling Amount
of the Loan.
"Qualifying Lender" means a Bank which is:
(a) a bank for the purposes of Section 349 of the Income and Corporation
Taxes Act 1988 which is within the charge to United Kingdom
corporation tax as regards interest payable or paid to it under this
Agreement and is beneficially entitled to such interest; or
(b) not resident for tax purposes in the United Kingdom but is a
financial institution which is resident in a country with which the
United Kingdom has an appropriate double taxation treaty pursuant to
which that financial institution is entitled to complete exemption
from United Kingdom tax on interest and is entitled to apply to
receive interest under this Agreement without withholding or
deduction on account of tax and is beneficially entitled to such
interest or is otherwise entitled to receive such interest without
withholding or deduction on account of tax.
"Quotation Date" means, in relation to any period for which an interest
rate is to be determined under the Finance Documents, the day on which
quotations would ordinarily be given by prime banks in the relevant
interbank market for deposits in the currency in relation to which such
rate is to be determined for delivery on the first day of that period,
provided that, if, for any such period, quotations would ordinarily be
given on more than one date, the Quotation Date for that period shall be
the last of those dates.
"Rating" means at any time the solicited long term credit rating or the
senior implied rating of the Parent or an issue of securities of or
guaranteed by the Parent, where the rating is based primarily on the
senior unsecured credit risk of the Parent and/or, in the case of the
senior implied rating, on the characteristics of any particular issue,
assigned by a Rating Agency.
"Rating Agency" means Standard & Poors Corporation or Moody's Investors
Service Inc.
"Reference Banks" means, in relation to LIBOR, EURIBOR and Mandatory
Cost, the principal London offices of The Royal Bank of Scotland plc, BNP
Paribas and HSBC Bank plc.
"Relevant Period" has the meaning given to it in Clause 21 (Financial
Condition).
"Repayment Date" means, in relation to any Revolving Advance, the last
day of the Term thereof.
"Repeated Representations" means each of the representations set out in
Clause 19.1 (Status) to Clause 19.6 (Governing law and enforcement),
Clause 19.9 (No default), paragraphs (a) and (b) of Clause 19.11
(Financial statements), Clause 19.12 (Pari passu ranking), 19.13 (No
proceedings pending or threatened), Clause 19.14 (No winding-up) and
Clause 19.15 (Material Adverse Change).
"Resignation Notice" means, in relation to a Borrower, a notice
substantially in the form set out in Part I of Schedule 8 (Form of
Resignation Notice) and, in relation to a Guarantor, a notice
substantially in the form set out in Part II of Schedule 8 (Form of
Resignation Notice).
"Revolving Advance" means an advance made or to be made by the Banks
under the Revolving Facility.
"Revolving Availability Period" means in relation to the Revolving
Facility the period from and including the Syndication Date to and
including the date one month prior to the Revolving Termination Date.
"Revolving Commitment" means, in relation to a Bank at any time and save
as otherwise provided herein, the amount set opposite its name under the
heading Revolving Commitment in Part I of Schedule 1 (The Banks).
"Revolving Facility" means the multicurrency revolving loan facility
granted to the Borrowers under paragraph (a) of Clause 2.1 (Grant of the
Facilities).
"Revolving Loan" means, at any time, the aggregate principal amount of
the outstanding Revolving Advances.
"Revolving Termination Date" means the day which is 72 months after the
date hereof.
"RMC Adjusted EBITDA" has the meaning given to it in Clause 21 (Financial
Condition).
"RMC Borrowing/EBITDA Ratio" means, at any time, the ratio as at the end
of the last RMC Relevant Period of RMC Consolidated Total Net Borrowings
as at the end of that RMC Relevant Period to RMC Adjusted EBITDA for the
last RMC Relevant Period.
"RMC Cemex Capital Contributions" has the meaning given to it in Clause
21 (Financial Condition).
"RMC Consolidated Net Worth" has the meaning given to it in Clause 21
(Financial Condition).
"RMC Consolidated Net Interest Payable" has the meaning given to it in
Clause 21 (Financial Condition).
"RMC Consolidated Total Net Borrowings" has the meaning given to it in
Clause 21 (Financial Condition).
"RMC EBITDA" has the meaning given to it in Clause 21 (Financial
Condition).
"RMC Group" means RMC Group Limited and its Subsidiaries from time to
time.
"RMC Indebtedness for Borrowed Money" has the meaning given to it in
Clause 21 (Financial Condition).
"RMC Relevant Period" has the meaning given to it in Clause 21 (Financial
Condition).
"RMC Royalty Expenses" has the meaning given to it in Clause 21
(Financial Condition).
"RMC Subordinated Debt" has the meaning given to it in Clause 21
(Financial Condition).
"Rolling Basis" has the meaning given to it in Clause 21 (Financial
Condition).
"Rollover Advance" means a Revolving Advance which is used to refinance a
maturing Revolving Advance and which is the same amount or less and the
same currency as such maturing Revolving Advance and is to be drawn on
the day such maturing Revolving Advance is to be repaid.
"Royalty Expenses" has the meaning given to it in Clause 21 (Financial
Condition).
"Security" means a mortgage, charge, pledge, lien or other security
interest securing any obligation of any person or any other agreement or
arrangement having a similar effect.
"Spain" means the Kingdom of Spain.
"Spanish Public Document" means any obligation in an Escritura Publica or
documento intervenido.
"Special Purpose Vehicle" means a securitisation trust or fund, limited
liability company, partnership or other special purpose person
established to implement a securitisation 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 any Group member held by another
Group member the disposal of which would cause the first Group member to
cease to be a Subsidiary of the second Group member.
"Sterling Amount" means:
(a) in relation to an Advance, its Original Sterling Amount as reduced
by the proportion (if any) of such Advance which has been repaid;
and
(b) in relation to the Loan, the aggregate of the Sterling Amounts of
the outstanding Advances.
"Subordinated Debt" has the meaning given to it in Clause 21 (Financial
Condition).
"Subsidiary" means in relation to any company or corporation, a company
or corporation:
(a) which is controlled, directly or indirectly, by the first mentioned
company or corporation;
(a) more than half the issued share capital of which is beneficially
owned, directly or indirectly by the first mentioned company or
corporation; or
(b) which is a Subsidiary of another Subsidiary of the first mentioned
company or corporation,
and for this purpose, a company or corporation shall be treated as being
controlled by another if that other company or corporation is able to
direct its affairs and/or to control the composition of its board of
directors or equivalent body.
"Syndication Date" means the last day of the Syndication Period.
"Syndication Letter" means the Syndication Letter dated on or about the
date of this Agreement between the Original Borrower, the Mandated Lead
Arrangers and the Banks originally party to this Agreement in relation to
the syndication process and other arrangements.
"Syndication Period" has the meaning ascribed to it in the Syndication
Letter.
"TARGET" means Trans-European Automated Real-time Gross Settlement
Express Transfer payment system.
"TARGET DAY" means any day on which TARGET is open for settlement of
payments in euro.
"Term" means, save as otherwise provided herein, in relation to any
Revolving Advance, the period for which such Revolving Advance is
borrowed, as specified in the Notice of Drawdown relating thereto.
"Term Advance" means an advance (as from time to time consolidated,
divided or reduced by repayment) made or to be made by the Banks under
the Term Facility.
"Term Availability Period" means, in relation to the Term Facility, the
period from and including the Syndication Date to and including the date
90 days after the Syndication Date.
"Term Commitment" means, in relation to a Bank at any time and save as
otherwise provided herein, the amount set opposite its name under the
heading Term Commitment in Part I of Schedule 1 (The Banks).
"Term Facility" means the multicurrency term loan facility granted to the
Borrower under paragraph (b) of Clause 2.1 (Grant of the Facilities).
"Term Loan" means, at any time, the, aggregate principal amount of
outstanding Term Advances.
"Term Repayment Date" means each of the dates set out in Clause 12
(Repayment of the Term Facility) including the Final Term Repayment Date.
"Total Borrowings" has the meaning given to it in Clause 21 (Financial
Condition).
"Total Commitments" means, at any time, the aggregate of the Banks'
Commitments. "Transfer Certificate" means a certificate substantially in
the form set out in Schedule 2 (Form of Transfer Certificate) signed by a
Bank and a Transferee under which:
(a) such Bank seeks to procure the transfer to such Transferee of all or
a part of such Bank's rights, benefits and obligations under the
Finance Documents upon and subject to the terms and conditions set
out in Clause 34.3 (Assignments and Transfers by Banks); and
(b) such Transferee undertakes to perform the obligations it will assume
as a result of delivery of such certificate to the Agent as
contemplated in Clause 34.5 (Transfers by Banks).
"Transfer Date" means, in relation to any Transfer Certificate, the date
for the making of the transfer as specified in such Transfer Certificate.
"Transferee" means a person to which a Bank seeks to transfer by novation
all or part of such Bank's rights, benefits and obligations under the
Finance Documents.
"Unpaid Sum" means the unpaid balance of any of the sums referred to in
Clause 27.1 (Default Interest Periods).
1.2 Interpretation
Any reference in this Agreement to:
an "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;
the "Agent", any "Bank" or any "Mandated Lead Arranger" shall be
construed so as to include its and any subsequent successors and
permitted transferees in accordance with their respective interests;
a document being in an "agreed form" means that document in the form
initialled by or on behalf of the Parent and the Agent;
"continuing", in relation to an Event of Default, shall be construed as a
reference to an Event of Default which has not been waived in accordance
with the terms hereof and, in relation to a Default, one which has not
been remedied within the relevant grace period or waived in accordance
with the terms hereof;
the "equivalent" on any date in one currency (the "first currency") of an
amount denominated in another currency (the "second currency") is a
reference to the amount of the first currency which could be purchased
with the amount of the second currency at the spot rate of exchange
quoted by the Agent at or about 11.00 a.m. on such date for the purchase
of the first currency with the second currency;
"indebtedness" shall be construed so as to include any obligation
(whether incurred as principal or as surety) for the payment or repayment
of money, whether present or future, actual or contingent;
a "law" shall be construed as any law (including common or customary
law), statute, constitution, decree, judgment, treaty, regulation,
directive, bye-law, order or any other legislative measure of any
government, supranational, local government, statutory or regulatory body
of court;
a "member state" shall be construed as a reference to a member state of
the European Union;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month save that:
(a) if any such numerically corresponding day is not a Business Day,
such period shall end on the immediately succeeding Business Day to
occur in that next succeeding calendar month or, if none, it shall
end on the immediately preceding Business Day; and
if there is no numerically corresponding day in that next succeeding
calendar month, that period shall end on the last Business Day in
that next succeeding calendar month.
The above rules will only apply to the last month of any period. All
references to months and monthly shall be construed accordingly.
a "person" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
"repay" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include prepay (or, as the case may be, the
corresponding derivative form thereof);
a "successor" shall be construed so as to include an assignee or
successor in title of such party and any person who under the laws of its
jurisdiction of incorporation or domicile has assumed the rights and
obligations of such party under this Agreement or to which, under such
laws, such rights and obligations have been transferred;
"tax" shall be construed so as to include any tax, levy, impost, duty or
other charge 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) of any jurisdiction;
"VAT" shall be construed as a reference to value added tax including any
similar tax which may be imposed in place thereof from time to time of
any jurisdiction;
a "wholly-owned Subsidiary" of a company or corporation shall be
construed as a reference to any company or corporation which has no other
members except that other company or corporation and that other company's
or corporation's wholly-owned Subsidiaries or persons acting on behalf of
that other company or corporation or its wholly-owned Subsidiaries; and
the "winding-up", "dissolution" or "administration" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law 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, bankruptcy, winding-up, reorganisation, dissolution or
administration.
1.3 Currency Symbols and Definitions
(a) (pound) and sterling denote lawful currency of the United Kingdom;
US$ and US dollars denote lawful currency of the United States of
America; A$ and Australian dollars denote lawful currency of the
Commonwealth of Australia; Swiss francs denotes lawful currency of
Switzerland; and Japanese yen denotes lawful currency of Japan.
(b) euro, (euro) and EUR means the single currency of the Participating
Member States.
1.4 Agreements and Statutes
Any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed
as a reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time to
time be, amended, varied, novated or supplemented; and
(b) a statute or treaty shall be construed as a reference to such
statute or treaty as the same may have been, or may from time to
time be, amended or, in the case of a statute, re-enacted.
1.5 Headings
Clause and Schedule headings are for ease of reference only.
1.6 Time
Any reference in this Agreement to a time of day shall, unless a
contrary indication appears, be a reference to London time.
1.7 Third Party Rights
A person who is not a Party has no right under the Contracts (Rights of
Third Parties) Act 1999 to enforce or enjoy the benefit of any term of
this Agreement other than any director, officer or employee of the Agent
or the Mandated Lead Arrangers as referred to in, and for the purposes
of, Clause 33.7 (No Actions).
2. THE FACILITIES
2.1 Grant of the Facilities
The Banks grant to the Borrowers, upon the terms and subject to the
conditions hereof:
(a) a multicurrency revolving loan facility in an aggregate amount of
(pound)425,558,038 or its equivalent from time to time in Optional
Currencies; and
(b) a multicurrency term loan facility in an aggregate amount of
(pound)178,796,154 or its equivalent from time to time in Optional
Currencies.
2.2 Purpose and Application of the Term Facility The proceeds of each Term
Advance will be applied in or towards:
(a) refinancing the Existing Facilities; and/or
(b) general corporate purposes
and none of the Finance Parties shall be obliged to concern themselves
with such application.
2.3 Purpose and Application of the Revolving Facility
The Revolving Facility is intended for general corporate purposes and,
accordingly, each Borrower shall apply all amounts raised by it hereunder
in or towards satisfaction of its general corporate purposes and none of
the Finance Parties shall be obliged to concern themselves with such
application.
2.4 Conditions Precedent
Save as the Banks may otherwise agree, none of the Borrowers may deliver
any Notice of Drawdown requesting a Term Advance or a Revolving Advance
unless:
(a) the Agent has confirmed to the Original Borrower and the Banks that
it has received all of the documents and other evidence listed in
Schedule 3 (Conditions Precedent) and that each is, in form and
substance, satisfactory to the Agent; and
(b) the Syndication Period has expired.
2.5 Banks' Obligations Several
The obligations of each Bank are several and the failure by a Bank to
perform its obligations hereunder shall not affect the obligations of an
Obligor towards any other party hereto nor shall any other party be
liable for the failure by such Bank to perform its obligations hereunder.
2.6 Banks' Rights Several
The rights of each Bank are several and any debt arising hereunder at any
time from an Obligor to any of the other parties hereto shall be a
separate and independent debt. Each such party shall be entitled to
protect and enforce its individual rights arising out of this Agreement
independently of any other party (so that it shall not be necessary for
any party hereto to be joined as an additional party in any proceedings
for this purpose).
3. UTILISATION OF THE TERM FACILITY
3.1 Drawdown Conditions for Term Advances
A Term Advance will be made by the Banks to a Borrower if:
(a) not less than one Business Day, in the case of any Term Advance to
be denominated in sterling, or three Business Days, in the case of
any Term Advance to be denominated in an Optional Currency, before
the proposed date for the making of such Term Advance, the Agent has
received a completed Notice of Drawdown from such Borrower;
(b) the proposed date for the making of such Term Advance is a Business
Day within the Term Availability Period;
(c) the proposed Original Sterling Amount of such Term Advance is (a)
(if less than the Available Term Facility) a minimum amount of
(pound)25,000,000 and an integral multiple of (pound)5,000,000 or
(b) equal to the amount of the Available Term Facility;
(d) there would not, immediately after the making of such Term Advance,
be more than six Term Advances outstanding; and
(e) on and as of the proposed date for the making of such Term Advance
(i) no Event of Default or Default is continuing or would result
from the proposed Term Advance and (ii) the Repeated Representations
are true in all material respects.
3.2 Each Bank's Participation in Term Advances
Each Bank will participate through its Facility Office in each Term
Advance made pursuant to Clause 3.1 (Drawdown Conditions for Term
Advances) in the proportion borne by its Available Term Commitment to the
Available Term Facility immediately prior to the making of that Term
Advance.
3.3 Reduction of Available Term Commitment
If a Bank's Available Term Commitment is reduced in accordance with the
terms hereof after the Agent has received the Notice of Drawdown for a
Term Advance and such reduction was not taken into account in the
Available Term Facility, then both the Original Sterling Amount and the
amount of that Term Advance shall be reduced accordingly.
4. MULTICURRENCY OPTION
4.1 Borrower's Request for Optional Currency
If a Term Advance has been or is to be made to a Borrower, the relevant
Borrower may, not later than three Business Days before the first day of
an Interest Period, request (by notice to the Agent) that any Term
Advance be denominated in any Optional Currency during such Interest
Period, in which event such Term Advance shall, subject to Clause 4.2
(Conditions for Denominating a Term Advance in an Optional Currency), be
denominated in such Optional Currency. If the relevant Borrower does not
make such a request, each Term Advance shall be denominated in the
currency in which it was denominated during the preceding Interest
Period.
4.2 Conditions for Denominating a Term Advance in an Optional Currency
If a Term Advance is to be denominated in an Optional Currency during any
Interest Period relating thereto, but:
(a) no later than one hour after the time at which the rate is to be
determined on the Quotation Date for such Interest Period, the Agent
notifies the relevant Borrower and the Banks that the Agent is of
the opinion by reason of circumstances affecting the London
interbank market generally that it is not feasible for such Term
Advance to be made in such Optional Currency or, as the case may be,
denominated in such Optional Currency; or
(b) to give effect to such request would cause the Term Loan to be
denominated in more than four Optional Currencies,
the agent shall notify the relevant Borrower and the Banks and such Term
Advance shall be denominated in sterling in an amount equal to the
Original Sterling Amount.
4.3 Amounts of Term Advances
The amount of a Term Advance during an Interest Period relating thereto
(in determining which it shall be assumed that any part of such Term
Advance falling to be repaid on or before the last day of the preceding
Interest Period, if any, relating thereto is duly repaid) shall be:
(a) the Sterling Amount of such Term Advance if such Term Advance is to
be denominated in sterling during such Interest Period; or
(b) if such Term Advance is to be denominated in an Optional Currency,
the amount of such Optional Currency which could be purchased with
the Sterling Amount of such Term Advance at the spot rate of
exchange quoted by the Agent at or about 11.00 a.m. on the third
Business Day preceding the first day of such Interest Period for the
purchase of such Optional Currency with sterling,
provided that if a Term Advance is to be denominated in the same Optional
Currency during two successive Interest Periods and the amount of such
Term Advance, calculated in accordance with paragraph (b), is no more
than five per cent. higher or lower than its Existing Amount, its New
Amount shall be its Existing Amount.
4.4 Currency Change
If a Term Advance is to be denominated in different currencies during two
successive Interest Periods, then, on the last day of the first of those
Interest Periods:
(a) each Bank shall pay an amount equal to its portion of the New Amount
of such Term Advance to the Agent, who shall hold the same on behalf
of such Bank;
(b) the Agent shall:
(i) apply the amount so made available to it by each Bank in or
towards the purchase of such Bank's portion of the Existing
Amount of such Term Advance and pay the amount so purchased
to such Bank; and
(ii) pay any portion of the amount made available to it by the
Banks and not applied in accordance with paragraph (b)(i) to
the relevant Borrower or, if a Default or an Event of
Default shall have occurred and the Agent or an Instructing
Group so determines, to the Banks, any amount so paid to the
Banks being treated as if it were a prepayment made by the
relevant Borrower, in respect of a Term Advance, under
Clause 13.2 (Prepayment of the Term Loan)); and
(c) the relevant Borrower shall pay to the Agent for the account of each
Bank a sum equal to the amount (if any) by which such Bank's share
of the Existing Amount of such Term Advance exceeds the portion
thereof purchased by the Agent pursuant to paragraph (b)(i).
4.5 Same Currency
Subject to Clause 4.3 (Amounts of Term Advances), if a Term Advance is to
be denominated in the same Optional Currency during two successive
Interest Periods and there is any difference between the Existing Amount
of such Term Advance and its New Amount, then, on the last day of the
first of those Interest Periods:
(a) if the Existing Amount of such Term Advance exceeds its New Amount,
the relevant Borrower shall pay to the Agent for the account of the
Banks an amount equal to the amount of such excess; or
(b) if the New Amount of such Term Advance exceeds its Existing Amount:
(i) each Bank shall pay to the Agent for the account of the
relevant Borrower an amount equal to its portion of the
amount of such excess; or
(ii) if a Default or an Event of Default shall have occurred and
the Agent or an Instructing Group so determines, no such
payments shall be made and a sum equal to the aggregate
amount which would have been so payable shall be treated as
having been prepaid by the relevant Borrower, in respect of
a Term Advance, under Clause 13.2 (Prepayment of the Term
Loan).
5. INTEREST PERIODS FOR TERM ADVANCES
5.1 Interest Periods for Term Advances
The period for which a Term Advance is outstanding shall be divided into
successive periods each of which (other than the first, which shall begin
on the day such Term Advance is made) shall start on the last day of the
preceding such period.
5.2 Duration of Interest Periods for Term Advances
The duration of each Interest Period in respect of a Term Advance shall,
save as otherwise provided herein, be one, two, three or six months, in
each case as the Borrower to which such Term Advance is made may by not
less than one Business Day's, in the case of any Term Advance denominated
in sterling, or three Business Days', in the case of any Term Advance
denominated in an Optional Currency, prior notice to the Agent select,
provided that:
(a) if such Borrower fails to give such notice of its selection in
relation to an Interest Period, the duration of that Interest Period
shall, subject to paragraph (b), be one month; and
(b) any Interest Period which would otherwise end during the month
preceding, or extend beyond, a Term Repayment Date shall be of such
duration that it shall end on such Term Repayment Date.
5.3 Consolidation of Term Advances
If two or more Interest Periods relating to Term Advances denominated in
the same currency and borrowed by the same Borrower end at the same time
then, on the last day of those Interest Periods, the Term Advances to
which they relate shall be consolidated into and treated as a single Term
Advance.
5.4 Division of Term Advances
The Borrower to which such Term Advance is made may, by not less than one
Business Day's, in the case of any Term Advance denominated in sterling,
or three Business Days', in the case of any Term Advance denominated in
an Optional Currency, prior notice to the Agent, direct that any Term
Advance shall, at the beginning of any Interest Period relating thereto,
be divided into (and thereafter, save as otherwise provided herein,
treated in all respects as) two or more Term Advances having such
Original Sterling Amounts (in aggregate, equalling the Sterling Amount of
the Term Advance being so divided) as shall be specified by such Borrower
in such notice, provided that such Borrower shall not be entitled to make
such a direction if:
(a) as a result of so doing, there would be more than six outstanding
Term Advances; or
(b) any Term Advance thereby coming into existence would have an
Original Sterling Amount of less than (pound)25,000,000.
5.5 Consolidated and Divided Term Advances
For the purpose of Clause 4 (Multicurrency Option), a Term Advance which
comes into existence upon the consolidation of two or more existing Term
Advances or the division of an existing Term Advance shall be treated as
having existed prior to the date on which it comes into existence and:
(a) in the case of a consolidated Term Advance, having an amount equal
to the aggregate of the amounts of the Term Advances so
consolidated;
(b) in the case of a divided Term Advance, having an amount equal to the
portion of the Term Advance so divided which bears the same
proportion to the amount of the Term Advance so divided as the
Sterling Amount of the Term Advance coming into existence bears to
the Sterling Amount of the Term Advance so divided.
6. PAYMENT AND CALCULATION OF INTEREST ON TERM ADVANCES
6.1 Payment of Interest
On the last day of each Interest Period relating to a Term Advance (and,
if the Interest Period of such Term Advance exceeds six months, on the
expiry of each period of six months during that Interest Period) the
Borrower to which such Term Advance has been made shall pay accrued
interest on the Term Advance to which such Interest Period relates.
6.2 Calculation of Interest
The rate of interest applicable to a Term Advance from time to time
during an Interest Period relating thereto shall be the rate per annum
which is the sum of:
(a) the relevant Margin from time to time during such period;
(b) the Mandatory Cost in respect thereof at such time; and
(c) LIBOR, or in relation to any Term Advance in euro, EURIBOR on the
Quotation Date therefor.
7. UTILISATION OF THE REVOLVING FACILITY
7.1 Drawdown Conditions for Revolving Advances
A Revolving Advance will be made by the Banks to a Borrower if:
(a) not more than one Business Day, in the case of any Revolving Advance
denominated in sterling, or three Business Days, in the case of any
Revolving Advance denominated in an Optional Currency, before the
proposed date for the making of such Revolving Advance, the Agent
has received a completed Notice of Drawdown from such Borrower;
(b) the proposed date for the making of such Revolving Advance is a
Business Day within the Revolving Availability Period;
(c) the proposed Original Sterling Amount of such Revolving Advance is
(i) (if less than the Available Revolving Facility) a minimum amount
of (pound)25,000,000 and an integral multiple of (pound)5,000,000 or
(ii) equal to the amount of the Available Revolving Facility;
(d) the proposed Term of the Revolving Advance requested is a period of
one, two, three or six months or such other period as the Banks may
agree in each case ending on or before the Revolving Termination
Date;
(e) there would not, immediately after the making of such Revolving
Advance, be more than ten Revolving Advances outstanding;
(f) on and as of the proposed date for the making of such Revolving
Advance, (i) no Event of Default or (save in relation to a Rollover
Advance) Default is continuing or would result from the proposed
Revolving Advance and (ii) the Repeated Representations are true in
all material respects,
then, save as otherwise provided herein, such Revolving Advance will be
made in accordance with the provisions hereof.
7.2 Conditions for Denominating a Revolving Advance in an Optional
Currency If a Borrower requests that a Revolving Advance be denominated
in an Optional Currency but:
(a) no later than one hour after the time at which the rate is to be
determined on the Quotation Date for such Revolving Advance, the
Agent notifies the relevant Borrower and the Banks that, by reason
of circumstances affecting the London interbank market generally,
the Agent is of the opinion that it is not feasible for such
Revolving Advance to be denominated in such Optional Currency; or
(b) to give effect to such request would cause the Revolving Loan to be
denominated in more than four Optional Currencies,
the Agent shall notify the relevant Borrower and the Banks and such
Revolving Advance shall be denominated in sterling.
7.3 Each Bank's Participation in Revolving Advances
Each Bank will participate through its Facility Office in each Revolving
Advance made pursuant to this Clause 7 in the proportion borne by its
Available Revolving Commitment to the Available Revolving Facility
immediately prior to the making of that Revolving Advance.
7.4 Reduction of Available Revolving Commitment
If a Bank's Revolving Commitment is reduced in accordance with the terms
hereof after the Agent has received the Notice of Drawdown for a
Revolving Advance and such reduction was not taken into account in the
Available Revolving Facility, then both the Original Sterling Amount and
the amount of that Revolving Advance shall be reduced accordingly.
8. PAYMENT AND CALCULATION OF INTEREST ON REVOLVING ADVANCES
8.1 Payment of Interest
On the Repayment Date relating to each Revolving Advance (and, if the
Term of such Revolving Advance exceeds six months, on the expiry of each
period of six months during such Term) the Borrower to which such
Revolving Advance has been made shall pay accrued interest on that
Revolving Advance.
8.2 Calculation of Interest
The rate of interest applicable to a Revolving Advance from time to time
during its Term shall be the rate per annum which is the sum of:
(a) the relevant Margin from time to time during such period;
(b) the Mandatory Cost; and
(c) LIBOR or, in relation to any Revolving Advance in euro, EURIBOR on
the Quotation Date therefor.
9. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES
9.1 Market Disruption
If, in relation to any Advance:
(a) LIBOR or, if applicable, EURIBOR is to be determined by reference to
Reference Banks and at or about the time at which the rate is to be
determined on the Quotation Date for the relevant Interest Period or
Term none or only one of the Reference Banks supplies a rate for the
purpose of determining LIBOR or, if applicable, EURIBOR for the
relevant Interest Period or Term; or
(b) before the close of business in London on the Quotation Date for
such Advance the Agent has been notified by a Bank or each of a
group of Banks to whom in aggregate thirty-five per cent. or more of
such Advance is owed (or, in the case of an undrawn Advance, if
made, would be owed) that LIBOR or, if applicable, EURIBOR does not
accurately reflect the cost of funding its participation in such
Advance,
then, the Agent shall notify the Parent, the relevant Borrower and the
Banks of such event and, notwithstanding anything to the contrary in this
Agreement, Clause 9.2 (Substitute Interest Period and Interest Rate)
shall apply to such Advance.
9.2 Substitute Interest Period and Interest Rate
If paragraph (a) of Clause 9.1 (Market Disruption) applies to an Advance,
the duration of the relevant Interest Period or Term shall be one month
or, if less, such that it shall end on a Term Repayment Date (in the case
of a Term Advance) or the Revolving Termination Date (in the case of a
Rollover Advance). If either paragraph (a) or (b) of Clause 9.1 (Market
Disruption) applies to an Advance, the rate of interest applicable to
such Advance during the relevant Interest Period or Term shall (subject
to any agreement reached pursuant to Clause 9.3 (Alternative Rate)) be
the rate per annum which is the sum of:
(a) the Margin at such time;
(b) the Mandatory Cost; and
(c) the rate per annum determined by the Agent to be the arithmetic mean
(rounded upwards to four decimal places) of the rates notified by
each Bank to the Agent before the last day of the relevant Interest
Period or Term to be those which express as a percentage rate per
annum the cost to each Bank of funding from whatever sources it may
reasonably select its portion of such Advance during such Interest
Period or Term.
9.3 Alternative Rate
If (a) either of those events mentioned in paragraph (a) and (b) of
Clause 9.1 (Market Disruption) occurs in relation to an Advance or (b) by
reason of circumstances affecting the London interbank market during any
period of three consecutive Business Days LIBOR is not available for
sterling to prime banks in the London interbank market, then if the Agent
or the Parent so requires, the Agent and the Parent shall enter into
negotiations (for a period of not more than 30 days) with a view to
agreeing a substitute basis (i) for determining the rates of interest
from time to time applicable to the Advances and/or (ii) upon which the
Advances may be maintained (whether in sterling or some other currency)
thereafter and any such substitute basis that is agreed shall take effect
in accordance with its terms and be binding on each party hereto,
provided that the Agent may not agree any such substitute basis without
the prior consent of each Bank.
10. NOTIFICATION
10.1 Advances
Not less than three Business Days, in the case of any Advance denominated
in an Optional Currency, or one Business Day, in the case of any Advance
denominated in sterling, before the first day of an Interest Period or
Term, the Agent shall notify each Bank of:
(a) the Facility that is to be utilised and the name of the Borrower;
(b) the proposed Sterling Amount of the relevant Advance;
(c) the proposed length of the relevant Interest Period or Term;
(d) whether or not such Advance is to be denominated in an Optional
Currency (and, if so, the amount of such Advance in the relevant
Optional Currency); and
(e) the aggregate principal amount of the relevant Advance allocated to
such Bank pursuant to Clause 7.3 (Each Bank's Participation in
Revolving Advances), or Clause 3.2 (Each Bank's Participation in
Term Advances).
10.2 Interest Rate Determination
The Agent shall promptly notify the relevant Borrower and the Banks of
each determination of LIBOR, EURIBOR, the Margin, the Mandatory Cost and
other costs, if any.
10.3 Changes to Advances or Interest Rates
The Agent shall promptly notify the relevant Borrower and the Banks of
any change to (a) the proposed currency of an Advance occasioned by the
operation of Clause 7.2 (Conditions for Denominating a Revolving Advance
in an Optional Currency) or Clause 4.2 (Conditions for Denominating a
Term Advance in an Optional Currency), (b) the proposed length of an
Interest Period or Term or (c) any interest rate occasioned by the
operation of Clause 9 (Market Disruption and Alternative Interest Rates).
11. REPAYMENT OF THE REVOLVING FACILITY
The Borrower shall repay the Revolving Advance made to it in full on the
Repayment Date relating thereto.
12. REPAYMENT OF THE TERM FACILITY
The Parent shall procure (and each Borrower which has drawn a Term
Advance shall repay its share of the Term Loan in order to ensure) that
the Term Loan is repaid in full by the Final Term Repayment Date and in
part by each Term Repayment Date set out in the table below by the
aggregate amount set beside that Term Repayment Date in the table below.
--------------------------------------- ------------------------------------
Term Repayment Date Aggregate Amount of Term Loan
to have been repaid
--------------------------------------- ------------------------------------
36 months from 18 October 2002 (pound) 5,192,673
--------------------------------------- ------------------------------------
48 months from 18 October 2002 (pound) 63,060,500
--------------------------------------- ------------------------------------
60 months from 18 October 2002 (pound) 178,796,154
--------------------------------------- ------------------------------------
13. CANCELLATION AND PREPAYMENT
13.1 Cancellation of the Term Facility
The Parent may, by giving to the Agent not less than five Business Days'
prior notice to that effect, cancel the whole or any part (being an
amount or integral multiple of (pound)50,000,000) of the Available Term
Facility. Any such cancellation shall reduce the Available Term
Commitment and Term Commitment of the Banks rateably.
13.2 Prepayment of the Term Loan
The Borrower to which a Term Advance has been made may, if it has given
to the Agent not less than five Business Days' prior notice to that
effect and subject always to the provisions of Clause 27.4 (Break Costs),
prepay the whole of any Term Advance or any part of any Term Advance
(being an amount such that the Sterling Amount of the Term Advance will
be reduced by an amount or integral multiple of (pound)50,000,000).
13.3 Cancellation of the Revolving Facility
The Parent may, by giving to the Agent not less than five Business Days'
prior notice to that effect, cancel the whole or any part (being an
amount or integral multiple of (pound)50,000,000) of the Available
Revolving Facility. Any such cancellation shall reduce the Sterling
Amount of the Available Revolving Commitment and Revolving Commitment of
each Bank rateably.
13.4 Prepayment of the Revolving Loan
The Borrower to which a Revolving Advance has been made may, by giving to
the Agent not less than five Business Days' prior notice to that effect
and subject always to the provisions of Clause 27.4 (Break Costs), prepay
the whole or any part of a Revolving Advance (being an amount such that
the Sterling Amount of the Revolving Loan will be reduced by an amount or
integral multiple of (pound)50,000,000).
13.5 Notice of Cancellation or Prepayment
Any notice of cancellation or prepayment given by a Borrower pursuant to
this Clause 13.5 shall be irrevocable, shall specify the date upon which
such cancellation or prepayment is to be made and the amount of such
cancellation or prepayment and, in the case of a notice of prepayment,
shall oblige the relevant Borrower to make such prepayment on such date.
13.6 Repayment of a Bank's Share of the Loan
If:
(a) any sum payable to any Bank by an Obligor is required to be
increased pursuant to Clause 14.1 (Tax Gross-up); or
(b) any Bank claims indemnification from the Parent under Clause 14.2
(Tax Indemnity) or Clause 16.1 (Increased Costs),
the Parent may, whilst such circumstance continues, give the Agent at
least ten Business Days' notice (which notice shall be irrevocable) of
its intention to procure the repayment of such Bank's share of the loan.
If the Parent gives such notice to the Agent, each Borrower to which an
Advance has been made shall repay such Bank's portion of the Advance to
which such Interest Period or Term relates, subject always to the
provisions of Clause 27.4 (Break Costs). Any repayment of a Term Advance
so made after the last day of the Term Availability Period shall reduce
rateably the obligation under Clause 12 (Repayment of the Term Facility)
on a pro rata basis.
13.7 No Further Advances
A Bank for whose account a repayment is to be made under Clause 13.6
(Repayment of a Bank's Share of the Loan) shall not be obliged to
participate in the making of Advances on or after the date upon which the
Agent receives the Parent's notice of its intention to procure the
repayment of such Bank's share of the Loan, and such Bank's Available
Revolving Commitment and Available Term Commitment shall be reduced to
zero.
13.8 Mandatory Prepayment on Change of Control
(a) If any person or group of connected persons which does not at the
Effective Date have direct or indirect control of RMC Group Limited
acquires such control then:
(i) the Parent will give notice of that event to the Agent
promptly on becoming aware thereof;
(ii) following receipt of that notice, or if any Bank otherwise
becomes aware of such an event and notifies the Agent, the
Agent (acting on the instructions of an Instructing Group)
will enter into negotiations with the Parent in good faith
for a period not exceeding 30 days (the Negotiation Period)
as to the terms on which the Banks may be prepared (without
obligation) to continue to provide financing facilities to
the Borrowers (the "Revised Terms"); and
(iii) during the Negotiation Period, no further Advances (other
than Rollover Advances) may be made.
(b) If the Revised Terms have not been agreed within 5 days of the end
of the Negotiation Period, the Agent may (after receipt of a notice
from a Bank that it is not prepared to continue to provide financing
facilities on the Revised Terms) give notice to the Parent that such
Bank is exercising its rights under this Clause 13.8 whereupon:
(i) all Commitments of such Bank shall immediately be cancelled;
and
(ii) all outstanding Advances of such Bank shall become due and
payable and shall be repaid by the relevant Borrowers
together with accrued interest and all other amounts payable
by the Borrowers hereunder within 5 days of the date of such
notice.
(c) For the purpose of this Clause 13.8, control and connected person
shall respectively be construed in accordance with Section 416 and
Section 839 of the Income and Corporation Taxes Act 1988.
13.9 No Other Repayments
The Borrowers shall not repay all or any part of the Loan except at the
times and in the manner expressly provided for in this Agreement.
13.10 No Reborrowing of the Term Facilities
None of the Borrowers shall be entitled to reborrow any amount of the
Term Facility which is repaid.
14. TAXES
14.1 Tax Gross-up
All payments to be made by an Obligor to any Finance Party under the
Finance Documents shall be made free and clear of and without deduction
for or on account of tax unless such Obligor is required to make such a
payment subject to the deduction or withholding of tax, in which case
the sum payable by such Obligor (in respect of which such deduction or
withholding is required to be made) shall, subject to Clause 14.3
(Excluded Claims), be increased to the extent necessary to ensure that
such Finance Party receives a sum net of any deduction or withholding
equal to the sum which it would have received had no such deduction or
withholding been made or required to be made.
14.2 Tax Indemnity
Without prejudice to Clause 14.1 (Tax Gross up), but subject to Clause
14.3 (Excluded Claims), if any Finance Party is required to make any
payment of or on account of tax on or in relation to any sum received or
receivable under the Finance Documents (including any sum deemed for
purposes of tax to be received or receivable by such Finance Party
whether or not actually received or receivable) or if any liability in
respect of any such payment is asserted, imposed, levied or assessed
against any Finance Party, the Parent shall, upon demand of the Agent,
promptly indemnify the Finance Party which suffers a loss or liability
as a result against such payment or liability, together with any
interest, penalties, costs and expenses payable or incurred in
connection therewith, provided that this Clause 14.2 shall not apply to:
(a) any tax imposed on and calculated by reference to the net income
actually received or receivable by such Finance Party (but, for the
avoidance of doubt, not including any sum deemed for purposes of tax
to be received or receivable by such Finance Party but not actually
receivable) by the jurisdiction in which such Finance Party is
incorporated or resident for tax purposes; or
(b) any tax imposed on and calculated by reference to the net income of
the Facility Office of such Finance Party actually received or
receivable by such Finance Party (but, for the avoidance of doubt,
not including any sum deemed for purposes of tax to be received or,
receivable by such Finance Party but not actually receivable) by the
jurisdiction in which its Facility Office is located.
14.3 Excluded Claims
If any Bank is not or ceases to be a Qualifying Lender, no Obligor shall
be liable to pay to that Bank under Clause 14.1 (Tax Gross-up) or Clause
14.2 (Tax Indemnity) any amount in respect of taxes levied or imposed in
excess of the amount it would have been obliged to pay if that Bank had
been or had not ceased to be a Qualifying Lender provided that this
Clause 14.3 shall not apply (and each Obligor shall be obliged to comply
with its obligations under Clause 14.1 (Tax Gross-up) or, as the case
may be, Clause 14.2 (Tax Indemnity)) if:
(a) after the date hereof, there shall have been any introduction of,
change in, or change in the interpretation, administration or
application of, any law or regulation or order or governmental rule
or treaty or any published practice or published concession of any
applicable tax authority and as a result thereof such Bank ceased to
be a Qualifying Lender; or
(b) such Bank is not or ceases to be a Qualifying Lender as a result of
the actions of or omission to act by any Obligor; or
(c) the relevant Obligor would be required to make a deduction or
withholding in respect of tax irrespective of whether the Bank is or
is not a Qualifying Lender.
14.4 Double Taxation Relief
If, and to the extent that, the effect of Clause 14.1 (Tax Gross-up) or
Clause 14.2 (Tax Indemnity) can be mitigated by virtue of the provisions
of any applicable double tax convention entered into by an Obligor's
jurisdiction of incorporation or the jurisdiction through which an
Obligor is borrowing under this Agreement (whether by claim to repayment
of any taxes referred to in Clause 14.1 (Tax Gross up) or Clause 14.2
(Tax Indemnity) or otherwise) each Bank and the Agent agrees to co
operate with the relevant Obligor with a view to submitting any forms
required for the purpose of ensuring the application of such double tax
convention so far as relevant, provided that neither a Bank nor the
Agent shall be required pursuant to this Clause 14.4 to complete or
co-operate in completing any form which is not substantially similar to
any form in use at the date of this Agreement (for the purpose of`
claiming exemption or relief from or repayment of taxes envisaged under
the Finance Documents pursuant to a double taxation convention between
an Obligor's jurisdiction of incorporation or the jurisdiction through
which an Obligor is borrowing under this Agreement and such Bank's or
the Agent's jurisdiction of residence) to the extent that completing or
co operating in completing such form would result in a Bank or the Agent
being subject to greater obligations under this Clause 14.4 than those
imposed on it on the date hereof.
14.5 Banks' Tax Status Confirmation
Each Bank confirms in favour of the Agent and each Obligor (on the date
hereof or, in the case of a Bank which becomes a party hereto pursuant
to a transfer or assignment, on the date on which the relevant transfer
or assignment becomes effective) that it is a Qualifying Lender and each
Bank shall promptly notify the Agent and the Parent if there is any
change in its position from that set out above.
14.6 Claims by Banks
A Bank intending to make a claim pursuant to Clause 14.2 (Tax Indemnity)
shall notify the Agent of the event giving rise to the claim, whereupon
the Agent shall notify the Parent thereof.
15. TAX RECEIPTS
15.1 Notification of Requirement to Deduct Tax
If, at any time, an Obligor is required by law to make any deduction or
withholding from any sum payable by it under the Finance Documents (or
if thereafter there is any change in the rates at which or the manner in
which such deductions or withholdings are calculated), such Obligor
shall promptly notify the Agent.
15.2 Evidence of Payment of Tax
If an Obligor makes any payment under the Finance Documents in respect
of which it is required to make any deduction or withholding, it shall
pay the full amount required to be deducted or withheld to the relevant
taxation or other authority within the time allowed for such payment
under applicable law and shall deliver to the Agent for each Bank,
within thirty days after it has made such payment to the applicable
authority, an original receipt (or a certified copy thereof) issued by
such authority evidencing the payment to such authority of all amounts
so required to be deducted or withheld in respect of that Bank's share
of such payment.
15.3 Tax Credit Payment
If an additional payment is made under Clause 14 (Taxes) by an Obligor
for the benefit of any Finance Party and such Finance Party, acting in
good faith in its sole discretion, determines that it has obtained (and
has derived full use and benefit from) a credit against, a relief or
remission for, or repayment of, any tax, then, if and to the extent that
such Finance Party, acting in good faith in its sole opinion, determines
that:
(a) such credit, relief, remission or repayment is in respect of or
calculated with reference to the additional payment made pursuant to
Clause 14 (Taxes); and
(b) its tax affairs for its tax year in respect of which such credit,
relief, remission or repayment was obtained have been finally
settled,
such Finance Party shall, to the extent that it can do so without
prejudice to the retention of the amount of such credit, relief,
remission or repayment, pay to such Obligor such amount as such Finance
Party shall, in its sole opinion acting in good faith, determine to be
the amount which will leave such Finance Party (after such payment) in
no worse after tax position than it would have been in had the
additional payment in question not been required to be made by such
Obligor.
15.4 Tax and Other Affairs
No provision of this Agreement shall interfere with the right of any
Finance Party to arrange its tax or any other affairs in whatever manner
it thinks fit, oblige any Finance Party to claim any credit, relief,
remission or repayment in respect of any payment under Clause 14 (Taxes)
in priority to any other credit, relief, remission or repayment
available to it nor oblige any Finance Party to disclose any information
relating to its tax or other affairs or any computations in respect
thereof. Each Finance Party shall have an absolute discretion as to
whether to claim any Tax Credit (and, if it does claim, the extent,
order and manner in which it does so) and whether any amount is due from
it under Clause 15.3 (Tax Credit Payment) (and if so, what amount and
when).
16. INCREASED COSTS
16.1 Increased Costs
If, by reason of (a) the introduction of or change in any law or
regulation or in its interpretation or administration or application
and/or (b) compliance with any request or requirement relating to the
maintenance of capital or any other request from or requirement of any
central bank or other fiscal, monetary or other authority:
(a) a Bank or any Holding Company of such Bank is unable to obtain the
rate of return on its capital which it would have been able to
obtain but for such Bank's entering into or assuming or maintaining
a commitment or performing its obligations under the Finance
Documents;
(b) a Bank or any Holding Company of such Bank incurs a cost as a result
of such Bank's entering into or assuming or maintaining a commitment
or performing its obligations under the Finance Documents;
(c) there is any increase in the cost to a Bank or any Holding Company
of such Bank of funding or maintaining such Bank's share of the
Advances or any Unpaid Sum; or
(d) there is a reduction of any amount due and payable under any Finance
Document,
then the Parent shall, from time to time on demand of the Agent,
promptly pay to the Agent for the account of that Bank amounts certified
by that Bank as necessary to indemnify that Bank or to enable that Bank
to indemnify its Holding Company from and against, as the case may be,
(i) such reduction in the rate of return of capital, (ii) such cost,
(iii) such increased cost, or (iv) such reduction of amount due.
16.2 Increased Costs Claims
A Bank intending to make a claim pursuant to Clause 16.1 (Increased
Costs) shall promptly after becoming aware of the circumstances giving
rise to such claim notify the Agent and the Parent and deliver to the
Parent a certificate specifying the amount of such claim and the basis
of computation thereof in reasonable detail.
16.3 Exclusions
Notwithstanding the foregoing provisions of this Clause 16, no Bank
shall be entitled to make any claim under this Clause 16 in respect of:
(a) any cost, increased cost or liability as referred to in Clause 16.1
(Increased Costs) to the extent the same is compensated by the
Mandatory Cost; or
(b) any cost, increased cost or liability compensated by Clause 14
(Taxes).
17. ILLEGALITY
If, at any time, it becomes unlawful for a Bank to make, fund or allow
to remain outstanding all or part of its share of the Advances, then
that Bank shall, promptly after becoming aware of the same, deliver to
the Parent through the Agent a notice to that effect and:
(a) such Bank shall not thereafter be obliged to participate in the
making of any Advances and the amount of its Available Term
Commitment and Available Revolving Commitment shall be immediately
reduced to zero; and
(b) if the Agent on behalf of such Bank so requires, the Parent shall
procure that each Borrower which has drawn an Advance shall on such
date as the Agent shall have specified (which shall be a Repayment
Date or the last day of the relevant Interest Period(s), as the case
maybe, or on such earlier date (if any) as such Bank shall certify
to be necessary to comply with the relevant law) repay such Bank's
share of any outstanding Advances together with accrued interest
thereon and all other amounts owing to such Bank under the Finance
Documents and any repayment of a Term Advance so made after the last
day of the Term Availability Period shall reduce rateably the
obligations under Clause 12 (Repayment of the Term Facility),
but, in each case, only to the extent to which such cancellation and/or
repayment is required to prevent or remedy such unlawfulness.
18. MITIGATION
If, in respect of any Bank, circumstances arise which would or would
upon the giving of notice result in:
(a) an increase in any sum payable to it or for its account pursuant to
Clause 14.1 (Tax Gross-up);
(b) a claim for indemnification pursuant to Clause 14.2 (Tax Indemnity)
or Clause 16.1 (Increased Costs); or
(c) the reduction of its Available Commitment to zero or any repayment
to be made, pursuant to Clause 17 (Illegality),
then, without in any way limiting, reducing or otherwise qualifying the
rights of such Bank or the obligations of the Obligors under any of the
Clauses referred to in paragraphs (a), (b) and (c) above, such Bank
shall promptly upon becoming aware of such circumstances notify the
Agent thereof and, in consultation with the Agent and the Parent and to
the extent that it can do so lawfully, and without prejudice to its own
position, take reasonable steps (including a change of location of its
Facility Office or the transfer of its rights, benefits and obligations
under the Finance Documents to another financial institution acceptable
to the Parent and willing to participate in the Facility) to mitigate
the effects of such circumstances, provided that such Bank shall be
under no obligation to take any such action if, in the reasonable
opinion of such Bank, to do so might have any adverse effect upon its
business, operations or financial condition (other than any minor costs
and expenses of an administrative nature). If as a result of taking any
such action to which the Parent has given written consent a Bank is no
longer a Qualifying Lender the provisions of Clause 14.3 (Excluded
Claims) shall not apply.
19. REPRESENTATIONS
Each Obligor makes the representations and warranties set out in this
Clause 19 to each Finance Party.
19.1 Status
(a) It is a corporation, duly organised and validly existing under the
laws and regulations of its jurisdiction of incorporation.
(b) It has the power to own its assets and carry on its business as it
is being conducted.
19.2 Binding obligations
The obligations expressed to be assumed by it in each Finance Document
are, subject to any reservations which are specifically referred to in
any Legal Opinion, legal, valid, binding and enforceable obligations.
19.3 Non-conflict with other obligations
The entry into and performance by it of, and the transactions
contemplated by, the Finance Documents do not and will not conflict
with:
(a) any law or regulation applicable to it;
(b) its constitutional documents; or
(c) any agreement or instrument binding upon it or any of its assets.
19.4 Power and authority
It has the power to enter into, perform and deliver, and has taken all
necessary action to authorise its entry into, performance and delivery
of, the Finance Documents to which it is a party and the transactions
contemplated by those Finance Documents.
19.5 Validity and admissibility in evidence
All Authorisations required or desirable:
(a) to enable it lawfully to enter into, exercise its rights and comply
with its obligations in the Finance Documents to which it is a
party; and
(b) to make the Finance Documents to which it is a party admissible in
evidence in its jurisdiction of incorporation,
have been obtained or effected and are in full force and effect.
19.6 Governing law and enforcement
(a) The choice of English law as the governing law of the Finance
Documents will be recognised and enforced in its jurisdiction of
incorporation subject to any reservations which are specifically
referred to in any Legal Opinion.
(b) Any judgment obtained in England in relation to a Finance Document
will be recognised and enforced in its jurisdiction of
incorporation, subject to any reservations which are specifically
referred to in any Legal Opinion.
19.7 No Deduction or Witholding
(a) Subject to paragraph (b) below, it is not required under the laws
and regulations of its jurisdiction of incorporation to make any
deduction for or on account of Tax from any payment it may make
under any Finance Document to any Qualifying Lender.
(b) Under the laws of its jurisdiction of incorporation in force at the
date hereof as modified by applicable Inland Revenue practice, the
Original Borrower will not be required to make any deduction or
withholding from any payment it may make under the Finance Documents
provided that, in the case of interest payments, the Banks are at
the date of receipt of any such payment Qualifying Lenders (provided
with regard to Banks falling within sub-paragraph (b) of the
definition of Qualifying Lender an appropriate direction has been
made).
19.8 No filing or stamp taxes
Under the laws and regulations of its jurisdiction of incorporation it
is not necessary that the Finance Documents be filed, recorded or
enrolled with any court or other authority in that jurisdiction or that
any stamp, registration or similar tax be paid on or in relation to the
Finance Documents or the transactions contemplated by the Finance
Documents.
19.9 No default
(a) No Default or Event of Default is continuing or might reasonably be
expected to result from the making of any Advance.
(b) No other event or circumstance is outstanding which constitutes a
default under any other agreement or instrument which is binding on
it or any of its Subsidiaries or to which its (or its Subsidiaries')
assets are subject which might have a Material Adverse Effect.
19.10 No misleading information
(a) Any factual information provided by the Parent for the purposes of
the Information Memorandum was true and accurate in all material
respects as at the date it was provided or as at the date (if any)
at which it is stated.
(b) The financial projections contained in the Information Memorandum
have been prepared in good faith on the basis of recent historical
information and on the basis of the assumptions stated therein,
which assumptions were fair in the light of conditions existing at
the time of delivery of such forecasts, and represented, at the time
of delivery, the Parent's best estimate of its future performance.
(c) So far as the Parent is aware, after reasonable enquiry, nothing has
occurred or been omitted from the Information Memorandum and no
information has been given or withheld that results in the
information contained in the Information Memorandum being untrue or
misleading in any material respect.
(d) All material written information (other than the Information
Memorandum) 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.
19.11 Financial statements
(a) Its Original Financial Statements were prepared in accordance with
GAAP consistently applied and are complete and accurate in all
material respects.
(b) Its Original Financial Statements fairly represent its financial
condition and operations during the relevant financial year.
(c) For the purposes of any repetition of the representation contained
in paragraphs (a) and (b) of this Clause 19.11 (pursuant to Clause
19.20 (Times on which representations are made)) the representations
will be made in respect of the latest consolidated financial
statements of each Obligor instead of the Original Financial
Statements.
19.12 Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari
passu with the claims of all its other unsecured and unsubordinated
creditors, except for obligations mandatorily preferred by law or
regulation applying to companies generally.
19.13 No proceedings pending or threatened
No litigation, arbitration or administrative proceedings of or before
any court, arbitral body or agency which are likely to be adversely
determined and which, if so determined, would be reasonably likely to
have a Material Adverse Effect or purports to affect the legality,
validity or enforceability of any of the obligations under the Finance
Documents have been started or threatened against any Obligor or any
Material Subsidiary.
19.14 No winding-up
No legal proceedings or other procedures or steps have been taken or, to
the Parent's knowledge after reasonable enquiry, are being threatened,
in relation to the winding-up, dissolution, administration or
reorganisation of any Obligor or Material Subsidiary (other than a
solvent liquidation or reorganisation of any Material Subsidiary which
is not an Obligor).
19.15 Material Adverse Change
There has been no material adverse change in the Parent's business,
condition (financial or otherwise), operations, performance or assets
taken as a whole (or the business, consolidated condition (financial or
otherwise) operations, performance or the assets generally of the Group
taken as a whole) since its Original Financial Statements.
19.16 Environmental compliance
Each member of the Group has performed and observed in all material
respects all Environmental Law, Environmental Permits and all other
material covenants, conditions, restrictions or agreements directly or
indirectly concerned with any contamination, pollution or waste or the
release or discharge of any toxic or hazardous substance in connection
with any real property which is or was at any time owned, leased or
occupied by any member of the Group or on which any member of the Group
has conducted any activity where failure to do so might reasonably be
expected to have a Material Adverse Effect.
19.17 Environmental Claims
No Environmental Claim has been commenced or (to the best of its
knowledge and belief) is threatened against any member of the Group
where that claim would be reasonably likely, if determined against that
member of the Group to have a Material Adverse Effect.
19.18 No Immunity
In any proceedings taken in its jurisdiction of incorporation in
relation to this Agreement, it will not be entitled to claim for itself
or any of its assets immunity from suit, execution, attachment or other
legal process.
19.19 Private and commercial acts
Its execution of the Finance Documents constitutes, and its exercise of
its rights and performance of its obligations hereunder will constitute,
private and commercial acts done and performed for private and
commercial purposes.
19.20 Times on which representations are made
(a) All the representations and warranties in this Clause 19 are made to
each Finance Party on the date of the Amendment Agreement and on the
Effective Date.
(b) The Repeated Representations are deemed to be made by each Obligor
to each Finance Party on the date of each Notice of Drawdown and on
the first day of each Interest Period.
(c) The Repeated Representations and each of the representations and
warranties set out in Clause 19.5 (Validity and admissibility in
evidence), Clause 19.9 (No default), paragraph (b) of Clause 19.10
(No misleading information) (in respect only of information given by
it) and Clause 19.14 (No winding-up) are deemed to be made by each
Additional Borrower and each Additional Guarantor to each Finance
Party on the day on which it becomes an Additional Borrower or an
Additional Guarantor, as the case may be.
(d) Each representation or warranty deemed to be made after the date of
this Agreement shall be made by reference to the facts and
circumstances existing at the date the representation or warranty is
made.
20. FINANCIAL INFORMATION
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
(a) The Parent shall supply to the Agent:
(i) as soon as the same become available, but in any event
within 180 days after the end of each of the Obligor's
(other than RMC Group Limited) respective financial years:
(A) the Parent's audited consolidated and unconsolidated
financial statements for that financial year; and
(B) each other Obligor's respective audited consolidated
(to the extent available and other than in respect of
RMC Group Limited) and unconsolidated financial
statements for that financial year; and
(ii) as soon as the same become available, but in any event
within 90 days after the end of each of the first three
quarters of each of its financial years its unaudited
consolidated financial statements for that period.
(b) The Original Borrower shall supply to the Agent:
(i) as soon as the same become available, but in any event
within 180 days after the end of each of its financial
years, the audited consolidated financial statements of the
RMC Group for such financial year; and
(ii) as soon as the same become available, but in any event
within 120 days after the end of the first half of each of
its financial years (beginning with the financial half year
ending on 30 June 2005), the unaudited consolidated
financial statements of the RMC Group for such period.
20.2 Compliance Certificate
(a) The Parent shall supply to the Agent, with each set of consolidated
financial statements delivered pursuant to paragraphs (a)(i)(A) and
(a)(ii) of Clause 20.1 (Financial statements), a Compliance
Certificate setting out (in reasonable detail) computations as to
compliance with Clause 21.2 (Financial Condition of the Group).
(b) The Original Borrower shall supply to the Agent, with each set of
consolidated financial statements delivered pursuant to Clause
20.1(b) (Financial statements), a Compliance Certificate setting out
(in reasonable detail) computations as to compliance with Clause
21.1 (Financial Condition of the RMC Group) and the calculation of
the Margin as at the date as at which those financial statements
were drawn up.
(c) Each Compliance Certificate delivered under paragraph (a) of this
Clause 20.2 shall be signed by an Authorised Signatory of the Parent
and, if required to be delivered with the consolidated financial
statements delivered pursuant to paragraph (a)(i) of Clause 20.1
(Financial statements), by the Parent's auditors. Each Compliance
Certificate delivered under paragraph (b) of this Clause 20.2 shall
be signed by the Original Borrower's auditors and a director (in the
case of a Compliance Certificate delivered with its financial
statements delivered pursuant to paragraph (b)(i) of Clause 20.1
(Financial statements) or by a director of the Original Borrower (in
the case of a Compliance Certificate delivered with its annual
financial statements delivered pursuant to paragraph (b)(ii) of
Clause 20.1 (Financial statements).
20.3 Requirements as to financial statements
(a) Each set of financial statements delivered by the Parent 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 Parent shall procure that each set of financial statements
delivered pursuant to Clause 20.1 (Financial statements) is prepared
using 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 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 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 Banks to
determine whether Clause 21 (Financial condition) 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.
(c) If the Parent adopts International Accounting Standards or, subject
to paragraph (b) above, there are changes to GAAP, or the accounting
practices or reference periods, the Parent and the Agent shall, at
the Parent's request, negotiate in good faith with a view to
agreeing such amendments to the financial covenants in Clause 21.2
(Financial Condition of the Group) 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
Banks protection equivalent to that which would have been enjoyed by
them had the Parent not adopted International Accounting Standards
or there had not been a change in 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 Parent subject to the consent of an
Instructing Group. If no such agreement is reached within 90 days of
the Parent's request, the Parent will remain subject to the
obligation to deliver the information specified in paragraph (b) of
this Clause 20.3.
(d) If the Original Borrower adopts International Accounting Standards
or, subject to paragraph (b) above, there are changes to GAAP, or
the accounting practices or reference periods, the Original Borrower
and the Agent shall, at the Original Borrower's request, negotiate
in good faith with a view to agreeing such amendments to the
financial covenants in Clause 21.1 (Financial Condition of the RMC
Group) 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 RMC Group's financial condition
grant to the Banks protection equivalent to that which would have
been enjoyed by them had the Original Borrower not adopted
International Accounting Standards or there had not been a change in
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 Original
Borrower subject to the consent of an Instructing Group. If no such
agreement is reached within 90 days of the Original Borrower's
request, the Original 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 Parent shall supply to the Agent:
(a) all documents dispatched by the Parent to its shareholders (or any
class of them) or its creditors generally at the same time as they
are dispatched;
(b) promptly upon becoming aware of them, the details of any litigation,
arbitration or administrative proceedings which are current, or
which, to the Parent's knowledge after reasonable enquiry, are being
threatened or are pending and are likely to be adversely determined
against any member of the Group which, in the reasonable opinion of
the Parent, are not spurious or vexatious, and which might, if
adversely determined, have a Material Adverse Effect;
(c) promptly, such further information regarding the financial
condition, assets and business of any Obligor or member of the Group
as the Agent (or any Lender through the Agent) may reasonably
request (including, but not limited to, information on Ratings, if
such credit rating has not been publicly announced) other than any
information the disclosure of which would result in a breach of any
applicable law or regulation or confidentiality agreement entered
into in good faith provided that the Parent shall use reasonable
efforts to be released from any such confidentiality agreement; and
(d) promptly upon becoming aware of them, the details of any
Environmental Claim which is current, threatened or pending against
any member of the Group which is referred to in Clause 22.12
(Environmental claims) which are not spurious or vexatious, which
are likely to be adversely determined against any member of the
Group and which could reasonably be expected, if adversely
determined, to have a Material Adverse Effect;
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 (unless that Obligor is aware that a notification has
already been provided by another Obligor).
(b) Promptly upon a request by the Agent, the Parent 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
Bank and each Bank 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 Bank) or any Bank (for itself or on behalf of any
prospective new Bank) in order for the Agent, such Bank or any
prospective new Bank 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 transactions contemplated in the Finance
Documents.
(b) The Parent shall, by not less than five Business Days' written
notice to the Agent, notify the Agent (which shall promptly notify
the Banks) of its intention to request that one of its Subsidiaries
becomes an Additional Obligor pursuant to Clause 35 (Changes to the
Obligors).
(c) Following the giving of any notice pursuant to paragraph (b) above,
the Parent shall promptly upon the request of the Agent or any Bank
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 Bank) or any Bank (for itself or on behalf of any
prospective new Bank) in order for the Agent, such Bank or any
prospective new Bank 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 Notarisations
Each Obligor shall notify the Agent of any Notarisations referred to in
paragraph (a)(iv) of Clause 22.5 (Notarisation) promptly upon such
Notarisations taking place.
21. FINANCIAL CONDITION
21.1 Financial condition of the RMC Group
The Parent shall ensure that the financial condition of the RMC Group
shall be such that RMC Consolidated Net Worth shall not be less than
(pound)1,000,000,000.
21.2 Financial Condition of the Group
The Parent shall ensure that in respect of any Relevant Period:
(a) the ratio of Net Borrowings to Adjusted EBITDA calculated on a
Rolling Basis shall be less than or equal to 3.5:1; and
(b) the ratio of EBITDA to Finance Charges calculated on a Rolling Basis
shall be greater than or equal to 3:1.
21.3 Financial definitions
In the definition of "Margin" and this Clause 21 (Financial condition)
the following terms have the following meanings:
"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, as determined in accordance with GAAP for
such Relevant Period, provided that the Parent need only make the
adjustments contemplated by "(b)" above if the operating income and
depreciation and amortization expense of the acquired business in the 12
months prior to its acquisition amount to US$10,000,000 or more.
"Cemex Capital Contributions" means contributions in cash to the capital
of the Parent by CEMEX S.A. de C.V. or by any of its Subsidiaries not
being a Subsidiary of the Parent made after 1 January 2004.
"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 amortisation of intangible assets plus
annual amortisation of start-up costs of the Group plus dividends
received from non-consolidated companies and from companies consolidated
by the equity method 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 GAAP.
"Finance Charges" means for any Relevant 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 GAAP.
"Guarantees" means any guarantee or indemnity of Financial Indebtedness
of another person (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.
"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.
"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 the Parent and its Subsidiaries at such time: cash on
hand, marketable securities, investments in money market funds, banker's
acceptances, short-term deposits and other liquid investments.
"Off-Balance-Sheet Transactions" means any present or future financing
transaction not reflected as indebtedness on the consolidated balance
sheet of the Parent, but being structured in a way that may result in
payment obligations by any Group member, 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 any Group member (e.g.
via a put-option agreement or similar structures) under which
payments are incapable of being triggered until three days after the
Revolving Termination Date in relation to the Revolving Facility; 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 US$100,000,000.
"Relevant Period" means each period of twelve months ending on the last
day of each consecutive quarter of the Parent's financial year and each
period of twelve months ending on the last day of the Parent's financial
year.
"RMC Adjusted EBITDA" means, in respect of any RMC Relevant Period, RMC
EBITDA for that RMC Relevant Period but adjusted to include the earnings
before interest, tax, depreciation and amortisation (calculated by
reference to management accounts) of a member of the RMC Group or
business acquired during that RMC Relevant Period, including for any
part of that RMC Relevant Period when it was not a member of the RMC
Group and/or the business acquired was not owned by any member of the
RMC Group.
"RMC Cemex Capital Contributions" means contributions in cash to the
capital of RMC Group Limited by CEMEX S.A. de C.V. or by any of its
Subsidiaries not being a Subsidiary of RMC Group Limited made after the
Effective Date and any increase in the amount of RMC Subordinated Debt
after 1 January 2006.
"RMC Consolidated Net Worth" means the consolidated total capital and
reserves of the RMC Group as determined from the latest financial
statements of the RMC Group delivered pursuant to Clause 20.1(b),
currently under the heading Total Capital and Reserves as adjusted by:
(a) adding back any diminution due to the writing off or amortisation of
acquisition goodwill or the debiting of acquisition goodwill to any
reserve;
(b) deducting any amount attributable to any intangible asset (other
than goodwill) included as an asset in the balance sheet; and
(c) including any RMC Subordinated Debt granted to any member of the RMC
Group.
"RMC Consolidated Net Interest Payable" means, in respect of any RMC
Relevant Period, the net interest expense of the RMC Group as determined
from the most recent audited and/or, as the case may be, interim
consolidated financial statements currently under the heading Interest
Payable (NET) for that RMC Relevant Period but excluding amounts in
respect of interests in joint ventures and associated undertakings and
excluding any amount classified as interest in accordance with FRS 12 as
referred to in the notes to the relevant financial statements under the
heading unwinding of discount.
"RMC Consolidated Total Net Borrowings" means, at any time and without
double counting, the aggregate amount of all obligations of the members
of the RMC Group for or in respect of RMC Indebtedness for Borrowed
Money less (i) the aggregate amount of the following items held by the
Original Borrower and its Subsidiaries at such time: cash in hand,
marketable securities, investments in money market funds, banker's
acceptances, short term deposits and other liquid investments and (ii)
any RMC Subordinated Debt.
"RMC EBITDA" means, in respect of any RMC Relevant Period, the
consolidated profits of the RMC Group (for the avoidance of doubt but
without duplication, calculated before any reduction on account of RMC
Consolidated Net Interest Payable, without reference to profit derived
from interests in joint ventures and associated undertakings and
including any amount classified as interest in accordance with FRS 12 as
referred to in the notes to the relevant financial statements under the
heading "unwinding of discount", currently under the heading Interest
Payable (NET)) as shown in the most recent audited and/or, as the case
may be, interim consolidated financial statements currently under the
heading Operating Profit (after adding back any amounts in respect of
the writing off or the amortisation of goodwill and other intangible
assets and depreciation and impairment of fixed assets) for the Relevant
Period before the deduction of RMC Consolidated Net Interest Payable and
corporation tax on the overall net income of the RMC Group payable in
respect of the RMC Relevant Period plus an amount equal to the amount of
RMC 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 RMC Royalty Expenses made in such period).
"RMC Indebtedness for Borrowed Money" means the principal amount of any
indebtedness (other than indebtedness incurred by one member of the RMC
Group in favour of another member of the RMC Group) for or in respect
of:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance credit facility
(excluding any bills of exchange or promissory notes owned by the
relevant person and excluding any bill or note drawn, accepted or
issued by that person in the ordinary course of trading and which is
not refinancing another bill or note relating to the same underlying
transaction);
(c) any amount raised pursuant to any note purchase facility or the
issue of bonds, notes, debentures, loan stock or any similar
instrument;
(d) any amount raised pursuant to any issue of shares which are
expressed to be redeemable prior to the Revolving Termination Date;
(e) the amount of any liability in respect of any lease or hire purchase
contract which would, in accordance with generally accepted
accounting principles in the relevant jurisdiction, be treated as a
finance or capital lease;
(f) the amount of any liability in respect of any advance or deferred
purchase agreement if the primary reason for entering into such
agreement is to raise finance;
(g) receivables sold or discounted (other than on a non-recourse basis)
to the extent of any recourse to the vendor (it being understood
that Permitted Securitisations shall be deemed not to be on a
recourse basis);
(h) any agreement or option to re acquire an asset if the primary reason
for entering into such agreement or option is to raise finance;
(i) any amount raised under any other transaction (including any forward
sale or purchase or hedging or swap agreement) having the commercial
effect of a borrowing; and
(j) the amount of any liability in respect of any guarantee or indemnity
for any of the items referred to in paragraphs (a) to (i) above.
"RMC Relevant Period" means each period of twelve months ending on the
last day of the Original Borrower's financial year and each period of
twelve months ending on the last day of the first half of the Original
Borrower's financial year.
"RMC Royalty Expenses" means expenses incurred by the Original Borrower
or any of its Subsidiaries to CEMEX S.A. de C.V. or any of its
Subsidiaries not being a Subsidiary of the Original Borrower as (a)
consideration for the granting to RMC Group Limited or any Subsidiary of
a licence 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 S.A. de C.V. or any
of its Subsidiaries not being a Subsidiary of the Original Borrower; 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
paragraphs (a) and (b) such amounts shall have been taken into
consideration in the calculation of RMC EBITDA.
"RMC Subordinated Debt" means debt granted by CEMEX S.A. de C.V. (a
company registered in Mexico) or any of its Subsidiaries not being a
member of the RMC Group to the Original Borrower 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 or
other like event of the Original Borrower) until the Agent has confirmed
in writing that all amounts outstanding hereunder have been paid in
full.
"Rolling Basis" means the calculation of a ratio or an amount made at
the end of a financial quarter in respect of that financial quarter and
the three immediately preceding financial quarters.
"Royalty Expenses" means expenses incurred by the Parent or any of its
Subsidiaries to CEMEX S.A. de C.V. or any of its Subsidiaries not being
a Subsidiary of the Parent as (a) consideration for the granting to the
Parent or any Subsidiary of a licence 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 S.A. de C.V. or any of its Subsidiaries not
being a Subsidiary of the Parent; 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 paragraphs (a) and (b) such amounts shall
have been taken into consideration in the calculation of operating
profit under Spanish GAAP.
"Subordinated Debt" means debt granted by CEMEX S.A. de C.V. (a company
registered in Mexico) or any of its Subsidiaries not being a member of
the Group to the Parent 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, concurso de acreedores or other like event
of the Parent) until the Agent has confirmed in writing that all amounts
outstanding hereunder have been paid in full.
"Total Borrowings" means without duplication, in respect of any person
all Guarantees granted by such person, plus all Off-Balance-Sheet
Transactions entered into by such person, plus all such person's
Financial Indebtedness, but excluding any Subordinated Debt.
21.4 Financial testing
(a) The financial covenants set out in Clause 21.2 (Financial Condition
of the Group) shall be tested quarterly by reference to each of the
Parent's consolidated financial statements delivered pursuant to
and/or each Compliance Certificate delivered with respect to any
such consolidated financial statements pursuant to Clause 20.1(a)
(Financial statements) and Clause 20.2(a) (Compliance Certificate).
(b) The financial covenants set out in Clause 21.1 (Financial Condition
of the RMC Group) shall be tested and the Margin shall be calculated
semi-annually by reference to each of the Original Borrower's
financial statements delivered pursuant to and/or each Compliance
Certificate delivered with respect to any such consolidated
financial statements pursuant to Clause 20.1(b) (Financial
Statements) and Clause 20.2(b) (Compliance Certificate).
21.5 Accounting terms
All accounting expressions which are not otherwise defined herein shall
have the meaning ascribed thereto in GAAP.
22. COVENANTS
The undertakings in this Clause 22 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.
22.1 Authorisations
Each Obligor shall promptly:
(a) obtain, comply with and do all that is necessary to maintain in full
force and effect; and
(b) supply certified copies to the Agent of,
any Authorisation required under any law or regulation of its
jurisdiction of incorporation to enable it to perform its obligations
under the Finance Documents and to ensure the legality, validity,
enforceability or admissibility in evidence in its jurisdiction of
incorporation of any Finance Document.
22.2 Preservation of corporate existence
Subject to Clause 22.8 (Merger), each Obligor shall (and the Parent
shall ensure that each of its Material Subsidiaries will), preserve and
maintain its corporate existence and rights.
22.3 Preservation of properties
Each Obligor shall (and the Parent shall ensure that each of its
Material Subsidiaries will) 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.
22.4 Compliance with laws and regulations
(a) Each Obligor shall (and shall procure that each of its Subsidiaries
will) comply in all respects with all laws and regulations to which
it may be subject, if failure to so comply would be likely to have a
Material Adverse Effect.
(b) The Parent shall (and shall procure that each of its Subsidiaries
will) ensure that the levels of contribution to pension schemes are
and continue to be sufficient to comply with all its and their
material obligations under such schemes and generally under
applicable laws (including ERISA) and regulations, except where
failure to make such contributions would not reasonably be expected
to have a Material Adverse Effect.
22.5 Notarisation
(a) Subject to paragraph (b) of this Clause 22.5, at any time when
notarised Spanish Public Documents have priority status on
insolvency of a Spanish company under Spanish law, the Parent shall
not (and shall procure that none of its Subsidiaries will) permit
any of its unsecured indebtedness to be notarised as a Spanish
Public Document (any such notarisation, a "Notarisation"), other
than the following permitted Notarisations ("Permitted
Notarisations"):
(i) any Permitted Notarisations listed in Schedule 12 (Existing
Notarisations) and any amendments or modifications thereof,
provided that any such amendment or modification shall not
result in the increase of the principal amount of the
relevant indebtedness nor the extension of the maturity
thereof nor, for the avoidance of doubt, relate to any
refinancing of the relevant indebtedness;
(ii) Notarisations which are required by applicable law or
regulation or which arise by operation of law other than
pursuant to any issue of debt securities in accordance with
Article 285 of the Spanish Corporations Law (Ley de
Sociedades Anonimas);
(iii) Notarisations with the prior written consent of an
Instructing Group;
(iv) any Notarisations securing indebtedness the principal amount
of which (when aggregated with the principal amount of any
other Notarisations other than any Permitted Notarisations
under paragraphs (i) or (iii) above) do not exceed
US$100,000,000 (or its equivalent in another currency or
currencies); and
(v) any Notarisations relating to indebtedness in respect of any
sale and purchase agreement customarily registered in a
public register in Spain and payment of which indebtedness
is made within seven days of the date of such agreement.
(b) Paragraph (a) of this Clause 22.5 shall not apply if the Parent,
concurrently with any such Notarisation (not being a Permitted
Notarisation) referred to in paragraph (a) of this Clause 22.5 and
at its own cost and expense, causes this Agreement to be the subject
of a Notarisation.
22.6 Negative pledge
The Parent shall not and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit to exist any
Security 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 Security ("Permitted Security"):
(a) Security 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 GAAP shall have been made;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics and material 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;
(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 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) Security existing on the date of this Agreement as described in
Schedule 10 (Existing Security) provided that the principal amount
secured thereby is not increased;
(f) any Security on property acquired by the Parent 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 Security
was not incurred in anticipation of such acquisition; and any
Security 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 the Parent or any of
its Subsidiaries after the date of this Agreement provided, further,
that (i) any such Security 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 by which the acquired Subsidiary will be
directly or indirectly controlled) and, if required by the terms of
the instrument originally creating such Security, other property
which is an improvement to, or is acquired for specific use with,
such acquired property; (ii) if applicable, any such Security shall
be created within nine months after, in the case of property, its
acquisition, or, in the case of improvements, their completion; and
(iii) no such Security shall be made in respect of any indebtedness
in relation to repayment of which recourse may be had to any member
of the Group (in the form of Security) other than in relation to the
item or items as referred to in (i) above;
(g) any Security renewing, extending or refinancing the indebtedness to
which any Security permitted by paragraph (f) above relates;
provided that the principal amount of indebtedness secured by such
Security immediately prior thereto is not increased and such
Security is not extended to other property;
(h) any Security created on shares representing no more than a Stake in
the capital stock of any of the Parent'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 the Parent's or any Subsidiary's
interest in such trust, corporation or entity are applied as
provided under Clause 22.7 (Disposals) and provided further that
such Security may not secure Financial Indebtedness of the Company
or any Subsidiary unless otherwise permitted under this Clause 22.6
and that the economic and voting rights in such capital stock is
maintained by the Parent in its Subsidiaries;
(i) any Security permitted by the Agent, acting on the instructions of
an Instructing Group;
(j) any securitisation of receivables notwithstanding that it is made at
discount from the amount due on such receivables and provided that
it is made on a non recourse basis or that recourse is directly or
indirectly limited to collection of the receivables plus related
interest and financial and collection costs and expenses;
(k) in addition to the Security permitted by the foregoing paragraphs
(a) to (j), Security securing indebtedness of the Parent and its
Subsidiaries (taken as a whole) not in excess of an amount equal to
5% of the Adjusted Consolidated Net Tangible Assets of the Group, as
determined in accordance with GAAP,
unless, in each case, the Obligors have made or caused to be made
effective provision whereby the obligations hereunder are secured
equally and rateably with, or prior to, the indebtedness secured by such
Security (other than Permitted Security) for so long as such
indebtedness is so secured.
For the purposes of paragraph (k) of this Clause 22.6, "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 GAAP (other than with respect
to items referred to in (ii) below), minus (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,
licences, concessions, patents, un-amortised debt discount and expense
and other intangibles, all as determined on a consolidated basis in
accordance with GAAP.
22.7 Disposals
(a) Subject to paragraph (b) of this Clause 22.7, the Parent shall not
(and the Parent shall ensure that none of its Subsidiaries will),
without the prior written consent of the Agent (acting on the
instructions of an Instructing Group), enter into a single
transaction or a series of transactions (whether related or not) and
whether voluntary or involuntary to sell, lease, transfer or
otherwise dispose of all its assets or a substantial part of its
assets representing more than 5 per cent. in aggregate of the total
consolidated assets of the Group, calculated by reference to the
latest consolidated financial statements of the Parent, delivered
pursuant to paragraph (a)(i)(A) of Clause 20.1 (Financial
statements), unless (i) full value for such assets is received by
the Parent or its Subsidiaries; (ii) an amount equal to the net
proceeds of any such sale, lease, transfer or other disposal is
reinvested within twelve months of receipt by the Parent or its
Subsidiaries in the business of the Group; and (iii) neither such
sale, lease, transfer or other disposal nor such reinvestment
directly results in a downgrade from the then current Ratings of the
Parent.
(b) Paragraph (a) of this Clause 22.7 does not apply to any sale, lease,
transfer or other disposal of assets:
(i) made on arm's length terms and for fair market value in the
ordinary course of business of the disposing entity;
(ii) in respect of any securitisation of receivables
notwithstanding that it is made at discount from the amount
due on such receivables and provided that it is made on a
non-recourse basis or that recourse is directly or
indirectly limited to collection of the receivables plus
related interest and financial and collection costs and
expenses;
(iii) from any member of the Group to another member of the Group
on arm's length terms and for fair market or book value
provided that the exception contained in this paragraph
(iii) shall not apply to any sale, lease, transfer or other
disposal of an asset:
(A) from any Obligor to another member of the Group which
is neither an Obligor nor a Subsidiary of an Obligor
unless the person to whom such sale, lease, transfer or
other disposal is made (the "Relevant Transferee")
becomes a Guarantor; or
(B) from any Material Subsidiary to another member of the
Group which is not a Material Subsidiary unless the
person making such sale, lease, transfer or other
disposal does not cease to be a Material Subsidiary or,
if it ceases to be a Material Subsidiary, any Relevant
Transferee shall be deemed to be a Material Subsidiary;
(iv) in respect of which the net proceeds are used to repay any
amounts outstanding hereunder in an amount equal to such net
proceeds and if the Available Commitments in an amount equal
thereto are cancelled; or
(v) in respect of which the proceeds are applied pursuant to any
prepayment requirement included as at the date hereof in
existing loan agreements of any Subsidiary in relation to
the use of proceeds received from the disposal of any
assets.
22.8 Merger
(a) Subject to paragraphs (b) and (c) of this Clause 22.8, unless it has
obtained the prior written approval of the Agent (acting on the
instructions of an Instructing Group), no Obligor shall (and the
Parent shall ensure that none of its Subsidiaries will) enter into
any amalgamation, demerger, merger or other corporate reconstruction
(a "Reconstruction"), other than (i) a Reconstruction relating only
to the Parent's Subsidiaries inter se; (ii) a Reconstruction between
the Parent and any of its Subsidiaries; (iii) a solvent
reorganisation or liquidation of any of the Subsidiaries not being
Obligors, provided that in any case no Default shall have occurred
and be continuing at the time of such transaction or would result
therefrom and provided further that (a) none of the Security (if
any) granted to the Banks nor the guarantees granted by the
Guarantors hereunder is or are adversely affected as a result, and
(b) the resulting entity, if it is not an Obligor, assumes the
obligations of the Obligor the subject of the merger.
(b) Subject to paragraph (c) of this Clause 22.8, the Obligors may merge
with any other person if the book value of such person's assets
prior to the merger does not exceed 3 per cent. of the book value of
the Group's assets taken as a whole considered on a consolidated
basis.
(c) In paragraphs (a) and (b) of this Clause 22.8, the then existing
Ratings of the Parent shall not be downgraded whether at the time
of, or within 3 months of, the date of announcement of a
Reconstruction, directly as a result of any merger involving the
Parent, and the resulting entity, if it is not an Obligor, shall
assume the obligations of the Obligor the subject of the merger.
22.9 Change of business
(a) None of the Obligors shall make a substantial change to the general
nature of its business from that carried on at the date of this
Agreement and there shall be no cessation of business in relation to
any of the Obligors (save (except in the case of the Parent which
shall in no event cease or substantially change its business) unless
another Obligor continues to operate any such business).
(b) The Parent shall procure that no substantial change is made to the
general nature of the business of any of its Material Subsidiaries
(other than a Guarantor) from that carried on at the date of this
Agreement and that there shall be no cessation of such business.
22.10 Insurance
The Obligors shall (and the Parent shall ensure that each of its
Material Subsidiaries (other than the Obligors) will) maintain
insurances on and in relation to its business and assets with reputable
underwriters or insurance companies against those risks and to the
extent as is usual for companies carrying on the same or substantially
similar business where such insurance is available on reasonable
commercial terms.
22.11 Environmental Compliance
The Parent shall (and the parent shall ensure that each of its
Subsidiaries will) comply in all material respects with all
Environmental Law and obtain and maintain any Environmental Permits and
take all reasonable steps in anticipation of known or expected future
changes to or obligations under the same, in each case where failure to
do so might reasonably be expected to have a Material Adverse Effect.
22.12 Environmental Claims
The Parent shall inform the Agent in writing as soon as reasonably
practicable upon becoming aware of the same:
(a) if any Environmental Claim has been commenced or (to the best of the
Parent's knowledge and belief) is threatened against any member of
the Group which is likely to be determined adversely to the member
of the Group; or
(b) of any facts or circumstances which will or are reasonably likely to
result in any Environmental Claim being commenced or threatened
against any member of the Group,
where the claim would be reasonably likely, if determined against that
member of the Group, to have a Material Adverse Effect.
22.13 Transactions with Affiliates
Each Obligor shall (and the Parent shall ensure that its Subsidiaries
will) ensure that any transactions with respective affiliates are on
terms that are fair and reasonable and no less favourable to such
Obligor or such Subsidiary than it would obtain in a comparable
arm's-length transaction with a person not an affiliate.
22.14 Pari passu ranking
Each Obligor shall ensure that at all times its payment obligations
under the Finance Documents rank at least pari passu with the claims of
all its other unsecured and unsubordinated creditors, except for
obligations mandatorily preferred by law or regulation applying to
companies generally from time to time.
22.15 Payment restrictions affecting Subsidiaries
The Parent shall not enter into or suffer to exist, or permit any of its
Subsidiaries to enter into or suffer to exist, any agreement or
arrangement directly limiting the ability of any of its Subsidiaries to:
(a) declare or pay dividends or other distributions in respect of its or
their respective equity interests in a Subsidiary, except any
agreement or arrangement (other than in relation to the Asia Fund as
at the date hereof) entered into by a person prior to such person
becoming a Subsidiary, in which case the Parent shall use its
reasonable endeavours to remove such limitations. If however, such
limitations are reasonably likely to affect the ability of a
Borrower or the Parent to satisfy their payment obligations under
this Agreement, the Parent shall use its best endeavours to remove
such limitations as soon as possible;
or
(b) repay or capitalise any intercompany indebtedness owed by any
Subsidiary to any Obligor and, for the avoidance of doubt,
subordination provisions shall not be considered a limitation for
the purpose of this Clause 22.15.
22.16 Indebtedness of Obligors
None of the Obligors (other than the Parent and the Original Borrower)
shall incur or permit to exist any Financial Indebtedness other than:
(a) Financial Indebtedness in respect of its taxes or costs, incurred
pursuant to legal requirements;
(b) Financial Indebtedness owed to another member of the Group;
(c) Financial Indebtedness of another member of the Group guaranteed by
a Guarantor;
(d) Financial Indebtedness in relation to the Loan Notes;
(e) Financial Indebtedness pursuant to the Finance Documents; and
(f) Financial Indebtedness not falling within paragraphs (a) to (d)
above, in an aggregate amount not exceeding EUR3,000,000 (or the
equivalent thereof in any other currency).
22.17 Notification of adverse change in Ratings
The Parent shall promptly notify the Agent of any change in its Ratings
or Outlook.
23. EVENTS OF DEFAULT
Each of the events or circumstances set out in this Clause 23 is an
Event of Default.
23.1 Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a
Finance Document at the place at and in the currency in which it is
expressed to be payable unless such failure to pay is caused by an
administrative error or technical difficulties within the banking system
in relation to the transmission of funds and payment is made within
three Business Days of its due date.
23.2 Financial Covenants
Any requirement of Clause 21 (Financial Condition) is not satisfied.
23.3 Other obligations
(a) An Obligor does not comply with any provision of the Finance
Documents (other than those referred to in Clause 23.1 (Non-payment)
and Clause 21 (Financial condition)).
(b) No Event of Default under paragraph (a) of this Clause 23.3 above
will occur if the failure to comply is capable of remedy and is
remedied within fifteen Business Days of the Agent giving written
notice to the Parent or the Parent becoming aware of the failure to
comply whichever is the earlier.
23.4 Misrepresentation
Any representation or statement made or deemed to be made by an Obligor
in the Finance Documents or any other document delivered by or on behalf
of any Obligor under or in connection with any Finance Document is or
proves to have been incorrect or misleading in any material respect when
made or deemed to be made.
23.5 Cross acceleration
(a) Any Financial Indebtedness of any Obligor or member of the Group is
not paid when due nor within any originally applicable grace period.
(b) Any Financial Indebtedness of any Obligor or member of the Group is
declared to be or otherwise becomes due and payable prior to its
specified maturity as a result of an event of default (however
described).
(c) No Event of Default will occur under this Clause 23.5 if the
aggregate amount of Financial Indebtedness falling within paragraphs
(a) and (b) of this Clause 23.5 above is less than US$50,000,000 (or
its equivalent in any other currency or currencies).
(d) Any event or circumstance described as an "Event of Default" occurs
pursuant to clause 24.3 (Other Obligations) of the Cemex Existing
Facility Agreement as a result of a breach of clause 23.7
(Disposals) or clause 23.20 (Indebtedness of Guarantors) under the
Cemex Existing Facility Agreement provided that, at such time, the
Original Borrower is an obligor under the Cemex Existing Facility
Agreement.
23.6 Insolvency
(a) Any of the Obligors or Material Subsidiaries is unable or admits
inability to pay its debts as they fall due or, by reason of actual
or anticipated financial difficulties, suspends making payments on
any of its debts or commences negotiations with one or more of its
creditors with a view to rescheduling any of its indebtedness.
(b) The value of the assets of any of the Obligors or Material
Subsidiaries is less than its liabilities (taking into account
contingent and prospective liabilities).
(c) A moratorium is declared in respect of any indebtedness of any of
the Obligors or Material Subsidiaries.
23.7 Insolvency proceedings
Any corporate action, legal proceedings or other procedure or step is
taken in relation to:
(a) a moratorium of any indebtedness, winding-up, dissolution,
administration or reorganisation (by way of voluntary arrangement,
scheme of arrangement or otherwise) of any of the Obligors or
Material Subsidiaries other than a solvent liquidation or
reorganisation of any of the Material Subsidiaries not being
Obligors;
(b) a composition, assignment or arrangement with any class of creditor
of any of the Obligors or Material Subsidiaries;
(c) the appointment of a liquidator (other than in respect of a solvent
liquidation of any of the Material Subsidiaries not being Obligors),
receiver, administrator, administrative receiver, compulsory manager
or other similar officer in respect of any of the Obligors or
Material Subsidiaries or any of their assets;
or any analogous procedure or step is taken in any jurisdiction.
This paragraph shall not apply to any winding-up petition which is
frivolous or vexatious and is discharged, stayed or dismissed within 60
days of commencement.
23.8 Expropriation and sequestration
Any expropriation or sequestration affects any asset or assets of any
Obligor or any Material Subsidiary and has a Material Adverse Effect.
23.9 Creditors' process and enforcement of Security
(a) Any Security is enforced against any Obligor or any Material
Subsidiary.
(b) Any attachment, distress or execution affects any asset or assets of
any Obligor or any Material Subsidiary which is reasonably likely to
cause a Material Adverse Effect.
(c) No Event of Default under paragraphs (a) or (b) of this Clause 23.9
above will occur if:
(i) the action is being contested in good faith by appropriate
proceedings;
(ii) the principal amount of the indebtedness secured by such
Security or in respect of which such attachment, distress or
execution is carried out represents less than US$50,000,000
(or its equivalent in any other currency or currencies); and
(iii) the enforcement proceedings, attachment, distress or
execution is or are discharged within 60 days of
commencement.
23.10 Failure to comply with judgment
Any Obligor or any Material Subsidiary fails to comply with or pay any
sum due from it under any judgment or any order made or given by any
court of competent jurisdiction save unless payment of any such sum is
suspended pending an appeal.
23.11 Unlawfulness
It is or becomes unlawful for an Obligor to perform any of its
obligations under the Finance Documents where non-performance is
reasonably likely to cause a Material Adverse Effect.
23.12 Repudiation
An Obligor repudiates a Finance Document or evidences an intention to
repudiate a Finance Document.
23.13 Change of Control
If CEMEX, S.A. de C.V. ceases to:
(a) be entitled to (whether by way of ownership of shares (directly or
indirectly), proxy, contract, agency or otherwise):
(i) cast, or control the casting of, at least 51 per cent. of
the maximum number of votes that might be cast at a general
meeting of the Parent;
(ii) appoint or remove all, or the majority, of the directors or
other equivalent officers of the Parent;
(iii) give directions with respect to the operating and financial
policies of the Parent which the directors or other
equivalent officers of the Parent are obliged to comply
with; or
(b) hold at least 51 per cent. of the common shares in the Parent.
23.14 Material adverse change
Any material adverse change arises in the financial condition of the
Group taken as a whole which the Agent (acting on the instructions of an
Instructing Group) reasonably determines would result in the failure by
any Obligor to perform its payment obligations under any of the Finance
Documents.
23.15 Acceleration
On and at any time after the occurrence of an Event of Default the Agent
may, while such Event of Default is continuing and shall if so directed
by an Instructing Group, by notice to the Parent:
(a) cancel the Total Commitments whereupon they shall immediately be
cancelled;
(b) declare that all or part of the Loans, together with accrued
interest, and all other amounts accrued under the Finance Documents
be immediately due and payable, whereupon they shall become
immediately due and payable; and/or
(c) declare that all or part of the Loans be payable on demand,
whereupon they shall immediately become payable on demand by the
Agent acting on the instructions of an Instructing Group.
23.16 Clean Up Period
If during the Clean-Up Period a matter or circumstance exists in respect
of the Original Borrower and/or any Subsidiary of the Original Borrower
which would constitute a breach under the Finance Documents including
(i) a breach of any representation or warranty made in Clause 19
(Representations), or (ii) a breach of any covenant set out in Clause 22
(Covenants) or (iii) a Default, such matter or circumstance will not
constitute a Default until after the end of the Clean-Up Period,
provided that reasonable steps are being taken to cure such matter or
circumstance (following the Parent becoming aware of the same), unless
such matter or circumstance (1) could reasonably be expected to have a
Material Adverse Effect (assuming for this purpose that the definition
thereof is deemed to be adjusted such that sub paragraph (c) thereof
refers solely to payment obligations and financial covenant obligations)
or (2) has been procured by, or approved by, the Parent.
24. GUARANTEE AND INDEMNITY
24.1 Guarantee and Indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a) guarantees to each Finance Party the due and punctual observance and
performance of all the terms, conditions and covenants on the part
of each Borrower contained in the Finance Documents and agrees to
pay from time to time on demand any and every sum or sums of money
which each Borrower is at any time liable to pay to any Finance
Party under or pursuant to the Finance Documents and which has
become due and payable but has not been paid at the time such demand
is made; and
(b) agrees as primary obligation to indemnify each Finance Party from
time to time on demand from and against any loss incurred by any
Finance Party as a result of any of the obligations of each Borrower
under or pursuant to the Finance Documents being or becoming void,
voidable, unenforceable or ineffective as against such Borrower for
any reason whatsoever, whether or not known to any Finance Party or
any other person, the amount of such loss being the amount which the
person or persons suffering it would otherwise have been entitled to
recover from such Borrower.
24.2 Additional Security
The obligations of each Guarantor herein contained, shall be in addition
to and independent of every other security which any Finance Party may
at any time hold in respect of any of any Obligor's obligations under
the Finance Documents.
24.3 Continuing Obligations
The obligations of each Guarantor herein contained shall constitute and
be continuing obligations notwithstanding any settlement of account or
other matter or thing whatsoever and shall not be considered satisfied
by any intermediate payment or satisfaction of all or any of the
obligations of the Borrowers under the Finance Documents and shall
continue in full force and effect until final payment in full of all
amounts owing by any Borrower under the Finance Documents and total
satisfaction of all the Borrowers' actual and contingent obligations
under the Finance Documents.
24.4 Obligations not Discharged
Neither the obligations of each Guarantor herein contained nor the
rights, powers and remedies conferred in respect of any Guarantor upon
any Finance Party by the Finance Documents or by law shall be
discharged, impaired or otherwise affected by:
(a) the winding-up, dissolution administration or re-organisation of any
Borrower or any other person or any change in its status, function,
control or ownership;
(b) any of the obligations of any Borrower or any other person under the
Finance Documents or under any other security taken in respect of
any of its obligations under the Finance Documents being or becoming
illegal, invalid, unenforceable or ineffective in any respect;
(c) time or other indulgence being granted or agreed to be granted to
any Borrower or any other person in respect of its obligations under
the Finance Documents or under any such other security;
(d) any amendment to, or any variation, waiver or release of, any
obligation of any Borrower or any other person, under the Finance
Documents or under any such other security;
(e) any failure to take, or fully to take, any security contemplated
hereby or otherwise agreed to be taken in respect of any Borrower's
obligations under the Finance Documents;
(f) any failure to realise or fully to realise the value of, or any
release, discharge, exchange or substitution of, any security taken
in respect of any Borrower's obligations under the Finance
Documents; or
(g) any other act, event or omission which, but for this Clause 24.4,
might operate to discharge, impair or otherwise affect any of the
obligations of any Guarantor herein contained or any of the rights,
powers or remedies conferred upon any of the Finance Parties by the
Finance Documents or by law.
24.5 Settlement Conditional
Any settlement or discharge, between an Obligor and any of the Finance
Parties, shall be conditional upon no security or payment to any Finance
Party by an Obligor or any other person on behalf of an Obligor being
avoided or reduced by virtue of any laws relating to bankruptcy,
insolvency, liquidation or similar laws of general application and, if
any such security or payment is so avoided or reduced, each Finance
Party shall be entitled to recover the value or amount of such security
or payment from such Obligor subsequently as if such settlement or
discharge had not occurred.
24.6 Exercise of Rights
No Finance Party shall be obliged before exercising any of the rights,
powers or remedies conferred upon them in respect of any Guarantor by
the Finance Documents or by law:
(a) to make any demand of any Borrower other than in accordance with
Clause 24.1 (Guarantee and Indemnity);
(b) to take any action or obtain judgement in any court against any
Borrower;
(c) to make or file any claim or proof in a winding-up or dissolution of
any Borrower; or
(d) to enforce or seek to enforce any other security taken in respect of
any of the obligations of any Borrower under the Finance Documents.
24.7 Deferral of Parent's Rights
Each Guarantor agrees that, so long as any amounts are or may be owed by
a Borrower under the Finance Documents or a Borrower is under any actual
or contingent obligations under the Finance Documents, it shall not
exercise any rights which it may at any time have by reason of
performance by it of its obligations under the Finance Documents:
(a) to be indemnified by a Borrower; and/or
(b) to claim any contribution from any other guarantor of any 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 security taken pursuant to, or in
connection with, the Finance Documents by all or any of the Finance
Parties.
24.8 Suspense Accounts
All moneys received, recovered or realised by a Bank by virtue of Clause
24.1 (Guarantee and Indemnity) may, in that Bank's discretion, be
credited to an interest bearing suspense or impersonal account and may
be held in such account for so long as such Bank thinks fit pending the
application from time to time (as such Bank may think fit) of such
moneys in or towards the payment and discharge of any amounts owing by
an Obligor to such Bank under the Finance Documents.
25. COMMITMENT COMMISSION AND FEES
25.1 Commitment Commission on the Term Facility
The Original Borrower shall pay to the Agent for account of each Bank a
commitment commission on the amount of such Bank's Available Term
Commitment from day to day during the period beginning on the date
hereof and ending on the last day of the Term Availability Period, such
commitment commission to be calculated at the rate of 45 per cent. of
the Margin from time to time at such time and payable in arrear on the
last day of each successive period of three months which ends during the
Term Availability Period and on the last day of the Term Availability
Period.
25.2 Commitment Commission on the Revolving Facility
The Original Borrower shall pay to the Agent for account of each Bank a
commitment commission on the amount of such Bank's Available Revolving
Commitment from day to day during the period beginning on the date
hereof and ending on the Revolving Termination Date, such commitment
commission to be calculated at the rate of 45 per cent. of the Margin
from time to time at such time and payable in arrear on the last day of
each successive period of three months which ends during such period and
on the Revolving Termination Date.
25.3 Agency Fee
The Original Borrower shall pay to the Agent for its own account the
agency fees specified in the letter dated 18 October 2002 from the Agent
to RMC Group Limited at the times, and in the amounts, specified in such
letter.
25.4 Other fees
The Original Borrower shall pay to the Agent for the account of the
Banks, the fees specified in a letter dated on or around 16 March 2005.
26. COSTS AND EXPENSES
26.1 Transaction Expenses
The Original Borrower shall, from time to time on demand of the Agent,
reimburse each of the Agent and the Mandated Lead Arrangers for all
reasonable costs and expenses (including legal fees) together with any
VAT thereon incurred by it in connection with the negotiation,
preparation, underwriting, syndication, documentation and execution of
the Finance Documents, any other document referred to in the Finance
Documents and the completion of the transactions therein contemplated.
26.2 Preservation and Enforcement of Rights
The Original Borrower shall, from time to time on demand of the Agent,
reimburse the Finance Parties for all costs and expenses (including
legal fees) on a full indemnity basis together with any VAT thereon
incurred in or in connection with the preservation and/or enforcement of
any of the rights of the Finance Parties under the Finance Documents and
any document referred to in the Finance Documents (including, without
limitation, any costs and expenses relating to any investigation as to
whether or not an Event of Default might have occurred or is likely to
occur or any steps necessary or desirable in connection with any
proposal for remedying or otherwise resolving an Event of Default or
Default).
26.3 Stamp Taxes
The Parent shall pay all stamp, registration and other taxes to which
the Finance Documents or any Judgement given in connection therewith is
or, at any time may be subject (other than any document effecting an
assignment as contemplated by Clause 34.3 (Assignments and Transfers by
Banks) to Clause 34.5 (Transfers by Banks)) and shall, from time to time
on demand of the Agent, indemnify the Finance Parties against any
liabilities, costs, claims and expenses resulting from any failure to
pay or any delay in paying any such tax.
26.4 Amendment Costs
If an Obligor requests any amendment, waiver or consent then the
relevant Obligor shall, within five Business Days of demand by the
Agent, reimburse the Finance Parties for all costs and expenses
(including legal fees) together with any VAT thereon reasonably incurred
by such person in responding to or complying with such request.
26.5 Banks' Liabilities for Costs
If the Original Borrower fails to perform any of its obligations under
this Clause 26, each Bank shall, in its Proportion, indemnify each of
the Agent and the Mandated Lead Arrangers against any loss incurred by
any of them as a result of such failure.
27. DEFAULT INTEREST AND BREAK COSTS
27.1 Default Interest Periods
If any sum due and payable by an Obligor hereunder is not paid on the
due date therefor in accordance with Clause 30 (Payments) or if any sum
due and payable by an Obligor under any judgement of any court in
connection herewith is not paid on the date of such judgement, the
period beginning on such due date or, as the case may be, the date of
such judgement and ending on the date upon which the obligation of such
Obligor to pay such sum is discharged shall be divided into successive
periods, each of which (other than the first) shall start on the last
day of the preceding such period and the duration of each of which shall
(except as otherwise provided in this Clause 27) be selected by the
Agent acting reasonably.
27.2 Default Interest
An Unpaid Sum shall bear interest during each Interest Period in respect
thereof at the rate per annum which is one per cent. per annum above the
percentage rate which would apply if such Unpaid Sum had been an Advance
in the amount and currency of such Unpaid Sum and for the same Interest
Period, provided that if such Unpaid Sum relates to an Advance which
became due and payable on a day other than the last day of an Interest
Period or Term relating thereto:
(a) the first Interest Period applicable to such Unpaid Sum shall be of
a duration equal to the unexpired portion of the current Interest
Period or Term relating to that Advance; and
(b) the percentage rate of interest applicable thereto from time to time
during such period shall be that which exceeds by one per cent. the
rate which would have been applicable to it had it not so fallen
due, save that the Margin shall be, or be deemed to be, the highest
rate specified in the definition thereof.
27.3 Payment of Default Interest
Any interest which shall have accrued under Clause 27.2 (Default
Interest) in respect of an Unpaid Sum shall be due and payable and shall
be paid by the Obligor owing such Unpaid Sum on the last day of each
Interest Period in respect thereof or on such other dates as the Agent
may specify (acting reasonably) by notice to such Obligor.
27.4 Break Costs
If any Bank or the Agent on its behalf receives or recovers all or any
part of such Bank's share of an Advance or Unpaid Sum otherwise than on
the last day of an Interest Period or Term relating thereto, the
Original Borrower shall pay to the Agent on demand for account of such
Bank an amount equal to the amount (if any) by which (a) the additional
interest which would have been payable on the amount so received or
recovered had it been received or recovered on the last day of that
Interest Period or Term exceeds (b) the amount of interest which in the
reasonable opinion of the Agent would have been payable to the Agent on
the last day of that Interest Period or Term in respect of a deposit in
the currency of the amount so received or recovered equal to the amount
so received or recovered placed by it with a prime bank in the relevant
interbank market for a period starting on the Business Day following the
date of such receipt or recovery and ending on the last day of that
Interest Period or Term.
27.5 Break Costs Certificate
Each Bank shall, as soon as reasonably practicable after a demand by the
Agent or the Original Borrower, provide a certificate to the Agent and
the Original Borrower confirming the amount of its break costs for any
Interest Period or Term in which they accrue.
28. PARENT'S INDEMNITIES
28.1 Parent's Indemnity
The Parent undertakes to indemnify:
(a) each Finance Party against any cost, claim, loss, expense (including
legal fees) or liability together with any VAT thereon, whether or
not reasonably foreseeable, which it may sustain or incur as a
consequence of the occurrence of any Event of Default or any default
by any Obligor in the performance of any of the obligations
expressed to be assumed by it in the Finance Documents;
(b) the Agent against any cost or loss it may suffer or incur as a
result of its entering into, or performing, any foreign exchange
contract for the purposes of Clause 4 (Multicurrency Option) or
Clause 30 (Payments);
(c) each Bank against any cost or loss it may suffer under Clause 26.5
(Banks' Liabilities for Costs);
(d) each Bank against any cost or loss it may suffer or incur as a
result of its funding or making arrangements to fund its portion of
an Advance requested by any Borrower but not made by reason of the
operation of this Agreement;
(e) each Bank against any loss it may suffer or incur as a result of any
change to the Term or Interest Period or currency of any Advance as
a result of the operation of this Agreement (other than by reason of
default or negligence of that Bank alone);
(f) each Bank against any loss it may suffer or incur as a result of its
funding its portion of any Advance which is denominated in sterling
by reason of Clause 7.2 (Conditions for Denominating a Revolving
Advance in an Optional Currency) or Clause 4.2 (Conditions for
Denominating a Term Advance in an Optional Currency).
28.2 Currency Indemnity
If any sum (a Sum) due from any Obligor under the Finance Documents or
any order or judgement given or made in relation thereto has to be
converted from the currency (the "First Currency") in which such Sum is
payable into another currency (the "Second Currency") for the purpose
of:
(a) making or filing a claim or proof against such Obligor; or
(b) obtaining or enforcing an order or judgement in any court or other
tribunal,
the Parent shall indemnify each person to whom such Sum is due from and
against any loss suffered or incurred as a result of any discrepancy
between (a) the rate of exchange used for such purpose to convert such
Sum from the First Currency into the Second Currency and (b) the rate or
rates of exchange available to such person at the time of receipt of
such Sum.
28.3 Acquisition Indemnity
The Parent shall indemnify each Finance Party (each an "Indemnified
Party") from time to time within five Business Days of demand of the
Indemnified Party, against any cost, claim, loss, expense (including
legal fees) or liability together with VAT thereon, whether or not
reasonably foreseeable, which the relevant Indemnified Party may sustain
or properly incur (except to the extent that the same result from the
gross negligence or wilful misconduct of that Indemnified Party) arising
out of a claim or action of any person relating to any use of the
proceeds of any Advance.
29. CURRENCY OF ACCOUNT AND PAYMENT
Sterling is the currency of account and payment for each and every sum
at any time due from an Obligor hereunder, provided that:
(a) each repayment of an Advance or Unpaid Sum or a part thereof shall
be made in the currency in which such Advance or Unpaid Sum is
denominated at the time of that repayment;
(b) each payment of interest shall be made in the currency in which the
sum in respect of which such interest is payable is denominated;
(c) each payment in respect of costs and expenses shall be made in the
currency in which the same were incurred;
(d) each payment pursuant to Clause 14.2 (Tax Indemnity), Clause 16.1
(Increased Costs) or Clause 28.1 (Parent's Indemnity) shall be made
in the currency specified by the party claiming thereunder;
(e) any amount expressed to be payable in a currency other than sterling
shall be paid in that other currency.
30. PAYMENTS
30.1 Notification of Payments
Without prejudice to the liability of each party hereto promptly to pay
each amount owing by it hereunder on the due date therefor, whenever a
payment is expected to be made by any of the parties hereto, the Agent
shall, at least two Business Days prior to the expected date for such
payment, notify all the parties hereto of the amount, currency and
timing of such payment and the identity of the party liable to make such
payment:
30.2 Payments to the Agent
On each date on which this Agreement requires an amount to be paid by an
Obligor or a Bank such Obligor or, as the case may be, such Bank shall
make the same available to the Agent for value on the due date at such
time and in such funds and to such account with such bank as the Agent
shall specify (acting reasonably) from time to time.
30.3 Payments by the Agent
(a) Save as otherwise provided herein, each payment received by the
Agent pursuant to Clause 30.2 (Payments to the Agent) shall:
(i) in the case of payment received for the account of a
Borrower, be made available by the Agent to such Borrower by
application:
(A) first, in or towards payment (on the date, and in the
currency and funds, of receipt) of any amount then due
from such Borrower hereunder to the person from whom
the amount was so received or in or towards the
purchase of any amount of any currency to be so
applied; and
(B) secondly, in or towards payment (on the date, and in
the currency and funds, of receipt) to such account
with such bank in the principal financial centre of the
country of the currency of such payment (or, in the
relation to the euro in the financial centre in a
Participating Member State or London) as such Borrower
shall have previously notified to the Agent for this
purpose; and
(ii) in the case of any other payment, be made available by the
Agent to the person entitled to receive the payment in
accordance with this Agreement (in the case of a Bank, for
the account of its Facility Office) for value the same day
by transfer to the account of the person with a bank in the
principal financial centre of the country of the currency of
such payment (or, in relation to the euro in the financial
centre in a Participating Member State) as that person has
previously notified to the Agent.
(b) A payment will be deemed to have been made by the Agent on the date
on which it is required to be made under this Agreement if the Agent
has, on or before that date, taken steps to make that payment in
accordance with the regulations or operating procedures of the
clearing or settlement system used by the Agent in order to make the
payment.
30.4 Payments by the Agent to the Banks
Any amount payable by the Agent to the Banks under this Agreement in the
currency of a Participating Member State shall be paid in euro.
30.5 No Set-off
All payments required to be made by an Obligor hereunder shall be
calculated without reference to any set-off or counterclaim and shall be
made free and clear of and without any deduction for or on account of
any set-off or counterclaim.
30.6 Clawback
Where a sum is to be paid hereunder to the Agent for account of another
person, the Agent shall not be obliged to make the same available to
that other person or to enter into or perform any exchange contract in
connection therewith until it has been able to establish to its
satisfaction that it has actually received such sum, but if it does so
and it proves to be the case that it had not actually received such sum,
then the person to whom such sum or the proceeds of such exchange
contract was so made available shall on request refund the same to the
Agent together with an amount sufficient to indemnify the Agent against
any cost or loss it may have suffered or incurred by reason of its
having paid out such sum or the proceeds of such exchange contract prior
to its having received such sum.
30.7 Partial Payments
If and whenever a payment is made by an Obligor hereunder and the Agent
receives an amount less than the due amount of such payment the Agent
may apply the amount received towards the obligations of the Obligors
under this Agreement in the following order:
(a) first, in or towards payment of any unpaid fees, costs and expenses
of each of the Agent and the Mandated Lead Arrangers for which any
Obligor is liable;
(b) secondly, in or towards payment pro rata of any accrued interest due
but unpaid;
(c) thirdly, in or towards payment pro rata of any principal due but
unpaid; and
(d) fourthly, in or towards payment pro rata of any other sum due but
unpaid.
30.8 Variation of Partial Payments
The order of payments set out in Clause 30.7 (Partial Payments) shall
override any appropriation made by the Obligor to which the partial
payment relates but the order set out in paragraphs (b), (c) and (d) of
Clause 30.7 (Partial Payments) may be varied if agreed by all the Banks.
30.9 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
an Unpaid Sum under this Agreement interest is payable on the
principal at the rate payable on the original due date.
31. SET-OFF
31.1 Contractual Set-off
At any time after an Event of Default has occurred and is continuing
unremedied or unwaived, each Bank shall be entitled to apply any credit
balance to which such Obligor is entitled on any account of such Obligor
with such Bank in satisfaction of any sum due and payable from such
Obligor to such Bank under the Finance Documents but unpaid. For this
purpose, each Bank shall be entitled to purchase with the moneys
standing to the credit of any such account such other currencies as may
be necessary to effect such application.
31.2 Set-off not Mandatory
No Bank shall be obliged to exercise any right given to it by Clause
31.1 (Contractual Set-off).
32. SHARING
32.1 Payments to Banks
If a Bank (a Recovering Bank) applies any receipt or recovery from an
Obligor to a payment due under this Agreement and such amount is
received or recovered other than in accordance with Clause 30
(Payments), then such Recovering Bank shall:
(a) notify the Agent of such receipt or recovery;
(b) at the request of the Agent, promptly 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 such Recovering
Bank as its share of any payment to be made in accordance with
Clause 30.7 (Partial Payments).
32.2 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 Bank) in accordance with Clause 30.7 (Partial
Payments).
32.3 Recovering Bank's Rights
The Recovering Bank will be subrogated into the rights of the parties
which have shared in a redistribution pursuant to Clause 32.2
(Redistribution of Payments) in respect of the Sharing Payment (and the
relevant Obligor shall be liable to the Recovering Bank in an amount
equal to the Sharing Payment).
32.4 Repayable Recoveries
If any part of the Sharing Payment received or recovered by a Recovering
Bank becomes repayable and is repaid by such Recovering Bank, then:
(a) each party which has received a share of such Sharing Payment
pursuant to Clause 32.2 (Redistribution of Payments) shall, upon
request of the Agent, pay to the Agent for account of such
Recovering Bank an amount equal to its share of such Sharing
Payment; and
(b) such Recovering Bank's rights of subrogation in respect of any
reimbursement shall be cancelled and the relevant Obligor will be
liable to the reimbursing party for the amount so reimbursed.
32.5 Exception
This Clause 32 shall not apply if the Recovering Bank would not, after
making any payment pursuant hereto, have a valid and enforceable claim
against the relevant Obligor.
32.6 Recoveries Through Legal Proceedings
If any Bank intends to commence any action in any court it shall give
prior notice to the Agent and the other Banks. If any Bank shall
commence any action in any court to enforce its rights hereunder and, as
a result thereof or in connection therewith, receives any amount, then
such Bank shall not be required to share any portion of such amount with
any Bank which has the legal right to, but does not, join in such action
or commence and diligently prosecute a separate action to enforce its
rights in another court.
33. THE AGENT, THE MANDATED LEAD ARRANGERS AND THE BANKS
33.1 Appointment of the Agent
Each of the Mandated Lead Arrangers and the Banks hereby appoints the
Agent to act as its agent in connection herewith and authorises the
Agent to exercise such rights, powers, authorities and discretions as
are specifically delegated to the Agent by the terms hereof together
with all such rights, powers, authorities and discretions as are
reasonably incidental thereto.
33.2 Agent's Discretions
The Agent may:
(a) assume, unless it has, in its capacity as agent for the Banks,
received notice to the contrary from any other party hereto, that
(i) any representation made or deemed to be made by an Obligor in
connection herewith is true, (ii) no Event of Default or Default has
occurred, (iii) no Obligor is in breach of or default under its
obligations under the Finance Documents and (iv) any right, power,
authority or discretion vested herein upon an Instructing Group, the
Banks or any other person or group of persons has not been
exercised;
(b) assume that (i) the Facility Office of each Bank is that notified to
it by such Bank in writing and (ii) the information provided by each
Bank pursuant to Clause 38 (Notices), Clause 33.14 (Banks' Mandatory
Cost Details) and Schedule 9 (Mandatory Costs) is true and correct
in all respects until it has received from such Bank notice of a
change to the Facility Office or any such information and act upon
any such notice until the same is superseded by a further notice;
(c) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or services may
to it seem necessary, expedient or desirable and rely upon any
advice so obtained;
(d) rely as to any matters of fact which might reasonably be expected to
be within the knowledge of an Obligor upon a certificate signed by
or on behalf of such Obligor;
(e) rely upon any communication or document believed by it to be
genuine;
(f) refrain from exercising any right, power or discretion vested in it
as agent hereunder unless and until instructed by Instructing Group
as to whether or not such right, power or discretion is to be
exercised and, if it is to be exercised, as to the manner in which
it should be exercised;
(g) refrain from acting in accordance with any instructions of an
Instructing Group to begin any legal action or proceeding arising
out of or in connection with this Agreement until it shall have
received such security as it may require (whether by way of payment
in advance or otherwise) for all costs, claims, losses, expenses
(including legal fees) and liabilities together with any VAT thereon
which it will or may expend or incur in complying with such
instructions; and
(h) assume (unless it has specific notice to the contrary) that any
notice or request made by the Parent is made on behalf of all the
Obligors.
33.3 Agent's Obligations
The Agent shall:
(a) promptly inform each Bank of the contents of any notice or document
received by it in its capacity as Agent from an Obligor under the
Finance Documents;
(b) promptly notify each Bank of the occurrence of any Event of Default
or any default by an Obligor in the due performance of or compliance
with its obligations under this Agreement of which the Agent has
notice from any other party hereto;
(c) save as otherwise provided herein, act as agent hereunder in
accordance with any instructions given to it by an Instructing
Group, which instructions shall be binding on the Mandated Lead
Arrangers and the Banks; and
(d) if so instructed by an Instructing Group, refrain from exercising
any right, power or discretion vested in it as agent under the
Finance Documents.
The Agent's duties under the Finance Documents are solely mechanical and
administrative in nature.
33.4 Excluded Obligations
Notwithstanding anything to the contrary expressed or implied herein,
neither the Agent nor the Mandated Lead Arrangers shall:
(a) be bound to enquire as to (i) whether or not any representation made
or deemed to be made by an Obligor in connection herewith is true,
(ii) the occurrence or otherwise of any Event of Default or Default,
(iii) the performance by an Obligor of its obligations under the
Finance Documents or (iv) any breach of or default by an Obligor of
or under its obligations under the Finance Documents;
(b) be bound to account to any Bank for any sum or the profit element of
any sum received by it for its own account;
(c) be bound to disclose to any other person any information relating to
any member of the Group if (i) such person, on providing such
information, expressly stated to the Agent or, as the case may be,
the Mandated Lead Arrangers, that such information was confidential
or (ii) such disclosure would or might in its opinion constitute a
breach of any law or be otherwise actionable at the suit of any
person;
(d) be under any obligations other than those for which express
provision is made herein; or
(e) be or be deemed to be a fiduciary for any other party hereto.
33.5 Indemnification
Each Bank shall, in its Proportion, from time to time on demand by the
Agent, indemnify the Agent against any and all costs, claims, losses,
expenses (including legal fees) and liabilities together with any VAT
thereon which the Agent may incur, otherwise than by reason of its own
gross negligence or wilful misconduct, in acting in its capacity as
agent hereunder (other than any which have been reimbursed by the Parent
pursuant to Clause 28.1 (Parent's Indemnity)).
33.6 Exclusion of Liabilities
Except in the case of gross negligence or wilful default, none of the
Agent and the Mandated Lead Arrangers accepts any responsibility:
(a) for the adequacy, accuracy and/or completeness of the Information
Memorandum or any other information supplied by the Agent or the
Mandated Lead Arrangers, by an Obligor or by any other person in
connection herewith or any other agreement, arrangement or document
entered into, made or executed in anticipation of, pursuant to or in
connection with the Finance Documents;
(b) for the legality, validity, effectiveness, adequacy or
enforceability of the Finance Documents or any other agreement,
arrangement or document entered into, made or executed in
anticipation of, pursuant to or in connection with the Finance
Documents; or
(c) for the exercise of, or the failure to exercise, any judgement,
discretion or power given to any of them by or in connection with
the Finance Documents or any other agreement, arrangement or
document entered into, made or executed in anticipation of, pursuant
to or in connection with the Finance Documents.
Accordingly, none of the Agent and the Mandated Lead Arrangers shall be
under any liability (whether in negligence or otherwise) in respect of
such matters, save in the case of gross negligence or wilful misconduct.
33.7 No Actions
Each of the Banks agrees that it will not assert or seek to assert
against any director, officer or employee of the Agent or the Mandated
Lead Arrangers any claim it might have against any of them in respect of
the matters referred to in Clause 33.6 (Exclusion of Liabilities).
33.8 Business with the Group
The Agent and the Mandated Lead Arrangers may accept deposits from, lend
money to and generally engage in any kind of banking or other business
with any member of the Group.
33.9 Resignation
The Agent may resign its appointment hereunder at any time (after
consultation with the Parent) without assigning any reason therefor by
giving not less than thirty days' prior notice to that effect to each of
the other parties hereto, provided that no such resignation shall be
effective until a successor for the Agent is appointed in accordance
with the succeeding provisions of this Clause 33.
33.10 Removal of Agent
An Instructing Group may remove the Agent from its role as agent
hereunder (after consultation with the Parent) by giving notice to that
effect to each of the other parties hereto. Such removal shall take
effect only when a successor to the Agent is appointed in accordance
with the terms hereof.
33.11 Successor Agent
If the Agent gives notice of its resignation pursuant to Clause 33.9
(Resignation) or it is removed pursuant to Clause 33.10 (Removal of
Agent), then any reputable and experienced bank or other financial
institution with an office in London may be appointed as a successor to
the Agent by an Instructing Group (after consultation with the Parent)
during the period of such notice but, if no such successor is so
appointed, the Agent may appoint such a successor itself. The resigning
Agent shall provide its successor, with (or with copies of) such of its
records as its successor requires to carry out its functions under this
Agreement.
33.12 Rights and Obligations
If a successor to the Agent is appointed under the provisions of Clause
33.11 (Successor Agent), then (a) the retiring or departing Agent shall
be discharged from any further obligation hereunder but shall remain
entitled to the benefit of the provisions of this Clause 33 and (b) its
successor and each of the other parties hereto shall have the same
rights and obligations amongst themselves as they would have had if such
successor had been a party hereto.
33.13 Own Responsibility
It is understood and agreed by each Bank that at all times it has itself
been, and will continue to be, solely responsible for making its own
independent appraisal of and investigation into all risks arising under
or in connection with the Finance Documents including, but not limited
to:
(a) the financial condition, creditworthiness, condition, affairs,
status and nature of each member of the Group;
(b) the legality, validity, effectiveness, adequacy and enforceability
of the Finance Documents and any other agreement, arrangement or
document entered into, made or executed in anticipation of, pursuant
to or in connection with the Finance Documents;
(c) whether such Bank has recourse, and the nature and extent of that
recourse, against an Obligor or any other person or any of their
respective assets under or in connection with the Finance Documents,
the transactions therein contemplated or any other agreement,
arrangement or document entered into, made or executed in
anticipation of, pursuant to or in connection with this Agreement;
and
(d) the adequacy, accuracy and/or completeness of the Information
Memorandum and any other information provided by the Agent or the
Mandated Lead Arrangers, an Obligor, or by any other person in
connection with the Finance Documents, the transactions contemplated
therein or any other agreement, arrangement or document entered
into, made or executed in anticipation of, pursuant to or in
connection with the Finance Documents.
Accordingly, each Bank acknowledges to the Agent and the Mandated Lead
Arrangers that it has not relied on and will not hereafter rely on the
Agent and the Mandated Lead Arrangers or any of them in respect of any
of these matters.
33.14 Banks' Mandatory Cost Details
Each Bank will supply the Agent with such information and in such detail
as the Agent may require in order to calculate the Mandatory Cost in
accordance with Schedule 9 (Mandatory Costs).
33.15 Agency Division Separate
In acting as agent hereunder for the Banks, 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 and,
notwithstanding the foregoing provisions of this Clause 33, any
information received by some other division or department of the Agent
may be treated as confidential and shall not be regarded as having been
given to the Agent's agency division.
34. ASSIGNMENTS AND TRANSFERS
34.1 Binding Agreement
The Finance Documents shall be binding upon and enure to the benefit of
each party hereto and its or any subsequent successors and Transferees.
34.2 No Assignments and Transfers by the Obligors
No Obligor shall be entitled to assign or transfer all or any of its
rights, benefits and obligations under the Finance Documents.
34.3 Assignments and Transfers by Banks
(a) Any Bank may, at any time, assign all or any of its rights and
benefits under the Finance Documents or transfer in accordance with
Clause 34.5 (Transfers by Banks) all or any of its rights, benefits
and obligations under the Finance Documents to a bank or financial
institution provided that such bank or financial institution takes
an assignment or transfer of a minimum Sterling Amount of
(pound)5,000,000 or, if less, the amount of the Bank's Commitment.
(b) A Bank may not assign any of its rights and benefits under the
Finance Documents (without prejudice to the right of a Bank to
transfer all or any of its rights, benefits and obligations under
the Finance Documents in accordance with Clause 34.5 (Transfers by
Banks)) without the prior consent of the Parent, such consent not to
be unreasonably withheld or delayed, in respect of any Advance
originally made by a Bank within sub-paragraph (b) of the definition
of Qualifying Lender to a Bank within sub-paragraph (a) of that
definition.
34.4 Assignments by Banks
If any Bank assigns all or any of its rights and benefits under the
Finance Documents in accordance with Clause 34.3 (Assignments and
Transfers by Banks), then, unless and until the assignee has delivered a
notice to the Agent confirming in favour of the Agent, the Mandated Lead
Arrangers and the other Banks that it shall be under the same
obligations towards each of them as it would have been under if it had
been an original party hereto as a Bank (whereupon such assignee shall
became a party hereto as a Bank), the Agent, the Mandated Lead Arrangers
and the other Banks shall not be obliged to recognise such assignee is
having the rights against each of them which it would have had if it had
been such a party hereto.
34.5 Transfers by Banks
If any Bank wishes to transfer all or any of its rights, benefits and/or
obligations under the Finance Documents as contemplated in Clause 34.3
(Assignments and Transfers by Banks), then such transfer may be effected
by the delivery to the Agent of a duly completed Transfer Certificate
executed by such Bank and the relevant Transferee in which event, on the
later of the Transfer Date specified in such Transfer Certificate and
the fifth Business Day after (or such earlier Business Day endorsed by
the Agent on such Transfer Certificate falling on or after) the date of
delivery of such Transfer Certificate to the Agent:
(a) to the extent that in such Transfer Certificate the Bank party
thereto seeks to transfer by novation its rights, benefits and
obligations under the Finance Documents, each of the Obligors and
such Bank shall be released from further obligations towards one
another under the Finance Documents and their respective rights
against one another shall be cancelled (such rights and obligations
being referred to in this Clause 34.5 as discharged rights and
obligations);
(b) each of the Obligors and the Transferee party thereto shall assume
obligations towards one another and/or acquire rights against one
another which differ from such discharged rights and obligations
only insofar as such Obligor and such Transferee have assumed and/or
acquired the same in place of such Obligor and such Bank;
(c) the Agent, the Mandated Lead Arrangers, such Transferee and the
other Banks shall acquire the same rights and benefits and assume
the same obligations between themselves as they would have acquired
and assumed had such Transferee been an original party hereto as a
Bank with the rights, benefits and/or obligations acquired or
assumed by it as a result of such transfer and to that extent the
Agent, the Mandated Lead Arrangers and the relevant Bank shall each
be released from further obligations to each other under the Finance
Documents; and
(d) such Transferee shall become a party hereto as a Bank.
34.6 Additional Costs
If any assignment or transfer by a Bank would, at the time thereof,
result in additional amounts becoming payable under Clause 16.1
(Increased Costs) then, unless the assignment or transfer was being
effected pursuant to Clause 18 (Mitigation), the relevant Obligor shall
be required to pay such amounts or additional amounts to or for the
account of the assignee or transferee only to the extent that it would
have been required to pay the same had there been no such assignment or
transfer.
34.7 Assignment and Transfer Fees
On the date upon which an assignment takes effect pursuant to Clause
34.4 (Assignments by Banks) or a transfer takes effect pursuant to
Clause 34.5 (Transfers by Banks) the relevant assignee or Transferee
shall pay to the Agent for its own account a fee of (pound)1,500.
34.8 Disclosure of Information
Any Bank may disclose to any person:
(a) to (or through) whom such Bank assigns or transfers (or may
potentially assign or transfer) all or any of its rights, benefits
and obligations under the Finance Documents;
(b) with (or through) whom such Bank enters into (or may potentially
enter into) any sub-participation in relation to, or any other
transaction under which payments are to be made by reference to, the
Finance Documents or any Obligor; or
(c) to whom information may be required to be disclosed by any
applicable law,
such information about any Obligor or the Group and the Finance
Documents as such Bank shall consider appropriate provided that, in
relation to paragraphs (a) and (b) above, the person to whom such
information is to be given has entered into a Confidentiality
Undertaking.
34.9 Notification
The Agent shall within fourteen days of receiving a Transfer Certificate
notify the Parent of any assignment or transfer completed pursuant to
this Clause 34.
35. CHANGES TO THE OBLIGORS
35.1 Request for Additional Borrower
The Parent may request that any of its wholly-owned Subsidiaries becomes
an Additional Borrower by delivering to the Agent an Accession
Memorandum duly executed by the Parent and such Subsidiary, together
with the documents and other evidence listed in Schedule 7 (Additional
Conditions Precedent) in relation to such Subsidiary.
35.2 Borrower Conditions Precedent
A wholly-owned Subsidiary of the Parent in respect of which the Parent
has delivered an Accession Memorandum to the Agent, shall become an
Additional Borrower and assume all the rights, benefits and obligations
of a Borrower as if it had been an Original Borrower on the date on
which the Agent notifies the Parent that the Agent has received, in form
and substance satisfactory to it, all documents and other evidence
listed in Schedule 7 (Additional Conditions Precedent) in relation to
such Subsidiary, unless on such date an Event of Default or Default is
continuing or would occur as a result of such Subsidiary becoming an
Additional Borrower.
35.3 Resignation of an Additional Borrower
If at any time an Additional Borrower is under no actual or contingent
obligation as a Borrower under or pursuant to any Finance Document, the
Parent may request that such Borrower shall cease to be a Borrower by
delivering to the Agent a Resignation Notice. Such Resignation Notice
shall be accepted by the Agent on the date on which it notifies the
Parent that it is satisfied that such Borrower is under no actual or
contingent obligation as a Borrower under or pursuant to any Finance
Document and such Borrower shall immediately cease to be a Borrower and
shall have no further rights, benefits or obligations under the Finance
Documents save for those which arose prior to such date.
35.4 Request for Additional Guarantor
The Parent may request that any of its wholly-owned Subsidiaries become
an Additional Guarantor by delivering to the Agent an Accession
Memorandum duly executed by the Parent and such Subsidiary, together
with the documents and other evidence listed in Schedule 7 (Additional
Conditions Precedent) in relation to such Subsidiary.
35.5 Guarantor Conditions Precedent
A wholly-owned Subsidiary of the Parent in respect of which the Parent
has delivered an Accession Memorandum to the Agent, shall become an
Additional Guarantor and assume all the rights, benefits and obligations
of a Guarantor as if it had been an Original Guarantor on the date on
which the Agent notifies the Parent that the Agent has received, in form
and substance satisfactory to it, all documents and other evidence
listed in Schedule 7 (Additional Conditions Precedent) in relation to
such Subsidiary, unless on such date an Event of Default or Default is
continuing or would occur as a result of such Subsidiary becoming an
Additional Guarantor.
35.6 Resignation of a Guarantor
If at any time:
(a) a Guarantor 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 Clause 35.4 (Request for Additional Guarantors); or
(b) the Holding Company of a Guarantor (the "Relevant Guarantor")
becomes a Guarantor, provided that:
(i) such Relevant 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 Relevant Guarantor notifies the Agent of any sale,
lease, transfer or other disposal in accordance with
paragraph (a) of this Clause 35.6; and
(iii) the Parent may not resign without the consent of all Banks,
the Parent may request that such Guarantor shall cease to be a Guarantor
by delivering to the Agent a Resignation Notice. Such Resignation Notice
shall be accepted by the Agent on the date on which it notifies the
Parent that it is satisfied that either of the conditions in paragraphs
(a) and (b) above is satisfied and such Guarantor shall immediately
cease to be a Guarantor and shall have no further rights, benefits or
obligations under the Finance Documents save for those which arose prior
to such date.
36. CALCULATIONS AND EVIDENCE OF DEBT
36.1 Basis of Accrual
Any interest, commission or fee accruing under the Finance Documents
will accrue from day to day and is calculated on the basis of actual
number of days elapsed and a year of 360 days (or, in the case of any
Advance denominated in sterling 365 days) or, in any case where market
practice differs, in accordance with market practice.
36.2 Proportionate Reductions
Any repayment of an Advance denominated in an Optional Currency shall
reduce the amount of such Advance by the amount of such Optional
Currency repaid and shall reduce the Sterling Amount of such Advance
proportionately.
36.3 Quotations
If on any occasion a Reference Bank or Bank fails to supply the Agent
with a quotation required of it under the foregoing provisions of this
Agreement, the rate for which such quotation was required shall be
determined from those quotations which are supplied to the Agent,
provided that, in relation to determining LIBOR or EURIBOR, this Clause
36.3 shall not apply if only one Reference Bank supplies a quotation.
36.4 Evidence of Debt
Each Bank shall maintain in accordance with its usual practice accounts
evidencing the amounts from time to time lent by and owing to it
hereunder.
36.5 Control Accounts
The Agent shall maintain on its books a control account or accounts in
which shall be recorded (a) the amount of any Advance or any Unpaid Sum
and each Bank's share therein, (b) the amount of all principal, interest
and other sums due or to become due from an Obligor and each Bank's
share therein and (c) the amount of any sum received or recovered by the
Agent hereunder and each Bank's share therein.
36.6 Prima Facie Evidence
In any legal action or proceeding arising out of or in connection with
this Agreement, the entries made in the accounts maintained pursuant to
Clause 36.4 (Evidence of Debt) and Clause 36.5 (Control Accounts) shall
be prima facie evidence of the existence and amounts of the specified
obligations of the Obligors.
36.7 Certificates of Banks
A certificate of a Bank as to (a) the amount by which a sum payable to
it hereunder is to be increased under Clause 14.1 (Tax Gross-up) or
becomes payable pursuant to Clause 27.4 (Break Costs), (b) the amount
for the time being required to indemnify it against any such cost,
payment or liability as is mentioned in Clause 14.2 (Tax Indemnity),
Clause 16.1 (Increased Costs) or Clause 28.1 (Parent's Indemnity) or (c)
the amount of any credit, relief, remission or repayment as is mentioned
in Clause 15.3 (Tax Credit Payment) shall, in the absence of manifest
error, be prima facie evidence of the existence and amounts of the
specified obligations of the Obligors.
36.8 Agent's Certificates
A certificate of the Agent as to the amount at any time due from a
Borrower or a Parent hereunder or the amount which, but for any of the
obligations of such Borrower or a Parent hereunder being or becoming
void, voidable, unenforceable or ineffective, at any time would have
been due from such Borrower hereunder shall, in the absence of manifest
error, be conclusive for the purposes of Clause 24 (Guarantee and
Indemnity).
36.9 Spanish Civil Procedure
In the event that this Agreement is raised to a Spanish Public Document
for the purposes of Article 572.2 of the Spanish Civil Procedure Law
(Ley de Enjuiciamiento Civil), all parties expressly agree that the
exact amount due at any time by the Obligors to the Banks will be the
amount specified in a certificate issued by (a) the Agent (as
representative of the Banks) in accordance with Clause 36.8 (Agent's
Certificates) reflecting the balance of the accounts referred to in
Clause 36.5 (Control Accounts) and/or (b) any Bank in accordance with
Clause 36.7 (Certificates of Banks) reflecting the balance of the
accounts referred to in Clause 36.4 (Evidence of Debt).
37. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
37.1 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 thereof, nor shall any single or partial exercise of
any right or remedy prevent any further or other exercise thereof or the
exercise of any other right or remedy. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies
provided by law.
37.2 Partial Invalidity
If, at any time, any provision of the Finance Documents is or becomes
illegal, invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions thereof nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.
38. NOTICES
38.1 Communications in Writing
Each communication to be made under the Finance Documents shall be made
in writing and, unless otherwise stated, shall be made by fax or letter.
38.2 Addresses
Any communication or document to be made or delivered pursuant to the
Finance Documents shall (unless the recipient of such communication or
document has, by fifteen days' written notice to the Agent, specified
another address or fax number) be made or delivered to the address or
fax number:
(a) in the case of the Original Obligor and the Agent, identified with
its name below:
Original Obligor:
Address: Cemex House
Coldharbour Lane
Thorpe
Egham
Surrey
TW20 8TD
Attn: Julie Fields
Fax: +44 (0) 1932 58 3360
Agent:
Address: 135 Bishopsgate
London
EC2M 3UR
Attn: Paul Fletcher
Fax: +44 (0) 20 7085 4564
(b) in the case of each Bank, notified in writing to the Agent prior to
the date hereof (or, in the case of a Transferee, at the end of the
Transfer Certificate to which it is a party as Transferee); and
(c) in the case of each Additional Obligor, in the relevant Accession
Memorandum,
provided that not more than one address may be specified by each party
pursuant to this Clause 38.2 at any time.
38.3 Delivery
Any communication or document to be made or delivered by one person to
another pursuant to the Finance Documents shall:
(a) if by way of fax, be deemed to have been received when transmission
has been completed; and
(b) if by way of letter, be deemed to have been delivered when left at
the relevant address or, as the case may be, ten days after being
deposited in the post postage prepaid in an envelope addressed to it
at such address,
provided that any communication or document to be made or delivered to
the Agent shall be effective only when received by its agency division
and then only if the same is expressly marked for the attention of the
department or officer identified with the Agent's signature below (or
such other department or officer as the Agent shall from time to time
specify for this purpose).
38.4 Notification of Changes
Promptly upon receipt of notification of a change or address of fax
number pursuant to Clause 38.2 (Addresses) or changing its own address
or fax number, the Agent shall notify the other parties hereto of such
change.
38.5 English Language
Each communication and document made or delivered by one party to
another pursuant to the Finance Documents shall be in the English
language or accompanied by a translation thereof into English certified
(by an officer of the person making or delivering the same) as being a
true and accurate translation thereof.
38.6 Deemed Receipt by the Obligors
Any communication or document made or delivered to the Parent in
accordance with Clause 38.3 (Delivery) shall be deemed to have been made
or delivered to each of the Obligors.
39. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument.
40. AMENDMENTS
40.1 Amendments
If the Agent has the prior consent of an Instructing Group, the Agent
and the Obligors may from time to time agree in writing to amend the
Finance Documents or to waive, prospectively or retrospectively, any of
the requirements of the Finance Documents and any amendments or waivers
so agreed shall be binding on all the Finance Parties and the Obligors
provided that no such waiver or amendment shall subject any party hereto
to any new or additional obligations without the consent of such party.
40.2 Amendments Requiring the Consent of all the Banks
An amendment or waiver which relates to:
(a) Clause 32 (Sharing) or this Clause 40;
(b) a change in the principal amount of or currency of any Advance, or
deferral of the Revolving Termination Date or a Term Repayment Date
or the Final Term Repayment Date;
(c) a change in the Margin, the amount or currency of any payment of
interest, fees or any other amount payable hereunder to any Finance
Party or deferral of the date for payment thereof;
(d) a release of the Parent from any of its obligations set out in
Clause 24 (Guarantee and Indemnity);
(e) the definition of Event of Default, Instructing Group, Material
Subsidiary, Default, Revolving Availability Period, Term
Availability Period, Term Repayment Date or Final Term Repayment
Date; or
(f) any provision which contemplates the need for the consent or
approval of all the Banks,
shall not be made without the prior consent of all the Banks.
40.3 Exceptions
Notwithstanding any other provisions hereof, the Agent shall not be
obliged to agree to any such amendment or waiver if the same would:
(a) amend or waive this Clause 40, Clause 26 (Costs and Expenses) or
Clause 33 (The Agent, the Mandated Lead Arrangers and the Banks); or
(b) otherwise amend or waive any of the Agent's rights hereunder or
subject the Agent or the Mandated Lead Arrangers to any additional
obligations hereunder.
41. GOVERNING LAW
(a) This Agreement is governed by English law.
(b) If any of the 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 shall govern the
existence and extent of such attorney's or attorneys' authority and
the effects of the exercise thereof.
42. JURISDICTION
42.1 English Courts
The courts of England have exclusive jurisdiction to settle any dispute
(a Dispute) arising out of or in connection with this Agreement
(including a dispute regarding the existence, validity or termination of
this Agreement or the consequences of its nullity).
42.2 Convenient Forum
The parties agree that the courts of England are the most appropriate
and convenient courts to settle Disputes between them and, accordingly,
that they will not argue to the contrary.
42.3 Non-Exclusive Jurisdiction
This Clause 42 is for the benefit of the Finance Parties only. As a
result and notwithstanding Clause 42.1 (English Courts), it does not
prevent any Finance Party from taking proceedings relating to a Dispute
(Proceedings) in any other courts with jurisdiction. To the extent
allowed by law, the Finance Parties may take concurrent Proceedings in
any number of jurisdictions.
42.4 Service of process
Without prejudice to any other mode of service allowed under any
relevant law, each Obligor (other than an Obligor incorporated in
England Wales):
(a) irrevocably appoints the Original Borrower as its agent for service
of process in relation to any proceedings before the English courts
in connection with any Finance Document (and the Original Borrower,
by its execution of this Agreement, accepts that appointment); and
(b) agrees that failure by a process agent to notify the relevant
Obligor of the process will not invalidate the proceedings
concerned.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
SCHEDULE 1
THE ORIGINAL PARTIES
Part I
The Banks
Name of Bank Term Commitment Revolving Commitment
(GBP) (GBP)
The Royal Bank of Scotland plc 23,888,788 61,853,333
HSBC Bank plc 23,888,788 61,853,333
BNP Paribas SA (London Branch) 21,571,488 55,853,333
WestLB AG, London Branch 21,102,668 54,639,454
Lloyds TSB Bank plc 19,104,851 49,466,666
Bank of America International Limited 13,888,788 17,438,889
The Bank of Tokyo-Mitsubishi Ltd. (London Branch) 11,946,969 13,053,031
ING Bank N.V., London Branch 7,157,882 18,533,333
Societe Generale 7,157,882 18,533,333
Wachovia Bank N.A. (London Branch) 7,157,882 18,533,333
The Governor and Company of the Bank of Ireland 4,789, 087 12,400,000
BRED Banque Populaire 4,789,087 12,400,000
Banco Bilbao Vizcaya Argentaria S.A. (London Branch) 2,394,543 6,200,000
Banco Popolare di Lodi S.C.A.R.L., London Branch 2,394,543 6,200,000
IXIS Corporate & Investment Bank 2,394,543 6,200,000
Credit Agricole Ille de France 2,317,300 6,000,000
State Bank of India (London Branch) 1,666,667 3,333,333
Chang Hwa Commercial Bank Limited (London Branch) 1,184,398 3,066,667
--------------------------------------------
Total 178,796,154 425,558,038
--------------------------------------------
Part II
The Original Guarantors
- ------------------------------------- ---------------------------------- -----------------------------------
Name Company Number/Trade Register of Jurisdiction
the Chamber of Commerce and
Industry in Amsterdam (The
Netherlands)
- ------------------------------------- ---------------------------------- -----------------------------------
RMC Group Limited 00249776 UK
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Espana, S.A. No. Hoja-Registro Mercantil, Spain
Madrid: M-156542, NIF: A46/004214
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Caracas Investments B.V. 34121194 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Egyptian Investment B.V. 34108365 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Manila Investments B.V. 34108359 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX American Holdings B.V. 34213058 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Shipping B.V. 34213063 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
CEMEX Caracas II Investments B.V. 34159953 The Netherlands
- ------------------------------------- ---------------------------------- -----------------------------------
SCHEDULE 2
FORM OF TRANSFER CERTIFICATE
To: The Agent
TRANSFER CERTIFICATE
relating to the agreement (as from time to time amended) varied, novated or
supplemented (the Credit Agreement) dated 18th October, 2002 whereby a
multicurrency term and revolving loan facility was made available to a group
of borrowers including RMC Group Limited by a group of banks on whose behalf
you act as agent in connection therewith.
1. Terms defined in the Credit Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms Bank, Transferee
and Portion Transferred are defined in the schedule hereto.
2. The Bank (i) confirms that the details in the schedule hereto under
the heading "Bank's Participation in the Revolving Facility",
"Revolving Advances", "Bank's Participation in the Term Facility" and
"Term Advances" accurately summarises its participation in the Credit
Agreement and the Interest Period or Term of any existing Advances and
(ii) requests the Transferee to accept and procure the transfer by
novation to the Transferee of the Portion Transferred (specified in
the schedule hereto) of its Revolving Commitment and its Term
Commitment and/or its participation in such Advance(s) by counter
signing and delivering this Transfer Certificate to the Agent at its
address for the service of notices specified in the Credit Agreement.
3. The Transferee hereby requests the Agent to accept this Transfer
Certificate as being delivered to the Agent pursuant to and for the
purposes of Clause 34.5 (Transfers by Banks) of the Credit Agreement
so as to take effect in accordance with the terms thereof on the
Transfer Date or on such later date as may be determined in accordance
with the terms thereof.
4. The Transferee confirms that it has received a copy of the Credit
Agreement together with such other information as it has required in
connection with this transaction and that it has not relied and will
not hereafter rely on the Bank to check or enquire on its behalf into
the legality, validity, effectiveness, adequacy, accuracy or
completeness of any such information and further agrees that it has
not relied and will not rely on the Bank to assess or keep under
review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of the Obligors.
5. The Transferee hereby undertakes with the Bank and each of the other
parties to the Credit Agreement that it will perform in accordance
with their terms all those obligations which by the terms of the
Finance Documents, will be assumed by it after delivery of this
Transfer Certificate to the Agent and satisfaction of the conditions
(if any) subject to which this Transfer Certificate is expressed to
take effect.
6. The Bank makes no representation or warranty and assumes no
responsibility with respect to the legality, validity, effectiveness,
adequacy or enforceability of the Finance Documents or any document
relating thereto and assumes no responsibility for the financial
condition of` the Obligors or for the performance and observance by
the Obligors of any of its obligations under the Finance Documents or
any document relating thereto and any and all such conditions and
warranties, whether express or implied by law or otherwise, are hereby
excluded.
7. The Bank hereby gives notice that nothing herein or in the Finance
Documents (or any document relating thereto) shall oblige the Bank to
(a) accept a re transfer from the Transferee of the whole or any part
of its rights, benefits and/or obligations under the Finance Documents
transferred pursuant hereto or (b) support any losses directly or
indirectly sustained or incurred by the Transferee for any reason
whatsoever including the non performance by an Obligor or any other
party to the Finance Documents (or any document relating thereto) of
its obligations under any such document The Transferee hereby
acknowledges the absence of any such obligation as is referred to in
(a) or (b) above.
8. This Transfer Certificate and the rights, benefits and obligations of
the parties hereunder shall be governed by and construed in accordance
with English law.
THE SCHEDULE
1. Bank:
2. Transferee:
3. Transfer Date:
4. Bank's Participation in the Revolving
Facility:
Bank's Revolving Commitment Portion Transferred
5. Revolving Advance(s): Term and Portion Transferred
Amount of Bank's Participation Repayment Date
6. Bank's Participation in the Portion Transferred
Term Facility:
Bank's Term Commitment
7. Term Advance(s): Interest Period Portion Transferred
Amount of Bank's Participation
[Transferor Bank] [Transferee Bank]
By: By:
Date: Date:
ADMINISTRATIVE DETAILS OF TRANSFEREE
Address:
Contact Name:
Account for Payments in sterling:
Fax:
Telephone:
- ------------------------------------------------------------------------------
* Details of the Bank's Available Term Commitment should not be completed
after the last day of the Term Availability Period
SCHEDULE 3
CONDITIONS PRECEDENT
1. In relation to Original Borrower:
(a) a copy, certified as at the date of this Agreement a true and up
to date copy by an Authorised Signatory of the Original
Borrower, of the constitutional documents of the Original
Borrower;
(b) a copy, certified as at the date of this Agreement a true and up
to date copy by an Authorised Signatory of the Original
Borrower, of a board resolution of the Original Borrower
approving the execution, delivery and performance of the Finance
Documents and the terms and conditions thereof and authorising a
named person or persons to sign the Finance Documents and any
documents to be delivered by the Original Borrower pursuant
thereto;
(c) a certificate of an Authorised Signatory of the Original
Borrower setting out the names and signatures of the persons
authorised to sign, on behalf of the Original Borrower, the
Finance Documents and any documents to be delivered by the
Original Borrower pursuant thereto; and
(d) a certificate of an Authorised Signatory of the Original
Borrower confirming that utilisation of the Facilities would not
breach any restriction of its borrowing powers.
2. An opinion of Clifford Chance LLP, solicitors to the Agent, in
substantially the form distributed to the Banks prior to the signing
of this Agreement.
3. Evidence that the fees, costs and expenses required to be paid by the
Original Borrower pursuant Clause 25.3 (Agency Fee), Clause 26.1
(Transaction Expenses) and Clause 26.3 (Stamp Taxes) have been paid.
4. A copy, certified a true copy by an Authorised Signatory of the
Original Borrower, of the Original Financial Statements of the
Original Borrower.
5. A certificate signed by an Authorised Signatory of the Original
Borrower confirming which companies within the RMC Group are Material
Subsidiaries.
6. The Syndication Letter.
7. Evidence satisfactory to the Agent that the Existing Facilities will
be repaid from the proceeds of the first drawdowns of the Facilities,
and cancelled.
SCHEDULE 4
NOTICE OF DRAWDOWN
From: [Borrower]
To: [Insert name of Agent]
Dated:
Dear Sirs,
1. We refer to an agreement (the "Credit Agreement") dated 18th October,
2002 as amended and made between a group of borrowers including RMC
Group Limited (the "Borrower"), Cemex Espana, S.A. (the "Parent") and
others as guarantors, Banc of America Securities Limited, BNP Paribas,
HSBC Investment Bank plc, The Royal Bank of Scotland plc and WestLB
Aktiengesellschaft as Mandated Lead Arrangers, The Royal Bank of
Scotland plc as Agent, and the financial institutions defined therein
as Banks.
2. Terms defined in the Credit Agreement shall have the same meaning in
this notice.
3. This notice is irrevocable [and we confirm that the purpose of this
Advance is in conformity with Clause 2.3 (Purpose and Application of
the Revolving Facility) of the Credit Agreement].*
4. We hereby give you notice that, pursuant to the Credit Agreement and
on [date of proposed Advance], we wish to borrow a [Term/Revolving]
Advance having an Original Sterling Amount of (pound)[o] upon the
terms and subject to the conditions contained therein.
5. We would like this Advance to be denominated in [currency].
6. [We would like this Advance to have a first Interest Period of [ ]
months duration.]*/[We would like this Advance to be divided upon the
making thereof into Advances as follows:
Original Sterling Amount Currency [Duration of First Interest
Period]*
OR
We would like this Advance to have a Term of [o] months duration.]**
7. We confirm that, at the date hereof, the Repeated Representations are
true in all material respects and no Event of Default [or Default] is
continuing.
8. The proceeds of this drawdown should be credited to [insert account
details].
Yours faithfully
...................................
Authorised Signatory
for and on behalf of
[Name of Borrower]
- ------------------------------------------------------------------------------
* Only for Term Advances.
** Delete as appropriate.
SCHEDULE 5
FORM OF COMPLIANCE CERTIFICATE
Part I
Parent's Compliance Certificate
To: [Insert name of Agent]
Date:
Dear Sirs,
We refer to an agreement (the "Credit Agreement") dated 18th October, 2002 as
amended and made between a group of borrowers including RMC Group Limited (the
"Borrower"), Cemex Espana, S.A. (the "Parent") and others as guarantors, Banc
of America Securities Limited, BNP Paribas, HSBC Investment Bank plc, The
Royal Bank of Scotland plc and WestLB Aktiengesellschaft as Mandated Lead
Arrangers, The Royal Bank of Scotland plc as Agent, and the financial
institutions defined therein as Banks.
Terms defined in the Credit Agreement shall bear the same meaning herein.
We confirm that:
[Insert details of financial conditions to be certified]
We confirm that the following companies constitute Material Subsidiaries for
the purposes of the Credit Agreement: [o].
[We confirm that, as at the date hereof, no Event of Default has occurred and
is continuing.]*
This compliance certificate is given without liability by the
[auditors/director].
[Signed: ...............
Director
of
[Parent]
or
.....................
for and on behalf of
[name of auditors of the Parent]
* Delete if compliance certificate signed by Auditors. If this statement
cannot be made, the certificate should identify any Event of Default that is
outstanding and the steps if any, being taken to remedy it.
Part II
Original Borrower's Compliance Certificate
To: [Insert name of Agent]
Date:
Dear Sirs,
We refer to an agreement (the "Credit Agreement") dated 18th October, 2002 as
amended and made between a group of borrowers including RMC Group Limited (the
"Borrower"), Cemex Espana, S.A. (the "Parent") and others as guarantors, Banc
of America Securities Limited, BNP Paribas, HSBC Investment Bank plc, The
Royal Bank of Scotland plc and WestLB Aktiengesellschaft as Mandated Lead
Arrangers, The Royal Bank of Scotland plc as Agent, and the financial
institutions defined therein as Banks.
Terms defined in the Credit Agreement shall bear the same meaning herein.
We confirm that:
[Insert details of financial conditions to be certified]
We confirm that:
[insert details of RMC Borrowing/EBITDA Ratio for Margin calculation
purposes]
This compliance certificate is given without liability by the
[auditors/director].
[Signed: ...............
Director
of
[Original Borrower]
or
.....................
for and on behalf of
[name of auditors of the Original Borrower]
SCHEDULE 6
FORM OF ACCESSION MEMORANDUM
To: [Insert name of Agent]
From: [Subsidiary]
and
RMC Group Limited
Date:
Dear Sirs,
1. We refer to an agreement (the "Credit Agreement") dated 18th October,
2002 as amended and made between a group of borrowers including RMC
Group Limited (the "Borrower"), Cemex Espana, S.A. (the "Parent") and
others as guarantors, Banc of America Securities Limited, BNP Paribas,
HSBC Investment Bank plc, The Royal Bank of Scotland plc and WestLB
Aktiengesellschaft as Mandated Lead Arrangers, The Royal Bank of
Scotland plc as Agent, and the financial institutions defined therein
as Banks.
2. Terms defined in the Credit Agreement shall bear the same meaning
herein.
3. The Parent requests that [Subsidiary] become an [Additional
Borrower/Additional Guarantor] pursuant to Clause [35.1 (Request for
Additional Borrower)/35.4 (Request for Additional Guarantor)] of the
Credit Agreement.
4. [Subsidiary] is a company duly organised under the laws of [name of
relevant jurisdiction].
5. [Subsidiary] confirms that it has received from the Parent a true and
up to date copy of the Credit Agreement.
6. [Subsidiary] undertakes, upon its becoming a [Borrower/Guarantor], to
perform all the obligations expressed to be undertaken under the
Credit Agreement by a [Borrower/ Guarantor] and agrees that it shall
be bound by the Credit Agreement in all respects as if it had been an
original party thereto as an [Original Borrower/Original Guarantor].
7. The Parent confirms that, if [Subsidiary] is accepted as an
[Additional Borrower/Additional Guarantor], its guarantee obligations
pursuant to Clause 0 (Guarantee and Indemnity) of the Credit Agreement
will apply to all the obligations of [Subsidiary] under the Finance
Documents in all respects in accordance with the terms of the Credit
Agreement.
8. The Parent:
(a) repeats the Repeated Representations; and
(b) confirms that no Event of Default or Default is continuing or
would occur as a result of [Subsidiary] becoming an [Additional
Borrower/Additional Guarantor].
9. [Subsidiary] makes the representations and warranties set out in
Clause 19.1 (Status) to Clause 19.18 (No Immunity).
10. [Subsidiary's] administrative details are as follows:
Address:
Fax No.:
11. [Process Agent*
[Subsidiary] agrees that the documents which start any Proceedings and
any other documents required to be served in relation to those
Proceedings may be served [on it at [address of Subsidiary's place of
business in England] or at any address in Great Britain at which
process may be served on it in accordance with Part XXIII of the
Companies Act 1985]/[on [name of process agent in England at, address
of process agent] or, if different, its registered office. If
[[Subsidiary], ceases to have a place of business in Great
Britain]/[the appointment of the person mentioned above ceases to be
effective], [Subsidiary] shall immediately appoint another person in
England to accept service of process on its behalf in England. If it
fails to do so (and such failure continues for a period of not less
than fourteen days), the Agent shall be entitled to appoint such a
person by notice. Nothing contained herein shall restrict the right to
serve process in any other manner allowed by law. This applies to
Proceedings in England and to Proceedings elsewhere.]
12. This Memorandum shall be governed by English law.
[Parent] [Subsidiary]
By:......................... By:.........................
* This clause is required only if the Additional Borrower is not incorporated
in England or Wales.
SCHEDULE 7
ADDITIONAL CONDITIONS PRECEDENT
1. A copy certified as at the, date of the relevant Accession Memorandum
a true and up to date copy by an Authorised Signatory of the proposed
Additional Borrower or Additional Guarantor, of the constitutional
documents of such proposed Additional Borrower or Additional
Guarantor, as the case may be.
2. A copy, certified as at the date of the relevant Accession Memorandum
a true and up to date copy by an Authorised Signatory of the proposed
Additional Borrower or Additional Guarantor, of a board resolution of
such proposed Additional Borrower or Additional Guarantor approving
the execution and delivery of an Accession Memorandum, the accession
of such proposed Additional Borrower or Additional Guarantor to this
Agreement and the performance of its obligations under the Finance
Documents and authorising a named person or persons to sign such
Accession Memorandum, any other Finance Document and any other
documents to be delivered by such proposed Additional Borrower or
Additional Guarantor pursuant thereto.
3. A certificate of an Authorised Signatory of the proposed Additional
Borrower or Additional Guarantor setting out the names and signatures
of the person or persons authorised to sign, on behalf of such
proposed Additional Borrower or Additional Guarantor, the Accession
Memorandum, any other Finance Documents and any other documents to be
delivered by such proposed Additional Borrower or Additional Guarantor
pursuant thereto.
4. A certificate of an Authorised Signatory of the proposed Additional
Borrower or Additional Guarantor confirming that the utilisation of
the Facilities would not breach any restriction of its borrowing
powers.
5. If the proposed Additional Borrower or Additional Guarantor is
incorporated in a jurisdiction other than England and Wales, a copy,
certified a true copy by or on behalf of the proposed Additional
Borrower or Additional Guarantor, of each such law, decree, consent,
licence, approval, registration or declaration as is, in the opinion
of counsel to the Banks, necessary to render the relevant Accession
Memorandum legal, valid, binding and enforceable to make such
Accession Memorandum admissible in evidence in the proposed Additional
Borrower's or Additional Guarantor's jurisdiction of incorporation and
to enable the proposed Additional Borrower or Additional Guarantor to
perform its obligations thereunder and under the other Finance
Documents.
6. If the proposed Additional Borrower is incorporated in Spain, a
certified copy of the form(s) PE-1 stamped by the Bank of Spain (Banco
de Espana), whereby it assigns Financial Operation Number(s) to the
Facilities.
7. A copy, certified a true copy by an Authorised Signatory of the
proposed Additional Borrower or Additional Guarantor, of its latest
financial statements.
8. If the proposed Additional Borrower or Additional Guarantor is
incorporated in a jurisdiction other than England and Wales, an
opinion of the Banks' local counsel in the relevant jurisdiction in
form and substance satisfactory to the Agent.
9. An opinion of Clifford Chance LLP, solicitors to the Agent, in form
and substance satisfactory to the Agent.
10. If the proposed Additional Borrower or Additional Guarantor is
incorporated in a jurisdiction other than England and Wales, evidence
that the process agent specified in the relevant Accession Memorandum
has agreed to act as its agent for the service or process in England.
SCHEDULE 8
FORM OF RESIGNATION NOTICE
Part I
Resignation of Additional Borrower
To: [Insert name of Agent]
From: Cemex Espana, S.A.
Dated:
Dear Sirs,
1. We refer to an agreement (the "Credit Agreement") dated 18th October,
2002 as amended and made between a group of borrowers including RMC
Group Limited (the "Borrower"), Cemex Espana, S.A. (the "Parent") and
others as guarantors, Banc of America Securities Limited, BNP Paribas,
HSBC Investment Bank plc, The Royal Bank of Scotland plc and WestLB
Aktiengesellschaft as Mandated Lead Arrangers, The Royal Bank of
Scotland plc as Agent, and the financial institutions defined therein
as Banks.
2. Terms defined in the Credit Agreement shall bear the same meaning
herein.
3. We declare that [name of Borrower] is under no actual or contingent
obligation under any Finance Document in its capacity as a Borrower.
4. Pursuant to Clause 35.3 (Resignation of an Additional Borrower) we
hereby request that [name of Obligor] shall cease to be a Borrower
under the Credit Agreement.
Yours faithfully
Cemex Espana, S.A.
Part II
Resignation of Guarantor
To: [Insert name of Agent]
From: Cemex Espana, S.A.
Dated:
Dear Sirs,
1. We refer to an agreement (the "Credit Agreement") dated 18th October,
2002 as amended and made between a group of borrowers including RMC
Group Limited (the "Borrower"), Cemex Espana, S.A. (the "Parent") and
others as guarantors, Banc of America Securities Limited, BNP Paribas,
HSBC Investment Bank plc, The Royal Bank of Scotland plc and WestLB
Aktiengesellschaft as Mandated Lead Arrangers, The Royal Bank of
Scotland plc as Agent, and the financial institutions defined therein
as Banks.
2. Terms defined in the Credit Agreement shall bear the same meaning
herein.
3. [We declare that [name of Guarantor] has made 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/ becomes a
Guarantor in accordance with Clause 35.4 (Request for Additional
Guarantors)].
[We declare that:
(a) [name of Guarantor]'s Holding Company becomes a Guarantor and
[name of Guarantor] ceases concurrently to be a guarantor in
respect of any other indebtedness of the Group or of any member
of the Group; and
(b) [name of Guarantor] has notified the Agent of any sale, lease,
transfer or other disposal in accordance with paragraph (a) of
Clause 35.6 of the Credit Agreement.]
4. Pursuant to Clause 35.6 (Resignation of a Guarantor) we hereby request
that [name of Obligor] shall cease to be a Guarantor under the Credit
Agreement.
Yours faithfully
Cemex Espana, S.A.
SCHEDULE 9
MANDATORY COST
1. The Mandatory Cost is an addition to the interest rate to compensate
the Banks 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 Bank, in accordance with the
paragraphs set out below. The Mandatory Cost will be calculated by the
Agent as a weighted average of the Banks' Additional Cost Rates
(weighted in proportion to the percentage participation of each Bank
in the relevant Advance) and will be expressed as a percentage rate
per annum.
3. The Additional Cost Rate for any Bank lending from a Facility Office
in a Participating Member State will be the percentage notified by
that Bank to the Agent. This percentage will be certified by that Bank
in its notice to the Agent to be its reasonable determination of the
cost (expressed as a percentage of that Bank's participation in all
Advances 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 Bank lending from a Facility Office
in the United Kingdom will be calculated by the Agent as follows:
(a) in relation to a sterling Advance:
AB + C(B-D) + Ex0.01
---------------------- per cent. per annum
100 - (A+C)
(b) in relation to a Advance in any currency other than sterling:
Ex0.01
--------- 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 Bank 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 Advance is an Unpaid Sum, the additional
rate of interest specified in paragraph (a) of Clause 27.2 (Default
interest)) payable for the relevant Interest Period on the Advance.
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 Banks 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 7 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 Bank shall supply any information required by the Agent for the
purpose of calculating its Additional Cost Rate. In particular, but
without limitation, each Bank shall supply the following information
on or prior to the date on which it becomes a Bank:
(a) the jurisdiction of its Facility Office; and
(b) any other information that the Agent may reasonably require for
such purpose.
Each Bank shall promptly notify the Agent of any change to the
information provided by it pursuant to this paragraph.
9. The percentages of each Bank 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 Bank notifies the Agent to the contrary, each Bank'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
Bank and shall be entitled to assume that the information provided by
any Bank 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 Banks on the basis of the Additional Cost
Rate for each Bank based on the information provided by each Bank 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 Bank 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 Parent
and the Banks, determine and notify to all parties any amendments
which are required to be made to this Schedule 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.
SCHEDULE 10
EXISTING SECURITY
CONSOLIDATED GROUP
LIEN SCHEDULE (M (euro)) AS OF 12.31.04
- ---------------------------------------------------------------------------------------------------------------------------------
COMPANY LENDER LIEN CONCEPT BALANCE EURO
- ---------------------------------------------------------------------------------------------------------------------------------
CEMEX, Inc. GE Capital (FKIT 279, 280) Equipment related with the credit 0.66
Kosmos Cement Company First Corp (FKIT 101649) Equipment related with the credit 0.02
CEMEX, Inc. Hampton Land related with the credit 0.20
Mineral Resource Technologies, Inc. Met-South, Inc. Ash storage facility 0.13
Centro Distributor de Cemento,
S.A. de C.V. Bank of America 0.61
--------
1.61
- ---------------------------------------------------------------------------------------------------------------------------------
SCHEDULE 11
MATERIAL SUBSIDIARIES
- -------------------------------------------------------
Name
- -------------------------------------------------------
Cemex Inc.
- -------------------------------------------------------
Cemex Corp.
- -------------------------------------------------------
Cemex Venezuela SACA
- -------------------------------------------------------
Vencement Investments
- -------------------------------------------------------
Construction Funding Corporation
- -------------------------------------------------------
RMC Europe Limited
- -------------------------------------------------------
RMC (UK) Limited
- -------------------------------------------------------
SCHEDULE 12
EXISTING NOTARISATIONS
Type Borrower/Guarantor Maturity date Total Principal Amount of
of Indebtedness notarised as of December
Agreement 31, 2004
Bilateral Lines Cemex Espana S.A./n.a. Between Jan. 2005 EUR 51,086,029 (1) (2)
and Dec. 2006
Deferred Purchase
Price Aricemex S.A./n.a. July, 2005 EUR 480,810
(1) Corresponds to the total committed amount under the facilities.
Amount drawn as of 12.31.04: EUR 23,808,155.
(2) EUR 48,080,968 matured in January 26, 2005.
SIGNATURES
The Original Guarantor
RMC GROUP LIMITED
By: /s/ R. E. LAMBOURNE
The Original Borrower
RMC GROUP LIMITED
By: /s/ R. E. LAMBOURNE
The Mandated Lead Arrangers
BANC OF AMERICA SECURITIES LIMITED
By: /s/ CHARLES BINGHAM
BNP PARIBAS
By: /s/ MICHAEL REDFERNE /s/ SIMON ALLOCCA
HSBC INVESTMENT BANK PLC
By: /s/ E. M. FLANDERS
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ M. I. PORTER
WESTLB AG, LONDON BRANCH
By: /s/ A. SUTHERLAND /s/ T. SAI LOUIE
The Agent
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ M. I. PORTER
The Banks
BANK OF AMERICA, N.A.
By: /s/ CHARLES BINGHAM
BNP PARIBAS
By: /s/ MICHAEL REDFERNE /s/ SIMON ALLOCCA
HSBC BANK PLC
By: /s/ I. A. DUNN
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ M. I. PORTER
WESTLB AG, LONDON BRANCH
By: /s/ A. SUTHERLAND /s/ T. SAI LOUIE
EXHIBIT 4.22
TERM 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
BARCLAYS BANK PLC,
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
and
BARCLAYS BANK PLC,
CITIBANK, N.A.,
and
CITIBANK, N.A., NASSAU, BAHAMAS BRANCH
as Lenders
US$1,000,000,000
Dated as of April 5, 2005
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................................................1
1.01 Certain Definitions................................................................................1
1.02 Other Definitional Provisions.....................................................................17
1.03 Accounting Terms and Determinations...............................................................17
ARTICLE II THE LOAN FACILITIES............................................................................17
2.01 Loans.............................................................................................17
2.02 Interest..........................................................................................21
ARTICLE III TERMINATION AND REDUCTION OF COMMITMENTS; FEES, TAXES, PAYMENT PROVISIONS......................22
3.01 Termination or Reduction of Commitments...........................................................22
3.02 Fees..............................................................................................23
3.03 Taxes.............................................................................................23
3.04 General Provisions as to Payments.................................................................25
3.05 Funding Losses....................................................................................27
3.06 Basis for Determining Interest Rate Inadequate or Unfair..........................................27
3.07 Capital Adequacy..................................................................................28
3.08 Illegality........................................................................................28
3.09 Requirements of Law...............................................................................29
3.10 Substitute Lenders................................................................................30
3.11 Sharing of Payments, Etc..........................................................................30
ARTICLE IV CONDITIONS PRECEDENT...........................................................................31
4.01 Conditions to Effectiveness.......................................................................31
4.02 Conditions Precedent to Borrowings and Continuation or
Conversion of the Loans..........................................................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................33
5.01 Corporate Existence and Power.....................................................................33
5.02 Power and Authority; Enforceable Obligations......................................................33
5.03 Compliance with Law and Other Instruments.........................................................34
5.04 Consents/Approvals................................................................................34
5.05 Financial Information.............................................................................34
5.06 Litigation........................................................................................35
5.07 No Immunity.......................................................................................35
5.08 Governmental Regulations..........................................................................35
5.09 Direct Obligations; Pari Passu; Liens.............................................................35
5.10 Subsidiaries......................................................................................35
5.11 Ownership of Property.............................................................................35
5.12 No Recordation Necessary..........................................................................35
5.13 Taxes.............................................................................................36
5.14 Compliance with Laws..............................................................................36
5.15 Absence of Default................................................................................37
5.16 Full Disclosure...................................................................................37
5.17 Choice of Law; Submission to Jurisdiction and
Waiver of Sovereign Immunity.....................................................................37
5.18 Total Outstandings................................................................................37
5.19 Pension and Welfare Plans.........................................................................37
5.20 Environmental Matters.............................................................................37
5.21 Margin Regulations................................................................................38
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS...............................................39
6.01 Corporate Existence and Power.....................................................................39
6.02 Power and Authority; Enforceable Obligations......................................................39
6.03 Compliance with Law and Other Instruments.........................................................39
6.04 Consents/Approvals................................................................................40
6.05 Litigation; Material Adverse Effect...............................................................40
6.06 No Immunity.......................................................................................40
6.07 Governmental Regulations..........................................................................40
6.08 Direct Obligations; Pari Passu....................................................................40
6.09 No Recordation Necessary..........................................................................40
6.10 Choice of Law; Submission to Jurisdiction and
Waiver of Sovereign Immunity.....................................................................41
ARTICLE VII AFFIRMATIVE COVENANTS..........................................................................41
7.01 Financial Reports and Other Information...........................................................41
7.02 Notice of Default and Litigation..................................................................42
7.03 Compliance with Laws and Contractual Obligations, Etc.............................................42
7.04 Payment of Obligations............................................................................43
7.05 Maintenance of Insurance..........................................................................43
7.06 Conduct of Business and Preservation of Corporate Existence.......................................43
7.07 Books and Records.................................................................................43
7.08 Maintenance of Properties, Etc....................................................................43
7.09 Use of Proceeds...................................................................................44
7.10 Pari Passu Ranking................................................................................44
7.11 Transactions with Affiliates......................................................................44
7.12 Maintenance of Governmental Approvals.............................................................44
7.13 Inspection of Property............................................................................44
ARTICLE VIII NEGATIVE COVENANTS.............................................................................45
8.01 Financial Conditions..............................................................................45
8.02 Liens.............................................................................................45
8.03 Consolidations and Mergers........................................................................47
8.04 Sales of Assets, Etc..............................................................................48
8.05 Change in Nature of Business......................................................................48
8.06 Margin Regulations................................................................................48
ARTICLE IX OBLIGATIONS OF GUARANTORS......................................................................48
9.01 The Guaranty......................................................................................48
9.02 Nature of Liability...............................................................................48
9.03 Unconditional Obligations.........................................................................48
9.04 Independent Obligation............................................................................49
9.05 Waiver of Notices.................................................................................49
9.06 Waiver of Defenses................................................................................50
9.07 Bankruptcy and Related Matters....................................................................50
9.08 No Subrogation....................................................................................52
9.09 Right of Contribution.............................................................................52
9.10 General Limitation on Guaranty....................................................................52
9.11 Covenants of the Guarantors.......................................................................52
ARTICLE X EVENTS OF DEFAULT..............................................................................53
10.01 Events of Default................................................................................53
10.02 Remedies.........................................................................................55
10.03 Notice of Default................................................................................55
10.04 Default Interest.................................................................................55
ARTICLE XI THE ADMINISTRATIVE AGENT.......................................................................56
11.01 Appointment and Authorization....................................................................56
11.02 Delegation of Duties.............................................................................56
11.03 Liability of Administrative Agent................................................................56
11.04 Reliance by Administrative Agent.................................................................57
11.05 Notice of Default................................................................................57
11.06 Credit Decision..................................................................................57
11.07 Indemnification..................................................................................58
11.08 Administrative Agent in Individual Capacity......................................................58
11.09 Successor Administrative Agent...................................................................59
ARTICLE XII THE JOINT BOOKRUNNERS..........................................................................59
12.01 The Joint Bookrunners............................................................................59
12.02 Liability of Joint Bookrunners...................................................................60
12.03 Joint Bookrunners in their respective Individual Capacities......................................60
12.04 Credit Decision..................................................................................60
ARTICLE XIII MISCELLANEOUS..................................................................................61
13.01 Notices..........................................................................................61
13.02 Amendments and Waivers...........................................................................61
13.03 No Waiver; Cumulative Remedies...................................................................62
13.04 Payment of Expenses, Etc.........................................................................62
13.05 Indemnification..................................................................................63
13.06 Successor and Assigns............................................................................63
13.07 Right of Set-off.................................................................................65
13.08 Confidentiality..................................................................................65
13.09 Use of English Language..........................................................................66
13.10 Governing Law....................................................................................66
13.11 Submission to Jurisdiction.......................................................................66
13.12 Appointment of Agent for Service of Process......................................................67
13.13 Waiver of Sovereign Immunity.....................................................................67
13.14 Judgment Currency................................................................................67
13.15 Counterparts.....................................................................................68
13.16 USA Patriot Act..................................................................................68
13.17 Severability.....................................................................................68
13.18 Survival of Agreements and Representations.......................................................68
SCHEDULES
Schedule 1.01(a) -- Commitments
Schedule 1.01(b) -- Lending Offices
Schedule 5.06 -- Litigation
Schedule 5.10 -- Subsidiaries
Schedule 6.05 -- Litigation
Schedule 8.02 -- 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
TERM CREDIT AGREEMENT
TERM CREDIT AGREEMENT, dated as of April 5, 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"), CITIGROUP GLOBAL MARKETS INC.,
as Documentation Agent, BARCLAYS BANK PLC, as Administrative Agent and as a
Lender, CITIBANK, N.A., as a Lender and CITIBANK, N.A., NASSAU, BAHAMAS
BRANCH, as a Lender.
RECITALS
WHEREAS, the Borrower desires that the Lenders extend a
multi-currency, multi-draw term credit facility to the Borrower to fund the
repayment of certain indebtedness of the Borrower; 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
3.08(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 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:
Applicable Margin
LIBOR and
Date Base Rate Loans Euribor Loans
- --------------------------------------------------------------------------- --------------- -------------
Effective Date up to and including the date 90 days following the 0.30% 0.30%
Effective Date
Commencing on and including the date 91 days following the Effective Date 0.40% 0.40%
until the Termination Date
"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.
"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 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 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, 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 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 four consecutive fiscal quarters immediately
preceding such fiscal quarter.
"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 (d) all Temporary Investments of the
Borrower and its Subsidiaries at 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 Leverage 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 the
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 at such time on the basis of the Spot Rate that
has been in effect two Business Days prior to the Disbursement Date
for such Loan (without regard to any subsequent fluctuations in the
Spot Rate) 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 Leverage 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.
"Facility Fee" has the meaning specified in Section 3.02.
"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 March 30, 2005 referred to in
Section 3.02.
"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 3.05.
"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 calendar month commencing in April
2005, 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 month
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.
"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 or any other
Transaction Document.
"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.
"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 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.
"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. 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
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.
"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.
"Termination Date" means the date which is the earliest of
(a) the date 180 days following the Effective Date, or if extended
with the written consent of such Lender, such later 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, it's Total Outstandings at such time.
"Total Outstandings" means at any time, as to any Lender,
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.
"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 or Euribor Business 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 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 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 of up to 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 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 prepaid 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 3.06 and Section 3.08, and
(B) Loans denominated in Euro shall consist solely of Euribor Loans,
subject to Section 3.06 and Section 3.08.
(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) 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 10:00 a.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 third LIBOR Business Day, or
Euribor Business Day, if 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) Maximum Borrowings. The Borrower may receive
Borrowings pursuant to up to six (6) Notices of Borrowing. For
avoidance of doubt, a Notice of Extension/Conversion is not a Notice
of Borrowing. Amounts repaid hereunder may not be reborrowed.
(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
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 be disregarded for purposes of
calculating the Facility 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 Facility 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 Facility
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)
except as provided in Section 3.08, LIBOR 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, (ii) LIBOR Loans may be extended, and Base Rate Loans may be
converted into LIBOR Loans, only if the conditions in Section 4.02
have been satisfied, (iii) Loans extended as, or converted into,
LIBOR 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 (iv) any
request for extension or conversion of a LIBOR 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, in the case
of the conversion of a LIBOR Loan into a Base Rate Loan, and on the
third LIBOR Business Day prior to, in the case of the extension of a
LIBOR Loan as, or conversion of a Base Rate Loan into, a LIBOR 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 in accordance with this
Section, or any such conversion or extension is not required by this
Section, then such LIBOR 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. It being 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 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 are not permitted to be converted into
another LIBOR Loan hereunder, such LIBOR 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.
(g) Notes. Each Lender's Commitment Percentage of the Loans
shall be evidenced by a duly executed note in favor of such Lender in
the form of Exhibit A attached hereto.
(h) Maximum Number of LIBOR Loans. The Borrower will be
limited to a maximum number of six (6) 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 Rate 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 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 in each case shall be payable for
the actual number of days elapsed (including the first day but
excluding the last day) 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. The applicable Base Rate
or LIBOR 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 three Business
Days' notice to the Administrative Agent and the Joint Bookrunners,
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.
(c) Any reduction of the Commitments shall reduce the
Commitment of each Lender pro rata.
3.02 Fees. The Borrower agrees to pay to the Administrative
Agent, on the Effective Date, for the account of the Lenders ratably in
accordance with their Commitment Percentage a facility fee (the "Facility
Fee") as agreed in the Fee Letter.
3.03 Taxes.
(a) Any and all payments by the Borrower or the 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 3.03(c), the
Borrower and the Guarantors 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 3.03) 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 therefore, 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 3.03, 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 3.03(f) or to the extent provided in
Section 3.03(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 3.03(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
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 Guarantor, 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 3.03 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 3.10 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 3.03(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 3.03 shall survive the
termination of this Credit Agreement and the payment of the
Borrower's Obligations.
3.04 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.
3.05 Funding Losses. If the Borrower makes any payment of
principal with respect to any LIBOR 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 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 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 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 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.
3.06 Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any LIBOR
Loan:
(a) the Administrative Agent determines that by reason of
circumstances affecting the London interbank market, reasonably
adequate means do not exist for ascertaining LIBOR applicable to such
Interest Period or that deposits in Dollars (in the applicable
amounts) are not being offered in the London interbank market for
such Interest Period, or
(b) the Required Lenders advise the Administrative Agent
that LIBOR 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 advise, 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.
3.07 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 3.07, (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.
3.08 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 3.06(c),
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, 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, made by it be converted to Base Rate Loans, in which
event all such LIBOR 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 that would have been made
by such Lender or the converted LIBOR 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.
(b) For purposes of this Section 3.08, 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.
3.09 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 the LIBOR 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 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 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.
3.10 Substitute Lenders. If any Lender has demanded
compensation (or if the Borrower is required to increase amounts payable
hereunder) pursuant to Sections 3.03, 3.07, 3.08 or to 3.09, and such Lender
does not waive its right to future additional compensation pursuant to Section
3.03, 3.07, 3.08 or 3.09, 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
3.03, 3.07, 3.08 or 3.09; 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 3.07) unless any such amount is being contested
by the Borrower in good faith.
3.11 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 3.11 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 3.11 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.
(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, 2003 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.
(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.
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) Notes. If requested by a Lender, there shall have been
delivered to the Administrative Agent for the account of such Lender,
a Note, executed by the Borrower;
(b) 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;
(c) Availability. Immediately after such Borrowing or the
continuation or conversion of any Loan, the Total Outstandings shall
not exceed the Aggregate Committed Amount;
(d) 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
(e) 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.
(a) The consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 2003, 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,
copies of which have been furnished to each Lender, fairly present,
the consolidated financial condition of the Borrower and its
Subsidiaries as at such date and the consolidated results of the
operations of the Borrower and its Subsidiaries for the period ended
on such date, all in accordance with Mexican GAAP, consistently
applied.
(b) The unaudited consolidated balance sheet of the Borrower
and its Subsidiaries as at December 31, 2004 and the related
consolidated statements of income, changes in equity and changes in
financial position for the fiscal year then ended, copies of which
have been furnished to each Lender, were prepared in conformity with
Mexican GAAP and fairly present the consolidated financial condition
of the Borrower and its Subsidiaries as at December 31, 2004 and the
results of operations for the fiscal period ended on such date.
(c) Since December 31, 2003 there has been no development or
event which has had or is reasonably likely to have a Material
Adverse Effect.
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. All Material Subsidiaries of the Borrower
are listed on Schedule 5.10.
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 3.03.
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 Total Outstandings. The Total Outstandings do not
exceed the aggregate amount of the Commitments.
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, without
limitation, 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, without
limitation, 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. (a) 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.
(b) Since December 31, 2003 there has been no development or
event which has had or is reasonably likely to have a Material
Adverse Effect.
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.
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 but not limited to 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 to repay amounts outstanding under the credit
agreement of New Sunward Holding B.V. dated September 24, 2004 or the credit
agreement of New Sunward Holding B.V. dated October 15, 2003 and to pay fees
and expenses related to this Agreement.
7.10 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.
7.11 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.
7.12 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.
7.13 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 Leverage
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 such 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 as
described in Schedule 8.02 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. The Borrower shall not, and
shall not permit any Material Subsidiary to, 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 Material Subsidiary, 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 Material Subsidiary (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 Subsidiary for such Subsidiary and treating any Debt
or Lien incurred by the Borrower or any Successor to the Borrower, or
by a Subsidiary of the Borrower or any Successor to such Subsidiary,
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 guarantee (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 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 as known of 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 on 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), 7.10 or 7.14 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 or any other Transaction
Document (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 the Transaction Documents; 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 any Transaction Document to which it is a party; or
(n) Material Adverse Effect. There shall occur any
circumstance, event or condition of a financial or other nature which
the Lenders determine in good faith is reasonably likely to have a
material adverse effect on the ability of the Borrower or either
Guarantor to perform its obligations under this Agreement or any of
the other Transaction Documents; or
(o) 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 Lenders:
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 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(c).
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 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 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 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 term 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 the signature pages hereof 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 3.04(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 docume nted out-of-pocket costs and
expenses (including reasonable leg al fees and disbursements of
special Mexican and New York counsel to t he 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 counsel for
the Administrative Agent and the allocated cost of in-house counsel
thereof; 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 counsel for the Administrative Agent, such Lender and the
allocated costs of in-house counsel thereof.
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 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 the 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 3.09, 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.$2,000.
(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 3.06 and 3.09 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,
3.06, 3.08, 3.09, 13.04, 13.05, 13.08, 13.09, 13.11 and 13.12, and
the obligations of the Lenders under Section 11.07, shall survive the
termination of the Commitments 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 APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
CEMEX, S.A. DE C.V.,
as Borrower
By /s/ Humberto Lozano
----------------------------------
Name: Humberto Lozano
Title:
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
CEMEX MEXICO, S.A. DE C.V.,
as Guarantor
By /s/ Humberto Lozano
----------------------------------
Name: Humberto Lozano
Title: Attorney-in-Fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
EMPRESAS TOTLECA DE MEXICO,
S.A. DE C.V.,
as Guarantor
By /s/ Humberto Lozano
----------------------------------
Name: Humberto Lozano
Title: Attorney-in-Fact
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
BARCLAYS BANK PLC,
as Administrative Agent
By /s/ Vidal H. Ramirez
----------------------------------
Name: Vidal H. Ramirez
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
BARCLAYS CAPITAL, THE INVESTMENT
BANKING DIVISION OF BARCLAYS BANC 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 APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
CITIGROUP GLOBAL MARKETS INC.,
as Documentation Agent, Joint Lead
Arranger and Joint Bookrunner
By /s/ Carlos Corona
----------------------------------
Name: Carlos Corona
Title: Director
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
BARCLAYS BANK PLC,
as a 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 APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
CITIBANK, N.A,
as a Lender
By /s/ Carlos Corona
----------------------------------
Name: Carlos Corona
Title: Vice President
THIS PAGE IS A SIGNATURE PAGE TO THE CREDIT AGREEMENT, DATED AS OF APRIL 5,
2005, AMONG CEMEX, S.A. DE C.V., AS BORROWER, CEMEX MEXICO, S.A. DE C.V. AND
EMPRESAS TOLTECA DE MEXICO, S.A. DE C.V., AS GUARANTORS, BARCLAYS BANK PLC, AS
ADMINISTRATIVE AGENT AND AS A LENDER, CITIBANK, N.A., AS A LENDER, CITIBANK,
N.A., NASSAU, BAHAMAS BRANCH, AS A LENDER, 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.
CITIBANK, N.A, NASSAU, BAHAMAS
BRANCH,
as a Lender
By /s/ Leslie Munroe
----------------------------------
Name: Leslie Munroe
Title: Attorney-in-Fact
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:
[GRAPHIC OMITTED] percent per annum
in relation to a Loan in any currency other than Sterling:
[GRAPHIC OMITTED] percent per annum.
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.
SCHEDULE 1.01(a)
----------------
Commitment
----------
- ------------------------------ ----------------- -----------------------
Commitment
Amount
Lender (in USD) Commitment Percentage
- ------------------------------ ----------------- -----------------------
$650,000,000 65%
Barclays Bank PLC
- ------------------------------ ----------------- -----------------------
Citibank, N.A. $250,000,000 25%
- ------------------------------ ----------------- -----------------------
Citibank, N.A. Nassau, $100,000,000 10%
Bahamas Branch
- ------------------------------ ----------------- -----------------------
SCHEDULE 1.01(b)
----------------
Lending Offices
---------------
- ------------------------------------------------------- -----------------------------------------------------
Lender Lending Offices
- ------------------------------------------------------- -----------------------------------------------------
Barclays Bank PLC 200 Park Avenue
New York, New York 10166
Attention: Nicholas A. Bell
Telephone: 212-412-4029
Fax: 212-412-7600
Email: Nicholas.Bell@barclayscapital.com
- ------------------------------------------------------- -----------------------------------------------------
Citibank, N.A. 2 Penns Way Suite 110
New Castle, DE 19720
Attention: Paul Joseph
F: 212-994-0849
P: 302-894-6016
Email: paul.o.joseph@citigroup.com
- ------------------------------------------------------- -----------------------------------------------------
Citibank, N.A. Nassau, Thompson Boulevard At Oaks Field
Bahamas Branch P.O. Box N-1576 Nassau, Bahamas
Attention: Maria Antonieta Zertuche / Jesus Cantu
Telephone: (81) 1226-8526 / 8505
Fax: (81) 1226-8560
Email: mzertucheiz@banamex.com / jcantu@banamex.com
- ------------------------------------------------------- -----------------------------------------------------
Schedule 5.06
-------------
Litigation
----------
A description of material regulatory and legal matters affecting
CEMEX and its Subsidiaries is provided below.
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the
Commerce Department and the International Trade Commission 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 filed a petition for a "changed circumstances" review. The International
Trade Commission decided in December 2001 not to initiate such a review. CEMEX
has appealed the ITC's decision in the "sunset review" and the "changed
circumstances" review to NAFTA. In January of 2005, a NAFTA Panel was formed
to review the ITC's sunset review determination. The NAFTA Panel has scheduled
oral argument for April 7, 2005.
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 the 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 upheld the Commerce Department's
decision to terminate the Suspension Agreement. The U.S. cement industry has
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 DOC'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 anti-dumping restrictions.
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 us 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 to our
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 anti-dumping
duty margin for imports during the fifth review period to 44.9% ad valorem.
The Custom's Service has begun 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 anti-dumping 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
anti-dumping margin was 80.75% ad valorem. The final results for the twelfth
review period establish the 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 metric 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
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 anti-dumping margin was 57.97% ad valorem. The final results for the
thirteenth review period establish 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 established at $52.41 per metric 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 Department upon
(effective 5/5/1997) 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 Department upon
(effective 5/4/1998) review. Liquidation suspended pending NAFTA panel
review.
8/1/98-7/31/99 37.49%, 49.58% 38.65% determined by the Commerce Department upon
(effective 3/17/1999) review. Liquidation suspended pending NAFTA panel
review.
8/1/99-7/31/00 49.58%, 45.98% (effective 50.98% determined by the Commerce Department upon
3/16/2000) review. Liquidation suspended pending appeal to NAFTA
panel review.
8/1/00-7/31/01 49.58%, 38.65% (effective 73.74% determined by the Commerce Department upon
5/14/2001) review. Liquidation suspended pending appeal to NAFTA
panel review.
8/1/01-7/31/02 38.65%, 50.98% (effective 80.75% determined by the Commerce Department upon
3/19/2002) 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 Department upon
(effective 1/14/2003) review. Liquidation suspended pending appeal to NAFTA
Panel.
8/1/03 - 7/31/04 73.74%, U.S.$52.41 per Subject to review by the Commerce Department.
metric ton (effective
10/15/2003)
8/1/04 - to date U.S.$52.41 per metric ton, Subject to review by the Commerce Department.
U.S.$32.85 per metric ton
(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 Commerce Department and the International Trade Commission,
or 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. These claims arose prior to our
acquisition of our Venezuelan operations in 1994, but for purposes of the
following discussion, we refer to the actions taken by the predecessor company
as actions taken by CEMEX Venezuela. CEMEX Venezuela contested the dumping
claim and the countervailing duty claim, and both cases were suspended.
The Commerce Department's preliminary determination regarding the
dumping claim was published on November 4, 1991. 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." The foreign
market value was determined by the Commerce Department based on information
provided by CEMEX Venezuela each quarter. CEMEX Venezuela was required to
report to the Commerce Department sales in the U.S. market, costs of
production and related data. During its sunset review of the Anti-Dumping
Suspension Agreement, the ITC determined that terminating the agreement would
not likely lead to a continuation or recurrence of injury to the U.S. market,
and voted to terminate the Anti-Dumping Suspension Agreement on October 5,
2000. Consequently, on November 8, 2000, the Commerce Department issued a
notice terminating the Anti-Dumping Suspension Agreement.
On July 28, 2003, the Court of International Trade upheld the
Commerce Department's termination of the Suspension Agreement. The domestic
petitioners have appealed the court's decision to the U.S. Court of Appeals
for the Federal Circuit, which, on December 14, 2004, upheld the CIT's
decision affirming the DOC'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 anti-dumping
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 a letter dated July 19, 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 Cement
Corporation or APO, Rizal and Solid, indirect subsidiaries of CEMEX, which
received their anti-dumping questionnaires from the International Trade
Commission under the Ministry of Economic Affairs (ITC-MOEA) on August 2,
2001, and from the MOF on August 16, 2001.
Rizal and Solid replied to the ITC-MOEA by confirming that they were
not exporting cement/clinker during the covered period. On the other hand, in
its position paper filed on August 18, 2001 and in the public hearing held on
August 20, 2001, APO contested the allegation of "injury" in the anti-dumping
proceedings before the ITC-MOEA.
In a letter dated October 2, 2001, the ITC-MOEA notified the
respondent producers about the result of the preliminary injury investigation
and its determination that there is a reasonable indication that the domestic
industry in Taiwan was materially injured by reason of imports of Portland
cement and clinker from South Korea and the Philippines that are alleged to be
sold in Taiwan at less than normal value. In keeping with the implementing
regulations on the imposition of anti-dumping duties in Taiwan, the ITCMOEA
has transferred the case to the MOF for further investigation.
On October 12, 2001 and November 2, 2001, APO filed its replies to
the MOF questionnaire to contest the allegation of "dumping" in the
anti-dumping proceedings before the MOF. In a letter dated January 22, 2002,
the MOF notified the petitioner and respondents that it adopted on January 15,
2002 a resolution preliminarily finding that there was "dumping" and resolving
that investigation on the issue of "dumping" would continue, but that no
provisional anti-dumping duty would be imposed.
In a letter dated June 26, 2002, the 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 a letter dated July 12, 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%.
On September 17, 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. The decision of the MOF was confirmed and has become
final.
Tax Matters
As of December 31, 2004, 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
Ps3,638.6 million. The tax assessments are based primarily on: (i)
recalculation 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.
As of December 31, 2004, the Philippine Bureau of Internal Revenue,
or BIR, assessed APO Cement Corp. for a deficiency in the amount of income tax
paid in the tax years 1998 through 2001 amounting to PhP959.58 million
(U.S.$16.92 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 assessment disallows APO's
income tax holiday related income. We have contested BIR's findings with the
Court of Tax Appeal, or CTA. In the same manner, Solid also questioned before
the CTA the tax assessment for taxable year 1997 amounting to PhP 132.02
million (U.S.$2.33 million) at an exchange rate of PhP 56.702 to US$1.00. We
also brought to the CTA the APO 1997 tax assessment amounting to PhP 84.31
million (U.S.$1.49 million). We believe that these claims will not have a
material adverse effect on us. However, an adverse resolution of these claims
could have a material adverse effect on our results of operations in the
Philippines. As of December 31, 2004, the cases are still with the CTA and
BIR, and APO and Solid have already presented their respective witnesses and
documentary evidence.
The BIR also finalized its tax assessments for Solid's 1999 tax year
amounting to PhP849.59 million (U.S.$14.98 million) as of December 31, 2003,
based on an exchange rate of PhP56.702 to U.S.$1.0. The BIR also finalized its
tax assessments for Solid's 2000 tax year amount to PhP1,670.37 million
(U.S.$29.46 million) as of December 31, 2004 at an exchange rate of PhP56.702
to U.S.$1.0. We continue to submit relevant evidence to the BIR to contest
these assessments. Our next recourse is to contest these assessments with the
CTA if the BIR issues a final collection letter.
In addition, Solid's 1998 tax year amounting to PhP359.02 million
(U.S.$6.33 million) and APO's 1997-1998 tax years amounting to PhP196.42
million (U.S.$3.46 million) are under preliminary review for deficiency taxes.
Finalization of the assessment was held in abeyance by the BIR as we continue
to present evidence to dispute their findings. We continue to support
documentary evidence to reduce the amount.
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 in the rice production capacity of land of the plaintiffs,
caused by pollution emanating from our cement plants located in Ibague,
Colombia. On January 13, 2004, we were notified of a judgment entered against
us under which we were ordered to pay to the plaintiffs an amount equal to
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). We filed an appeal on January 15,
2004, and the case was sent to the Superior Court of Ibague for review.
Typically, proceedings of this nature 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 contend that these subsidiaries are responsible for the 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, based on an exchange rate of CoP2,323.77 to
U.S.$1.00, which was the Colombian Peso/Dollar exchange rate on February 28,
2005 as published by the Banco de la Republica de Colombia, the central bank
of Colombia). This proceeding has reached the evidentiary stage. Typically,
proceedings of this nature continue for several years before final resolution.
As of December 31, 2003, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
U.S.$ 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 December 2002, an ex-maritime broker for Puerto Rican Cement
Company, Inc. filed a civil liability lawsuit in Puerto Rico against CEMEX,
S.A. de C.V., PRCC and other unaffiliated entities, including Puerto Rican
authorities. The plaintiff contends that the defendants conspired to violate
state and federal antitrust laws so that one of the defendants, who is not
affiliated with us, could gain control of the maritime broker market in Port
of Ponce, Puerto Rico. The plaintiff has asked for relief in the amount of
approximately U.S.$18 million. In September 2003, the United States District
Court for the District of Puerto Rico dismissed all claims against us, and
entered judgment accordingly. The plaintiff has subsequently filed two post
judgment motions requesting reconsideration of the court's opinion, and we
have requested the denial of such motions. Resolution of these motions is
still pending before the court.
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 Cemex Asia Holdings Ltd. or
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.
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
Government of Indonesia (the "GOI") before the International Centre for
Settlement of Investment Disputes, or ICSID, based in Washington D.C. ICSID
was established by the Convention on the Settlement of Investment Disputes
between States and Nationals of other States, and is intended to facilitate
the resolution of international investment disputes. ICSID is an autonomous
international organization with close links to the World Bank. 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 2004, an Arbitral Tribunal was established to hear the dispute. The GOI
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 in July 2005. We cannot predict what
effect, if any, this action will have on our investment in Gresik or how the
Arbitral Tribunal will rule on the GOI's jurisdictional objections or the
merits of the dispute. We cannot predict what effect, if any, the arbitration
will have on our investment in Gresik or what the ruling of the Arbitral
Tribunal will be.
During 2004, four "public interest lawsuits, which include CEMEX
Colombia as a codefendant, were filed. The first and last of these lawsuits
was filed on April 14, 2004 and December 16, 2004, respectively. All
Plaintiffs argue that the use of a base material which the ready mix industry
offers resulted in premature distress of the roads built for the mass public
transportation system of Bogota known as Transmilenio. In connection with
CEMEX Colombia and other materials suppliers, the lawsuits allege that the
base material they supplied failed to fulfill technical standards offered by
the producers thereof (quality deficiencies) and/or that they provided
insufficient or inaccurate information in connection with the product. The
four lawsuits seek road repairs in a manner which guarantees its service
during the period for which it was originally designed (20 years); however,
the lawsuits do not estimate the alleged damages (cost of repairs). CEMEX
Colombia has timely contested each of the lawsuits and will continue to
vigorously defend its interests. One of the lawsuits has been dismissed based
on arguments presented to the court by CEMEX Colombia; all others are in the
initial stage of the proceedings. At this early stage it is not possible to
estimate the alleged damages nor the portion thereof which could be assessed
to CEMEX Colombia, but we believe that it is unlikely to have a material
adverse effect on our results of operations. 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 our business, we are party to various legal
proceedings. Other than as disclosed herein, we are not currently involved in
any litigation or arbitration proceedings, including any such proceedings
which are pending, which we believe will have, or have had, a material adverse
effect on us, nor, so far as we are aware, are any proceedings of that kind
threatened.
Schedule 5.10
-------------
Subsidiaries
------------
Name Jurisdiction of Incorporation
---- -----------------------------
Cemex Mexico, S.A. de C.V. Mexico
Empresas Tolteca de Mexico, S.A. de C.V. Mexico
Cemex Concretos, S.A. de C.V. Mexico
Sunward Acquisitions N.V. Netherlands
Cemex Trademarks Worldwide Switzerland
Cemex Espana, S.A. Spain
Cemex Corp. Delaware
Cemex, Inc. Louisiana
Cemex Construction Materials, L.P. Texas
Cemex Colombia, S.A. Colombia
Schedule 6.05
-------------
Litigation
----------
A description of material regulatory and legal matters affecting
CEMEX and its Subsidiaries is provided below.
U.S. Anti-Dumping Sunset Reviews
Under the U.S. anti-dumping and countervailing duty laws, the
Commerce Department and the International Trade Commission 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 filed a petition for a "changed circumstances" review. The International
Trade Commission decided in December 2001 not to initiate such a review. CEMEX
has appealed the ITC's decision in the "sunset review" and the "changed
circumstances" review to NAFTA. In January of 2005, a NAFTA Panel was formed
to review the ITC's sunset review determination. The NAFTA Panel has scheduled
oral argument for April 7, 2005.
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 the 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 upheld the Commerce Department's
decision to terminate the Suspension Agreement. The U.S. cement industry has
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 DOC'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 anti-dumping restrictions.
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 us 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 to our
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 Deparment's remand results which lowered the anti-dumping
duty margin for imports during the fifth review period to 44.9% ad valorem.
The Customs Service has begun 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 anti-dumping 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
anti-dumping margin was 80.75% ad valorem. The final results for the twelfth
review period establish the 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 metric 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
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 anti-dumping margin was 57.97% ad valorem. The final results for the
thirteenth review period establish 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 established at $52.41 per metric 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 Department upon review.
(effective 5/5/1997) Liquidation suspended pending NAFTA panel review.
8/1/97-7/31/98 73.69%, 35.88% and 45.98% determined by the Commerce Department upon review.
37.49% Liquidation suspended pending NAFTA panel review.
(effective 5/4/1998)
8/1/98-7/31/99 37.49%, 49.58% 38.65% determined by the Commerce Department upon review.
(effective 3/17/1999) Liquidation suspended pending NAFTA panel review.
8/1/99-7/31/00 49.58%, 45.98% 50.98% determined by the Commerce Department upon review.
(effective 3/16/2000) Liquidation suspended pending appeal to NAFTA panel
review.
8/1/00-7/31/01 49.58%, 38.65% 73.74% determined by the Commerce Department upon review.
(effective 5/14/2001) Liquidation suspended pending appeal to NAFTA panel
review.
8/1/01-7/31/02 38.65%, 50.98% 80.75% determined by the Commerce Department upon review.
(effective 3/19/2002) Liquidation suspended pending appeal to NAFTA panel
review.
8/1/02 - 7/31/03 50.98%, 73.74% 54.97% determined by the Commerce Department upon review.
(effective 1/14/2003) Liquidation suspended pending appeal to NAFTA Panel.
8/1/03 - 7/31/04 73.74%, U.S.$52.41 per Subject to review by the Commerce Department.
metric ton (effective
10/15/2003)
8/1/04 - to date U.S.$52.41 per metric Subject to review by the Commerce Department.
ton, U.S.$32.85 per
metric ton (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 Commerce Department and the International Trade Commission,
or 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. These claims arose prior to our
acquisition of our Venezuelan operations in 1994, but for purposes of the
following discussion, we refer to the actions taken by the predecessor company
as actions taken by CEMEX Venezuela. CEMEX Venezuela contested the dumping
claim and the countervailing duty claim, and both cases were suspended.
The Commerce Department's preliminary determination regarding the
dumping claim was published on November 4, 1991. 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." The foreign
market value was determined by the Commerce Department based on information
provided by CEMEX Venezuela each quarter. CEMEX Venezuela was required to
report to the Commerce Department sales in the U.S. market, costs of
production and related data. During its sunset review of the Anti-Dumping
Suspension Agreement, the ITC determined that terminating the agreement would
not likely lead to a continuation or recurrence of injury to the U.S. market,
and voted to terminate the Anti-Dumping Suspension Agreement on October 5,
2000. Consequently, on November 8, 2000, the Commerce Department issued a
notice terminating the Anti-Dumping Suspension Agreement.
On July 28, 2003, the Court of International Trade upheld the
Commerce Department's termination of the Suspension Agreement. The domestic
petitioners have appealed the court's decision to the U.S. Court of Appeals
for the Federal Circuit, which, on December 14, 2004, upheld the CIT's
decision affirming the DOC'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 anti-dumping
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 a letter dated July 19, 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 Cement
Corporation or APO, Rizal and Solid, indirect subsidiaries of CEMEX, which
received their anti-dumping questionnaires from the International Trade
Commission under the Ministry of Economic Affairs (ITC-MOEA) on August 2,
2001, and from the MOF on August 16, 2001.
Rizal and Solid replied to the ITC-MOEA by confirming that they were
not exporting cement/clinker during the covered period. On the other hand, in
its position paper filed on August 18, 2001 and in the public hearing held on
August 20, 2001, APO contested the allegation of "injury" in the anti-dumping
proceedings before the ITC-MOEA.
In a letter dated October 2, 2001, the ITC-MOEA notified the
respondent producers about the result of the preliminary injury investigation
and its determination that there is a reasonable indication that the domestic
industry in Taiwan was materially injured by reason of imports of Portland
cement and clinker from South Korea and the Philippines that are alleged to be
sold in Taiwan at less than normal value. In keeping with the implementing
regulations on the imposition of anti-dumping duties in Taiwan, the ITCMOEA
has transferred the case to the MOF for further investigation.
On October 12, 2001 and November 2, 2001, APO filed its replies to
the MOF questionnaire to contest the allegation of "dumping" in the
anti-dumping proceedings before the MOF. In a letter dated January 22, 2002,
the MOF notified the petitioner and respondents that it adopted on January 15,
2002 a resolution preliminarily finding that there was "dumping" and resolving
that investigation on the issue of "dumping" would continue, but that no
provisional anti-dumping duty would be imposed.
In a letter dated June 26, 2002, the 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 a letter dated July 12, 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%.
On September 17, 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. The decision of the MOF was confirmed and has become
final.
Tax Matters
As of December 31, 2004, 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
Ps3,638.6 million. The tax assessments are based primarily on: (i)
recalculation 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.
As of December 31, 2004, the Philippine Bureau of Internal Revenue,
or BIR, assessed APO Cement Corp. for a deficiency in the amount of income tax
paid in the tax years 1998 through 2001 amounting to PhP959.58 million
(U.S.$16.92 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 assessment disallows APO's
income tax holiday related income. We have contested BIR's findings with the
Court of Tax Appeal, or CTA. In the same manner, Solid also questioned before
the CTA the tax assessment for taxable year 1997 amounting to PhP 132.02
million (U.S.$2.33 million) at an exchange rate of PhP 56.702 to US$1.00. We
also brought to the CTA the APO 1997 tax assessment amounting to PhP 84.31
million (U.S.$1.49 million). We believe that these claims will not have a
material adverse effect on us. However, an adverse resolution of these claims
could have a material adverse effect on our results of operations in the
Philippines. As of December 31, 2004, the cases are still with the CTA and
BIR, and APO and Solid have already presented their respective witnesses and
documentary evidence.
The BIR also finalized its tax assessments for Solid's 1999 tax year
amounting to PhP849.59 million (U.S.$14.98 million) as of December 31, 2003,
based on an exchange rate of PhP56.702 to U.S.$1.0. The BIR also finalized its
tax assessments for Solid's 2000 tax year amount to PhP1,670.37 million
(U.S.$29.46 million) as of December 31, 2004 at an exchange rate of PhP56.702
to U.S.$1.0. We continue to submit relevant evidence to the BIR to contest
these assessments. Our next recourse is to contest these assessments with the
CTA if the BIR issues a final collection letter.
In addition, Solid's 1998 tax year amounting to PhP359.02 million
(U.S.$6.33 million) and APO's 1997-1998 tax years amounting to PhP196.42
million (U.S.$3.46 million) are under preliminary review for deficiency taxes.
Finalization of the assessment was held in abeyance by the BIR as we continue
to present evidence to dispute their findings. We continue to support
documentary evidence to reduce the amount.
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 in the rice production capacity of land of the plaintiffs,
caused by pollution emanating from our cement plants located in Ibague,
Colombia. On January 13, 2004, we were notified of a judgment entered against
us under which we were ordered to pay to the plaintiffs an amount equal to
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). We filed an appeal on January 15,
2004, and the case was sent to the Superior Court of Ibague for review.
Typically, proceedings of this nature 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 contend that these subsidiaries are responsible for the 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, based on an exchange rate of CoP2,323.77 to
U.S.$1.00, which was the Colombian Peso/Dollar exchange rate on February 28,
2005 as published by the Banco de la Republica de Colombia, the central bank
of Colombia). This proceeding has reached the evidentiary stage. Typically,
proceedings of this nature continue for several years before final resolution.
As of December 31, 2003, CEMEX, Inc. had accrued liabilities
specifically relating to environmental matters in the aggregate amount of
U.S.$ 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 December 2002, an ex-maritime broker for Puerto Rican Cement
Company, Inc. filed a civil liability lawsuit in Puerto Rico against CEMEX,
S.A. de C.V., PRCC and other unaffiliated entities, including Puerto Rican
authorities. The plaintiff contends that the defendants conspired to violate
state and federal antitrust laws so that one of the defendants, who is not
affiliated with us, could gain control of the maritime broker market in Port
of Ponce, Puerto Rico. The plaintiff has asked for relief in the amount of
approximately U.S.$18 million. In September 2003, the United States District
Court for the District of Puerto Rico dismissed all claims against us, and
entered judgment accordingly. The plaintiff has subsequently filed two
post-judgment motions requesting reconsideration of the court's opinion, and
we have requested the denial of such motions. Resolution of these motions is
still pending before the court.
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 Cemex Asia Holdings Ltd. or
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.
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
Government of Indonesia (the "GOI") before the International Centre for
Settlement of Investment Disputes, or ICSID, based in Washington D.C. ICSID
was established by the Convention on the Settlement of Investment Disputes
between States and Nationals of other States, and is intended to facilitate
the resolution of international investment disputes. ICSID is an autonomous
international organization with close links to the World Bank. 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 2004, an Arbitral Tribunal was established to hear the dispute. The GOI
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 in July 2005. We cannot predict what
effect, if any, this action will have on our investment in Gresik or how the
Arbitral Tribunal will rule on the GOI's jurisdictional objections or the
merits of the dispute. We cannot predict what effect, if any, the arbitration
will have on our investment in Gresik or what the ruling of the Arbitral
Tribunal will be.
During 2004, four "public interest" lawsuits, which include CEMEX
Colombia as a codefendant, were filed. The first and last of these lawsuits
was filed on April 14, 2004 and December 16, 2004, respectively. All
Plaintiffs argue that the use of a base material which the ready mix industry
offers resulted in premature distress of the roads built for the mass public
transportation system of Bogota known as Transmilenio. In connection with
CEMEX Colombia and other materials suppliers, the lawsuits allege that the
base material they supplied failed to fulfill technical standards offered by
the producers thereof (quality deficiencies) and/or that they provided
insufficient or inaccurate information in connection with the product. The
four lawsuits seek road repairs in a manner which guarantees its service
during the period for which it was originally designed (20 years); however,
the lawsuits do not estimate the alleged damages (cost of repairs). CEMEX
Colombia has timely contested each of the lawsuits and will continue to
vigorously defend its interests. One of the lawsuits has been dismissed based
on arguments presented to the court by CEMEX Colombia; all others are in the
initial stage of the proceedings. At this early stage it is not possible to
estimate the alleged damages nor the portion thereof which could be assessed
to CEMEX Colombia, but we believe that it is unlikely to have a material
adverse effect on our results of operations. 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 our business, we are party to various legal
proceedings. Other than as disclosed herein, we are not currently involved in
any litigation or arbitration proceedings, including any such proceedings
which are pending, which we believe will have, or have had, a material adverse
effect on us, nor, so far as we are aware, are any proceedings of that kind
threatened.
Schedule 8.02
CEMEX, S.A. de C.V.
LIEN SCHEDULE
as of Dec 31, 2004
(Figures in millions of US Dollars)
COMPANY LENDER LIEN CONCEPT BALANCE
CEMEX, Inc. GE Capital Equipment related with the credit 0.893
Kosmos Cement Company First Corp. Equipment related with the credit 0.021
CEMEX, Inc. Hampton Land related with the credit 0.267
Mineral Resource Technologies, Inc. Met-South, Inc. Ash storage facility 0.181
Centro Distribuidor de Cemento, S.A de C.V. Bank of America Cash Collateral 0.823
-------------
2.184
EXHIBIT A
---------
FORM OF NOTE
U.S.$ Date _____________
New York, New York
FOR VALUE RECEIVED, the undersigned, CEMEX, S.A. de C.V., a
sociedad anonima de capital variable organized and existing under the laws of
the United Mexican States and located at Ave. Ricardo Margain Zozaya #325,
Col. Valle Del Campestre, Garza Garcia, N.L. 66265, Mexico (the "Borrower"),
unconditionally promises to pay, without setoff or counterclaim, to the order
of (the "Lender") on the Termination Date, as defined in the Term Credit
Agreement (as defined below), at the office of Barclays Bank PLC, 200 Park
Avenue, New York, New York 10166 in lawful money of the United States of
America, or, if one or more advances is made in a Foreign Currency, in the
applicable Foreign Currency, and in immediately available funds, the aggregate
unpaid principal amount of all Loans made by the Lender to the undersigned
pursuant to the Term Credit Agreement that are then due and payable to the
Lender pursuant thereto. The undersigned further unconditionally agrees to
pay, without setoff or counterclaim, interest in like money at such office
from the date hereof until paid in full on the unpaid principal amount hereof
from time to time outstanding at the applicable interest rate per annum
determined as provided in, and payable as specified in, the Term Credit
Agreement. The Lender is authorized to record the date, type, amount and
currency of each Loan made by the Lender pursuant to the Term Credit
Agreement, 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 Section 2.01(e) of the Term Credit Agreement and the principal
amount subject thereto, and, in the case of LIBOR Loans and Euribor Loans, the
interest rate and interest period with respect thereto on the schedules
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 Term Credit Agreement.
This Note is one of the Notes referred to in the Term Credit
Agreement dated as of April 5, 2005, 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 (as the same may
from time to time be amended, supplemented or otherwise modified, the "Term
Credit Agreement"; terms defined therein being used herein as so defined), and
is entitled to the benefits thereof and is subject to optional and mandatory
prepayment in whole or in part as provided therein.
Upon the occurrence of any one or more of the Events of
Default specified in the Term Credit Agreement, all amounts remaining unpaid
on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
The Borrower agrees to pay all reasonable costs and
expenses, including all reasonable fees and disbursements of counsel
(including the allocated cost of internal counsel), incurred by the Lender in
connection with the enforcement of the Lender's rights and remedies under the
Term Credit Agreement and this Note.
The Borrower hereby irrevocably and unconditionally submits
for itself and its property in any legal suit, action or proceeding relating
to this Note or for recognition and enforcement of any judgment in respect
thereof, to the 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, to the jurisdiction of any competent
court in the place of its corporate domicile and any appellate courts thereof,
and consents that any such suit, action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
laying of venue of any such suit, action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same. The Borrower hereby irrevocably agrees that
service of all writs, process and summonses in any such suit, action or
proceeding brought in the State of New York may be made upon CT Corporation
System having offices on the date hereof at 111 Eighth Avenue, 13th Floor, New
York, New York 10011, U.S.A. (the "Process Agent"), and the Borrower hereby
irrevocably appoints the Process Agent as its authorized agent to accept such
service of any and all such writs, process and summonses and agrees that the
failure of the Process Agent to give any notice of any such service of process
to the Borrower shall not impair or affect the validity of such service or of
any judgment based thereon.
The obligations of the Borrower hereunder to make payments
in Dollars, or, if one or more advances is made in a Foreign Currency, in the
applicable Foreign Currency, shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
other currency except to the extent that such tender or recovery results in
the effective receipt by the Lender of the full Dollar Amount payable
hereunder and the Borrower shall be obligated to indemnify the Lender (and the
Lender shall have an additional legal claim) for any difference between such
full amount and the amount effectively received by the Lender pursuant to any
such tender or recovery. The Lender's determination of amounts effectively
received by it shall be presumptively correct in the absence of manifest
error.
To the extent that the Borrower 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, execution or otherwise) with respect to itself or its property, the
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Note and the other Transaction Documents. The foregoing waiver and
consent are intended to be effective to the fullest extent now or hereafter
permitted by applicable law of any jurisdiction in which any suit, action or
proceeding with respect to this Note may be commenced.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
CEMEX, S.A. de C.V.
By: _____________________
Title: __________________
Guaranteed:
CEMEX MEXICO, S.A. de C.V.,
in its capacity as Guarantor
Under Article IX of the Term Credit
Agreement
By: _________________________________
Title: ______________________________
Guaranteed:
EMPRESAS TOLTECA DE MEXICO,
S.A. de C.V., in its capacity as
Guarantor under Article IX of the Term Credit
Agreement
By: _________________________________
Title: ______________________________
Schedule 1 to Note
------------------
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
Principal
Amount of Currency Type of Interest Interest Maturity Paid or Principal Notation
Date Loan of Loan Loan(1) Rate Period Date Converted Balance Made By
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ----------- ------------
- -------------------
(1) The type of Loan may be represented by "L" for LIBOR Loans, "E" for
Euribor Loans or "BR" for Base Rate Loans.
EXHIBIT B
---------
FORM OF NOTICE OF BORROWING
---------------------------
BARCLAYS BANK PLC,
as Administrative Agent
200 Park Avenue
New York, New York 10016
Attention: Global Services Unit
Reference is made to the Term Credit Agreement, dated as of
April 5, 2005, among Cemex, S.A. de C.V., as Borrower (the "Borrower"), Cemex
Mexico, S.A. de C.V., as Guarantor, Empresas Tolteca de Mexico, S.A. de C.V.,
as Guarantor, 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, as a Lender and as Administrative Agent,
Citibank, N.A., as a Lender and Citibank, N.A., Nassau, Bahamas Branch, as a
Lender (as the same may be amended, supplemented or otherwise modified from
time to time, the "Term Credit Agreement"). Terms used but not otherwise
defined herein shall have the meanings provided in the Term Credit Agreement.
The undersigned hereby gives notice pursuant to Section 2.01 of the Term
Credit Agreement of its request for [a] Loan[s] with the following terms:
(A) Requested Disbursement Date
(which is a Business Day) ________________________
(B) Principal amount of Borrowing
and currency ________________________
(C) Interest rate basis ________________________
(D) (If a LIBOR loan or Euribor Loan
is requested) Interest Period
and the last date thereof ________________________
The disbursement shall be deposited in the following account
and in accordance with the requirements of Section 2.01(d) of the Term Credit
Agreement:
Bank Name: __________________________________
Bank Address: __________________________________
Bank ABA #: __________________________________
Account Name: __________________________________
Account #: __________________________________
Reference: __________________________________
The Borrower hereby represents and warrants that each
condition specified in Section 4.02 of the Term Credit Agreement has been
satisfied or waived.
IN WITNESS WHEREOF, the undersigned has hereto set his name
on this _______ day of ____________, _________
CEMEX, S.A. DE C.V.,
as Borrower
By: ________________________________
Name:___________________________
Title:__________________________
EXHIBIT C
---------
FORM OF NOTICE OF EXTENSION/CONVERSION
--------------------------------------
BARCLAYS BANK PLC,
as Administrative Agent
200 Park Avenue
New York, New York 10016
Attention: Global Services Unit
Reference is made to the Term Credit Agreement, dated as of
April 5, 2005, among Cemex, S.A. de C.V., as Borrower (the "Borrower"), Cemex
Mexico, S.A. de C.V., as Guarantor, Empresas Tolteca de Mexico, S.A. de C.V.,
as Guarantor, 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, as a Lender and as Administrative Agent,
Citibank, N.A., as a Lender and Citibank, N.A., Nassau, Bahamas Branch, as a
Lender (as amended, supplemented or otherwise modified from time to time, the
"Term Credit Agreement"). Terms used but not otherwise defined herein shall
have the meanings provided in the Term Credit Agreement. The undersigned
hereby gives notice pursuant to Section 2.01(e) of the Term Credit Agreement
that it requests an extension or conversion of [a] Loan[s] outstanding under
the Term Credit Agreement, and in connection therewith sets forth below the
terms on which such extension or conversion is requested to be made:
(A) Date of Extension or
Conversion _______________________
(B) The Loan[s] to be Extended/
Converted and the
Principal Amount thereof _______________________
(C) Interest rate basis _______________________
(D) (If a LIBOR loan or Euribor loan)
Interest Period
and the last date thereof _______________________
(E) Currency _______________________
The Borrower hereby represents and warrants that each
condition specified in Section 4.02 of the Term Credit Agreement has been
satisfied or waived.
IN WITNESS WHEREOF, the undersigned has hereto set his name
on this _______ day of ____________, _________
CEMEX, S.A. DE C.V.,
as Borrower
By: ________________________________
Name:___________________________
Title:__________________________
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
-------------------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of
____________, ______________ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE]
(the "Assignee"), CEMEX, S.A. de C.V. (the "Borrower"), CEMEX MEXICO, S.A. de
C.V. (a "Guarantor"), EMPRESAS TOLTECA DE MEXICO, S.A. de C.V. (a
"Guarantor"), and BARCLAYS BANK PLC as Administrative Agent (in such capacity,
the "Administrative Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, this Assignment and Assumption Agreement (this
"Agreement") relates to the Term Credit Agreement dated as of April 5, 2005
among the Borrower, the Guarantors, the 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, the Assignor and the other
Lenders party thereto (as from time to time further amended, supplemented or
otherwise modified, the "Term Credit Agreement");
WHEREAS, as provided in the Term Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in an aggregate
principal amount at any time outstanding not to exceed U.S.$__________(the
"Assignor's Commitment");
[WHEREAS, Loans made to the Borrower by the Assignor under
the Term Credit Agreement in the aggregate principal amount of [insert U.S.$
or applicable Foreign Currency and the amount for each advance] are
outstanding on the date hereof;]
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Term Credit Agreement in respect of [a
portion of] its Commitment thereunder in an amount equal to U.S.$____ (the
"Assigned Amount"), [together with a corresponding portion of its outstanding
Loans] and the Assignee proposes to accept assignment of such rights and
assume the corresponding obligations from the Assignor on the terms set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Term Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby irrevocably
assigns and sells to the Assignee all of the rights of the Assignor under the
Term Credit Agreement [to the extent of the Assigned Amount], and the Assignee
hereby irrevocably accepts such assignment from the Assignor and assumes all
of the obligations of the Assignor under the Term Credit Agreement [to the
extent of the Assigned Amount] [, including the purchase from the Assignor of
the corresponding portion of the principal amount of the Loans made by the
Assignor]. Upon the execution and delivery hereof by the Assignor, the
Assignee, [the Borrower,][and the Administrative Agent] and the payment of the
amounts specified in Section 3 hereof required to be paid on the date hereof
(a) the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Lender under the Term Credit
Agreement with a Commitment in an amount equal to the Assigned Amount [in
addition to its existing Commitment], and (b) the Commitment of the Assignor
shall, as of the date hereof, be reduced by a like amount and the Assignor
released from its obligations under the Term Credit Agreement to the extent
such obligations have been assumed by the Assignee. The assignment provided
for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between
them.* Each of the Assignor and the Assignee hereby agrees that if either
party receives any amount under the Term Credit Agreement that is for the
account of the other party, it shall receive the same for the account of such
other party to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
- -------------------
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the
Assignee. It may be preferable in an appropriate case to specify
these amounts generically or by formula rather than as a fixed sum.
SECTION 4. Consent Of [The Borrower] [And The Administrative
Agent]. This Agreement is conditioned upon the consent of [the Borrower] [and
the Administrative Agent] pursuant to Section 3.10 of the Term Credit
Agreement and the payment of a processing fee of U.S.$3,500 to the
Administrative Agent. The execution of this Agreement by [the Borrower] [and
the Administrative Agent] is evidence of this consent. Pursuant to Section
13.06(b) of the Term Credit Agreement, the Borrower agrees to execute and
deliver a new Note to the Assignee.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor (i) represents and warrants that it is
legally authorized to enter into this Agreement; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Term Credit
Agreement or with respect to the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Term Credit
Agreement, any other Transaction Document or any other instrument or document
furnished pursuant thereto, other than that the Assignor has not created any
adverse claim upon the interest being assigned by it hereunder and that such
interest is free and clear of any such adverse claim and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, the Guarantors, any of their Affiliates
or any other obligor or the performance or observance by the Borrower, the
Guarantors, any of their Affiliates or any other obligor of any of their
respective obligations under the Term Credit Agreement or any other
Transaction Document or any other instrument or document furnished pursuant
hereto or thereto.
(b) The Assignee (i) represents and warrants that it is
legally authorized to enter into this Agreement; (ii) confirms that it has
received a copy of the Term Credit Agreement, together with copies of the
financial statements delivered pursuant to Section 7.01 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Agreement; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Administrative
Agent, or any Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Term Credit Agreement, the other
Transaction Documents or any other instrument or document furnished pursuant
hereto or thereto; (iv) appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under the Term Credit Agreement, the other Transaction Documents or
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (v) agrees that it will be bound by the
provisions of the Term Credit Agreement and will perform in accordance with
its terms all the obligations which by the terms of the Term Credit Agreement
are required to be performed by it as a Lender.
SECTION 6. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition or
statements of the Borrower and the Guarantors, or the validity and
enforceability of the obligations of the Borrower in respect of the Term
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 7. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and inure to the benefit of the parties hereto and their
respective successor and assigns.
SECTION 8. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of New York.
SECTION 9. COUNTERPARTS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Delivery of an executed counterpart of a signature page of this Assignment by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By: ________________________________________
Title:_______________________________________
[ASSIGNEE]
By: ________________________________________
Title:_______________________________________
CEMEX, S.A. de C.V.,
as Borrower
By: ________________________________________
Title:_______________________________________
CEMEX MEXICO, S.A. de C.V.,
as Guarantor
By: ________________________________________
Title:_______________________________________
EMPRESAS TOLTECA DE MEXICO, S.A. de C.V.,
as Guarantor
By: ________________________________________
Title:_______________________________________
BARCLAYS BANK PLC,
as Administrative Agent
By: ________________________________________
Title:_______________________________________
EXHIBIT E
---------
FORM OF OPINION OF SPECIAL NEW YORK COUNSEL
TO THE BORROWER AND GUARANTORS
EXHIBIT F
---------
FORM OF OPINION OF MEXICAN COUNSEL
TO THE BORROWER AND THE GUARANTORS
EXHIBIT G
TO TERM 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+Ex0.01
----------------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 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, 2004, including the name of each subsidiary and its
country of incorporation:
CEMEX Mexico, S.A. De C.V.......................... Mexico
Empresas Tolteca De Mexico, S.A. De C.V............ Mexico
Centro Distribuidor De Cemento, S.A. De C.V........ Mexico
CEMEX International Finance Company................ Ireland
CEMEX Trademarks Holding Ltd....................... Switzerland
CEMEX Trademarks Worldwide Ltd..................... Switzerland
Mexcement Holdings, S.A. De C.V.................... Mexico
Sunward Acquisitions N.V........................... Netherlands
Sunward Holdings B.V.............................. Netherlands
New Sunward Holding B.V............................ Netherlands
CEMEX Espana, S.A.................................. Spain
CEMEX Caracas Investments B.V...................... Netherlands
CEMEX Colombia, S.A................................ Colombia
CEMEX Corp......................................... United States (DE)
CEMEX, Inc......................................... United States (LA)
CEMEX Hungary Kft.................................. Hungary
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: May 27, 2005 /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: May 27, 2005 /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: May 27, 2005 /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: May 27, 2005
/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: May 27, 2005
/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: May 27, 2005 /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, 2004 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: May 27, 2005
/s/ Hector Medina
- ---------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: May 27, 2005
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, 2004 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: May 27, 2005
/s/ Hector Medina
- ---------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: May 27, 2005
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, 2004 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: May 27, 2005
/s/ Hector Medina
- ---------------------------------
Name: Hector Medina
Title: Executive Vice President of
Planning and Finance
Date: May 27, 2005
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 AUDITORS
We hereby consent to the incorporation by reference into (i) the Registration
Statement on Form F-3 (File No. 333-86700) of CEMEX, S.A. de C.V., (ii) the
Registration Statement on Form S-8 (File No. 333-13970) of CEMEX, S.A. de C.V.,
(iii) the Registration Statement on Form S-8 (File No. 333-83962) of CEMEX,
S.A. de C.V. and (iv) the Registration Statement on Form S-8 (File No.
333-86060) of CEMEX, S.A. de C.V., of our report, dated January 15, 2005
(except for note 24, which is as of March 31, 2005), with respect to the
consolidated balance sheets of CEMEX, S.A. de C.V. and subsidiaries as of
December 31, 2003 and 2004, 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, 2004, which report
appears 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
May 26, 2005